THE WOODLANDS, Texas,
May 9, 2019 /PRNewswire/
-- TETRA Technologies, Inc. ("TETRA" or the "Company")
(NYSE:TTI) today announced consolidated first quarter 2019 net
loss per share before discontinued operations attributable to TETRA
stockholders of $0.09. This
compares to consolidated fourth quarter 2018 earnings per share
before discontinued operations attributable to TETRA stockholders
of $0.04, and a consolidated net loss
per share before discontinued operations attributable to TETRA
stockholders of $0.10 in the first
quarter of 2018.
TETRA's adjusted per share(1) results attributable to
TETRA stockholders for the first quarter of 2019, before
discontinued operations excluding special items, were a net loss
per share of $0.04. This
compares to an adjusted net loss per share(1) of
$0.01 in the fourth quarter of 2018
and an adjusted net loss per share(1) of $0.06 in the first quarter of 2018, all before
discontinued operations, which exclude special items detailed later
in this press release.
First quarter 2019 revenue before discontinued operations was
$244 million, a decrease of 14% from
the fourth quarter of 2018 but an increase of 22% from the first
quarter of last year.
(1)
|
Adjusted
earnings/loss per share is not in accordance with generally
accepted accounting principles in the United States ("GAAP").
Please see Schedule F for the reconciliations of these non-GAAP
financial measures to the most directly comparable GAAP
measure.)
|
|
|
First Quarter
2019 Results
|
|
Three Months
Ended
|
|
March 31,
2019
|
|
December 31,
2018
|
|
March 31,
2018
|
|
(In Thousands, Except
per Share Amounts)
|
Revenue
|
$
|
243,728
|
|
|
$
|
282,471
|
|
|
$
|
199,381
|
|
Profit (loss) before
discontinued operations
|
(18,674)
|
|
|
3,316
|
|
|
(21,057)
|
|
Adjusted EBITDA
before discontinued operations(2)
|
36,331
|
|
|
46,609
|
|
|
26,222
|
|
GAAP EPS before
discontinued operations attributable to TETRA
stockholders
|
(0.09)
|
|
|
0.04
|
|
|
(0.10)
|
|
Adjusted EPS
attributable to TETRA stockholders(2)
|
(0.04)
|
|
|
(0.01)
|
|
|
(0.06)
|
|
GAAP net cash
provided (used) by operating activities
|
7,412
|
|
|
44,953
|
|
|
(31,261)
|
|
TETRA only adjusted
free cash flow from continuing operations(2)
|
$
|
(34,920)
|
|
|
$
|
15,598
|
|
|
$
|
(29,917)
|
|
|
|
(2)
|
These measures are
not presented in accordance with GAAP. Please see the accompanying
schedules for the reconciliations of these non-GAAP financial
measures to the most directly comparable GAAP measures.
|
Key messages include:
- Reached agreement with a major operator for a TETRA CS Neptune®
completion fluids project for a lower tertiary development well in
a proven field in the Gulf of
Mexico, with the completion phase of the project anticipated
in the second half of 2019.
- Consolidated loss before taxes and before discontinued
operations was $17.1 million, a
$23.2 million sequential
deterioration. Consolidated Adjusted EBITDA before discontinued
operations of $36.3 million (14.9% of
revenue) decreased sequentially by $10.3
million primarily due to lower Compression equipment sales
and lower Water & Flowback Services margins (see Schedule G for
reconciliation of these non-GAAP measures).
- Water & Flowback Services income before taxes was
$2.2 million, 2.8% of revenue.
Adjusted EBITDA of $10.1 million
declined from $15.9 million in the
fourth quarter of 2018 due to increased transition related costs as
weaker activity from smaller independents was replaced with
stronger activity from large independent and major operators (see
Schedule G for reconciliation of these non-GAAP measures).
- Completion Fluids & Products income before taxes was
$6.2 million, 10.0% of revenue.
Adjusted EBITDA of $10.4 million
compares to $13.0 million in the
fourth quarter of 2018 and $6.2
million in the first quarter of 2018 (see Schedule G for
reconciliation of these non-GAAP measures).
- Compression net loss before taxes was $7.8 million. Adjusted EBITDA decreased to
$25.9 million from $29.2 million in the fourth quarter of 2018 due
to the timing of new equipment shipments and the completion of
major overhauls in after-market services, both following a
historically high fourth quarter (see Schedule G for reconciliation
of these non-GAAP measures). Compression services revenue and gross
margins increased sequentially and were significantly above the
first quarter of 2018 reflecting the growth capital being deployed
at higher rates, better pricing on the existing fleet and improved
cost management. Overall utilization of the service fleet increased
from 86.6% in the fourth quarter of 2018 to 87.2% in the first
quarter of 2019.
Brady M. Murphy, TETRA's Chief
Executive Officer, stated, "In the first quarter of 2019 we
experienced continued improvement in Compression Services revenues
and margins and reached agreement with a major operator for a TETRA
CS Neptune® completion fluids project in the Gulf of Mexico, but also experienced lower
margins in Water and Flowback Services in a transition quarter. The
transition is related to a major revenue shift from the fourth
quarter of 2018 to the first quarter of 2019 from smaller
North America independent
operators impacted by the oil price decline to the major operators
with stronger balance sheets who maintained or increased activity
through this recent cycle. Although this is a very positive
reflection on our ability to gain market share from major operators
by increasing our revenues from this customer segment alone by
approximately 15% over fourth quarter 2018, this revenue gain was
nearly offset from the smaller operators decreasing activity. The
net impact was significant as additional costs associated with
de-mobilization and mobilization activity within the quarter
impacted our margins. Water & Flowback Services also
experienced high repair costs on lower flowback activity during the
first quarter, following a three-year high in flowback activity
(excluding the impact of early production facility sales) during
the fourth quarter. Also during the first quarter we
increased the number of our integrated solution projects to 19, up
from 16 in the prior quarter. The customer mix for integrated
solution projects reflected a similar change as our overall
North America business, as
projects for our large operators improved by seven, but were offset
by a reduction of four from smaller operators. We are pleased
that we are now servicing five customers with multiple integrated
solution projects. Our Completion Fluids & Products
business showed strong year over year growth with improved margins,
driven primarily by stronger international activity. In the
U.S. this business experienced its typical weaker first quarter
activity compared to the seasonally strong fourth quarter.
Overall Compression revenue decreased sequentially on lower new
equipment shipments and weaker after-market services following
record highs in the fourth quarter. While the overall market
was challenging in the first quarter, we saw meaningful improvement
in March exit rates for the Compression and Water & Flowback
Services segments. With the additional TETRA CS Neptune® completion
fluids projects expected to occur in in the second half of the
year, we expect improved financial performance across all segments
through the balance of 2019."
"Water & Flowback Services first quarter 2019 revenue
decreased 1% sequentially to $78.7
million and was up 29% from the same period last year.
We gained market share with the larger operators but at more
competitive pricing in some basins. Despite the slower
completion activity in the first quarter 2019, our momentum is
strong in integrating and automating our water management
solutions. In the first quarter we also added two large recycling
projects which should allow us to stay on these jobs for extended
periods of time and more effectively utilize equipment and
personnel. We continue to see a shift towards the larger
independents and majors, which will allow us to further showcase
our technology differentiation and multiple offerings with a more
stable revenue stream."
"Completion Fluids & Products revenue was $61.6 million for the first quarter, a decrease
of 5% from the fourth quarter of 2018 driven by seasonally weaker
Gulf of Mexico sales partially
offset by stronger international sales. Our Adjusted EBITDA
margins of 16.8% were 520 basis points better than the first
quarter of last year but 330 basis points lower than the fourth
quarter of 2018. Our chemicals business performed above our
expectations, including an early start to the seasonal Northern Europe industrial
activity."
"On our conference call last quarter, we reported that we were
in advanced discussions for a TETRA CS Neptune® completion fluids
Gulf of Mexico project scheduled
for this year. We have reached agreement with a major
operator for a lower tertiary development project in a field with
existing production and where other wells in the same field have
pressures that required a higher density completion fluid.
This well is scheduled for completion in the second half of
2019. However, until the well is completed and the formation
pressures are determined, we will not be able to confirm TETRA CS
Neptune® completion fluids will be required. If this project
is completed as anticipated, the required fluids are expected to be
of similar volumes as the prior Gulf of Mexico TETRA CS Neptune®
completion fluid projects. Additionally, we continue to build
and advance the number of opportunities for TETRA CS Neptune®
completion fluid projects through advanced discussions directly
with operators and through our relationship with Halliburton.
We continue to see opportunities for other TETRA CS Neptune®
projects this year, although timing on these complex projects is
always difficult to predict."
"First quarter 2019 Compression revenue decreased 25%
sequentially to $103.5 million and
was 21% above the first quarter of last year. Compression
services gross margins were 48.2%, up 110 basis points from the
fourth quarter excluding the impact of a tax contingency of
$2.1 million in the fourth quarter of
last year (see Schedule K for reconciliation of this non-GAAP
financial measure). New equipment orders of $11 million were received in the first
quarter. New equipment sales backlog was $94 million at the end of the March 31, 2019, that is all expected to be
delivered by year-end 2019. Compression loss before taxes for
the first quarter was $7.8 million
compared to a $3.3 million loss for
the fourth quarter of 2018. Adjusted EBITDA was $25.9 million in the first quarter compared to
$29.2 million in the fourth quarter
(see Schedule G for reconciliation of these non-GAAP financial
measures). The overall fundamentals for the Compression
business are extremely strong, with the demand for high horsepower
equipment not showing any signs of slowing down. As of
March 31, 2019 total active operating
horsepower was 1,017,452, exceeding 1.0 million deployed horsepower
for the first time in CSI Compressco's history."
Free Cash Flow and Balance Sheet
Consolidated net cash from operating activities for the first
quarter of 2019 was $7.4
million. TETRA only adjusted free cash flow from
continuing operations in the first quarter was a use of
$34.9 million and compares to a use
of cash of $29.9 million in first
quarter of 2018 (see Schedules I and J for a reconciliation of
these non-GAAP financial measures). We have historically
consumed cash in the first half of the year and have generated cash
in the second half of the year, reflecting the seasonality of the
business. Consolidated net debt was $809 million, while TETRA only net debt was
$192 million (see Schedule H for a
reconciliation of these non-GAAP financial measures). At the
end of the first quarter of 2019, TETRA only non-restricted cash
was $20 million.
Special items
Special items, including Discontinued Operations, incurred in
the first quarter, as detailed on Schedule F, include the
following:
- $1.2 million non-cash expense for
the fair value adjustment of CSI Compressco's Series A Convertible
Preferred Units
- $0.4 million expense for cash
redemption of CSI Compressco's Series A Convertible Preferred
Units
- $0.4 million non-cash expense for
TETRA stock warrant fair value adjustment
- $0.4 million non-cash income for
a fair value adjustment of the SwiftWater earn-out obligation
- $0.7 million 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, May 9, 2019, at 10:30 a.m. EDT. 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 10127859, 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
Elijio Serrano
Chief Financial Officer
TETRA Technologies, Inc.
The Woodlands, Texas,
Telephone (281) 367-1983
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
Schedule K: Non-GAAP Reconciliation to Compression and Related
Services Gross Profit and Gross Margin Excluding the Impact of Tax
Contingency
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," "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
March 31,
|
|
2019
|
|
2018
|
|
(In Thousands, Except
per Share Amounts)
|
Revenues
|
$
|
243,728
|
|
|
$
|
199,381
|
|
|
|
|
|
Cost of sales,
services, and rentals
|
176,744
|
|
|
144,957
|
|
Depreciation,
amortization, and accretion
|
30,628
|
|
|
26,441
|
|
Impairments and other
charges
|
146
|
|
|
—
|
|
Total cost of
revenues
|
207,518
|
|
|
171,398
|
|
Gross profit
|
36,210
|
|
|
27,983
|
|
|
|
|
|
General and
administrative expense
|
34,277
|
|
|
30,803
|
|
Interest expense,
net
|
18,379
|
|
|
14,973
|
|
Warrants fair value
adjustment (income) expense
|
407
|
|
|
(1,994)
|
|
|
|
|
|
|
|
CCLP Series A
Preferred Units fair value adjustment expense
|
1,163
|
|
|
1,358
|
|
Other (income)
expense, net
|
(951)
|
|
|
2,776
|
|
Loss before taxes and
discontinued operations
|
(17,065)
|
|
|
(19,933)
|
|
Provision for income
taxes
|
1,609
|
|
|
1,124
|
|
Loss before
discontinued operations
|
(18,674)
|
|
|
(21,057)
|
|
Discontinued
operations:
|
|
|
|
Loss from discontinued
operations (including 2018 loss on disposal of $31.5 million), net
of taxes
|
(426)
|
|
|
(41,706)
|
|
Net loss
|
(19,100)
|
|
|
(62,763)
|
|
Loss attributable to
noncontrolling interest
|
8,262
|
|
|
9,115
|
|
Loss attributable to
TETRA stockholders
|
$
|
(10,838)
|
|
|
$
|
(53,648)
|
|
|
|
|
|
Basic per share
information:
|
|
|
|
Income (loss) before
discontinued operations attributable to TETRA
stockholders
|
$
|
(0.09)
|
|
|
$
|
(0.10)
|
|
Income (loss) from
discontinued operations attributable to TETRA
stockholders
|
$
|
0.00
|
|
|
$
|
(0.36)
|
|
Net income (loss)
attributable to TETRA stockholders
|
$
|
(0.09)
|
|
|
$
|
(0.46)
|
|
Weighted average shares
outstanding
|
125,681
|
|
|
117,598
|
|
|
|
|
|
Diluted per share
information:
|
|
|
|
Income (loss) before
discontinued operations attributable to TETRA
stockholders
|
$
|
(0.09)
|
|
|
$
|
(0.10)
|
|
Income (loss) from
discontinued operations attributable to TETRA
stockholders
|
$
|
0.00
|
|
|
$
|
(0.36)
|
|
Net income (loss)
attributable to TETRA stockholders
|
$
|
(0.09)
|
|
|
$
|
(0.46)
|
|
Weighted average shares
outstanding
|
125,681
|
|
|
117,598
|
|
Schedule B:
Financial Results By Segment (Unaudited)
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
|
2018
|
|
(In
Thousands)
|
Revenues by
segment:
|
|
|
|
Completion Fluids &
Products Division
|
$
|
61,581
|
|
|
$
|
53,104
|
|
Water & Flowback
Services Division
|
78,678
|
|
|
61,075
|
|
Compression
Division
|
103,469
|
|
|
85,422
|
|
Eliminations and
other
|
—
|
|
|
(220)
|
|
Total
revenues
|
$
|
243,728
|
|
|
$
|
199,381
|
|
|
|
|
|
Gross profit
(loss) by segment:
|
|
|
|
Completion Fluids &
Products Division
|
$
|
10,664
|
|
|
$
|
6,686
|
|
Water & Flowback
Services Division
|
8,851
|
|
|
11,404
|
|
Compression
Division
|
16,859
|
|
|
10,040
|
|
Corporate overhead and
eliminations
|
(164)
|
|
|
(147)
|
|
Total gross
profit
|
$
|
36,210
|
|
|
$
|
27,983
|
|
|
|
|
|
Income (loss)
before taxes(1) by segment:
|
|
|
|
Completion Fluids &
Products Division
|
$
|
6,186
|
|
|
$
|
2,449
|
|
Water & Flowback
Services Division
|
2,231
|
|
|
6,548
|
|
Compression
Division
|
(7,801)
|
|
|
(14,018)
|
|
Corporate overhead and
eliminations
|
(17,681)
|
|
|
(14,912)
|
|
Total income (loss)
before taxes(1)
|
$
|
(17,065)
|
|
|
$
|
(19,933)
|
|
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)
|
|
|
|
|
|
March 31,
2019
|
|
December 31,
2018
|
|
(In
Thousands)
|
Balance
Sheet:
|
|
|
|
Cash (excluding
restricted cash)
|
$
|
36,868
|
|
|
$
|
40,038
|
|
Accounts receivable,
net
|
183,646
|
|
|
187,592
|
|
Inventories
|
156,628
|
|
|
143,571
|
|
Assets of
discontinued operations
|
1,422
|
|
|
1,354
|
|
Note receivable,
including accrued interest
|
7,586
|
|
|
7,544
|
|
Other current
assets
|
24,143
|
|
|
20,592
|
|
PP&E,
net
|
860,949
|
|
|
853,931
|
|
Operating lease
right-of-use assets
|
60,149
|
|
|
—
|
|
Other
assets
|
128,134
|
|
|
130,905
|
|
Total
assets
|
$
|
1,459,525
|
|
|
$
|
1,385,527
|
|
|
|
|
|
Liabilities of
discontinued operations
|
$
|
3,529
|
|
|
$
|
4,145
|
|
Other current
liabilities
|
215,709
|
|
|
196,206
|
|
Long-term
debt(1)
|
845,843
|
|
|
815,560
|
|
Long-term portion of
asset retirement obligations
|
12,331
|
|
|
12,202
|
|
CCLP Series A
Preferred
|
18,278
|
|
|
27,019
|
|
Warrants
liability
|
2,480
|
|
|
2,073
|
|
Operating lease
liabilities
|
49,632
|
|
|
—
|
|
Other long-term
liabilities
|
11,613
|
|
|
15,573
|
|
Equity
|
300,110
|
|
|
312,749
|
|
Total liabilities and
equity
|
$
|
1,459,525
|
|
|
$
|
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.
|
March 31,
2019
|
|
December 31,
2018
|
|
(In
Thousands)
|
TETRA
|
|
|
|
Asset-Based Credit
Agreement
|
$
|
29,131
|
|
|
$
|
—
|
|
Term Credit
Agreement
|
183,020
|
|
|
182,547
|
|
TETRA total
debt
|
212,151
|
|
|
182,547
|
|
Less current
portion
|
—
|
|
|
—
|
|
TETRA total
long-term debt
|
$
|
212,151
|
|
|
$
|
182,547
|
|
|
|
|
|
CSI Compressco
LP
|
|
|
|
CCLP Credit
Agreement
|
—
|
|
|
—
|
|
7.25% Senior
Notes
|
290,204
|
|
|
289,797
|
|
7.50% Senior Secured
Notes
|
343,488
|
|
|
343,216
|
|
Total debt
|
633,692
|
|
|
633,013
|
|
Less current
portion
|
—
|
|
|
—
|
|
CCLP total
long-term debt
|
$
|
633,692
|
|
|
$
|
633,013
|
|
Consolidated total
long-term debt
|
$
|
845,843
|
|
|
$
|
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 includes 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 margins. 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
|
|
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
|
|
CCLP 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
|
|
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
|
|
December 31,
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 special items and
discontinued operations
|
$
|
(3,822)
|
|
$
|
(803)
|
|
$
|
(1,909)
|
|
$
|
(1,110)
|
|
$
|
(0.01)
|
|
Stock Warrant fair
value adjustment
|
11,150
|
|
2,342
|
|
—
|
|
8,808
|
|
0.07
|
|
CCLP Series A
preferred fair value adjustments
|
2,077
|
|
436
|
|
1,662
|
|
(21)
|
|
0.00
|
|
Other costs and
expenses
|
(773)
|
|
(162)
|
|
—
|
|
(611)
|
|
0.00
|
|
Earnout
adjustment
|
300
|
|
63
|
|
—
|
|
237
|
|
0.00
|
|
Non-income tax
contingency
|
(2,110)
|
|
(443)
|
|
(1,476)
|
|
(191)
|
|
0.00
|
|
Impairments and other
charges
|
(681)
|
|
(143)
|
|
(477)
|
|
(61)
|
|
0.00
|
|
Effect of deferred tax
valuation allowance and other related tax adjustments
|
—
|
|
1,535
|
|
—
|
|
(1,535)
|
|
(0.01)
|
|
Net income (loss)
before discontinued operations
|
6,141
|
|
2,825
|
|
(2,200)
|
|
5,516
|
|
0.04
|
|
Loss from discontinued
operations
|
|
|
|
(584)
|
|
0.00
|
|
Net Income (loss)
attributable to TETRA stockholders, as reported
|
|
|
|
$
|
4,932
|
|
$
|
0.04
|
|
|
Three Months
Ended
|
|
March 31,
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 special items and
discontinued operations
|
$
|
(16,067)
|
|
$
|
(3,375)
|
|
$
|
(5,896)
|
|
$
|
(6,796)
|
|
$
|
(0.06)
|
|
Severance
expense
|
(73)
|
|
(15)
|
|
—
|
|
(58)
|
|
0.00
|
|
Stock warrant fair
value adjustment
|
1,994
|
|
419
|
|
—
|
|
1,575
|
|
0.01
|
|
CCLP Series A
preferred fair value adjustments
|
(1,358)
|
|
(285)
|
|
(981)
|
|
(92)
|
|
0.00
|
|
Prior debt issuance
cost
|
(3,541)
|
|
(744)
|
|
(2,238)
|
|
(559)
|
|
0.00
|
|
Transaction
costs
|
(888)
|
|
(186)
|
|
—
|
|
(702)
|
|
(0.01)
|
|
Effect of deferred tax
valuation allowance and other related tax adjustments
|
—
|
|
5,310
|
|
—
|
|
(5,310)
|
|
(0.05)
|
|
Net income (loss)
before discontinued operations
|
(19,933)
|
|
1,124
|
|
(9,115)
|
|
(11,942)
|
|
(0.10)
|
|
Loss from discontinued
operations
|
|
|
|
(41,706)
|
|
(0.36)
|
|
Net Income (loss)
attributable to TETRA stockholders, as reported
|
|
|
|
$
|
(53,648)
|
|
$
|
(0.46)
|
|
Schedule G:
Non-GAAP Reconciliation to GAAP Financials
(Unaudited)*
|
|
|
|
Three Months
Ended
|
|
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 before
Discontinued Operations
|
$
|
(18,674)
|
|
$
|
1,609
|
|
$
|
(17,065)
|
|
$
|
2,224
|
|
$
|
(14,841)
|
|
$
|
18,379
|
|
$
|
30,628
|
|
$
|
2,165
|
|
$
|
36,331
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2018
|
|
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
|
|
|
$
|
9,480
|
|
$
|
—
|
|
$
|
9,480
|
|
$
|
(164)
|
|
$
|
3,723
|
|
$
|
—
|
|
$
|
13,039
|
|
Water & Flowback
Services Division
|
|
|
8,043
|
|
(300)
|
|
7,743
|
|
10
|
|
8,151
|
|
—
|
|
15,904
|
|
Compression
Division
|
|
|
(3,282)
|
|
714
|
|
(2,568)
|
|
13,367
|
|
18,004
|
|
380
|
|
29,183
|
|
Eliminations and
other
|
|
|
4
|
|
—
|
|
4
|
|
—
|
|
(4)
|
|
—
|
|
—
|
|
Subtotal
|
|
|
14,245
|
|
414
|
|
14,659
|
|
13,213
|
|
29,874
|
|
380
|
|
58,126
|
|
Corporate and
other
|
|
|
(8,104)
|
|
(10,377)
|
|
(18,481)
|
|
5,487
|
|
171
|
|
1,306
|
|
(11,517)
|
|
TETRA before
Discontinued Operations
|
$
|
3,316
|
|
$
|
2,825
|
|
$
|
6,141
|
|
$
|
(9,963)
|
|
$
|
(3,822)
|
|
$
|
18,700
|
|
$
|
30,045
|
|
$
|
1,686
|
|
$
|
46,609
|
|
|
Three Months
Ended
|
|
March 31,
2018
|
|
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
|
|
|
$
|
2,449
|
|
$
|
70
|
|
$
|
2,519
|
|
$
|
(233)
|
|
$
|
3,901
|
|
$
|
—
|
|
$
|
6,187
|
|
Water & Flowback
Services Division
|
|
|
6,548
|
|
3
|
|
6,551
|
|
(15)
|
|
5,027
|
|
—
|
|
11,563
|
|
Compression
Division
|
|
|
(14,018)
|
|
4,898
|
|
(9,120)
|
|
11,214
|
|
17,367
|
|
(604)
|
|
18,857
|
|
Eliminations and
other
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(5)
|
|
—
|
|
(5)
|
|
Subtotal
|
|
|
(5,021)
|
|
4,971
|
|
(50)
|
|
10,966
|
|
26,290
|
|
(604)
|
|
36,602
|
|
Corporate and
other
|
|
|
(14,912)
|
|
(1,106)
|
|
(16,018)
|
|
4,007
|
|
151
|
|
1,480
|
|
(10,380)
|
|
TETRA before
Discontinued Operations
|
$
|
(21,057)
|
|
$
|
1,124
|
|
$
|
(19,933)
|
|
$
|
3,865
|
|
$
|
(16,068)
|
|
$
|
14,973
|
|
$
|
26,441
|
|
$
|
876
|
|
$
|
26,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
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
March 31, 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.
|
March 31,
2019
|
|
TETRA
|
|
CCLP
|
|
Consolidated
|
|
(In
Millions)
|
Non-restricted
cash
|
$
|
20.0
|
|
|
$
|
16.9
|
|
|
$
|
36.9
|
|
|
|
|
|
|
|
Carrying value of
long-term debt:
|
|
|
|
|
|
Asset-Based Credit
Agreement
|
29.1
|
|
|
—
|
|
|
29.1
|
|
Term Credit
Agreement
|
183.0
|
|
|
—
|
|
|
183.0
|
|
Senior Notes
outstanding
|
—
|
|
|
633.7
|
|
|
633.7
|
|
Net debt
|
$
|
192.1
|
|
|
$
|
616.8
|
|
|
$
|
808.9
|
|
Schedule I:
Non-GAAP Reconciliation to TETRA Only Adjusted Free Cash Flow
(Unaudited) *
|
|
|
|
Three Months
Ended
|
|
March 31,
2019
|
|
December 31,
2018
|
|
March 31,
2018
|
|
(In
Thousands)
|
Consolidated
|
|
|
|
|
|
Net cash provided
(used) by operating activities
|
$
|
7,412
|
|
|
$
|
44,953
|
|
|
$
|
(31,261)
|
|
ARO
settlements
|
—
|
|
|
35
|
|
|
—
|
|
Capital expenditures,
net of sales proceeds
|
(32,045)
|
|
|
(34,487)
|
|
|
(28,816)
|
|
Consolidated adjusted
free cash flow
|
$
|
(24,633)
|
|
|
$
|
10,501
|
|
|
$
|
(60,077)
|
|
|
|
|
|
|
|
CSI Compressco
LP
|
|
|
|
|
|
Net cash provided
(used) by operating activities
|
$
|
31,632
|
|
|
$
|
23,605
|
|
|
$
|
(365)
|
|
Capital expenditures,
net of sales proceeds
|
(23,152)
|
|
|
(25,325)
|
|
|
(17,039)
|
|
CSI Compressco free
cash flow
|
$
|
8,480
|
|
|
$
|
(1,720)
|
|
|
$
|
(17,404)
|
|
|
|
|
|
|
|
TETRA
Only
|
|
|
|
|
|
Cash from operating
activities
|
$
|
(24,220)
|
|
|
$
|
21,348
|
|
|
$
|
(30,896)
|
|
ARO
settlements
|
—
|
|
|
35
|
|
|
—
|
|
Investment in CCLP
Compressors
|
(2,402)
|
|
|
—
|
|
|
—
|
|
Capital expenditures,
net of sales proceeds
|
(8,893)
|
|
|
(9,162)
|
|
|
(11,777)
|
|
Free cash flow before
ARO settlements
|
(35,515)
|
|
|
12,221
|
|
|
(42,673)
|
|
Distributions from CSI
Compressco LP
|
169
|
|
|
3,087
|
|
|
2,954
|
|
Adjusted TETRA only
free cash flow
|
$
|
(35,346)
|
|
|
$
|
15,308
|
|
|
$
|
(39,719)
|
|
|
|
*
|
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
|
|
Mar 31,
2019
|
|
Dec 31,
2018
|
|
Mar 31,
2018
|
|
|
|
|
(In
Thousands)
|
TETRA
Only
|
|
|
|
|
|
Cash from operating
activities
|
$
(24,220)
|
|
$
21,348
|
|
$
(30,896)
|
|
|
|
|
|
|
Less: Discontinued
operations operating activities (adjusted
EBITDA)(1)
|
(426)
|
|
(325)
|
|
(8,176)
|
|
|
|
|
|
|
Cash from continued
operating activities
|
(23,794)
|
|
21,673
|
|
(22,720)
|
|
|
|
|
|
|
Less: Continuing
operations capital expenditures(2)
|
(8,893)
|
|
(9,162)
|
|
(10,151)
|
Less: Investment in
CCLP Compressors
|
(2,402)
|
|
__
|
|
__
|
|
|
|
|
|
|
Plus: Distributions
from CSI Compressco LP
|
169
|
|
3,087
|
|
2,954
|
|
|
|
|
|
|
TETRA only adjusted
free cash flow from continuing operations
|
$
(34,920)
|
|
$
15,598
|
|
$
(29,917)
|
|
|
|
|
|
|
(1) Reconciled to loss from
discontinued operations as follows:
|
|
|
|
|
|
|
Three Months
Ended
|
|
Mar 31,
2019
|
|
Dec 31,
2018
|
|
Mar 31,
2018
|
|
|
|
|
(In
Thousands)
|
Loss
from discontinued operations
|
(426)
|
|
(325)
|
|
(41,706)
|
Plus:
Income tax provision (benefit)
|
-
|
|
-
|
|
(2,327)
|
Plus:
Depreciation & amortization
|
-
|
|
-
|
|
2,069
|
Plus: loss on disposal
of discontinued operations
|
-
|
|
-
|
|
33,788
|
Discontinued
operations adjusted EBITDA
|
(426)
|
|
(325)
|
|
(8,176)
|
|
|
|
|
|
|
(2) Reconciled to TETRA only capital
expenditures as follows:
|
|
|
|
|
|
|
Three Months
Ended
|
|
Mar 31,
2019
|
|
Dec 31,
2018
|
|
Mar 31,
2018
|
|
|
|
|
(In
Thousands)
|
TETRA
only capital expenditures
|
(8,893)
|
|
(9,162)
|
|
(11,777)
|
Less:
Discontinued operations capital expenditures
|
-
|
|
-
|
|
(1,626)
|
Continuing operations
capital expenditures
|
(8,893)
|
|
(9,162)
|
|
(10,151)
|
Schedule K –
Non-GAAP Reconciliation to Compression and Related Services Gross
Profit and Gross Margin Excluding the Impact of Tax Contingency
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
Mar 31,
2019
|
|
Dec 31,
2018
|
|
|
|
|
Revenue of
Compression and related services
|
$
63,032
|
|
$
60,582
|
|
|
|
|
Cost of compression
and related services, excluding depreciation
|
32,621
|
|
34,165
|
|
|
|
|
Gross Profit of
Compression and related services
|
30,411
|
|
26,417
|
|
|
|
|
Gross
Margin
|
48.2%
|
|
43.6%
|
|
|
|
|
Non-income tax
contingency
|
-
|
|
2,110
|
|
|
|
|
Adjusted Gross
Profit
|
30,411
|
|
28,527
|
|
|
|
|
Adjusted Gross
Margin
|
48.2%
|
|
47.1%
|
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SOURCE TETRA Technologies, Inc.