Tetra Technologies Inc 10-Q for FY2020 Q1

Tetra Technologies Inc (TTI)

10-Q 2020-05-07 For: 2020-03-31

Added on April 11, 2026

About this 10-Q

Tetra Technologies Inc filed this 10-Q on May 7, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $222.94M; down 8.5% from $243.73M a year earlier
Net loss: $1.55M; compared with a net loss of $10.84M a year earlier
Diluted EPS: -$0.01; compared with -$0.09 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	6
Notes to Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3. Quantitative and Qualitative Disclosures about Market Risk	35
Item 4. Controls and Procedures	35

PART II—OTHER INFORMATION
Item 1. Legal Proceedings	35
Item 1A. Risk Factors	36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3. Defaults Upon Senior Securities	37
Item 4. Mine Safety Disclosures	37
Item 5. Other Information	37
Item 6. Exhibits	38
SIGNATURES	39



	Three Months Ended March 31,
	2020			2019
Revenues:
Product sales	$	85,033		$	91,781
Services	137,909			151,947
Total revenues	222,942			243,728
Cost of revenues:
Cost of product sales	58,967			74,588
Cost of services	89,727			102,156
Depreciation, amortization, and accretion	29,460			30,628
Impairments and other charges	5,371			146
Total cost of revenues	183,525			207,518
Gross profit	39,417			36,210
General and administrative expense	30,537			34,277
Interest expense, net	17,856			18,379
Warrants fair value adjustment (income) expense	(338		)	407
CCLP Series A Preferred Units fair value adjustment (income) expense	—			1,163
Other (income) expense, net	439			(951		)
Loss before taxes and discontinued operations	(9,077		)	(17,065		)
Provision for income taxes	1,154			1,609
Loss before discontinued operations	(10,231		)	(18,674		)
Discontinued operations:
Loss from discontinued operations, net of taxes	(145		)	(426		)
Net loss	(10,376		)	(19,100		)
Less: loss attributable to noncontrolling interest	8,825			8,262
Net loss attributable to TETRA stockholders	$	(1,551	)	$	(10,838	)
Basic net loss per common share:
Loss before discontinued operations attributable to TETRA stockholders	$	(0.01	)	$	(0.09	)
Loss from discontinued operations attributable to TETRA stockholders	$	0.00		$	0.00
Net loss attributable to TETRA stockholders	$	(0.01	)	$	(0.09	)
Average shares outstanding	125,587			125,681
Diluted net loss per common share:
Loss before discontinued operations attributable to TETRA stockholders	$	(0.01	)	$	(0.09	)
Loss from discontinued operations attributable to TETRA stockholders	$	0.00		$	0.00
Net loss attributable to TETRA stockholders	$	(0.01	)	$	(0.09	)
Average diluted shares outstanding	125,587			125,681



	March 31, 2020			December 31, 2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	29,473		$	17,704
Restricted cash	53			64
Trade accounts receivable, net of allowances of $6,308 in 2020 and $5,262 in 2019	169,231			176,291
Inventories	142,116			136,510
Prepaid expenses and other current assets	23,107			20,785
Total current assets	363,980			351,354
Property, plant, and equipment:
Land and building	57,357			60,586
Machinery and equipment	1,347,642			1,335,157
Automobiles and trucks	30,052			31,681
Chemical plants	58,327			57,692
Construction in progress	24,760			34,393
Total property, plant, and equipment	1,518,138			1,519,509
Less accumulated depreciation	(777,891		)	(760,872		)
Net property, plant, and equipment	740,247			758,637
Other assets:
Patents, trademarks and other intangible assets, net of accumulated amortization of $89,450 in 2020 and $88,422 in 2019	72,104			74,199
Deferred tax assets, net	24			24
Operating lease right-of-use assets	75,344			68,131
Other assets	18,065			19,577
Total other assets	165,537			161,931
Total assets	$	1,269,764		$	1,271,922



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

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



	Three Months Ended March 31,
	2020			2019
Operating activities:
Net loss	$	(10,376	)	$	(19,100	)
Reconciliation of net loss to cash provided by operating activities:
Depreciation, amortization, and accretion	29,460			30,627
Impairment and other charges	5,371			146
Benefit for deferred income taxes	55			229
Equity-based compensation expense	784			2,165
Provision for doubtful accounts	1,380			627
Amortization and expense of financing costs	569			1,292
CCLP Series A Preferred Unit distributions and adjustments	—			2,159
Warrants fair value adjustment	(337		)	407
Contingent consideration liability fair value adjustment	—			(400		)
Gain on sale of assets	(833		)	(201		)
Changes in operating assets and liabilities:
Accounts receivable	3,601			2,353
Inventories	(12,414		)	(15,809		)
Prepaid expenses and other current assets	(2,442		)	(3,222		)
Trade accounts payable and accrued expenses	8,742			6,638
Other	(1,384		)	(499		)
Net cash provided by operating activities	22,176			7,412
Investing activities:
Purchases of property, plant, and equipment, net	(12,390		)	(32,409		)
Proceeds on sale of property, plant, and equipment	1,425			364
Other investing activities	350			319
Net cash used in investing activities	(10,615		)	(31,726		)
Financing activities:
Proceeds from long-term debt	56,512			66,000
Principal payments on long-term debt	(54,511		)	(35,451		)
CCLP distributions	(309		)	(307		)
Redemptions of CCLP Series A Preferred	—			(8,346		)
Tax remittances on equity based compensation	(319		)	(429		)
Debt issuance costs and other financing activities	(235		)	(155		)
Net cash provided by financing activities	1,138			21,312
Effect of exchange rate changes on cash	(940		)	(167		)
Increase (decrease) in cash and cash equivalents	11,759			(3,169		)
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	$	29,527		$	36,933


Supplemental cash flow information:
Interest paid	$	15,421		$	15,544
Income taxes paid	1,479			1,644



	2020		2021		2022		2023		2024		Total
	(In Thousands)
Compression service contracts remaining performance obligations	$	38,720	$	15,941	$	2,026	$	54	$	—	$	56,741



	March 31, 2020		December 31, 2019
	(In Thousands)
Finished goods	$	67,824	$	70,135
Raw materials	3,886		4,125
Parts and supplies	38,859		47,793
Work in progress	31,547		14,457
Total inventories	$	142,116	$	136,510



	March 31, 2020		December 31, 2019
Weighted average remaining lease term:
Operating leases	6.37 Years		6.43 Years

Weighted average discount rate:
Operating leases	9.43	%	9.46	%



		Operating Leases
	(In Thousands)

Remainder of 2020		$	19,961
2021		22,092
2022		18,422
2023		14,776
2024		12,372
Thereafter		30,268
Total lease payments		117,891
Less imputed interest		(41,264		)
Total lease liabilities		$	76,627



	Three Months Ended March 31, 2020								Three Months Ended March 31, 2019
	Offshore Services			Maritech		Total			Offshore Services			Maritech		Total
Major classes of line items constituting pretax loss from discontinued operations
Revenue	$	—		$	—	$	—		$	—		$	—	$	—
Cost of revenues	(60		)	—		(60		)	22			—		22
Depreciation, amortization, and accretion	—			—		—			—			—		—
General and administrative expense	205			—		205			404			—		404
Other (income) expense, net	—			—		—			—			—		—
Pretax loss from discontinued operations	(145		)	—		(145		)	(426		)	—		(426		)
Pretax loss on disposal of discontinued operations						—								—
Total pretax loss from discontinued operations						(145		)						(426		)
Income tax benefit						—								—
Total loss from discontinued operations						$	(145	)						$	(426	)



Derivative Contracts	US Dollar Notional Amount		Traded Exchange Rate	Settlement Date
	(In Thousands)
Forward purchase Euro	$	8,167	1.08	4/21/2020
Forward purchase Euro	10,497		1.10	4/21/2020
Forward purchase pounds sterling	9,400		1.17	4/21/2020
Forward sale pounds sterling	500		1.18	4/21/2020
Forward sale pounds sterling	1,875		1.17	4/21/2020
Forward sale Norwegian krone	1,000		11.76	4/21/2020
Forward purchase Norwegian krone	4,300		11.36	4/21/2020
Forward sale Mexican peso	4,974		24.40	4/21/2020



Derivative Contracts	British Pound Notional Amount		Traded Exchange Rate	Settlement Date
	(In Thousands)
Forward purchase Euro	£	3,445	0.92	4/21/2020



	Three Months Ended March 31,
	2020		2019
	(In Thousands)
Completion Fluids & Products
U.S.	$	37,958	$	31,606
International	37,279		29,975
	75,237		61,581
Water & Flowback Services
U.S.	54,384		73,199
International	3,083		5,479
	57,467		78,678
Compression
U.S.	80,599		93,517
International	9,639		9,952
	90,238		103,469
Total Revenue
U.S.	172,941		198,322
International	50,001		45,406
	$	222,942	$	243,728



				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	March 31, 2020			(Level 1)		(Level 2)			(Level 3)
	(In Thousands)
Midland manufacturing facility and related assets	$	19,646		$	—	$	—		$	19,646
Warrants liability	(112		)	—		—			(112		)
Asset for foreign currency derivative contracts	1,160			—		1,160			—
Liability for foreign currency derivative contracts	(614		)	—		(614		)	—
Net asset	$	20,080



				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 March 31,
	2020			2019
	(In Thousands)
Revenues from external customers
Product sales
Completion Fluids & Products Division	$	70,190		$	57,328
Water & Flowback Services Division	25			364
Compression Division	14,818			34,089
Consolidated	$	85,033		$	91,781

Services
Completion Fluids & Products Division	$	5,047		$	4,253
Water & Flowback Services Division	57,442			78,314
Compression Division	75,420			69,380
Consolidated	$	137,909		$	151,947

Total revenues
Completion Fluids & Products Division	$	75,237		$	61,581
Water & Flowback Services Division	57,467			78,678
Compression Division	90,238			103,469
Interdivision eliminations	—			—
Consolidated	$	222,942		$	243,728

Income (loss) before taxes
Completion Fluids & Products Division	$	19,396		$	6,186
Water & Flowback Services Division	(2,244		)	2,231
Compression Division	(12,790		)	(7,801		)
Interdivision eliminations	5			6
Corporate Overhead⁽¹⁾	(13,444		)	(17,687		)
Consolidated	$	(9,077	)	$	(17,065	)



Derivative Contracts	Swedish Krona Notional Amount			Traded Exchange Rate	Settlement Date
	(In Thousands)
Forward purchase Euro		210	kr	10.90	4/6/2020
Forward purchase Euro		66,690	kr	10.91	4/6/2020
Forward purchase Euro		2,400	kr	11.24	4/21/2020



Foreign currency derivative contracts	Balance Sheet Location	Fair Value at March 31, 2020			Fair Value at December 31, 2019
		(In Thousands)
Forward purchase contracts	Current assets	$	1,160		$	86
Forward sale contracts	Current liabilities	(433		)	(53		)
Forward purchase contracts	Current liabilities	(181		)	(3		)
Net asset (liability)		$	546		$	30


(1)	Amounts reflected include the following general corporate expenses:


•	evaluate the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis; and


•	determine our ability to incur and service debt and fund capital expenditures.



	Three Months Ended
	March 31, 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			Depreciation & Amortization			Equity Comp. Expense		Adjusted EBITDA
	(In Thousands)
Completion Fluids & Products Division						$	19,396		$	450		$	19,846		$	(154	)	$	1,934		$	—	$	21,626
Water & Flowback Services Division						(2,244		)	1,607			(637		)	(9		)	7,425			—		6,779
Compression Division						(12,790		)	5,971			(6,819		)	12,564			19,908			324		25,977
Eliminations and other						5			—			5			—			(4		)	—		1
Subtotal						4,367			8,028			12,395			12,401			29,263			324		54,383
Corporate and other						(13,444		)	73			(13,371		)	5,455			197			1,145		(6,574		)
TETRA excluding Discontinued Operations	$	(10,231	)	$	1,154	$	(9,077	)	$	8,101		$	(976	)	$	17,856		$	29,460		$	1,469	$	47,809

	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, Net			Depreciation & Amortization			Equity Comp. Expense		Adjusted EBITDA
	(In Thousands)
Completion Fluids & Products Division						$	6,186		$	683		$	6,869		$	(179	)	$	3,665		$	—	$	10,355
Water & Flowback Services Division						2,231			(400		)	1,831			4			8,267			—		10,102
Compression Division						(7,801		)	1,610			(6,191		)	13,213			18,532			365		25,919
Eliminations and other						6			—			6			(1		)	(4		)	—		1
Subtotal						622			1,893			2,515			13,037			30,460			365		46,377
Corporate and other						(17,687		)	331			(17,356		)	5,342			168			1,800		(10,046		)
TETRA excluding Discontinued Operations	$	(18,674	)	$	1,609	$	(17,065	)	$	2,224		$	(14,841	)	$	18,379		$	30,628		$	2,165	$	36,331



	Three Months Ended March 31,						Period to Period Change
	2020			2019			2020 vs 2019			% Change
	(In Thousands, Except Percentages)
Revenues	$	222,942		$	243,728		$	(20,786	)	(8.5	)%
Gross profit	39,417			36,210			3,207			8.9	%
Gross profit as a percentage of revenue	17.7		%	14.9		%
General and administrative expense	30,537			34,277			(3,740		)	(10.9	)%
General and administrative expense as a percentage of revenue	13.7		%	14.1		%
Interest expense, net	17,856			18,379			(523		)	(2.8	)%
Warrants fair value adjustment (income) expense	(338		)	407			(745		)	(183.0	)%
CCLP Series A Preferred Units fair value adjustment (income) expense	—			1,163			(1,163		)	(100.0	)%
Other (income) expense, net	439			(951		)	1,390			(146.2	)%
Loss before taxes and discontinued operations	(9,077		)	(17,065		)	7,988			46.8	%
Loss before taxes and discontinued operations as a percentage of revenue	(4.1		)%	(7.0		)%
Provision for income taxes	1,154			1,609			(455		)	(28.3	)%
Loss before discontinued operations	(10,231		)	(18,674		)	8,443			(45.2	)%
Discontinued operations:
Loss from discontinued operations, net of taxes	(145		)	(426		)	281			(66.0	)%
Net loss	(10,376		)	(19,100		)	8,724			(45.7	)%
Loss attributable to noncontrolling interest	8,825			8,262			563			6.8	%
Net loss attributable to TETRA stockholders	$	(1,551	)	$	(10,838	)	$	9,287		(85.7	)%



	March 31, 2020
Condensed Consolidating Balance Sheet	TETRA		CCLP		Eliminations			Consolidated
	(In Thousands)
Cash, excluding restricted cash	$	22,057	$	7,416	$	—		$	29,473
Affiliate receivables	14,964		—		(14,964		)	—
Other current assets	194,292		140,215		—			334,507
Property, plant and equipment, net	112,095		628,152		—			740,247
Long-term affiliate receivables	11,618		—		(11,618		)	—
Other assets, including investment in CCLP	22,474		58,519		84,544			165,537
Total assets	$	377,500	$	834,302	$	57,962		$	1,269,764

Affiliate payables	$	—	$	14,964	$	(14,964	)	$	—
Other current liabilities	80,576		114,620		—			195,196
Long-term debt, net	207,413		638,429		—			845,842
Warrants liability	112		—		—			112
Long-term affiliate payable	—		11,618		(11,618		)	—
Other non-current liabilities	61,771		19,912		—			81,683
Total equity	27,628		34,759		84,544			146,931
Total liabilities and equity	$	377,500	$	834,302	$	57,962		$	1,269,764



	Payments Due
	Total		2020		2021		2022		2023		2024		Thereafter
	(In Thousands)
Long-term debt - TETRA	$	221,500	$	—	$	—	$	—	$	1,000	$	—	$	220,500
Long-term debt - CCLP	649,430		—		—		295,930		3,500		—		350,000
Interest on debt - TETRA	95,794		13,106		17,474		17,474		17,435		17,317		12,988
Interest on debt - CCLP	185,387		35,779		47,705		40,593		26,310		26,250		8,750
Purchase obligations	92,569		7,144		9,525		9,525		9,525		9,525		47,325
Asset retirement obligations⁽¹⁾	12,878		—		—		—		—		—		12,878
Operating leases	117,891		19,961		22,092		18,422		14,776		12,372		30,268
Total contractual cash obligations⁽²⁾	$	1,375,449	$	75,990	$	96,796	$	381,944	$	72,546	$	65,464	$	682,709


⁽¹⁾	We have estimated the timing of these payments for asset retirement obligation liabilities based upon our plans. The amounts shown represent the discounted obligation as of March 31, 2020.


⁽²⁾	Amounts exclude other long-term liabilities reflected in our Consolidated Balance Sheet that do not have known payment streams. These excluded amounts include approximately $0.4 million of liabilities under FASB Codification Topic 740, “Accounting for Uncertainty in Income Taxes,” as we are unable to reasonably estimate the ultimate amount or timing of settlements.


•	economic and operating conditions that are outside of our control, including the trading price of our common stock;


•	the current significant surplus in the supply of oil and the ability of the OPEC and other oil producing nations to agree on and comply with supply limitations; the duration and magnitude of the unprecedented disruption in the oil and gas industry currently, which is negatively impacting our business;


•	expected customer drilling activity and capital spending for 2020 and 2021 and projections concerning our business activities


•	the planned closures of our El Dorado plant and CCLP’s Midland facility;


•	the availability of raw materials and labor at reasonable prices;


•	restrictions under our debt agreements and the consequences of any failure to comply with debt covenants;


•	the effect and results of litigation, regulatory matters, settlements, audits, assessments, and contingencies;


•	information technology risks including the risk of cyberattack;


•	the severity and duration of the COVID-19 pandemic and related economic repercussions and the resulting negative impact on the demand for oil and gas;