THE WOODLANDS, Texas,
Aug. 8, 2019 /PRNewswire/
-- TETRA Technologies, Inc. ("TETRA") (NYSE:TTI) announced
consolidated second quarter net loss before discontinued operations
of $8.2 million, compared to
$18.7 million in the first quarter of
2019 and $12.1 million in the same
quarter of last year. Net loss per share before discontinued
operations(1) during the second quarter was $0.06 per share and compared to a net loss per
share of $0.09 in the first quarter
of this year and a net loss per share of $0.05 in the second quarter of 2018.
Adjusted per share(2) loss in the second quarter before
discontinued operations and excluding special items, was a loss of
$0.02 and compares to adjusted
per share loss of $0.04 in
the first quarter and adjusted earnings per share of $0.03 in the second quarter of 2018.
Brady M. Murphy, TETRA's
Chief Executive Officer, stated, "I'm very pleased with our second
quarter performance. We achieved sequential Adjusted
EBITDA(2) improvement across all three of our segments
and record high gross margins and utilization for our compression
services equipment since the acquisition of Compressor Systems,
Inc. in 2014. In a challenging macro environment we exceeded
$50 million of Adjusted EBITDA, the
highest Adjusted EBITDA since the third quarter of 2015.
"Consolidated revenue was $289
million in the second quarter, increasing 18% sequentially
and was up 11% year on year despite the North America land rig count declining 5% from
the second quarter of last year. Adjusted EBITDA of
$50 million was up 38% sequentially
and 8% from the second quarter of last year.
"Our Completion Fluids & Products Division is
experiencing high demand for our services and products in both the
Gulf of Mexico and international
offshore markets, with meaningful pricing improvements as reflected
in our $14.6 million net income
before taxes and 22.4% Adjusted EBITDA as a percent of revenue,
which is up sequentially by 560 basis points. During the
second quarter we signed a contract to provide TETRA CS Neptune®
completion fluids for a deepwater Gulf of
Mexico project, with the project expected to be completed
towards the end of the third quarter. Furthermore, working with
Halliburton and through some of our own initiatives we have been
technically qualified or are in the process of qualifying TETRA CS
Neptune® completion fluids with six major operators for future
projects.
"Water & Flowback Services net income before taxes was
$2.5 million. Adjusted EBITDA
as a percent of revenue improved sequentially to 14.9% on slightly
lower revenue from the first quarter of 2019, as we continue to
focus on integrated projects utilizing our automation
capabilities. We are also expanding our first large water
treatment and recycling facility in the Permian Basin to be able to
treat up to 100,000 barrels per day, up from current capacity of
60,000 barrels per day.
"Compression revenue increased sequentially on much higher
new equipment shipments and stronger after-market services.
Compression services gross margins and utilization were at record
highs since the acquisition of Compressor Systems, Inc., driven by
increased prices, higher utilization of equipment, cost actions and
the deployment of new service equipment at much higher pricing.
The overall fundamentals for the Compression business have
not changed and the Compression segment remains one of the
strongest segments in the industry."
Operating Segments
Completion Fluids & Products
Completion Fluids & Products
revenue was $79.8 million in
the second quarter of 2019, an increase of 30% from the first
quarter of 2019 on stronger offshore fluids sales in the
Gulf of Mexico and Eastern
Hemisphere, in addition to the seasonally strong Northern Europe industrial chemicals
business. Completion Fluids & Products income before
taxes was $14.6 million, or 18.3% of
revenue. Adjusted EBITDA of $17.9
million increased by $7.5
million sequentially and was 22.4% of revenue. The
improvements also included a small amount of TETRA CS Neptune®
completion fluids revenue.
Water and Flowback Services
Water & Flowback Services second quarter 2019 revenue
decreased 7% sequentially to $73.1
million. Income before taxes was $2.5 million, or 3.4% of revenue. However,
Adjusted EBITDA increased 8% sequentially to $10.9 million, despite the sequential revenue
drop. Adjusted EBITDA as a percent of revenue improved to
14.9% in the second quarter of 2019 from 12.8% in the first quarter
driven by our transition towards integrated projects with
automation and a reduction in the first quarter transition costs
from smaller independents to major operators. In addition to
a ramp up in the recycling projects, we successfully launched our
second generation sand cyclone equipment and technology during the
second quarter, which is designed to achieve more than 85% sand
recovery efficiency. Early results indicate that in some
cases, we are able to achieve up to 95% sand recovery efficiencies
with this technology. Our new automated de-sanding
unit and technology is currently seeing good results in
field trials and we expect to launch this technology shortly
as well.
Compression
Second quarter Compression revenue increased 31% from the
first quarter of 2019, to $136
million, and was 36% above the second quarter of last
year. Compression services gross margins were 52.7%, up 450
basis points from the first quarter of 2019 and overall fleet
utilization was 89.1%, both of which are the highest since the
acquisition of Compressor System, Inc. As of June 30, 2019, total active operating horsepower
was 1,029,045, a sequential improvement of over 11,500 horsepower.
In the second quarter we also took an impairment charge to
write-off 441 low horsepower GasJack units with a total of 20,286
horsepower, which we have decided to dispose. That impairment
is reflected in our compression services fleet's horsepower and
utilization metrics. Compression net loss before taxes was
$3.5 million, an improvement from the
net loss of $7.8 million in first
quarter of 2019. Second quarter 2019 Adjusted EBITDA of
$32.8 million increased 26% from the
first quarter of 2019 primarily due to higher new equipment sales
and aftermarket activity. We received new equipment orders of
$18 million in the second quarter of
2019, up from $11 million in the
first quarter of this year. New equipment sales backlog
decreased to $60 million at
June 30, 2019 from $94 million at the end of the previous
quarter.
A summary of key financial metrics for the second quarter
is as follows:
Second Quarter 2019 Results
|
|
Three Months Ended
|
|
June 30,
2019
|
|
March 31,
2019
|
|
June 30,
2018
|
|
(In Thousands, Except
per Share Amounts)
|
Revenue
|
$
|
288,796
|
|
|
$
|
243,728
|
|
|
$
|
260,072
|
|
Loss before
discontinued operations
|
(8,201)
|
|
|
(18,674)
|
|
|
(12,132)
|
|
Adjusted EBITDA
before discontinued operations (2)
|
50,084
|
|
|
36,331
|
|
|
46,285
|
|
GAAP EPS before
discontinued operations attributable to TETRA
stockholders
|
(0.06)
|
|
|
(0.09)
|
|
|
(0.05)
|
|
Adjusted EPS
attributable to TETRA stockholders (2)
|
(0.02)
|
|
|
(0.04)
|
|
|
0.03
|
|
GAAP net cash
provided (used) by operating activities
|
30,965
|
|
|
7,412
|
|
|
19,134
|
|
TETRA only adjusted
free cash flow from continuing operations (2)
|
$
3,117
|
|
$
|
(34,920)
|
|
|
$
|
18,018
|
|
|
|
(1)
|
Refers to net loss
per share before discontinued operations attributable to TETRA
stockholders.
|
(2)
|
These financial
measures are not in accordance with generally accepted accounting
principles in the United States ("GAAP"). Please see Schedules E,
F, G, H, I and J for reconciliations of these non-GAAP financial
measures to the most directly comparable GAAP measure.)
|
Free Cash Flow and Balance Sheet
Consolidated cash provided from operating activities for
the second quarter was $31.0
million. TETRA only adjusted free cash flow from
continuing operations in the second quarter was $3.1 million and compares to a use of cash of
$34.9 million in first quarter of
2019 (see Schedules I and J for a reconciliation of these non-GAAP
financial measures). We have historically consumed cash in
the first quarter of the year and have generated cash in the second
half of the year, reflecting the seasonality of some of our
businesses. We continue to believe that TETRA only adjusted
free cash flow from continuing operations will be positive for the
full year and above last year's levels. Consolidated net debt
was $830 million, while TETRA only
net debt was $200 million (see
Schedule H for a reconciliation of these non-GAAP financial
measures). At the end of the second quarter of 2019, TETRA
only non-restricted cash was $22
million.
Special items
Special items in the second quarter, including
Discontinued Operations are detailed on Schedule F, and include the
following:
- $2.3 million non-cash expense
related to an impairment of low horsepower compression equipment
to be disposed of
- $1.8 million expense
related to the retirement of our prior CEO
- $1.5 million non-cash income for TETRA stock
warrant fair value adjustment
- $0.5 million expense
related to the cash redemption of CSI Compressco's Series A
Convertible Preferred Units
- $0.4 million non-cash
income for the fair value adjustment of the SwiftWater earn-out
obligation
- $0.1 million non-cash
expense for the fair value adjustment of CSI Compressco's Series A
Convertible Preferred Units
- $0.2 million expense for
other charges
Additionally, a normalized tax rate of 21% is reflected in
Adjusted Net Income, as shown on Schedule F.
Conference Call
TETRA will host a conference call to discuss these results
today, August 8, 2019, at
10:30 a.m. EST. The phone number for
the call is 1-888-347-5303. The conference will also be available
by live audio webcast and may be accessed through TETRA's website
at www.tetratec.com. A replay of the conference call will be
available at 1-877-344-7529, conference number 10127860, for one
week following the conference call and the archived webcast call
will be available through the Company's website for 30 days
following the conference call.
Investor Contact
For further information: Elijio
Serrano, CFO, TETRA Technologies, Inc., The Woodlands, Texas, Phone: 281.367.1983,
Fax: 281.364.4346, www.tetratec.com
Financial Statements, Schedules and Non-GAAP
Reconciliation Schedules
(Unaudited)
Schedule A: Consolidated
Income Statement
Schedule B: Financial Results By
Segment
Schedule C: Consolidated Balance
Sheet
Schedule D: Long-Term
Debt
Schedule E: Statement Regarding Use of
Non-GAAP Financial Measures
Schedule F: Special
Items
Schedule G: Non-GAAP Reconciliation to GAAP
Financials
Schedule H: Non-GAAP Reconciliation of
TETRA Net Debt
Schedule I: Non-GAAP Reconciliation
to TETRA Only Adjusted Free Cash Flow
Schedule J:
Non-GAAP Reconciliation to TETRA Only Adjusted Free Cash Flow From
Continuing Operations
Company Overview and Forward-Looking Statements
TETRA Technologies, Inc. is a geographically diversified
oil and gas services company, focused on completion fluids and
associated products and services, water management, frac flowback,
production well testing, and compression services and
equipment. TETRA owns an equity interest, including all of
the general partner interest, in CSI Compressco LP (NASDAQ:CCLP), a
master limited partnership.
This news release includes certain statements that are
deemed to be forward-looking statements. Generally, the use of
words such as "may," "expectation," "expect," "intend," "estimate,"
"projects," "anticipate," "believe," "assume," "could," "should,"
"plans," "targets" or similar expressions that convey the
uncertainty of future events, activities, expectations or outcomes
identify forward-looking statements that the Company intends to be
included within the safe harbor protections provided by the federal
securities laws. These forward-looking statements include
statements concerning the anticipated recovery of the oil and gas
industry, expected benefits from the acquisition of SwiftWater
Energy Services and expected results of operational business
segments for 2019, including levels of CSI Compressco's cash
distributions per unit, projections concerning the Company's
business activities, financial guidance, estimated earnings,
earnings per share, and statements regarding the Company's beliefs,
expectations, plans, goals, future events and performance, and
other statements that are not purely historical. These
forward-looking statements are based on certain assumptions and
analyses made by the Company in light of its experience and its
perception of historical trends, current conditions, expected
future developments and other factors it believes are appropriate
in the circumstances. Such statements are subject to a number of
risks and uncertainties, many of which are beyond the control of
the Company. Investors are cautioned that any such statements are
not guarantees of future performances or results and that actual
results or developments may differ materially from those projected
in the forward-looking statements. Some of the factors that could
affect actual results are described in the section titled "Risk
Factors" contained in the Company's Annual Reports on Form 10-K, as
well as other risks identified from time to time in its reports on
Form 10-Q and Form 8-K filed with the Securities and Exchange
Commission.
Schedule A:
Consolidated Income Statement (Unaudited)
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(In Thousands, Except
per Share Amounts)
|
Revenues
|
$
|
288,796
|
|
|
$
|
260,072
|
|
|
$
|
532,524
|
|
|
$
|
459,453
|
|
|
|
|
|
|
|
|
|
Cost of sales,
services, and rentals
|
206,302
|
|
|
183,292
|
|
|
383,046
|
|
|
328,249
|
|
Depreciation,
amortization, and accretion
|
31,817
|
|
|
28,979
|
|
|
62,445
|
|
|
55,420
|
|
Impairments and other
charges
|
2,311
|
|
|
—
|
|
|
2,457
|
|
|
—
|
|
Total cost of
revenues
|
240,430
|
|
|
212,271
|
|
|
447,948
|
|
|
383,669
|
|
Gross profit
|
48,366
|
|
|
47,801
|
|
|
84,576
|
|
|
75,784
|
|
|
|
|
|
|
|
|
|
General and
administrative expense
|
36,295
|
|
|
33,617
|
|
|
70,572
|
|
|
64,420
|
|
Interest expense,
net
|
18,529
|
|
|
18,379
|
|
|
36,908
|
|
|
33,352
|
|
Warrants fair value
adjustment (income) expense
|
(1,520)
|
|
|
2,195
|
|
|
(1,113)
|
|
|
201
|
|
CCLP Series A
Preferred Units fair value adjustment (income) expense
|
146
|
|
|
(512)
|
|
|
1,309
|
|
|
846
|
|
Other (income)
expense, net
|
627
|
|
|
3,808
|
|
|
(324)
|
|
|
6,584
|
|
Loss before taxes and
discontinued operations
|
(5,711)
|
|
|
(9,686)
|
|
|
(22,776)
|
|
|
(29,619)
|
|
Provision for income
taxes
|
2,490
|
|
|
2,446
|
|
|
4,099
|
|
|
3,570
|
|
Loss before
discontinued operations
|
(8,201)
|
|
|
(12,132)
|
|
|
(26,875)
|
|
|
(33,189)
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
Loss from discontinued
operations (including 2018 loss on disposal of $31.5 million), net
of taxes
|
(345)
|
|
|
(21)
|
|
|
(771)
|
|
|
(41,727)
|
|
Net loss
|
(8,546)
|
|
|
(12,153)
|
|
|
(27,646)
|
|
|
(74,916)
|
|
Less: loss attributable
to noncontrolling interest
|
1,633
|
|
|
6,188
|
|
|
9,895
|
|
|
15,303
|
|
Net loss attributable
to TETRA stockholders
|
$
|
(6,913)
|
|
|
$
|
(5,965)
|
|
|
$
|
(17,751)
|
|
|
$
|
(59,613)
|
|
|
|
|
|
|
|
|
|
Basic per share information:
|
|
|
|
|
|
|
|
Loss before
discontinued operations attributable to TETRA
stockholders
|
$
|
(0.06)
|
|
|
$
|
(0.05)
|
|
|
$
|
(0.13)
|
|
|
$
|
(0.14)
|
|
Loss from discontinued
operations attributable to TETRA stockholders
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
(0.01)
|
|
|
$
|
(0.33)
|
|
Net loss attributable
to TETRA stockholders
|
$
|
(0.06)
|
|
|
$
|
(0.05)
|
|
|
$
|
(0.14)
|
|
|
$
|
(0.47)
|
|
Weighted average shares
outstanding
|
125,612
|
|
122,474
|
|
125,646
|
|
|
125,553
|
|
|
|
|
|
|
|
|
Diluted per share information:
|
|
|
|
|
|
|
|
Loss before
discontinued operations attributable to TETRA
stockholders
|
$
|
(0.06)
|
|
|
$
|
(0.05)
|
|
|
$
|
(0.13)
|
|
|
$
|
(0.14)
|
|
Loss from discontinued
operations attributable to TETRA stockholders
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
(0.01)
|
|
|
$
|
(0.33)
|
|
Net loss attributable
to TETRA stockholders
|
$
|
(0.06)
|
|
|
$
|
(0.05)
|
|
|
$
|
(0.14)
|
|
|
$
|
(0.47)
|
|
Weighted average shares
outstanding
|
125,612
|
|
|
122,474
|
|
125,646
|
|
|
125,553
|
|
Schedule B:
Financial Results By Segment
(Unaudited)(1)
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(In
Thousands)
|
Revenues by
segment:
|
|
|
|
|
|
|
|
Completion Fluids &
Products Division
|
$
|
79,767
|
|
|
$
|
76,556
|
|
|
$
|
141,348
|
|
|
$
|
129,660
|
|
Water & Flowback
Services Division
|
73,124
|
|
|
83,646
|
|
|
151,802
|
|
|
144,721
|
|
Compression
Division
|
135,905
|
|
|
99,924
|
|
|
239,374
|
|
|
185,346
|
|
Eliminations and
other
|
—
|
|
|
(54)
|
|
|
—
|
|
|
(274)
|
|
Total
revenues
|
$
|
288,796
|
|
|
$
|
260,072
|
|
|
$
|
532,524
|
|
|
$
|
459,453
|
|
|
|
|
|
|
|
|
|
Gross profit
(loss) by segment:
|
|
|
|
|
|
|
|
Completion Fluids &
Products Division
|
$
|
19,809
|
|
|
$
|
14,396
|
|
|
$
|
30,472
|
|
|
$
|
21,082
|
|
Water & Flowback
Services Division
|
7,490
|
|
|
18,631
|
|
|
16,341
|
|
|
30,035
|
|
Compression
Division
|
21,235
|
|
|
14,933
|
|
|
38,094
|
|
|
24,973
|
|
Corporate overhead and
eliminations
|
(168)
|
|
|
(159)
|
|
|
(331)
|
|
|
(306)
|
|
Total gross
profit
|
$
|
48,366
|
|
|
$
|
47,801
|
|
|
$
|
84,576
|
|
|
$
|
75,784
|
|
|
|
|
|
|
|
|
|
Income (loss)
before taxes by segment:
|
|
|
|
|
|
|
|
Completion Fluids &
Products Division
|
$
|
14,614
|
|
|
$
|
9,981
|
|
|
$
|
20,800
|
|
|
$
|
12,430
|
|
Water & Flowback
Services Division
|
2,460
|
|
|
8,311
|
|
|
4,691
|
|
|
14,859
|
|
Compression
Division
|
(3,483)
|
|
|
(8,655)
|
|
|
(11,284)
|
|
|
(22,673)
|
|
Corporate overhead and
eliminations
|
(19,302)
|
|
|
(19,323)
|
|
|
(36,983)
|
|
|
(34,235)
|
|
Total income (loss)
before taxes
|
$
|
(5,711)
|
|
|
$
|
(9,686)
|
|
|
$
|
(22,776)
|
|
|
$
|
(29,619)
|
|
Please note that the above results by Segment include special
charges and expenses. Please see Schedule F for details of those
special charges and expenses.
(1)
|
Excludes discontinued
operations
|
Schedule C:
Consolidated Balance Sheet (Unaudited)
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
(In
Thousands)
|
Balance Sheet:
|
|
|
|
Cash (excluding
restricted cash)
|
$
|
25,979
|
|
|
$
|
40,038
|
|
Accounts receivable,
net
|
195,424
|
|
|
187,592
|
|
Inventories
|
138,424
|
|
|
143,571
|
|
Assets of
discontinued operations
|
—
|
|
|
1,354
|
|
Note receivable,
including accrued interest
|
7,627
|
|
|
7,544
|
|
Other current
assets
|
25,392
|
|
|
20,592
|
|
PP&E,
net
|
860,435
|
|
|
853,931
|
|
Operating lease
right-of-use assets
|
57,924
|
|
|
—
|
|
Other
assets
|
127,981
|
|
|
130,905
|
|
Total
assets
|
$
|
1,439,186
|
|
|
$
|
1,385,527
|
|
|
|
|
|
Liabilities of
discontinued operations
|
$
|
2,510
|
|
|
$
|
4,145
|
|
Other current
liabilities
|
204,952
|
|
|
196,206
|
|
Long-term debt
(1)
|
856,482
|
|
|
815,560
|
|
Long-term portion of
asset retirement obligations
|
12,468
|
|
|
12,202
|
|
CCLP Series A
Preferred
|
7,894
|
|
|
27,019
|
|
Warrants
liability
|
960
|
|
|
2,073
|
|
Operating lease
liabilities
|
47,398
|
|
|
—
|
|
Other long-term
liabilities
|
11,831
|
|
|
15,573
|
|
Equity
|
294,691
|
|
|
312,749
|
|
Total liabilities and
equity
|
$
|
1,439,186
|
|
|
$
|
1,385,527
|
|
|
|
(1)
|
Please see Schedule D
for the individual debt obligations of TETRA and CSI Compressco
LP.
|
Schedule D: Long-Term Debt (Unaudited)
TETRA Technologies Inc. and its subsidiaries, other than
CSI Compressco LP and its subsidiaries, are obligated under an
asset-based bank credit agreement and term credit agreement,
neither of which are obligations of CSI Compressco LP and its
subsidiaries. CSI Compressco LP and its subsidiaries are obligated
under a separate asset-based bank credit agreement and two series
of senior notes, neither of which are obligations of TETRA and its
other subsidiaries. Amounts presented are net of deferred financing
costs.
|
June 30, 2019
|
|
December 31, 2018
|
|
(In
Thousands)
|
TETRA
|
|
|
|
Asset-Based Credit
Agreement
|
$
|
18,507
|
|
|
$
|
—
|
|
Term Credit
Agreement
|
203,602
|
|
|
182,547
|
|
TETRA total
debt
|
222,109
|
|
|
182,547
|
|
Less current
portion
|
—
|
|
|
—
|
|
TETRA total long-term debt
|
$
|
222,109
|
|
|
$
|
182,547
|
|
|
|
|
|
CSI Compressco LP
|
|
|
|
CCLP Credit
Agreement
|
—
|
|
|
—
|
|
7.25% Senior
Notes
|
290,615
|
|
|
289,797
|
|
7.50% Senior Secured
Notes
|
343,758
|
|
|
343,216
|
|
Total debt
|
634,373
|
|
|
633,013
|
|
Less current
portion
|
—
|
|
|
—
|
|
CCLP total long-term debt
|
$
|
634,373
|
|
|
$
|
633,013
|
|
Consolidated total long-term
debt
|
$
|
856,482
|
|
|
$
|
815,560
|
|
Schedule E: Statement Regarding Use of Non-GAAP
Financial Measures
In addition to financial results determined in accordance
with GAAP, this press release may include the following non-GAAP
financial measures for the Company: net debt; adjusted consolidated
and segment income (loss) before taxes and special charges;
adjusted diluted earnings (loss) per share before discontinued
operations; consolidated and segment adjusted EBITDA; and TETRA
only adjusted free cash flow and TETRA only free cash flow from
continuing operations; and segment adjusted EBITDA as a percent of
revenue. The following schedules provide reconciliations of these
non-GAAP financial measures to their most directly comparable GAAP
measures. The non-GAAP financial measures should be considered in
addition to, not as a substitute for, financial measures prepared
in accordance with GAAP, as more fully discussed in the Company's
financial statements and filings with the Securities and Exchange
Commission.
Management believes that the exclusion of the special
charges from the historical results of operations enables
management to evaluate more effectively the Company's operations
over the prior periods and to identify operating trends that could
be obscured by the excluded items.
Adjusted income (loss) before taxes (and adjusted income
(loss) before taxes as a percent of revenue) is defined as the
Company's (or the Segment's) income (loss) before taxes excluding
certain special or other charges (or credits). Adjusted income
(loss) before taxes (and adjusted income (loss) before taxes as a
percent of revenue) is used by management as a supplemental
financial measure to assess financial performance, without regard
to charges or credits that are considered by management to be
outside of its normal operations.
Adjusted diluted earnings (loss) per share before
discontinued operations is defined as the Company's diluted
earnings (loss) per share excluding certain special or other
charges (or credits) and using a normalized effective income tax
rate. Adjusted diluted earnings (loss) per share is used by
management as a supplemental financial measure to assess financial
performance, without regard to charges or credits that are
considered by management to be outside of its normal
operations.
Adjusted EBITDA before discontinued operations (and
Adjusted EBITDA before discontinued operations as a percent of
revenue) is defined as earnings before interest, taxes,
depreciation, amortization, impairments and certain non-cash
charges and non-recurring adjustments. Adjusted EBITDA before
discontinued operations (and Adjusted EBITDA before discontinued
operations as a percent of revenue) is used by management as a
supplemental financial measure to assess the financial performance
of the Company's assets, without regard to financing methods,
capital structure or historical cost basis and to assess the
Company's ability to incur and service debt and fund capital
expenditures.
TETRA only adjusted free cash flow is a non-GAAP measure
that the Company defines as cash from TETRA's operations, excluding
cash settlements of Maritech AROs, less capital expenditures net of
sales proceeds and cost of equipment sold, and including cash
distributions to TETRA from CSI Compressco LP. TETRA only adjusted
free cash flow from continuing operations is defined as TETRA only
adjusted free cash flow less discontinued operations EBITDA and
discontinued operations capital expenditures. Management uses this
supplemental financial measure to:
- assess the Company's ability to retire debt;
- evaluate the capacity of the Company to further invest
and grow; and
- to measure the performance of the Company as compared to
its peer group.
TETRA only adjusted free cash flow and TETRA only adjusted
free cash flow from continuing operations do not necessarily imply
residual cash flow available for discretionary expenditures, as
they exclude cash requirements for debt service or other
non-discretionary expenditures that are not deducted.
TETRA net debt is defined as the sum of the carrying value
of long-term and short-term debt on its consolidated balance sheet,
less cash, excluding restricted cash on the consolidated balance
sheet and excluding the debt and cash of CSI Compressco LP.
Management views TETRA net debt as a measure of TETRA's ability to
reduce debt, add to cash balances, pay dividends, repurchase stock,
and fund investing and financing activities.
Schedule F:
Special Items (Unaudited)
|
|
Three Months Ended
|
|
June 30, 2019
|
|
IncCome (loss)
before taxes
and
discontinued
operations
|
Provision
(Benefit) for
Tax
|
Noncont.
Interest
|
Net Income
Attributable
to TETRA
Stockholders
|
Diluted EPS
|
|
(In Thousands, Except
per Share Amounts)
|
Income (loss)
attributable to TETRA stockholders, excluding special items and
discontinued operations
|
$
|
(2,545)
|
|
$
|
(530)
|
|
$
|
(11)
|
|
$
|
(2,004)
|
|
$
|
(0.02)
|
|
Stock Warrant fair
value adjustment
|
1,520
|
|
319
|
|
—
|
|
1,201
|
|
0.01
|
|
Convertible Series A
preferred fair value adjustments
|
(146)
|
|
(35)
|
|
(74)
|
|
(37)
|
|
(0.00)
|
|
5% Cash Redemption on
CCLP Series A Preferred
|
(546)
|
|
(115)
|
|
(278)
|
|
(153)
|
|
(0.00)
|
|
SwiftWater Earnout
adjustment
|
400
|
|
84
|
|
—
|
|
316
|
|
0.00
|
|
Lee Plant Facility
Vandalism
|
289
|
|
61
|
|
—
|
|
228
|
|
0.00
|
|
CEO
Retirement
|
(1,843)
|
|
(387)
|
|
—
|
|
(1,456)
|
|
(0.01)
|
|
Transaction
Expense
|
(376)
|
|
(79)
|
|
(168)
|
|
(129)
|
|
(0.00)
|
|
Inventory
Adjustment
|
(153)
|
|
(32)
|
|
(68)
|
|
(53)
|
|
(0.00)
|
|
Impairments and other
charges
|
(2,311)
|
|
(485)
|
|
(1,034)
|
|
(792)
|
|
(0.01)
|
|
Effect of deferred tax
valuation allowance and other related tax adjustments
|
—
|
3,689
|
|
—
|
(3,689)
|
|
(0.03)
|
|
Net income (loss)
before discontinued operations
|
(5,711)
|
|
2,490
|
|
(1,633)
|
|
(6,568)
|
|
(0.06)
|
|
Loss from discontinued
operations
|
|
|
|
(345)
|
|
0.00
|
|
Net Income (loss)
attributable to TETRA stockholders, as reported
|
|
|
|
$
|
(6,913)
|
|
$
|
(0.06)
|
|
|
Three Months Ended
|
|
March 31, 2019
|
|
Income (loss)
before taxes
and
discontinued
operations
|
Provision
(Benefit) for
Tax
|
Noncont.
Interest
|
Net Income
Attributable
to TETRA
Stockholders
|
Diluted EPS
|
|
(In Thousands, Except
per Share Amounts)
|
Income (loss)
attributable to TETRA stockholders, excluding special items and
discontinued operations
|
$
|
(14,841)
|
|
$
|
(3,324)
|
|
$
|
(6,472)
|
|
$
|
(5,045)
|
|
$
|
(0.04)
|
|
Stock Warrant fair
value adjustment
|
(407)
|
|
(85)
|
|
—
|
|
(322)
|
|
0.00
|
|
Convertible Series A
preferred fair value adjustments
|
(1,163)
|
|
(244)
|
|
(1,333)
|
|
414
|
|
0.00
|
|
5% Cash Redemption on
CCLP Series A Preferred
|
(372)
|
|
(78)
|
|
(457)
|
|
163
|
|
0.00
|
|
SwiftWater Earnout
adjustment
|
400
|
|
84
|
|
—
|
|
316
|
|
0.00
|
|
Lee Plant Facility
Vandalism
|
(536)
|
|
(113)
|
|
—
|
|
(423)
|
|
0.00
|
|
Impairments and other
charges
|
(146)
|
|
(31)
|
|
—
|
|
(115)
|
|
0.00
|
|
Effect of deferred tax
valuation allowance and other related tax adjustments
|
—
|
|
5,400
|
|
—
|
|
(5,400)
|
|
(0.04)
|
|
Net income (loss)
before discontinued operations
|
(17,065)
|
|
1,609
|
|
(8,262)
|
|
(10,412)
|
|
(0.09)
|
|
Loss from discontinued
operations
|
|
|
|
(426)
|
|
(0.00)
|
|
Net Income (loss)
attributable to TETRA stockholders, as reported
|
|
|
|
$
|
(10,838)
|
|
$
|
(0.09)
|
|
|
Three Months Ended
|
|
June 30, 2018
|
|
Income (loss)
before taxes
and
discontinued
operations
|
Provision
(Benefit) for
Tax
|
Noncont.
Interest
|
Net Income
Attributable
to TETRA
Stockholders
|
Diluted EPS
|
|
(In Thousands, Except
per Share Amounts)
|
Income (loss)
attributable to TETRA stockholders, excluding unusual
charges
|
$
|
(3,620)
|
|
$
|
(343)
|
|
$
|
(6,593)
|
|
$
|
3,316
|
|
$
|
0.03
|
|
Severance
expense
|
(43)
|
|
(9)
|
|
(9)
|
|
(25)
|
|
0.00
|
|
Stock warrant fair
value adjustment
|
(2,195)
|
|
(461)
|
|
—
|
|
(1,734)
|
|
(0.01)
|
|
Convertible Series A
preferred fair value adjustments
|
512
|
|
108
|
|
414
|
|
(10)
|
|
0.00
|
|
Transaction
costs
|
(40)
|
|
(8)
|
|
—
|
|
(32)
|
|
0.00
|
|
SwiftWater Earnout
Adjustment
|
(4,300)
|
|
(903)
|
|
—
|
|
(3,397)
|
|
(0.03)
|
|
Effect of deferred tax
valuation allowance and other related tax adjustments
|
—
|
|
4,062
|
|
—
|
|
(4,062)
|
|
(0.03)
|
|
Net income (loss)
before discontinued operations
|
(9,686)
|
|
2,446
|
|
(6,188)
|
|
(5,944)
|
|
(0.05)
|
|
Loss from Discontinued
Operations
|
|
|
|
(21)
|
|
0.00
|
|
Net Income (loss)
attributable to TETRA stockholders, as reported
|
|
|
|
(5,965)
|
|
$
|
(0.05)
|
|
Schedule G:
Non-GAAP Reconciliation to GAAP Financials
(Unaudited)*
|
|
|
Three Months Ended
|
|
June 30, 2019
|
|
Net Income
(Loss),
as
reported
|
Tax
Provision
|
Income
(Loss)
Before
Tax, as
Reported
|
Impairments
& Special
Charges
|
Adjusted
Income
(Loss)
Before
Tax
|
Adjusted
Interest
Expense,
Net
|
Adjusted Depreciation
&
Amortization
|
Equity
Comp.
Expense
|
Adjusted
EBITDA
|
|
(In
Thousands)
|
Completion Fluids &
Products Division
|
|
|
$
|
14,614
|
|
$
|
(289)
|
|
$
|
14,325
|
|
$
|
(157)
|
|
$
|
3,723
|
|
$
|
—
|
|
$
|
17,891
|
|
Water & Flowback
Services Division
|
|
|
2,460
|
|
(400)
|
|
2,060
|
|
(8)
|
|
8,871
|
|
—
|
|
10,923
|
|
Compression
Division
|
|
|
(3,483)
|
|
3,607
|
|
124
|
|
12,998
|
|
19,054
|
|
590
|
|
32,766
|
|
Eliminations and
other
|
|
|
1
|
|
—
|
|
1
|
|
—
|
|
(3)
|
|
—
|
|
(2)
|
|
Subtotal
|
|
|
13,592
|
|
2,918
|
|
16,510
|
|
12,833
|
|
31,645
|
|
590
|
|
61,578
|
|
Corporate and
other
|
|
|
(19,303)
|
|
268
|
|
(19,035)
|
|
5,696
|
|
172
|
|
1,673
|
|
(11,494)
|
|
TETRA excluding Discontinued
Operations
|
$
|
(8,201)
|
|
$
|
2,490
|
|
$
|
(5,711)
|
|
$
|
3,186
|
|
$
|
(2,525)
|
|
$
|
18,529
|
|
$
|
31,817
|
|
$
|
2,263
|
|
$
|
50,084
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
Net
Income
(Loss),
as
reported
|
Tax
Provision
|
Income
(Loss)
Before
Tax, as
Reported
|
Impairments
& Special
Charges
|
Adjusted
Income
(Loss)
Before
Tax
|
Interest
Expense
|
Adjusted Depreciation
&
Amortization
|
Equity
Comp.
Expense
|
Adjusted
EBITDA
|
|
(In
Thousands)
|
Completion Fluids &
Products Division
|
|
|
$
|
6,186
|
|
$
|
683
|
|
$
|
6,869
|
|
$
|
(179)
|
|
$
|
3,665
|
|
$
|
—
|
|
$
|
10,355
|
|
Water & Flowback
Services Division
|
|
|
2,231
|
|
(400)
|
|
1,831
|
|
4
|
|
8,267
|
|
—
|
|
10,102
|
|
Compression
Division
|
|
|
(7,801)
|
|
1,610
|
|
(6,191)
|
|
13,213
|
|
18,532
|
|
365
|
|
25,919
|
|
Eliminations and
other
|
|
|
6
|
|
—
|
|
6
|
|
(1)
|
|
(4)
|
|
—
|
|
1
|
|
Subtotal
|
|
|
622
|
|
1,893
|
|
2,515
|
|
13,037
|
|
30,460
|
|
365
|
|
46,377
|
|
Corporate and
other
|
|
|
(17,687)
|
|
331
|
|
(17,356)
|
|
5,342
|
|
168
|
|
1,800
|
|
(10,046)
|
|
TETRA excluding Discontinued
Operations
|
$
|
(18,674)
|
|
$
|
1,609
|
|
$
|
(17,065)
|
|
$
|
2,224
|
|
$
|
(14,841)
|
|
$
|
18,379
|
|
$
|
30,628
|
|
$
|
2,165
|
|
$
|
36,331
|
|
|
Three Months Ended
|
|
June 30, 2018
|
|
Net
Income
(Loss),
as
reported
|
Tax
Provision
|
Income
(Loss)
Before
Tax, as
Reported
|
Impairments
& Special Charges
|
Adjusted
Income
(Loss)
Before
Tax
|
Interest
Expense
|
Adjusted Depreciation &
Amortization
|
Equity
Comp.
Expense
|
Adjusted
EBITDA
|
|
(In
Thousands)
|
Completion Fluids &
Products Division
|
|
|
$
|
9,981
|
|
$
|
—
|
|
$
|
9,981
|
|
$
|
(131)
|
|
$
|
3,875
|
|
$
|
—
|
|
$
|
13,725
|
|
Water & Flowback
Services Division
|
|
|
8,311
|
|
4,330
|
|
12,641
|
|
(1)
|
|
7,497
|
|
—
|
|
20,137
|
|
Compression
Division
|
|
|
(8,655)
|
|
(499)
|
|
(9,154)
|
|
13,634
|
|
17,448
|
|
496
|
|
22,424
|
|
Eliminations and
other
|
|
|
4
|
|
—
|
|
4
|
|
—
|
|
(5)
|
|
—
|
|
(1)
|
|
Subtotal
|
|
|
9,641
|
|
3,831
|
|
13,472
|
|
13,502
|
|
28,815
|
|
496
|
|
56,285
|
|
Corporate and
other
|
|
|
(19,327)
|
|
2,236
|
|
(17,091)
|
|
4,877
|
|
164
|
|
2,050
|
|
(10,000)
|
|
TETRA excluding Discontinued
Operations
|
$
|
(12,132)
|
|
$
|
2,446
|
|
$
|
(9,686)
|
|
$
|
6,067
|
|
$
|
(3,619)
|
|
$
|
18,379
|
|
$
|
28,979
|
|
$
|
2,546
|
|
$
|
46,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Excludes the impact
from discontinued operations.
|
Schedule H: Non-GAAP Reconciliation of TETRA Net Debt
(Unaudited)
The cash and debt positions of TETRA and CSI Compressco LP
as of June 30, 2019, are shown below.
TETRA and CSI Compressco LP's debt agreements are distinct and
separate with no cross default provisions, no cross collateral
provisions and no cross guarantees. Management believes that the
most appropriate method to analyze the debt positions of each
company is to view them separately, as noted below.
The following reconciliation of net debt is presented as a
supplement to financial results prepared in accordance with
GAAP.
|
June 30, 2019
|
|
TETRA
|
|
CCLP
|
|
Consolidated
|
|
(In
Millions)
|
Non-restricted
cash
|
$
|
21.7
|
|
|
$
|
4.3
|
|
|
$
|
26.0
|
|
|
|
|
|
|
|
Carrying value of
long-term debt:
|
|
|
|
|
|
Asset-Based Credit
Agreement
|
18.5
|
|
|
—
|
|
|
18.5
|
|
Term Credit
Agreement
|
203.6
|
|
|
—
|
|
|
203.6
|
|
Senior Notes
outstanding
|
—
|
|
|
634.4
|
|
|
634.4
|
|
Net debt
|
$
|
200.4
|
|
|
$
|
630.1
|
|
|
$
|
830.5
|
|
Schedule I:
Non-GAAP Reconciliation to TETRA Only Adjusted Free Cash Flow
(Unaudited) *
|
|
|
Three Months Ended
|
|
June 30, 2019
|
|
March 31, 2019
|
|
June 30, 2018
|
|
(In
Thousands)
|
Consolidated
|
|
|
|
|
|
Net cash provided
(used) by operating activities
|
$
|
30,965
|
|
|
$
|
7,412
|
|
|
$
|
19,134
|
|
ARO
settlements
|
—
|
|
|
—
|
|
|
—
|
|
Capital expenditures,
net of sales proceeds
|
(27,345)
|
|
|
(32,045)
|
|
|
(38,318)
|
|
Consolidated adjusted
free cash flow
|
$
|
3,620
|
|
|
$
|
(24,633)
|
|
|
$
|
(19,184)
|
|
|
|
|
|
|
|
CSI Compressco LP
|
|
|
|
|
|
Net cash provided
(used) by operating activities
|
$
|
8,710
|
|
|
$
|
31,632
|
|
|
$
|
(3,908)
|
|
Capital expenditures,
net of sales proceeds
|
(16,434)
|
|
|
(23,152)
|
|
|
(30,223)
|
|
CSI Compressco free
cash flow
|
$
|
(7,724)
|
|
|
$
|
8,480
|
|
|
$
|
(34,131)
|
|
|
|
|
|
|
|
TETRA Only
|
|
|
|
|
|
Cash from operating
activities
|
$
|
22,255
|
|
|
$
|
(24,220)
|
|
|
$
|
23,042
|
|
ARO
settlements
|
—
|
|
|
—
|
|
|
—
|
|
Investment in CCLP
Compressors
|
(8,740)
|
|
|
(2,402)
|
|
|
—
|
|
Capital expenditures,
net of sales proceeds
|
(10,911)
|
|
|
(8,893)
|
|
|
(8,095)
|
|
Free cash flow before
ARO settlements
|
2,604
|
|
|
(35,515)
|
|
|
14,947
|
|
Distributions from CSI
Compressco LP
|
168
|
|
|
169
|
|
|
2,992
|
|
Adjusted TETRA only
free cash flow
|
$
|
2,772
|
|
|
$
|
(35,346)
|
|
|
$
|
17,939
|
|
|
*Includes the impact
from discontinued operations. See schedule J to exclude the
impact from discontinued operations.
|
Schedule J:
Non-GAAP Reconciliation to TETRA Only Adjusted Free Cash Flow From
Continuing Operations (Unaudited)
|
|
|
Three Months Ended
|
|
Jun 30, 2019
|
|
Mar 31, 2019
|
|
Jun 30, 2018
|
|
|
|
|
(In
Thousands)
|
TETRA Only
|
|
|
|
|
|
Cash from operating
activities
|
$
22,255
|
|
$
(24,220)
|
|
$
23,042
|
|
|
|
|
|
|
Less: Discontinued
operations operating activities (adjusted EBITDA)
|
(345)
|
|
(426)
|
|
(21)
|
|
|
|
|
|
|
Cash from continued
operating activities
|
22,600
|
|
(23,794)
|
|
23,063
|
|
|
|
|
|
|
Less: Continuing
operations capital expenditures
|
(10,911)
|
|
(8,893)
|
|
(8,037)
|
Less: Investment in
CCLP Compressors
|
(8,740)
|
|
(2,402)
|
|
__
|
|
|
|
|
|
|
Plus: Distributions
from CSI Compressco LP
|
168
|
|
169
|
|
2,992
|
|
|
|
|
|
|
TETRA only adjusted
free cash flow from continuing operations
|
$
3,117
|
|
$
(34,920)
|
|
$
18,018
|
|
|
|
|
|
|
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SOURCE TETRA Technologies, Inc.