THE WOODLANDS, Texas,
Nov. 9, 2017 /PRNewswire/
-- TETRA Technologies, Inc. ("TETRA" or the "Company")
(NYSE:TTI) announced consolidated third quarter 2017 earnings per
share attributable to TETRA stockholders of $0.03, which compares to consolidated losses of
$0.10 per share attributable to TETRA
stockholders in the second quarter of 2017 and $0.16 per share in the third quarter of 2016.
TETRA's adjusted per share results attributable to TETRA
stockholders for the third quarter of 2017, excluding Maritech and
special items, were earnings per share of $0.04, which compares to adjusted losses per
share of $0.04 in the second quarter
of 2017 and $0.05 in the third
quarter of 2016, also excluding Maritech and special items. Third
quarter 2017 revenue of $216 million
increased 4% from the second quarter of 2017 and 23% from the third
quarter of last year. The sequential improvement in revenue
was driven by stronger offshore and onshore Fluids Division and
Production Testing Division activity.
(Adjusted earnings/loss per share is a non-GAAP
financial measure that is reconciled to the nearest GAAP measure in
the accompanying schedules.)
Third Quarter
2017 Results
|
|
Three Months
Ended
|
|
September 30,
2017
|
|
June 30,
2017
|
|
September 30,
2016
|
|
(In Thousands, Except
per Share Amounts)
|
Revenue
|
$
|
216,364
|
|
|
$
|
208,369
|
|
|
$
|
176,553
|
|
Net income (loss)
attributable to TETRA stockholders
|
3,145
|
|
|
(10,991)
|
|
|
(15,009)
|
|
Adjusted
EBITDA(1)
|
45,079
|
|
|
28,537
|
|
|
36,927
|
|
GAAP EPS attributable
to TETRA stockholders
|
0.03
|
|
|
(0.10)
|
|
|
(0.16)
|
|
Adjusted EPS
attributable to TETRA stockholders(1)
|
0.04
|
|
|
(0.04)
|
|
|
(0.05)
|
|
Consolidated net cash
provided (used) by operating activities
|
37,395
|
|
|
19,977
|
|
|
(7,830)
|
|
TETRA only adjusted
free cash flow(1)
|
$
|
17,818
|
|
|
$
|
6,090
|
|
|
$
|
(13,821)
|
|
|
|
(1)
|
Non-GAAP financial
measures are reconciled to GAAP in the schedules below.
|
Highlights include:
- Fluids Division revenue increased 5% sequentially and 49%
compared to the third quarter of 2016 reflecting the completion of
a significant Gulf of Mexico CS Neptune® completion
fluids project that started late in the second quarter of
2017. Additionally, stronger US onshore fracking activity
resulted in a 46% sequential increase in water management revenue,
which was double compared to the same quarter a year
ago.
- Compression Division revenues decreased 5% over the second
quarter reflecting the timing in the shipment of new equipment
sales. Overall service fleet utilization improved
sequentially by 250 basis points to 81.4%; new equipment orders
were $37 million (compared to
$12 million in the second quarter of
2017); and the backlog for new equipment sales increased to
$53.6 million, the highest since the
start of the downturn.
- Consolidated net cash provided by operating activities was
$37.4 million in the third quarter
compared to $20 million in the second
quarter of 2017. TETRA only adjusted free cash flow was
$17.8 million, an improvement of
$11.7 million over the second
quarter. (See Schedule G for the reconciliation of TETRA only
adjusted free cash flow to GAAP.)
Stuart M. Brightman, TETRA's
President and Chief Executive Officer, stated, "We saw strong
positive momentum across all divisions in the third quarter,
especially with offshore completion fluids, onshore water
management services, production testing and contract compressions
services. All our divisions reported improved adjusted EBITDA
compared to the second quarter of 2017. GAAP EPS attributable
to TETRA stockholders for the quarter was $0.03, a significant improvement sequentially and
compared to a year ago.
"Fluids Division revenue for the third quarter of 2017 exceeded
$90 million for the first time since
the fourth quarter of 2015. Revenue of $93.4 million increased 5% sequentially and 49%
compared to the same quarter of 2016. We completed our latest Gulf
of Mexico CS Neptune® completion fluid project during
the third quarter, and immediately mobilized to the next project,
also in the Gulf of Mexico. This project is expected to be
completed during November. We also saw a step change increase
in water management revenue led by stronger activity in the Permian
and the Delaware and MidCon
markets. As a result of this significant increase in
activity, as well as improved pricing, we have accelerated
investments of additional lay flat hose to take advantage of the
strong market. International offshore completion fluids sales
were also very strong, led by higher activity in the Middle East, and led to the highest revenue
for this business since the first quarter of 2014. Fluids
Division income before taxes was $24.9
million (26.6% of revenue), while Adjusted EBITDA was
$30.8 million (33.0% of revenue).
"Third quarter 2017 Compression Division revenue declined
sequentially 5% to $71.6 million,
reflecting the timing on the shipment of new equipment.
During the quarter, utilization of our service fleet improved
sequentially by 250 basis points to 81.4%. Utilization of our
larger horsepower equipment (greater than 800 HP, which are
typically deployed on gathering systems) was 90.1%, up from 89.6%
at the end of the second quarter of 2017. New equipment orders were
$37 million, resulting in a book to
bill ratio of 4.9 times and a backlog of $53.6 million. All these indicators reflect
the growing demand from our customers to build out gathering
systems in the Delaware Basin and
to add capacity to existing systems, particularly in the Permian
Basin. We are also seeing an improving pricing environment.
As a result, we have initiated orders for additional large
horsepower compressors targeted for gathering systems.
Compression Division loss before taxes was $7.0 million (including a favorable $1.3 million non-cash adjustment to the fair
market value of the CCLP Series A Preferred units and a
$3.0 million favorable insurance
settlement for equipment previously damaged), compared to a loss of
$6.2 million in the second quarter of
2017. Adjusted EBITDA was $20.9
million (compared to $17.5
million in the second quarter of 2017). On
October 19, 2017, CSI Compressco LP
declared a cash distribution attributable to the third quarter of
2017 of $0.1875 per outstanding
common unit. The distribution coverage ratio was 1.56X for the
third quarter of 2017.
"Third quarter 2017 revenue for the Production Testing Division
increased sequentially by 19%, to $18.9
million, and by 26% compared to the same quarter of 2016,
led by stronger activity for both domestic and international.
Production Testing loss before taxes was $1.4 million, while Adjusted EBITDA was positive
at $1.1 million (5.6% of revenue).
The improvement of third quarter Adjusted EBITDA represented 56% of
the incremental revenue over the second quarter, and 39% of the
incremental revenue over the same quarter of 2016.
"Our Offshore Services segment revenue improved 12% to
$32.7 million compared to the prior
year quarter on stronger activity levels and by 16% sequentially,
reflecting the seasonality of the business. Profit
before taxes was $0.5 million, while
Adjusted EBITDA was $3.3 million.
Adjusted EBITDA was negatively impacted by approximately
$2 million as a result of Hurricane
Harvey in the third quarter."
Free Cash Flow and Balance Sheet
Consolidated net cash provided by operating activities for the
third quarter of 2017 was $37.4
million, compared to $20
million in the second quarter of 2017. TETRA only
adjusted free cash flow in the third quarter of 2017 was
$17.8 million, an improvement of
$11.7 million from the second quarter
of 2017. Consolidated debt was $624
million and TETRA only debt was $117
million, an improvement in TETRA only debt of $20.2 million compared to the end of the second
quarter of 2017. As a result of the improved earnings and
free cash flow, no amounts were outstanding on TETRA's revolving
credit facility at the end of September. Cash on hand for
TETRA only was $13.5 million.
With no amounts outstanding on TETRA's revolving credit facility
and $13.5 million of cash on hand,
TETRA is positioned to invest opportunistically into the recovering
market.
Special items and Maritech
Consolidated third quarter GAAP pre-tax earnings included a
favorable impact from non-cash items of $1.2
million (primarily the fair value adjustment of the CSI
Compressco Series A Convertible Preferred Units) and $3.0 million insurance recovery for CSI
Compressco during the quarter.
Special items, including Maritech, that were excluded to arrive
at Adjusted EBITDA for the third quarter, as detailed on Schedule
E, include the following:
- Maritech pre-tax loss of $0.9
million
- $1.1 million non-cash income for
a fair value adjustment of the CSI Compressco Series A Convertible
Preferred units
- $0.6 million of software
implementation training expense for CSI Compressco
- $0.1 million of other special
charges
Additionally, a normalized tax rate of 30% is reflected in
Adjusted Net Income, as shown on Schedule E.
Financial Guidance
We expect total year TETRA only adjusted free cash flow to be
between $15 million and $30 million
in 2017 as we are accelerating investments in lay flat hose to take
advantage of strong demand for water transfer services.
No reconciliation of the forecasted range of TETRA only adjusted
free cash flow for the full year 2017 to the nearest GAAP measure
is included in this release because the reconciliation would
require presenting forecasted information for CSI Compressco that
is not publicly disclosed.
Conference Call
TETRA will host a conference call to discuss these results
today, November 9, 2017, at
10:30 a.m. ET. The phone number for
the call is 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 10101596, for one week
following the conference call and the archived web call will be
available through the Company's website for thirty days following
the conference call.
Investor Contact
TETRA Technologies, Inc., The
Woodlands, Texas
Stuart M. Brightman,
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: Special Items
Schedule F: Non-GAAP Reconciliation to GAAP Financials
Schedule G: Non-GAAP Reconciliation to TETRA Only Adjusted Free
Cash Flow
Schedule H: Non-GAAP Reconciliation of TETRA Net Debt
Company Overview and Forward-Looking Statements
TETRA 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,
offshore rig cooling, compression services and equipment, and
selected offshore services, including well plugging and
abandonment, decommissioning, and diving. 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," "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 results
of operational business segments for 2017, anticipated benefits
from CSI Compressco following the acquisition of Compressor
Systems, Inc. (CSI) in 2014, including levels of 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, including the ability of CSI
Compressco to successfully integrate the operations of CSI and
recognize the anticipated benefits of the acquisition. 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 Report on Form 10-K for the year ended
December 31, 2016, 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
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(In Thousands, Except
per Share Amounts)
|
Revenue
|
$
|
216,364
|
|
|
$
|
176,553
|
|
|
$
|
592,734
|
|
|
$
|
521,542
|
|
|
|
|
|
|
|
|
|
Cost of sales,
services, and rentals
|
146,009
|
|
|
115,948
|
|
|
423,128
|
|
|
361,982
|
|
Depreciation,
amortization, and accretion
|
29,200
|
|
|
31,852
|
|
|
87,298
|
|
|
98,997
|
|
Impairments of
long-lived assets
|
—
|
|
|
—
|
|
|
—
|
|
|
10,927
|
|
Insurance
Recoveries
|
(2,352)
|
|
|
—
|
|
|
(2,352)
|
|
|
—
|
|
Total cost of
revenues
|
172,857
|
|
|
147,800
|
|
|
508,074
|
|
|
471,906
|
|
Gross profit
|
43,507
|
|
|
28,753
|
|
|
84,660
|
|
|
49,636
|
|
|
|
|
|
|
|
|
|
General and
administrative expense
|
31,208
|
|
|
28,589
|
|
|
90,896
|
|
|
89,381
|
|
Goodwill
impairment
|
—
|
|
|
—
|
|
|
—
|
|
|
106,205
|
|
Interest expense,
net
|
14,654
|
|
|
14,325
|
|
|
42,749
|
|
|
43,299
|
|
Warrants fair value
adjustment income
|
(47)
|
|
|
—
|
|
|
(11,568)
|
|
|
—
|
|
CCLP Series A
Preferred fair value adjustment
|
(1,137)
|
|
|
6,294
|
|
|
(4,340)
|
|
|
6,294
|
|
Litigation
arbitration award expense (income), net
|
38
|
|
|
—
|
|
|
(10,064)
|
|
|
—
|
|
Other (income)
expense, net
|
(668)
|
|
|
2,130
|
|
|
(94)
|
|
|
3,636
|
|
Income (loss) before
taxes
|
(541)
|
|
|
(22,585)
|
|
|
(22,919)
|
|
|
(199,179)
|
|
Provision (benefit)
for income taxes
|
797
|
|
|
1,443
|
|
|
4,290
|
|
|
1,804
|
|
Net income
(loss)
|
(1,338)
|
|
|
(24,028)
|
|
|
(27,209)
|
|
|
(200,983)
|
|
(Income) loss
attributable to noncontrolling interest
|
4,483
|
|
|
9,019
|
|
|
16,900
|
|
|
71,075
|
|
Net income (loss)
attributable to TETRA stockholders
|
$
|
3,145
|
|
|
$
|
(15,009)
|
|
|
$
|
(10,309)
|
|
|
$
|
(129,908)
|
|
|
|
|
|
|
|
|
|
Basic per share
information:
|
|
|
|
|
|
|
|
Net income (loss)
attributable to TETRA stockholders
|
$
|
0.03
|
|
|
$
|
(0.16)
|
|
|
$
|
(0.09)
|
|
|
$
|
(1.53)
|
|
Weighted average shares
outstanding
|
114,563
|
|
91,746
|
|
114,435
|
|
85,093
|
|
|
|
|
|
|
|
|
Diluted per share
information:
|
|
|
|
|
|
|
|
Net income (loss)
attributable to TETRA stockholders
|
$
|
0.03
|
|
|
$
|
(0.16)
|
|
|
$
|
(0.09)
|
|
|
$
|
(1.53)
|
|
Weighted average shares
outstanding
|
114,569
|
|
|
91,746
|
|
114,435
|
|
85,093
|
Schedule B: Financial Results By Segment (Unaudited)
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(In
Thousands)
|
Revenue by
segment:
|
|
|
|
|
|
|
|
Fluids
Division
|
$
|
93,442
|
|
|
$
|
62,610
|
|
|
$
|
255,483
|
|
|
$
|
182,556
|
|
Production Testing
Division
|
18,927
|
|
|
15,065
|
|
|
56,376
|
|
|
48,320
|
|
Compression
Division
|
71,611
|
|
|
70,718
|
|
|
212,482
|
|
|
228,504
|
|
Offshore
Division
|
|
|
|
|
|
|
|
Offshore
Services
|
32,668
|
|
|
29,239
|
|
|
69,290
|
|
|
65,604
|
|
Maritech
|
21
|
|
|
238
|
|
|
427
|
|
|
575
|
|
Intersegment
eliminations
|
—
|
|
|
(297)
|
|
|
—
|
|
|
(813)
|
|
Offshore Division
total
|
32,689
|
|
|
29,180
|
|
|
69,717
|
|
|
65,366
|
|
Eliminations and
other
|
(305)
|
|
|
(1,020)
|
|
|
(1,324)
|
|
|
(3,204)
|
|
Total
revenues
|
$
|
216,364
|
|
|
$
|
176,553
|
|
|
$
|
592,734
|
|
|
$
|
521,542
|
|
|
|
|
|
|
|
|
|
Gross profit
(loss) by segment:
|
|
|
|
|
|
|
|
Fluids
Division
|
$
|
31,359
|
|
|
$
|
15,369
|
|
|
$
|
67,828
|
|
|
$
|
29,445
|
|
Production Testing
Division
|
404
|
|
|
(2,032)
|
|
|
(374)
|
|
|
(8,054)
|
|
Compression
Division
|
11,015
|
|
|
12,353
|
|
|
24,711
|
|
|
33,035
|
|
Offshore
Division
|
|
|
|
|
|
|
|
Offshore
Services
|
1,592
|
|
|
3,459
|
|
|
(5,504)
|
|
|
(763)
|
|
Maritech
|
(737)
|
|
|
(297)
|
|
|
(1,675)
|
|
|
(3,709)
|
|
Intersegment
eliminations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Offshore Division
total
|
855
|
|
|
3,162
|
|
|
(7,179)
|
|
|
(4,472)
|
|
Corporate overhead and
eliminations
|
(126)
|
|
|
(99)
|
|
|
(326)
|
|
|
(318)
|
|
Total gross
profit
|
$
|
43,507
|
|
|
$
|
28,753
|
|
|
$
|
84,660
|
|
|
$
|
49,636
|
|
|
|
|
|
|
|
|
|
Income (loss)
before taxes by segment:
|
|
|
|
|
|
|
|
Fluids
Division
|
$
|
24,891
|
|
|
$
|
8,835
|
|
|
$
|
60,953
|
|
|
$
|
8,931
|
|
Production Testing
Division
|
(1,405)
|
|
|
(4,222)
|
|
|
(6,565)
|
|
|
(27,924)
|
|
Compression
Division
|
(7,014)
|
|
|
(14,862)
|
|
|
(27,527)
|
|
|
(123,602)
|
|
Offshore
Division
|
|
|
|
|
|
|
|
Offshore
Services
|
452
|
|
|
1,879
|
|
|
(12,328)
|
|
|
(5,792)
|
|
Maritech
|
(914)
|
|
|
(643)
|
|
|
(1,698)
|
|
|
(4,664)
|
|
Intersegment
eliminations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Offshore Division
total
|
(462)
|
|
|
1,236
|
|
|
(14,026)
|
|
|
(10,456)
|
|
Corporate overhead and
eliminations
|
(16,551)
|
|
|
(13,572)
|
|
|
(35,754)
|
|
|
(46,128)
|
|
Total income (loss)
before taxes
|
$
|
(541)
|
|
|
$
|
(22,585)
|
|
|
$
|
(22,919)
|
|
|
$
|
(199,179)
|
|
Please note that the above results by Segment include special
charges and expenses. Please see Schedule E for details of those
special items.
Schedule C: Consolidated Balance Sheet (Unaudited)
|
September 30,
2017
|
|
December 31,
2016
|
|
(In
Thousands)
|
Balance
Sheet:
|
|
|
|
Cash (excluding
restricted cash)
|
$
|
20,850
|
|
|
$
|
29,840
|
|
Accounts receivable,
net
|
152,872
|
|
|
114,284
|
|
Inventories
|
122,045
|
|
|
106,546
|
|
Other current
assets
|
19,664
|
|
|
25,121
|
|
PP&E,
net
|
895,870
|
|
|
945,451
|
|
Other
assets
|
90,109
|
|
|
94,298
|
|
Total
assets
|
$
|
1,301,410
|
|
|
$
|
1,315,540
|
|
|
|
|
|
Current portion of
decommissioning liabilities
|
$
|
492
|
|
|
$
|
1,451
|
|
Other current
liabilities
|
140,106
|
|
|
115,434
|
|
Long-term debt
(1)
|
624,126
|
|
|
623,730
|
|
Long-term portion of
decommissioning liabilities
|
56,025
|
|
|
54,027
|
|
CCLP Series A
Preferred
|
68,309
|
|
|
77,062
|
|
Warrant
liability
|
6,936
|
|
|
18,503
|
|
Other long-term
liabilities
|
22,906
|
|
|
24,867
|
|
Equity
|
382,510
|
|
|
400,466
|
|
Total liabilities and
equity
|
$
|
1,301,410
|
|
|
$
|
1,315,540
|
|
|
|
(1)
|
Please see Schedule D
for the separate debt obligations of TETRA and CSI Compressco
LP.
|
Schedule D: Long-Term Debt
TETRA Technologies Inc. and its subsidiaries, other than CSI
Compressco LP and its subsidiaries, are obligated under a bank
credit agreement and senior note, neither of which are obligations
of CSI Compressco LP and its subsidiaries. CSI Compressco LP and
its subsidiaries are obligated under a separate bank credit
agreement and senior notes, neither of which are obligations of
TETRA and its other subsidiaries. Amounts presented are net of
deferred financing costs.
|
September 30,
2017
|
|
December 31,
2016
|
|
(In
Thousands)
|
TETRA
|
|
|
|
Bank revolving line
of credit facility
|
$
|
—
|
|
|
$
|
3,229
|
|
TETRA 11% Senior
Note
|
117,355
|
|
|
116,411
|
|
TETRA total
debt
|
117,355
|
|
|
119,640
|
|
Less current
portion
|
—
|
|
|
—
|
|
TETRA total
long-term debt
|
$
|
117,355
|
|
|
$
|
119,640
|
|
|
|
|
|
CSI Compressco
LP
|
|
|
|
Bank Credit
Facility
|
$
|
218,977
|
|
|
$
|
217,467
|
|
7.25% Senior
Notes
|
287,794
|
|
|
286,623
|
|
Total debt
|
506,771
|
|
|
504,090
|
|
Less current
portion
|
—
|
|
|
—
|
|
CCLP total
long-term debt
|
$
|
506,771
|
|
|
$
|
504,090
|
|
Consolidated total
long-term debt
|
$
|
624,126
|
|
|
$
|
623,730
|
|
Non-GAAP Financial Measures
In addition to financial results determined in accordance with
GAAP, this news release includes the following non-GAAP financial
measures for the Company: net debt, adjusted consolidated and
segment income (loss) before taxes, excluding the Maritech segment
and special charges; consolidated and segment adjusted EBITDA; and
TETRA only adjusted free cash flow. 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 following the sale of essentially all
of Maritech's oil and gas properties, it is helpful to show the
Company's results, excluding the impact of the costs and charges
relating to the decommissioning of Maritech's remaining properties,
since these results will show the Company's historical results of
operations on a basis consistent with expected future
operations. Management also 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 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 (and Adjusted EBITDA as a percent of revenue) is
defined as earnings before interest, taxes, depreciation,
amortization, impairments and special charges or credits, equity
compensation, and allocated corporate overhead charges to our CSI
Compressco LP subsidiary, pursuant to our Omnibus Agreement, which
were reimbursed with CSI Compressco LP common units. Adjusted
EBITDA (and Adjusted EBITDA 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 defined 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 and debt restructuring costs. 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 of companies.
TETRA only adjusted free cash flow does not necessarily imply
residual cash flow available for discretionary expenditures, as it
excludes 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 E: Special Items, including Maritech
|
Three Months
Ended
|
|
September 30,
2017
|
|
Income
(Loss) Before
Tax
|
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 and
Maritech
|
$
|
(204)
|
|
$
|
(60)
|
|
$
|
(4,934)
|
|
$
|
4,790
|
|
$
|
0.04
|
|
Severance
expense
|
(24)
|
|
(7)
|
|
(5)
|
|
(12)
|
|
0.00
|
|
Stock warrant fair
value adjustment
|
47
|
|
14
|
|
—
|
|
33
|
|
0.00
|
|
CCLP Series A
Preferred fair value adjustment
|
1,137
|
|
341
|
|
827
|
|
(31)
|
|
0.00
|
|
Software
Implementation
|
(583)
|
|
(175)
|
|
(371)
|
|
(37)
|
|
0.00
|
|
Effect of deferred tax
valuation allowance and other related tax adj.
|
—
|
|
684
|
|
—
|
|
(684)
|
|
(0.01)
|
|
Maritech profit
(loss)
|
(914)
|
|
—
|
|
—
|
|
(914)
|
|
(0.01)
|
|
Net Income (loss)
attributable to TETRA stockholders, as reported
|
$
|
(541)
|
|
$
|
797
|
|
$
|
(4,483)
|
|
$
|
3,145
|
|
$
|
0.03
|
|
|
|
|
Three Months
Ended
|
|
June 30,
2017
|
|
Income
(Loss) Before
Tax
|
Provision
(Benefit) for
Tax
|
Noncont.
Interest
|
Net Income
(Loss)
Attributable
to TETRA
Stockholders
|
Diluted
EPS
|
|
(In Thousands, Except
per Share Amounts)
|
Income (loss)
attributable to TETRA stockholders, excluding unusual charges and
Maritech
|
$
|
(17,036)
|
|
$
|
(5,110)
|
|
$
|
(6,983)
|
|
$
|
(4,943)
|
|
$
|
(0.04)
|
|
Severance
expense
|
(589)
|
|
(176)
|
|
—
|
|
(413)
|
|
0.00
|
|
Stock warrant fair
value adjustment
|
5,545
|
|
1,663
|
|
—
|
|
3,882
|
|
0.03
|
|
Allowance for bad
debt
|
(198)
|
|
(59)
|
|
—
|
|
(139)
|
|
0.00
|
|
CCLP Series A
Preferred fair value adjustment
|
4,834
|
|
1,450
|
|
3,478
|
|
(94)
|
|
0.00
|
|
Legal award
|
(3,255)
|
|
(977)
|
|
—
|
|
(2,278)
|
|
(0.02)
|
|
Insurance
deductible
|
(200)
|
|
(60)
|
|
—
|
|
(140)
|
|
0.00
|
|
Software
Implementation
|
(196)
|
|
(59)
|
|
(123)
|
|
(14)
|
|
0.00
|
|
Effect of deferred tax
valuation allowance and other related tax adj.
|
—
|
|
6,731
|
|
—
|
|
(6,731)
|
|
(0.06)
|
|
Maritech profit
(loss)
|
(121)
|
|
—
|
|
—
|
|
(121)
|
|
—
|
|
Net Income (loss)
attributable to TETRA stockholders, as reported
|
$
|
(11,216)
|
|
$
|
3,403
|
|
$
|
(3,628)
|
|
$
|
(10,991)
|
|
$
|
(0.10)
|
|
|
|
|
Three Months
Ended
|
|
September 30,
2016
|
|
Income
(Loss) Before
Tax
|
Provision
(Benefit) for
Tax
|
Noncont.
Interest
|
Net Income
(Loss)
Attributable
to TETRA
Stockholders
|
Diluted
EPS
|
|
(In Thousands, Except
per Share Amounts)
|
Income (loss)
attributable to TETRA stockholders, excluding unusual charges and
Maritech
|
$
|
(11,428)
|
|
$
|
(3,428)
|
|
$
|
(3,019)
|
|
$
|
(4,981)
|
|
$
|
(0.05)
|
|
Severance
expense
|
(210)
|
|
(63)
|
|
(33)
|
|
(114)
|
|
—
|
|
Debt refinancing gain
on early retirement
|
397
|
|
119
|
|
309
|
|
(31)
|
|
—
|
|
Allowance for doubtful
accounts
|
(1,361)
|
|
(408)
|
|
(416)
|
|
(537)
|
|
(0.01)
|
|
Equity related
expenses
|
(9,340)
|
|
(2,802)
|
|
(5,860)
|
|
(678)
|
|
(0.01)
|
|
Maritech profit
(loss)
|
(643)
|
|
—
|
|
—
|
|
(643)
|
|
(0.01)
|
|
Net Income (loss)
attributable to TETRA stockholders, as reported
|
$
|
(22,585)
|
|
$
|
1,443
|
|
$
|
(9,019)
|
|
(15,009)
|
|
$
|
(0.16)
|
|
Schedule F: Non-GAAP Reconciliation to GAAP
Financials
|
Three Months
Ended
|
|
September 30,
2017
|
|
|
Net
Income
(Loss),
as
reported
|
Tax
Provision
|
Income
(Loss)
Before
Tax, as
Reported
|
Impairments
& Special
Items
|
Adjusted
Income
(Loss)
Before
Tax
|
Interest
Expense
|
Adjusted
Depreciation
&
Amortization
|
Equity
Comp.
Expense
|
Omnibus
Equity
|
Adjusted
EBITDA
|
|
|
(In
Thousands)
|
|
Fluids
Division
|
|
|
$
|
24,891
|
|
$
|
12
|
|
$
|
24,903
|
|
$
|
(8)
|
|
$
|
5,937
|
|
$
|
—
|
|
$
|
—
|
|
$
|
30,832
|
|
|
Production Testing
Division
|
|
|
(1,405)
|
|
—
|
|
(1,405)
|
|
(47)
|
|
2,518
|
|
—
|
|
—
|
|
1,066
|
|
|
Compression
Division
|
|
|
(7,014)
|
|
(545)
|
|
(7,559)
|
|
10,811
|
|
17,361
|
|
261
|
|
—
|
|
20,874
|
|
|
Offshore Services
Segment
|
|
|
452
|
|
4
|
|
456
|
|
—
|
|
2,886
|
|
—
|
|
—
|
|
3,342
|
|
|
Eliminations and
other
|
|
|
—
|
|
2
|
|
2
|
|
(1)
|
|
(4)
|
|
—
|
|
—
|
|
(3)
|
|
|
Subtotal
|
|
|
16,924
|
|
(527)
|
|
16,397
|
|
10,755
|
|
28,698
|
|
261
|
|
—
|
|
56,111
|
|
|
Corporate and
other
|
|
|
(16,551)
|
|
(46)
|
|
(16,597)
|
|
3,899
|
|
129
|
|
1,537
|
|
—
|
|
(11,032)
|
|
|
TETRA excluding
Maritech
|
|
|
373
|
|
(573)
|
|
(200)
|
|
14,654
|
|
28,827
|
|
1,798
|
|
—
|
|
45,079
|
|
|
Maritech
|
|
|
(914)
|
|
—
|
|
(914)
|
|
—
|
|
373
|
|
—
|
|
—
|
|
(541)
|
|
|
Total
TETRA
|
$
|
(1,338)
|
|
$
|
797
|
|
$
|
(541)
|
|
$
|
(573)
|
|
$
|
(1,114)
|
|
$
|
14,654
|
|
$
|
29,200
|
|
$
|
1,798
|
|
$
|
—
|
|
$
|
44,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
|
Net
Income
(Loss),
as
reported
|
Tax
Provision
|
Income
(Loss)
Before
Tax, as
Reported
|
Impairments
& Special
Items
|
Adjusted
Income
(Loss)
Before
Tax
|
Adjusted
Interest
Expense,
Net
|
Adjusted
Depreciation
&
Amortization
|
Equity
Comp.
Expense
|
Omnibus
Equity
|
Adjusted
EBITDA
|
|
|
(In
Thousands)
|
|
Fluids
Division
|
|
|
$
|
15,786
|
|
$
|
—
|
|
$
|
15,786
|
|
$
|
27
|
|
$
|
5,870
|
|
$
|
—
|
|
$
|
—
|
|
$
|
21,683
|
|
|
Production Testing
Division
|
|
|
(3,091)
|
|
5
|
|
(3,086)
|
|
(125)
|
|
2,599
|
|
—
|
|
—
|
|
(612)
|
|
|
Compression
Division
|
|
|
(6,180)
|
|
(4,638)
|
|
(10,818)
|
|
10,184
|
|
17,204
|
|
935
|
|
|
17,505
|
|
|
Offshore Services
Segment
|
|
|
(6,445)
|
|
3,658
|
|
(2,787)
|
|
—
|
|
2,463
|
|
—
|
|
—
|
|
(324)
|
|
|
Eliminations and
other
|
|
|
4
|
|
—
|
|
4
|
|
2
|
|
(7)
|
|
—
|
|
—
|
|
(1)
|
|
|
Subtotal
|
|
|
74
|
|
(975)
|
|
(901)
|
|
10,088
|
|
28,129
|
|
935
|
|
—
|
|
38,251
|
|
|
Corporate and
other
|
|
|
(11,169)
|
|
(4,966)
|
|
(16,135)
|
|
4,240
|
|
118
|
|
2,063
|
|
—
|
|
(9,714)
|
|
|
TETRA excluding
Maritech
|
|
|
(11,095)
|
|
(5,941)
|
|
(17,036)
|
|
14,328
|
|
28,247
|
|
2,998
|
|
—
|
|
28,537
|
|
|
Maritech
|
|
|
(121)
|
|
—
|
|
(121)
|
|
—
|
|
373
|
|
—
|
|
—
|
|
252
|
|
|
Total
TETRA
|
$
|
(14,619)
|
|
$
|
3,403
|
|
$
|
(11,216)
|
|
$
|
(5,941)
|
|
$
|
(17,157)
|
|
$
|
14,328
|
|
$
|
28,620
|
|
$
|
2,998
|
|
$
|
—
|
|
$
|
28,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
September 30,
2016
|
|
|
Net
Income
(Loss),
as
reported
|
Tax
Provision
|
Income
(Loss)
Before
Tax, as
Reported
|
Impairments
& Special
Items
|
Adjusted
Income
(Loss)
Before
Tax
|
Adjusted
Interest
Expense,
Net
|
Depreciation
&
Amortization
|
Equity
Comp.
Expense
|
Omnibus
Equity
|
Adjusted
EBITDA
|
|
|
(In
Thousands)
|
|
Fluids
Division
|
|
|
$
|
8,835
|
|
$
|
701
|
|
$
|
9,536
|
|
$
|
8
|
|
$
|
6,873
|
|
$
|
—
|
|
$
|
—
|
|
$
|
16,417
|
|
|
Production Testing
Division
|
|
|
(4,222)
|
|
26
|
|
(4,196)
|
|
(147)
|
|
3,891
|
|
—
|
|
—
|
|
(452)
|
|
|
Compression
Division
|
|
|
(14,862)
|
|
10,497
|
|
(4,365)
|
|
9,763
|
|
17,830
|
|
774
|
|
—
|
|
24,002
|
|
|
Offshore Services
Segment
|
|
|
1,879
|
|
11
|
|
1,890
|
|
—
|
|
2,793
|
|
—
|
|
—
|
|
4,683
|
|
|
Eliminations and
other
|
|
|
(2)
|
|
—
|
|
(2)
|
|
—
|
|
(4)
|
|
—
|
|
—
|
|
(6)
|
|
|
Subtotal
|
|
|
(8,372)
|
|
11,235
|
|
2,863
|
|
9,624
|
|
31,383
|
|
774
|
|
—
|
|
44,644
|
|
|
Corporate and
other
|
|
|
(13,570)
|
|
(721)
|
|
(14,291)
|
|
4,699
|
|
101
|
|
1,774
|
|
—
|
|
(7,717)
|
|
|
TETRA excluding
Maritech
|
|
|
(21,942)
|
|
10,514
|
|
(11,428)
|
|
14,323
|
|
31,484
|
|
2,548
|
|
—
|
|
36,927
|
|
|
Maritech
|
|
|
(643)
|
|
—
|
|
(643)
|
|
2
|
|
368
|
|
—
|
|
—
|
|
(273)
|
|
|
Total
TETRA
|
$
|
(24,028)
|
|
$
|
1,443
|
|
$
|
(22,585)
|
|
$
|
10,514
|
|
$
|
(12,071)
|
|
$
|
14,325
|
|
$
|
31,852
|
|
$
|
2,548
|
|
$
|
—
|
|
$
|
36,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule G: Non-GAAP Reconciliation to TETRA Only Adjusted
Free Cash Flow
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30, 2017
|
|
June
30, 2017
|
|
September
30, 2016
|
|
September
30, 2017
|
|
September
30, 2016
|
|
(In
Thousands)
|
Consolidated
|
|
|
|
|
|
|
|
|
|
Net cash provided
(used) by operating activities
|
$
|
37,395
|
|
|
$
|
19,977
|
|
|
$
|
(7,830)
|
|
|
$
|
36,834
|
|
|
$
|
27,226
|
|
ARO
settlements
|
53
|
|
|
23
|
|
|
324
|
|
|
550
|
|
|
3,769
|
|
Capital expenditures,
net of sales proceeds
|
(11,538)
|
|
|
(11,451)
|
|
|
(5,727)
|
|
|
(27,801)
|
|
|
(12,444)
|
|
Consolidated adjusted
free cash flow
|
25,910
|
|
|
8,549
|
|
|
(13,233)
|
|
|
9,583
|
|
|
18,551
|
|
|
|
|
|
|
|
|
|
|
|
CSI Compressco
LP
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
13,218
|
|
|
9,533
|
|
|
9,958
|
|
|
24,572
|
|
|
45,522
|
|
Capital expenditures,
net of sales proceeds
|
(2,236)
|
|
|
(4,262)
|
|
|
(3,796)
|
|
|
(13,713)
|
|
|
(7,602)
|
|
CSI Compressco free
cash flow
|
10,982
|
|
|
5,271
|
|
|
6,162
|
|
|
10,859
|
|
|
37,920
|
|
|
|
|
|
|
|
|
|
|
|
TETRA
Only
|
|
|
|
|
|
|
|
|
|
Cash provided (used) by
operating activities (1)
|
24,177
|
|
|
10,444
|
|
|
(17,788)
|
|
|
14,294
|
|
|
(18,296)
|
|
ARO
settlements
|
53
|
|
|
23
|
|
|
324
|
|
|
550
|
|
|
3,769
|
|
Capital expenditures,
net of sales proceeds (1)
|
(9,302)
|
|
|
(7,189)
|
|
|
(1,931)
|
|
|
(16,120)
|
|
|
(4,842)
|
|
Free cash flow before
ARO settlements
|
14,928
|
|
|
3,278
|
|
|
(19,395)
|
|
|
(1,276)
|
|
|
(19,369)
|
|
Distributions from CSI
Compressco LP
|
2,890
|
|
|
2,812
|
|
|
5,574
|
|
|
11,337
|
|
|
16,724
|
|
TETRA only adjusted
free cash flow
|
$
17,818
|
|
|
$
|
6,090
|
|
|
$
(13,821)
|
|
|
$
10,061
|
|
|
$
(2,645)
|
|
|
|
(1)
|
TETRA only cash from
operating activities and capital expenditures, net, for the nine
months ended September 30, 2017, include the elimination of an
intercompany equipment sale of $2.0 million.
|
Schedule H: Non-GAAP Reconciliation of TETRA Net Debt
The cash and debt positions of TETRA and CSI Compressco LP as of
September 30, 2017, are shown below.
TETRA and CSI Compressco LP's credit and 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.
|
September 30,
2017
|
|
TETRA
|
|
CCLP
|
|
Consolidated
|
|
(In
Millions)
|
Non-restricted
cash
|
$
|
13.5
|
|
|
$
|
7.4
|
|
|
$
|
20.9
|
|
|
|
|
|
|
|
Carrying value of
long-term debt:
|
|
|
|
|
|
Revolver debt
outstanding
|
—
|
|
|
219.0
|
|
|
219.0
|
|
Senior Notes
outstanding
|
117.4
|
|
|
287.8
|
|
|
405.2
|
|
Net debt
|
$
|
103.9
|
|
|
$
|
499.4
|
|
|
$
|
603.3
|
|
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SOURCE TETRA Technologies, Inc.