Tetra Technologies Inc 10-Q for FY2020 Q3

Tetra Technologies Inc (TTI)

10-Q 2020-11-03 For: 2020-09-30

Added on April 11, 2026

About this 10-Q

Tetra Technologies Inc filed this 10-Q on November 3, 2020, covering the quarter ended September 30, 2020 (FY2020 Q3).

Headline figures

Quarter ended September 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $152.6M; down 38.0% from $245.95M a year earlier
Net loss: $13.3M; compared with a net loss of $15.83M a year earlier
Diluted EPS: -$0.10; compared with -$0.13 a year earlier

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Delaware			74-2148293
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

24955 Interstate 45 North
The Woodlands,
Texas			77380
(Address of Principal Executive Offices)			(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	TTI	New York Stock Exchange


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐


TETRA Technologies, Inc. and Subsidiaries
Table of Contents
			Page
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations			1
Consolidated Statements of Comprehensive Income (Loss)			2
Consolidated Balance Sheets			3
Consolidated Statements of Equity			5
Consolidated Statements of Cash Flows			7
Notes to Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3. Quantitative and Qualitative Disclosures about Market Risk			42
Item 4. Controls and Procedures			42

PART II—OTHER INFORMATION
Item 1. Legal Proceedings			42
Item 1A. Risk Factors			42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			43
Item 3. Defaults Upon Senior Securities			44
Item 4. Mine Safety Disclosures			44
Item 5. Other Information			44
Item 6. Exhibits			45
SIGNATURES			46


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues:
Product sales	$	68,810	$	93,377	$	252,016	$	320,508
Services	83,791		152,570		315,968		457,963
Total revenues	152,601		245,947		567,984		778,471
Cost of revenues:
Cost of product sales	50,541		71,957		184,512		254,798
Cost of services	52,441		98,356		201,056		298,911
Depreciation, amortization, and accretion	29,604		30,867		88,906		93,312
Impairments and other charges	97		849		14,445		3,306
Insurance recoveries	(52)		(1,042)		(643)		(1,392)
Total cost of revenues	132,631		200,987		488,276		648,935
Gross profit	19,970		44,960		79,708		129,536
General and administrative expense	25,256		34,926		89,807		105,498

Interest expense, net	17,631		18,146		53,073		55,054
Warrants fair value adjustment (income) expense	—		78		(327)		(1,035)
CCLP Series A Preferred Units fair value adjustment expense	—		—		—		1,309

Other (income) expense, net	(2,137)		(690)		2,141		(1,014)
Loss before taxes and discontinued operations	(20,780)		(7,500)		(64,986)		(30,276)
Provision for income taxes	645		1,579		3,800		5,678
Loss before discontinued operations	(21,425)		(9,079)		(68,786)		(35,954)
Discontinued operations:
Loss from discontinued operations, net of taxes	(173)		(9,130)		(155)		(9,901)
Net loss	(21,598)		(18,209)		(68,941)		(45,855)
Less: loss attributable to noncontrolling interest	8,296		2,378		32,833		12,273
Net loss attributable to TETRA stockholders	$	(13,302)	$	(15,831)	$	(36,108)	$	(33,582)
Basic net loss per common share:
Loss before discontinued operations attributable to TETRA stockholders	$	(0.10)	$	(0.06)	$	(0.29)	$	(0.19)
Loss from discontinued operations attributable to TETRA stockholders	—		(0.07)		—		(0.08)
Net loss attributable to TETRA stockholders	$	(0.10)	$	(0.13)	$	(0.29)	$	(0.27)
Average shares outstanding	125,893		125,568		125,789		125,620
Diluted net loss per common share:
Loss before discontinued operations attributable to TETRA stockholders	$	(0.10)	$	(0.06)	$	(0.29)	$	(0.19)
Loss from discontinued operations attributable to TETRA stockholders	—		(0.07)		—		(0.08)
Net loss attributable to TETRA stockholders	$	(0.10)	$	(0.13)	$	(0.29)	$	(0.27)
Average diluted shares outstanding	125,893		125,568		125,789		125,620


	September 30, 2020		December 31, 2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	75,165	$	17,704
Restricted cash	59		64
Trade accounts receivable, net of allowances of $7,742 in 2020 and $5,262 in 2019	108,222		175,918
Inventories	113,020		136,510


Prepaid expenses and other current assets	21,176		21,158
Total current assets	317,642		351,354
Property, plant, and equipment:
Land and building	39,534		60,586
Machinery and equipment	1,341,905		1,335,157
Automobiles and trucks	26,581		31,681
Chemical plants	60,195		57,692
Construction in progress	10,819		34,393
Total property, plant, and equipment	1,479,034		1,519,509
Less accumulated depreciation	(804,466)		(760,872)
Net property, plant, and equipment	674,568		758,637
Other assets:

Patents, trademarks and other intangible assets, net of accumulated amortization of $93,976 in 2020 and $88,422 in 2019	68,350		74,199
Deferred tax assets, net	24		24

Operating lease right-of-use assets	78,867		68,131
Other assets	22,089		19,577
Total other assets	169,330		161,931
Total assets	$	1,161,540	$	1,271,922


	Common Stock Par Value		Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Retained Deficit		Noncontrolling Interest		Total Equity
							Currency Translation

Balance at December 31, 2019	$	1,283	$	466,959	$	(19,164)	$	(52,183)	$	(362,522)	$	128,453	$	162,826
Net loss for first quarter 2020	—		—		—		—		(1,551)		(8,825)		(10,376)
Translation adjustment, net of taxes of $0	—		—		—		(6,238)		—		(229)		(6,467)
Comprehensive loss	—		—		—		—		—		—		(16,843)
Distributions to public unitholders	—		—		—		—		—		(309)		(309)
Equity award activity	4		—		—		—		—		—		4
Treasury stock activity, net	—		—		(89)		—		—		—		(89)
Equity compensation expense	—		1,145		—		—		—		228		1,373

Other	—		(16)		—		—		—		(15)		(31)
Balance at March 31, 2020	$	1,287	$	468,088	$	(19,253)	$	(58,421)	$	(364,073)	$	119,303	$	146,931
Net loss for second quarter 2020	—		—		—		—		(21,255)		(15,712)		(36,967)
Translation adjustment, net of taxes of $0	—		—		—		980		—		115		1,095
Comprehensive loss	—		—		—		—		—		—		(35,872)
Distributions to public unitholders	—		—		—		—		—		(311)		(311)
Equity award activity	1		—		—		—		—		—		1
Treasury stock activity, net	—		—		(181)		—		—		—		(181)
Equity compensation expense	—		1,685		—		—		—		449		2,134
Other	—		4		—		—		—		(20)		(16)
Balance at June 30, 2020	$	1,288	$	469,777	$	(19,434)	$	(57,441)	$	(385,328)	$	103,824	$	112,686
Net loss for third quarter 2020	—		—		—		—		(13,302)		(8,296)		(21,598)
Translation adjustment, net of taxes of $0	—		—		—		2,807		—		67		2,874
Comprehensive loss	—		—		—		—		—		—		(18,724)
Distributions to public unitholders	—		—		—		—		—		(312)		(312)
Equity award activity	1		—		—		—		—		—		1
Treasury stock activity, net	—		—		(50)		—		—		—		(50)
Equity compensation expense	—		1,363		—		—		—		232		1,595
Other	—		6		—		—		—		(27)		(21)
Balance at September 30, 2020	$	1,289	$	471,146	$	(19,484)	$	(54,634)	$	(398,630)	$	95,488	$	95,175


	Nine Months Ended September 30,
	2020		2019
Operating activities:
Net loss	$	(68,941)	$	(45,855)
Reconciliation of net loss to net cash provided by operating activities:
Depreciation, amortization, and accretion	88,906		93,364
Impairment and other charges	14,445		3,306

Benefit for deferred income taxes	550		545
Equity-based compensation expense	4,847		6,260
Provision for doubtful accounts	5,907		3,351
Loss on disposition of business	—		7,500
Amortization and expense of financing costs	3,698		4,614
Insurance recoveries associated with damaged equipment	(643)		(1,392)
Equipment received in lieu of cash	725		—
Debt exchange expenses	4,777		—
CCLP Series A Preferred Unit distributions and adjustments	—		3,574
Warrants fair value adjustment	(326)		(1,035)
Contingent consideration liability fair value adjustment	—		(800)

Gain on sale of assets	(4,340)		(1,583)
Changes in operating assets and liabilities:
Accounts receivable	61,314		13,309
Inventories	11,780		(6,847)
Prepaid expenses and other current assets	(916)		(1,831)
Trade accounts payable and accrued expenses	(57,844)		10,344

Other	888		(3,234)
Net cash provided by operating activities	64,827		83,590
Investing activities:
Purchases of property, plant, and equipment, net	(22,011)		(89,192)
Acquisition of businesses, net of cash acquired	—		(12,024)

Proceeds on sale of property, plant, and equipment	24,704		2,152
Insurance recoveries associated with damaged equipment	643		1,392
Other investing activities	(576)		(890)
Net cash provided by (used in) investing activities	2,760		(98,562)
Financing activities:
Proceeds from long-term debt	404,060		246,090
Principal payments on long-term debt	(408,666)		(204,718)
CCLP distributions	(932)		(924)


Redemptions of CCLP Series A Preferred	—		(28,049)
Tax remittances on equity based compensation	(341)		(571)
Debt issuance costs and other financing activities	(3,897)		(373)
Net cash provided by (used in) financing activities	(9,776)		11,455
Effect of exchange rate changes on cash	(355)		(606)
Increase (decrease) in cash and cash equivalents	57,456		(4,123)
Cash and cash equivalents and restricted cash at beginning of period	17,768		40,102
Cash and cash equivalents and restricted cash at end of period	$	75,224	$	35,979

Supplemental cash flow information:
Interest paid	$	42,199	$	49,073
Income taxes paid	4,692		6,226


	2020		2021		2022		2023		2024		Total
	(In Thousands)
Compression service contracts remaining performance obligations	$	13,939	$	26,608	$	5,785	$	703	$	56	$	47,091


	Three months ended September 30,		Nine months ended September 30,
	2020	2019	2020		2019
	(In Thousands)
Completion Fluids & Products
U.S.	15,013	31,480	$	85,073	$	100,622
International	36,937	27,860	113,460		100,066
	51,950	59,340	198,533		200,688
Water & Flowback Services
U.S.	19,767	68,052	97,016		209,663
International	1,767	4,789	6,708		14,980
	21,534	72,841	103,724		224,643
Compression
U.S.	71,478	105,153	240,661		324,792
International	7,639	8,613	25,066		28,348
	79,117	113,766	265,727		353,140




Total Revenue
U.S.	106,258	204,685	422,750		635,077
International	46,343	41,262	145,234		143,394
	152,601	245,947	$	567,984	$	778,471


	September 30, 2020		December 31, 2019
	(In Thousands)
Finished goods	$	70,452	$	70,135
Raw materials	3,744		4,125
Parts and supplies	32,340		47,793
Work in progress	6,484		14,457
Total inventories	$	113,020	$	136,510


	September 30, 2020		December 31, 2019
Weighted average remaining lease term:
Operating leases	6.09 years		6.43 years


Weighted average discount rate:
Operating leases	9.33	%	9.46	%


		Operating Leases
	(In Thousands)

Remainder of 2020		$	5,809
2021		22,322
2022		18,896
2023		15,803
2024		12,067
Thereafter		32,611
Total lease payments		107,508
Less imputed interest		(26,946)
Total lease liabilities		$	80,562


	Three Months Ended September 30, 2020						Three Months Ended September 30, 2019
	Offshore Services		Maritech		Total		Offshore Services		Maritech		Total
Major classes of line items constituting pretax loss from discontinued operations
Revenue	$	—	$	—	$	—	$	—	$	—	$	—
Cost of revenues	2		—		2		(273)		—		(273)
Depreciation, amortization, and accretion	—		—		—		52		—		52
General and administrative expense	171		—		171		1,734		—		1,734
Other expense, net	—		—		—		117		—		117
Pretax income (loss) from discontinued operations	(173)		—		(173)		(1,630)		—		(1,630)
Pretax (loss) on disposal of discontinued operations					—						(7,500)
Total pretax (loss) from discontinued operations					(173)						(9,130)
Income tax provision (benefit)					—						—
Total (loss) from discontinued operations					$	(173)					$	(9,130)


	Nine Months Ended September 30, 2020						Nine Months Ended September 30, 2019
	Offshore Services		Maritech		Total		Offshore Services		Maritech		Total
Major classes of line items constituting pretax loss from discontinued operations
Revenue	$	—	$	—	$	—	$	—	$	—	$	—
Cost of revenues	(332)		—		(332)		(251)		—		(251)
Depreciation, amortization, and accretion	—		—		—		52		—		52
General and administrative expense	487		—		487		2,483		—		2,483
Other expense, net	—		—		—		117		—		117
Pretax (loss) from discontinued operations	(155)		—		(155)		(2,401)		—		(2,401)
Pretax (loss) on disposal of discontinued operations					—						(7,500)
Total pretax (loss) from discontinued operations					(155)						(9,901)
Income tax provision (benefit)					—						—
Total (loss) from discontinued operations					$	(155)					$	(9,901)


			Fair Value Measurements Using
	Total as of		Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	September 30, 2020		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)


Warrants liability	$	(123)	$	—	$	—	$	(123)
Asset for foreign currency derivative contracts	59		—		59		—

Net asset	$	(64)


			Fair Value Measurements Using
	Total as of		Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	December 31, 2019		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Warrants liability	$	(449)	$	—	$	—	$	(449)
Asset for foreign currency derivative contracts	86		—		86		—
Liability for foreign currency derivative contracts	(56)		—		(56)		—
Net liability	$	(419)


	Three Months Ended
	September 30, 2020
	Net Income (Loss), as reported		Tax Provision		Income (Loss) Before Tax, as Reported		Impairments & Special Charges		Adjusted Income (Loss) Before Tax		Interest Expense, Net		Adjusted Depreciation & Amortization		Adjusted Equity Comp. Expense		Adjusted EBITDA
	(In Thousands)
Completion Fluids & Products Division					$	11,756	$	729	$	12,485	$	(291)	$	1,710	$	—	$	13,904
Water & Flowback Services Division					(7,746)		274		(7,472)		(77)		7,584		—		35
Compression Division					(11,321)		879		(10,442)		13,293		19,948		143		22,942
Eliminations and other					3		—		3		—		(3)		—		—
Subtotal					(7,308)		1,882		(5,426)		12,925		29,239		143		36,881
Corporate and other					(13,472)		1,031		(12,441)		4,706		173		983		(6,579)
TETRA excluding Discontinued Operations	$	(21,425)	$	645	$	(20,780)	$	2,913	$	(17,867)	$	17,631	$	29,412	$	1,126	$	30,302



	Three Months Ended
	September 30, 2019
	Net Income (Loss), as reported		Tax Provision		Income (Loss) Before Tax, as Reported		Impairments & Special Charges		Adjusted Income (Loss) Before Tax		Interest Expense, Net		Depreciation & Amortization		Equity Comp. Expense		Adjusted EBITDA
	(In Thousands)
Completion Fluids & Products Division					$	11,318	$	(736)	$	10,582	$	(216)	$	3,676	$	—	$	14,042
Water & Flowback Services Division					2,578		76		2,654		(2)		8,568		—		11,220
Compression Division					(3,464)		3,597		133		12,869		18,459		(211)		31,250
Eliminations and other					(1)		—		(1)		—		(3)		—		(4)
Subtotal					10,431		2,937		13,368		12,651		30,700		(211)		56,508
Corporate and other					(17,931)		379		(17,552)		5,495		167		1,539		(10,351)
TETRA excluding Discontinued Operations	$	(9,079)	$	1,579	$	(7,500)	$	3,316	$	(4,184)	$	18,146	$	30,867	$	1,328	$	46,157


	Three Months Ended September 30,						Period to Period Change
	2020			2019			2020 vs 2019		% Change
	(In Thousands, Except Percentages)
Revenues	$	51,950		$	59,340		$	(7,390)	(12.5)	%
Gross profit	16,196			16,181			15		0.1	%
Gross profit as a percentage of revenue	31.2		%	27.3		%
General and administrative expense	4,619			4,865			(246)		(5.1)	%
General and administrative expense as a percentage of revenue	8.9		%	8.2		%
Interest income, net	(291)			(216)			(75)		34.7	%

Other expense, net	112			214			(102)		(47.7)	%
Income before taxes	$	11,756		$	11,318		$	438	3.9	%
Income before taxes as a percentage of revenue	22.6		%	19.1		%


Foreign currency derivative contracts	Balance Sheet Location	Fair Value at September 30, 2020		Fair Value at December 31, 2019
		(In Thousands)
Forward purchase contracts	Current assets	$	59	$	86

Forward sale contracts	Current liabilities	—		(53)
Forward purchase contracts	Current liabilities	—		(3)
Net asset		$	59	$	30


	September 30, 2020
Condensed Consolidating Balance Sheet	TETRA		CCLP		Eliminations		Consolidated
	(In Thousands)
Cash, excluding restricted cash	$	58,466	$	16,699	$	—	$	75,165
Affiliate receivables	9,428		—		(9,428)		—
Other current assets	145,672		96,805		—		242,477
Property, plant and equipment, net	102,068		572,500		—		674,568
Long-term affiliate receivables	11,858		—		(11,858)		—
Other assets, including investment in CCLP	6,617		64,801		97,912		169,330
Total assets	$	334,109	$	750,805	$	76,626	$	1,161,540

Affiliate payables	$	—	$	9,428	$	(9,428)	$	—
Other current liabilities	64,601		67,467		—		132,068
Long-term debt, net	206,273		636,943		—		843,216

Warrants liability	123		—		—		123
Long-term affiliate payable	—		11,858		(11,858)		—
Other non-current liabilities	63,425		27,533		—		90,958
Total equity	(313)		(2,424)		97,912		95,175
Total liabilities and equity	$	334,109	$	750,805	$	76,626	$	1,161,540


	Payments Due
	Total		2020		2021		2022		2023		2024		Thereafter
	(In Thousands)
Long-term debt - TETRA	$	220,500	$	—	$	—	$	—	$	—	$	—	$	220,500
Long-term debt - CCLP	636,249		—		—		80,720		—		—		555,529
Interest on debt - TETRA	79,931		3,997		15,986		15,986		15,986		15,986		11,990
Interest on debt - CCLP	241,409		22,503		51,405		49,454		45,553		45,553		26,941
Purchase obligations	87,806		2,381		9,525		9,525		9,525		9,525		47,325
Asset retirement obligations(1)	12,973		—		—		—		—		—		12,973
Operating leases	107,508		5,809		22,322		18,896		15,803		12,067		32,611
Total contractual cash obligations(2)	$	1,386,376	$	34,690	$	99,238	$	174,581	$	86,867	$	83,131	$	907,869


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Publicly Announced Plans or Programs(1)
July 1 – July 31, 2020	27,403	(2)	$	0.40	—	$	14,327,000
August 1 – August 31, 2020	18,356	(2)	0.61		—	14,327,000
September 1 – September 30, 2020	—		—		—	14,327,000
Total	45,759				—	$	14,327,000


10.1*			Transition Agreement dates July 27, 2020 between TETRA Technologies, Inc. and Bass C. Wallace, Jr.
10.2*			Form of Cash Retention Award Agreement under the TETRA Technologies, Inc. 2018 Equity Incentive Plan.
31.1*			Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*			Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**			Certification Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**			Certification Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.SCH+			XBRL Taxonomy Extension Schema Document.
101.CAL+			XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF+			XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB+			XBRL Taxonomy Extension Label Linkbase Document.
101.PRE+			XBRL Taxonomy Extension Presentation Linkbase Document.
104*			Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL documents


		TETRA Technologies, Inc.

Date:	November 3, 2020	By:	/s/Brady M. Murphy
			Brady M. Murphy
			President
			Chief Executive Officer

Date:	November 3, 2020	By:	/s/Elijio V. Serrano
			Elijio V. Serrano
			Senior Vice President
			Chief Financial Officer

Date:	November 3, 2020	By:	/s/Richard D. O’Brien
			Richard D. O’Brien
			Vice President – Finance and Global Controller
			Principal Accounting Officer


LTI Cash Incentive Awards	Values at Target
	RTSR	RONCE (EBIT)	Total
1/1/2020-12/31/2022 Performance Period	$131,250	$131,250	$262,500
	RTSR	CFO/Share	Total
1/1/2019-12/31/2021 Performance Period	$125,000	$125,000	$250,000
	RTSR	3-Year CFO	Total
1/1/2018-12/31/2020 Performance Period	$100,000	$100,000	$200,000


Award Type	Unvested	Vested and Unexercised
Restricted Stock Awards
Granted 2/22/2017	0	0
Granted 2/22/2018	17,498	0
Total:	17,498

Restricted Stock Units
Granted 2/21/2019	71,747	0
Granted 5/2/2019	40,742	0
Granted 2/20/2020	106,419	0
Total	218,908	0

Incentive Stock Options
Granted 5/20/2011	0	2,066
Granted 5/20/2012	0	10,089
Granted 5/20/2013	0	11,679
Granted 5/20/2014	0	10,009
Granted 5/4/2015	0	15,207
Granted 5/2/2016	0	21,783
Granted 2/22/2017	0	17,949
Granted 2/22/2018	12,144	9,108
Total:	12,144	97,890

Nonqualified Stock Options
Granted 5/20/2011	0	12,806
Granted 5/20/2012	0	11,276
Granted 5/20/2013	0	7,985
Granted 5/20/2014	0	8,857
Granted 5/4/2015	0	21,347
Granted 5/2/2016	0	14,656
Granted 2/22/2017	0	50,213
Granted 2/22/2018	0	33,393
Total:	0	160,533

Phantom Units
Granted 2/22/2020	50,873	0
Total:	50,873	0


Component 2 Award	Average Stock Price as of the Determination Date	Payout as a Percentage of Base Pay as of the Determination Date
Minimum	$[__] or less	[__]%
Base Value	$[__]	[__]%
	$[__]	[__]%
Maximum	$[__]	[__]%


Dated:	November 3, 2020	/s/Brady M. Murphy
		Brady M. Murphy
		President and
		Chief Executive Officer
		TETRA Technologies, Inc.