TETRA Technologies, Inc. Announces Third Quarter 2019 Results

THE WOODLANDS, Texas, Nov. 7, 2019 /PRNewswire/ -- TETRA Technologies, Inc. ("TETRA") (NYSE:TTI) announced consolidated third quarter net loss before discontinued operations of $9.1 million, compared to a net loss before discontinued operations of $8.2 million in the second quarter of 2019 and $12.9 million in the same quarter of last year. Net loss per share before discontinued operations attributable to TETRA shareholders during the third quarter was $0.06, unchanged from the second quarter of 2019 and from the third quarter of 2018. Adjusted per share((1)) loss before discontinued operations and excluding special items, was $0.02 in the third quarter, unchanged from the second quarter of this year and the third quarter of 2018.

Brady M. Murphy, TETRA's Chief Executive Officer, stated, "Despite a challenging North America onshore market that is experiencing a significant pullback in activity, I'm pleased with our third quarter performance. We continue to focus on differentiated offerings in each of our segments and on generating free cash flow. Our third quarter results reflect great progress on these objectives. Consolidated revenue from continuing operations was $246 million in the third quarter, down 15% sequentially and down 4% from last year. During the quarter, consolidated cash provided by operations was $46.6 million and TETRA only adjusted free cash flow from continuing operations((1)) was $9.7 million, which was a significant improvement over the second quarter of this year and the third quarter of last year. Adjusted EBITDA((1)) on a consolidated basis was $46 million, down from $50 million in the second quarter primarily as a result of the seasonal decline in our northern Europe industrial chemicals business, while Adjusted EBITDA as a percentage of revenue((1)) improved sequentially across all three divisions. The TETRA CS Neptune® completion fluids project that we were expecting to be materially completed in the third quarter has been delayed and is now anticipated to be completed in the fourth quarter. Despite the delay in TETRA CS Neptune® completion fluids activity, our Completion Fluids & Products Division achieved income before taxes as a percentage of revenue of 19.1% and delivered solid Adjusted EBITDA as a percentage of revenue((1)) of 23.7%, which is the highest Adjusted EBITDA as a percentage of revenue((1)) without the benefit of TETRA CS Neptune® completion fluids sales since the fourth quarter of 2015. Our Compression Division again achieved record high gross margins and utilization for our compression services equipment. Water & Flowback Services Division income before taxes and Adjusted EBITDA((1)) showed resiliency in a difficult market with income before taxes of $2.6 million and Adjusted EBITDA((1)) increasing sequentially by $0.3 million to $11.2 million, outperforming the macro market indicators.

"Our Completion Fluids & Products Division continues to experience high demand for our services and products in domestic and most international offshore markets, with favorable product mix and pricing improvements that is reflected in the Division's income before taxes of $11.3 million. In the second quarter of this year we signed a contract to provide TETRA CS Neptune® completion fluids for an ultra-deepwater Gulf of Mexico project that was expected to be materially completed towards the end of the third quarter. This project was delayed and is now expected to be completed during the fourth quarter. These type of projects are complex, ultra-deepwater wells that are prone to unforeseen challenges, making the predictability on the timing of completing the well very difficult. During the third quarter we also launched the TETRA CS Neptune® completion fluids monovalent family of products at the Society of Petroleum Engineering (SPE) Europe conference. Monovalent completion fluids are more compatible with certain reservoirs and can also provide lower corrosion rates in some applications. Feedback to-date has been very positive, and we believe that this new technology will open more opportunities to deploy our highly differentiated portfolio of TETRA CS Neptune® completion fluids. Highlighting our progress with technology differentiation, TETRA was a finalist for World Oil's Magazine's Best Oilfield Fluids and Chemicals Award for the TETRA Advanced Displacement System (TADS). Outside the oilfield services market, our industrial chemicals business remains strong and meaningfully contributed to our strong Completion Fluids & Products Division results and helps offset some of the volatility in our North America oilfield onshore business.

"Water & Flowback Services Division income before taxes was $2.6 million. The Division had income before taxes as a percentage of revenue of 3.5% and Adjusted EBITDA as a percent of revenue((1)) of 15.4% on slightly lower revenue from the second quarter of 2019, as we continue to focus on integrated projects utilizing our automation capabilities. We finished the quarter with 20 integrated projects with 13 customers. Four of the projects were with either new customers or in new basins. To support our closed loop water management capability, we released our new TETRA BlueLinx(TM) Automated Control System, which provides remote control and monitoring for nearly every aspect of our integrated water management services. In the third quarter, our automation efforts and cost cutting initiatives helped us successfully navigate through this challenging market. We also made progress commercializing our TETRA Advanced Cyclone System (TACS), which is achieving proven sand recovery efficiency greater than 95%, compared to traditional cyclones which typically have closer to 50% sand recovery efficiency. We signed a take-or-pay contract with a major E&P operator in the Permian Basin, who was the first to run extensive trials with TACS, for multiple units to displace their current technology. We have also been awarded a contract for multiple test separators in Argentina, our first Latin American contract for this type of equipment. TETRA was also a finalist for two World Oil Magazine Best Water Management Technology Awards, one for its TETRA SwiftWater Automated Treatment (SWAT(TM)) System, and the other for TETRA Lowest Cost Per Barrel Water Management Solution. We were the only company that had two technology solutions in the finals.

"Compression Division revenue decreased sequentially to $114 million from $136 million on lower new equipment sales while compression services and aftermarket services revenue both increased. Compression services gross margins were once again at record highs driven by price increases that we continue to achieve, record high utilization of equipment, cost actions and the deployment of new equipment at higher pricing. While we have seen some of our customers slow down the need for additional compression services going into 2020, the overall fundamentals for the compression services business have not changed and this segment remains one of the strongest in the oil and gas industry. We continue to see centralized gas lift as a growing trend to increase liquid production, and it, combined with our increased focus on surface artificial lift methods with solutions such as the Gas Assisted Plunger Lift (GAPL) and Backside Auto Injection Systems (BAIS) technology, has resulted in a fourfold increase since the beginning of the year in the number of GasJack® units we have working for these unconventional applications. We are extremely pleased with the amount of interest and demand these new applications are creating for GasJack® units."

Operating Segments

Completion Fluids & Products Division

Completion Fluids & Products revenue was $59.3 million in the third quarter of 2019, a decrease of 26% from the second quarter of 2019 following the seasonal high industrial chemicals activity in Northern Europe. Completion Fluids & Products income before taxes was $11.3 million, or 19.1% of revenue. Adjusted EBITDA((1)) of $14.0 million decreased by $3.8 million sequentially and was 23.7% of revenue, a 130 basis point improvement sequentially. We did not have the benefit of an expected TETRA CS Neptune® completion fluids project in this quarter.

Water & Flowback Services Division

Water & Flowback Services third quarter 2019 revenue decreased 0.4% sequentially to $72.8 million. Income before taxes was $2.6 million, or 3.5% of revenue. Adjusted EBITDA((1)) increased 3% sequentially to $11.2 million, despite the sequential revenue drop. Results in this division held up well across most North America basins, despite the headwinds the industry is facing. Adjusted EBITDA as a percent of revenue((1)) improved to 15.4% in the third quarter of 2019 from 14.9% in the second quarter driven by our transition towards integrated projects with automation and cost cutting efforts.

Compression Division

Third quarter Compression revenue decreased 16% from the second quarter of 2019 due to the timing on the shipment of new equipment, to $114 million, and was 1% below the third quarter of last year. Compression services gross margins were 53.2%, up 50 basis points from the second quarter of 2019 and overall fleet utilization was 90.1%, both of which are the highest since the acquisition of Compressor Systems, Inc. in 2014. As of September 30, 2019, total active operating horsepower was 1,043,384, a sequential improvement of over 14,000 horsepower. Compression Division net loss before taxes was $3.5 million, in-line with the net loss in the second quarter of 2019. Third quarter 2019 Adjusted EBITDA((1)) of $31.3 million decreased 5% from the second quarter of 2019 primarily due to lower new equipment sales. We received net new equipment orders of $29 million in the third quarter of 2019, up from $18 million in the second quarter of this year. New equipment sales backlog increased to $63 million at September 30, 2019 from $60 million at the end of the previous quarter.




                        (1) These financial measures are
                         not in accordance with generally
                         accepted accounting principles in
                         the United States ("GAAP"). Please
                         see Schedules E, F, G, H. I, J and
                         K for reconciliations of these
                         non-GAAP financial measures to
                         the most directly comparable GAAP
                         measures.

A summary of key financial metrics for the second quarter is as follows:



       
                
       Third Quarter 2019 Results


                                                                      
          
                Three Months Ended


                                              Sep 30, 2019                                 Jun 30, 2019                 Sep 30, 2018



                                                                  
         (In Thousands, Except per Share Amounts)


        Revenue                                            $
     245,947                                                                 $
     288,796                     $
     256,851


        Loss before
         discontinued
         operations                                (9,079)                                                  (8,201)                              (12,852)


        Adjusted EBITDA
         before
         discontinued
         operations(2)                              46,157                                                    50,084                                 41,803


        GAAP EPS before
         discontinued
         operations
         attributable to
         TETRA
         stockholders                               (0.06)                                                   (0.06)                                (0.06)


        Adjusted EPS
         attributable to
         TETRA
         stockholders(2)                            (0.02)                                                   (0.02)                                (0.02)


        GAAP net cash
         provided (used)
         by operating
         activities                                 46,605                                                    30,965                                 13,760


        TETRA only
         adjusted free
         cash flow from
         continuing
         operations(2)                              $9,749                                                           $
             3,117                       $
     (558)

    ---

Free Cash Flow and Balance Sheet

Consolidated cash provided from operating activities for the third quarter was $46.6 million. TETRA only adjusted free cash flow from continuing operations((2)) in the third quarter was $9.7 million and compares to $3.1 million in the second quarter of 2019. We have historically consumed cash in the first half of the year and generated cash in the second half of the year, reflecting the seasonality of some of our businesses. We continue to forecast that TETRA only adjusted free cash flow from continuing operations will be positive for the full year and above last year's levels. Consolidated total debt((2)) was $858 million while consolidated net debt(([2])) was $822 million, with TETRA only net debt of $192 million (see Schedule H for a reconciliation of these non-GAAP financial measures). At the end of the third quarter of 2019, TETRA only non-restricted cash was $21 million.




                            (2) These financial measures are not
                             in accordance with generally
                             accepted accounting principles in
                             the United States ("GAAP"). Please
                             see Schedules E, F, G, H. I, J and
                             K for reconciliations of these non-
                             GAAP financial measures to the most
                             directly comparable GAAP measures.

Special items

Special items in the third quarter, including Discontinued Operations, are detailed on Schedule F, and include the following:

    --  $1.8 million expense for bad debt expenses, related to customers that
        filed for bankruptcy
    --  $0.8 million expense for asset impairments for a compression unit
        destroyed by fire
    --  $0.1 million non-cash income for TETRA stock warrant fair value
        adjustment
    --  $0.3 million expense related to the final cash redemption of CSI
        Compressco's Series A Convertible Preferred Units
    --  $0.4 million expense in severance and other charges (credits)

Loss from discontinued operations of $9.1 million in the third quarter includes the impact of a reserve for a promissory note and other receivables from the counterparty on the sale of our Offshore Decommissioning to the buyer that filed for bankruptcy.

Additionally, the Provision (Benefit) for Tax on Schedule F reflects a normalized tax rate of 21%.

Conference Call

TETRA will host a conference call to discuss these results today, November 7, 2019, at 10:30 a.m. EST. The phone number for the call is 1-888-347-5303. The conference will also be available by live audio webcast and may be accessed through TETRA's website at www.tetratec.com. A replay of the conference call will be available at 1-877-344-7529, conference number 10127861, for one week following the conference call and the archived webcast call will be available through the Company's website for 30 days following the conference call.

Investor Contact

For further information: Elijio Serrano, CFO, TETRA Technologies, Inc., The Woodlands, Texas, Phone: 281.367.1983, Fax: 281.364.4346, www.tetratec.com

Financial Statements, Schedules and Non-GAAP Reconciliation Schedules (Unaudited)

Schedule A: Consolidated Income Statement
Schedule B: Financial Results By Segment
Schedule C: Consolidated Balance Sheet
Schedule D: Long-Term Debt
Schedule E: Statement Regarding Use of Non-GAAP Financial Measures
Schedule F: Special Items
Schedule G: Non-GAAP Reconciliation to GAAP Financials
Schedule H: Non-GAAP Reconciliation of TETRA Net Debt
Schedule I: Non-GAAP Reconciliation to TETRA Only Adjusted Free Cash Flow
Schedule J: Non-GAAP Reconciliation to TETRA Only Adjusted Free Cash Flow From Continuing Operations
Schedule K: Non-GAAP Reconciliation to TETRA Adjusted EBITDA as a Percentage of Revenue

Company Overview and Forward-Looking Statements

TETRA Technologies, Inc. is a geographically diversified oil and gas services company, focused on completion fluids and associated products and services, water management, frac flowback, production well testing, and compression services and equipment. TETRA owns an equity interest, including all of the general partner interest, in CSI Compressco LP (NASDAQ:CCLP), a master limited partnership.

This news release includes certain statements that are deemed to be forward-looking statements. Generally, the use of words such as "may," "expectation," "expect," "intend," "estimate," "projects," "anticipate," "believe," "assume," "could," "should," "plans," "targets" or similar expressions that convey the uncertainty of future events, activities, expectations or outcomes identify forward-looking statements that the Company intends to be included within the safe harbor protections provided by the federal securities laws. These forward-looking statements include statements concerning the anticipated recovery of the oil and gas industry, expected 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                                            Nine Months Ended
                                                         September 30,                                              
            September 30,


                                            2019                                         2018                            2019                   2018

                                                                                                                                              ---

                                                               
              (In Thousands, Except per Share Amounts)



       Revenues                                    $
              245,947                                        $
          256,851                                   $
        778,471      $
         716,304




        Cost of sales,
         services, and rentals           170,313                                        183,121                                     553,709                             511,370


        Depreciation,
         amortization, and
         accretion                        30,867                                         29,460                                      93,312                              84,880


        Impairments and other
         charges                             849                                          2,940                                       3,306                               2,940


        Insurance recoveries
         (credits)                       (1,042)                                                                                  (1,392)



        Total cost of revenues           200,987                                        215,521                                     648,935                             599,190



        Gross profit                      44,960                                         41,330                                     129,536                             117,114




        General and
         administrative
         expense                          34,926                                         34,446                                     105,498                              98,866


        Interest expense, net             18,146                                         18,894                                      55,054                              52,246


        Warrants fair value
         adjustment (income)
         expense                              78                                          (179)                                    (1,035)                                 22


        CCLP Series A
         Preferred Units fair
         value adjustment
         (income) expense                      -                                           498                                       1,309                               1,344


        Other (income)
         expense, net                      (690)                                           619                                     (1,014)                              7,203



        Loss (benefit) before
         taxes and
         discontinued
         operations                      (7,500)                                      (12,948)                                    (30,276)                           (42,567)


        Provision (benefit)
         for income taxes                  1,579                                           (96)                                      5,678                               3,474



        Loss before
         discontinued
         operations                      (9,079)                                      (12,852)                                    (35,954)                           (46,041)



       Discontinued operations:


        Loss from discontinued
         operations, net of
         taxes                           (9,130)                                           796                                     (9,901)                           (40,931)




       Net loss                        (18,209)                                      (12,056)                                    (45,855)                           (86,972)


        Less: loss
         attributable to
         noncontrolling
         interest                          2,378                                          5,120                                      12,273                              20,423



        Net loss attributable
         to TETRA stockholders                     $
              (15,831)                                       $
          (6,936)                                 $
        (33,582)    $
         (66,549)





                                    Basic per share information:

    ---

        Loss before
         discontinued
         operations
         attributable to TETRA
         stockholders                                $
              (0.06)                                        $
          (0.06)                                   $
        (0.19)      $
         (0.21)


        Loss from discontinued
         operations
         attributable to TETRA
         stockholders                                $
              (0.07)                                          $
          0.00                                    $
        (0.08)      $
         (0.33)



        Net loss attributable
         to TETRA stockholders                       $
              (0.13)                                        $
          (0.06)                                   $
        (0.27)      $
         (0.54)



        Weighted average
         shares outstanding              125,568                                      125,689                         125,620                        123,557

                                                                                                                                                      ===



                                    Diluted per share information:

    ---

        Loss before
         discontinued
         operations
         attributable to TETRA
         stockholders                                $
              (0.06)                                        $
          (0.06)                                   $
        (0.19)      $
         (0.21)


        Loss from discontinued
         operations
         attributable to TETRA
         stockholders                                $
              (0.07)                                          $
          0.00                                    $
        (0.08)      $
         (0.33)



        Net loss attributable
         to TETRA stockholders                       $
              (0.13)                                        $
          (0.06)                                   $
        (0.27)      $
         (0.54)



        Weighted average
         shares outstanding              125,568                                        125,689                         125,620                        123,557



       
                Schedule B: Financial Results By Segment (Unaudited)(1)




                                                                Three Months Ended                                    Nine Months Ended
                                                       September 30,                                        September 30,


                                           2019                                       2018                          2019                  2018

                                                                                                                                        ---

                                                                            
             (In Thousands)


                                    Revenues by segment:

    ---

        Completion Fluids &
         Products Division                         $
              59,340                                   $
             63,073                         $
         200,688     $
          192,733


        Water & Flowback
         Services Division               72,841                                       78,568                                   224,643                    223,289


        Compression Division            113,766                                      115,261                                   353,140                    300,607


        Eliminations and
         other                                -                                        (51)                                                              (325)



        Total revenues                            $
              245,947                                  $
             256,851                         $
         778,471     $
          716,304





                                    Gross profit (loss) by segment:

    ---

        Completion Fluids &
         Products Division                         $
              16,181                                   $
             13,129                          $
         46,653      $
          34,211


        Water & Flowback
         Services Division                8,236                                       11,522                                    24,577                     41,556


        Compression Division             20,710                                       16,847                                    58,804                     41,820


        Corporate overhead
         and eliminations                 (167)                                       (168)                                    (498)                     (473)



        Total gross profit                         $
              44,960                                   $
             41,330                         $
         129,536     $
          117,114





                                    Income (loss) before taxes by segment:

    ---

        Completion Fluids &
         Products Division                         $
              11,318                                    $
             8,713                          $
         32,118      $
          21,143


        Water & Flowback
         Services Division                2,578                                        5,809                                     7,269                     20,668


        Compression Division            (3,464)                                     (7,844)                                 (14,748)                  (30,517)


        Corporate overhead
         and eliminations              (17,932)                                    (19,626)                                  (54,915)                  (53,861)



        Total income (loss)
         before taxes                             $
              (7,500)                                $
             (12,948)                       $
         (30,276)    $
         (42,567)

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)




                                                         September 30,
                                                              2019                                     December 31, 2018

                                                                                                  ---

                                                          
              (In Thousands)


                                    Balance Sheet:

    ---

        Cash (excluding
         restricted cash)                                                   $
             35,918                    $
             40,038


        Accounts
         receivable, net                                       170,168                         187,592


        Inventories                                            142,406                         143,571


        Assets of
         discontinued
         operations                                                 16                           1,354


        Note receivable,
         including
         accrued interest                                            -                          7,544


        Other current
         assets                                                 22,624                          20,592


        PP&E, net                                              861,392                         853,931


        Operating lease
         right-of-use
         assets                                                 57,848


        Other assets                                           125,328                         130,905



        Total assets                                                     $
             1,415,700                 $
             1,385,527





        Liabilities of
         discontinued
         operations                                                          $
             1,907                     $
             4,145


        Other current
         liabilities                                           211,165                         196,206


        Long-term debt
         (1)                                                  858,272                         815,560


        Long-term
         portion of asset
         retirement
         obligations                                            12,603                          12,202


        CCLP Series A
         Preferred                                                   -                         27,019


        Warrants
         liability                                               1,038                           2,073


        Operating lease
         liabilities                                            45,993


        Other long-term
         liabilities                                            11,194                          15,573



       Equity                                                 273,528                         312,749



        Total liabilities
         and equity                                                      $
             1,415,700                 $
             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.


                                        September 30,                                     December 31,
                                             2019                                           2018



                                               
            (In Thousands)


                     TETRA

    ---

        Asset-Based Credit
         Agreement                                                   $
       8,585         
            $


        Term Credit
         Agreement                            204,112                           182,547


        TETRA total debt                      212,697                           182,547


        Less current portion


                     TETRA total long-
                      term debt                       $
              
         212,697                      $
     
     182,547





                     CSI Compressco LP

    ---

        CCLP Credit
         Agreement                             10,559


        7.25% Senior Notes                    291,028                           289,797


        7.50% Senior Notes                    343,988                           343,216



        Total debt                            645,575                           633,013


        Less current portion



                     CCLP total long-
                      term debt                       $
              
         645,575                      $
     
     633,013



                     Consolidated total
                      long-term debt                  $
              
         858,272                      $
     
     815,560

Schedule E: Statement Regarding Use of Non-GAAP Financial Measures

In addition to financial results determined in accordance with GAAP, this press release may include the following non-GAAP financial measures for the Company: net debt; adjusted consolidated and segment income (loss) before taxes and special charges; adjusted diluted earnings (loss) per share before discontinued operations; consolidated and segment adjusted EBITDA; TETRA only adjusted free cash flow and TETRA only free cash flow from continuing operations; and segment adjusted EBITDA as a percent of revenue. The following schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures. The non-GAAP financial measures should be considered in addition to, not as a substitute for, financial measures prepared in accordance with GAAP, as more fully discussed in the Company's financial statements and filings with the Securities and Exchange Commission.

Management believes that the exclusion of the special charges from the historical results of operations enables management to evaluate more effectively the Company's operations over the prior periods and to identify operating trends that could be obscured by the excluded items.

Adjusted income (loss) before taxes (and adjusted income (loss) before taxes as a percent of revenue) is defined as the Company's (or the Segment's) income (loss) before taxes excluding certain special or other charges (or credits). Adjusted income (loss) before taxes (and adjusted income (loss) before taxes as a percent of revenue) is used by management as a supplemental financial measure to assess financial performance, without regard to charges or credits that are considered by management to be outside of its normal operations.

Adjusted diluted earnings (loss) per share before discontinued operations is defined as the Company's diluted earnings (loss) per share excluding certain special or other charges (or credits) and using a normalized effective income tax rate. Adjusted diluted earnings (loss) per share is used by management as a supplemental financial measure to assess financial performance, without regard to charges or credits that are considered by management to be outside of its normal operations.

Adjusted EBITDA before discontinued operations (and Adjusted EBITDA before discontinued operations as a percent of revenue) is defined as earnings before interest, taxes, depreciation, amortization, impairments and certain non-cash charges and non-recurring adjustments. Adjusted EBITDA before discontinued operations (and Adjusted EBITDA before discontinued operations as a percent of revenue) is used by management as a supplemental financial measure to assess the financial performance of the Company's assets, without regard to financing methods, capital structure or historical cost basis and to assess the Company's ability to incur and service debt and fund capital expenditures.

TETRA only adjusted free cash flow is a non-GAAP measure that the Company defines as cash from TETRA's operations, 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



                                                                                                     
              
                September 30, 2019


                                                             Income (loss)               Provision                Noncont.                           Net Income       Diluted EPS
                                                  before taxes             (Benefit) for              Interest                          Attributable
                                                       and                       Tax                                                      to TETRA
                                                  discontinued                                                                          Stockholders
                                                   operations

                                                                                                                                                                              ---

                                                                                                   
            (In Thousands, Except per Share Amounts)


      Income (loss)
       attributable to TETRA
       stockholders,
       excluding special
       items and discontinued
       operations                                                              $
              (4,143)                                                                 $
           (871)                   $
        (354)           $
     (2,918) $
     (0.02)


      Stock Warrant fair
       value adjustment                                               (78)                                            (16)                                                                  (62)                  0.00


      5% Cash Redemption on
       CCLP Series A
       Preferred                                                     (341)                                            (72)                                                  (238)           (31)                  0.00


      Lee Plant Facility
       Vandalism                                                       736                                              155                                                                    581                   0.00


      Transaction Expense                                            (643)                                           (135)                                                  (152)          (356)                  0.00


      Asset Impairment                                               (848)                                           (178)                                                  (507)          (163)                (0.00)



     Severance                                                      (339)                                            (71)                                                   (70)          (198)                  0.00



     Bad debt                                                     (1,844)                                           (387)                                                (1,057)          (400)                  0.00


      Effect of deferred tax
       valuation allowance
       and other related tax
       adjustments                                                       -                                           3,154                                                                (3,154)                (0.03)



      Net income (loss)
       before discontinued
       operations                                                  (7,500)                                           1,579                                                 (2,378)        (6,701)                (0.06)



      Loss from discontinued operations                                                                                                               (9,130)                      (0.07)



      Net Income (loss) attributable to TETRA
       stockholders, as reported                                                                                                                                $
         (15,831)                  $
        (0.13)


                                                              
              
                Three Months Ended



                                                                
              
                June 30, 2019


                                        Income (loss)                           Provision                          Noncont.    Net Income                    Diluted EPS
                       before taxes              (Benefit) for               Interest                Attributable
                           and                        Tax                                              to TETRA
                      discontinued                                                                  Stockholders
                        operations



                                                         
              (In Thousands, Except per Share Amounts)


     Income (loss)
       attributable
       to TETRA
       stockholders,
       excluding
       special items
       and
       discontinued
       operations       $
              (2,545)           $
              (530)          $
              (11)           $
             (2,004)                $
          (0.02)


      Stock Warrant
       fair value
       adjustment                   1,520                        319                                                 1,201            0.01


     Convertible
       Series A
       preferred fair
       value
       adjustments                   (146)                       (35)                     (74)                        (37)           0.00


      5% Cash
       Redemption on
       CCLP Series A
       Preferred                     (546)                      (115)                    (278)                       (153)           0.00


      SwiftWater
       Earnout
       adjustment                     400                         84                                                   316            0.00


      Lee Plant
       Facility
       Vandalism                      289                         61                                                   228            0.00


      CEO Retirement               (1,843)                      (387)                                             (1,456)         (0.01)


      Transaction
       Expense                       (376)                       (79)                    (168)                       (129)           0.00


      Inventory
       Adjustment                    (153)                       (32)                     (68)                        (53)           0.00


      Impairments and
       other charges               (2,311)                      (485)                  (1,034)                       (792)         (0.01)


     Effect of
       deferred tax
       valuation
       allowance and
       other related
       tax
       adjustments                                                                  3,689                                          (3,689)                         (0.03)


      Net income
       (loss) before
       discontinued
       operations                  (5,711)                     2,490                   (1,633)                     (6,568)         (0.06)



      Loss from
       discontinued
       operations                                                                                                       (345)           0.00



     Net Income
       (loss)
       attributable
       to TETRA
       stockholders,
       as reported                                                                                                                         $
        (6,913)                  $
     (0.06)



                                                                                            
            
                Three Months Ended



                                                                                            
            
                September 30, 2018


                                                   Income (loss)                  Provision                        Noncont.                 Net Income         Diluted EPS
                                     before taxes                (Benefit) for                Interest                       Attributable
                                          and                          Tax                                                     to TETRA
                                     discontinued                                                                            Stockholders
                                      operations



                                                                                        
           (In Thousands, Except per Share Amounts)


      Income (loss)
       attributable to TETRA
       stockholders,
       excluding unusual
       charges                          $
            (8,823)                                                              $
              (1,854)                       $
            (4,646)           $
     (2,323) $
     (0.02)


      Stock warrant fair
       value adjustment           179                                              38                                                                        141                        0.00


      Convertible Series A
       preferred fair value
       adjustments              (498)                                          (105)                                                 (362)                (31)                       0.00


      Transaction Expense       (426)                                           (89)                                                 (112)               (225)                       0.00


      SwiftWater Earnout
       Adjustment                 600                                             126                                                                        474                        0.00



     Bank Fees               (1,040)                                          (218)                                                                     (822)                     (0.01)


      Impairments and other
       charges                (2,940)                                          (617)                                                                   (2,323)                     (0.02)


      Effect of deferred tax
       valuation allowance
       and other related tax
       adjustments                                                             2,623                                                                    (2,623)                     (0.02)



      Net income (loss)
       before discontinued
       operations            (12,948)                                            (96)                                               (5,120)             (7,732)                     (0.06)



      Loss from Discontinued
       Operations                                                                                                                      796                 0.00



      Net Income (loss)
       attributable to TETRA
       stockholders, as
       reported                                                                                                                    (6,936)                        $
            (0.06)



     
                Schedule G: Non-GAAP Reconciliation to GAAP Financials (Unaudited)
         
                  *




                                                                                                                                                                            
            
               Three Months Ended



                                                                                                                                                                            
            
               September 30, 2019


                                                                   
              Net            
              Tax             
             Income         
         Impairments         
            Adjusted              
              Interest                     Adjusted             Equity             
          Adjusted
                                                                       Income                   Provision                    (Loss)                & Special                    Income                           Expense                  Depreciation            Comp.                     EBITDA
                                                                      (Loss),                                                Before                 Charges                     (Loss)                                                          &                Expense
                                                                         as                                                 Tax, as                                             Before                                                    Amortization
                                                                      reported                                              Reported                                             Tax



                                                                                                                                                                                   
             (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




                                                                                                                                                                              
             
               June 30, 2019


                                                                   
              Net            
              Tax             
             Income         
         Impairments         
            Adjusted              
              Adjusted                     Adjusted             Equity             
          Adjusted
                                                                       Income                   Provision                    (Loss)                & Special                    Income                          Interest                  Depreciation            Comp.                     EBITDA
                                                                       (Loss)                                                Before                 Charges                     (Loss)                          Expense,                        &                Expense
                                                                         as                                                 Tax, as                                             Before                             Net                    Amortization
                                                                      reported                                              Reported                                             Tax



                                                                                                                                                                                   
             (In Thousands)



     Completion Fluids & Products Division                                                                               $
              14,614                                                                      $
              (289)                               $
              14,325                          $
         (157)               $
        3,723            
     $                          $
        17,891



     Water & Flowback Services Division                                                                         2,460                                               (400)                                                         2,060                                              (8)                          8,871                                10,923



     Compression Division                                                                                      (3,483)                                             3,607                                                            124                                          12,998                          19,054         590                     32,766



     Eliminations and other                                                                                         1                                                                                                                1                                                                            (3)                                  (2)




     Subtotal                                                                                                  13,592                                              2,918                                                         16,510                                          12,833                          31,645         590                     61,578



     Corporate and other                                                                                      (19,303)                                               268                                                        (19,035)                                          5,696                             172       1,673                   (11,494)



                   TETRA excluding Discontinued Operations                              $
        
                (8,201)                           $
         
                2,490                                 $
              
                (5,711)                       $
          
                3,186                   $
      
           (2,525)        $
       
          18,529             $
      
        31,817      $
         
           2,263  $
        
          50,084




                                                                                                                                                                            
            
               Three Months Ended



                                                                                                                                                                            
            
               September 30, 2018



                                                                   
              Net            
              Tax             
             Income         
         Impairments         
            Adjusted              
              Interest                     Adjusted             Equity             
          Adjusted
                                                                       Income                   Provision                    (Loss)                & Special                    Income                           Expense                  Depreciation            Comp.                     EBITDA
                                                                      (Loss),                                                Before                 Charges                     (Loss)                                                          &                Expense
                                                                         as                                                 Tax, as                                             Before                                                    Amortization
                                                                      reported                                              Reported                                             Tax



                                                                                                                                                                                   
             (In Thousands)



     Completion Fluids & Products Division                                                                                                                                                                        $
              8,713                     
     $                                                   $
         8,713                 $
        (70)                  $
      3,846    
     $                           $
        12,489



     Water & Flowback Services Division                                                                                                                                                                                       5,809                                             2,340                                 8,149                          5                       7,765                                        15,919



     Compression Division                                                                                                                                                                                                   (7,844)                                              675                               (7,169)                    13,690                      17,682                       367               24,570



     Eliminations and other                                                                                                                                                                                                       5                                                                                      5                          1                         (5)                                            1




     Subtotal                                                                                                                                                                                                                 6,683                                             3,015                                 9,698                     13,626                      29,288                       367               52,979



     Corporate and other                                                                                                                                                                                                   (19,631)                                            1,111                              (18,520)                     5,268                         172                     1,904             (11,176)



                   TETRA excluding Discontinued Operations                             $
        
                (12,852)                            $
         
                (96)                               $
              
                (12,948)                       $
          
                4,126                   $
      
           (8,822)        $
       
          18,894             $
      
        29,460      $
         
           2,271  $
        
          41,803


               * 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 September 30, 2019, are shown below. TETRA and CSI Compressco LP's debt agreements are distinct and separate with no cross default provisions, no cross collateral provisions and no cross guarantees. Management believes that the most appropriate method to analyze the debt positions of each company is to view them separately, as noted below.

The following reconciliation of net debt is presented as a supplement to financial results prepared in accordance with GAAP.


                                        
            
         September 30, 2019


                                        TETRA                               CCLP                  Consolidated



                                               
       (In Millions)



     Non-restricted cash                      $
       20.6                          $
      15.3                      $
      35.9





     Carrying value of long-term debt:



     Asset-Based Credit Agreement        8.6                          10.6                  19.2



     Term Credit Agreement             204.1                                              204.1



     Senior Notes outstanding                                       635.0                 635.0




     Net debt                                $
       192.1                         $
      630.3                     $
      822.4



     
                Schedule I: Non-GAAP Reconciliation to TETRA Only Adjusted Free Cash Flow (Unaudited)
            
             
                
                
                *




                                                                                                               
          
            Three Months Ended


                                                                                        September 30, 2019                                      June 30, 2019                September 30, 2018

                                                                                                                                                                                ---

                                                                                                                   
          (In Thousands)



     
                Consolidated


      Net cash provided (used) by operating activities                                                     $
          46,605                                                $
         30,965                 $
         13,760


      Capital expenditures, net of sales proceeds                                                 (27,650)                                                    (27,345)                    (39,172)




     Consolidated adjusted free cash flow                                                                 $
          18,955                                                 $
         3,620               $
         (25,412)





     
                CSI Compressco LP


      Net cash provided (used) by operating activities                                                     $
          27,444                                                 $
         8,710                 $
         10,789


      Capital expenditures, net of sales proceeds                                                 (20,867)                                                    (16,434)                    (30,902)




     CSI Compressco free cash flow                                                                         $
          6,577                                               $
         (7,724)              $
         (20,113)





     
                TETRA Only



     Cash from operating activities                                                                       $
          19,161                                                $
         22,255                  $
         2,971



     Investment in CCLP Compressors                                                               (2,830)                                                     (8,740)


      Capital expenditures, net of sales proceeds                                                  (6,783)                                                    (10,911)                     (8,270)




     Free cash flow                                                                                 9,548                                                        2,604                     (5,299)



     Distributions from CSI Compressco LP                                                             169                                                          168                       3,037




     Adjusted TETRA only free cash flow                                                                    $
          9,717                                                 $
         2,772                $
         (2,262)



                              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



                                                                                                                             Sep 30, 2019        Jun 30, 2019       Sep 30, 2018

                                                                                                                                                                             ---



                                                                                                                      
       (In Thousands)



              
                TETRA Only



              Cash from operating activities                                                                                     $19,161            $(22,255)             $2,971





              Less: Discontinued operations operating activities (adjusted EBITDA)                                                  (32)               (345)            (1,704)





              Cash from continued operating activities                                                                            19,193             (22,600)              4,675





              Less: Continuing operations capital expenditures                                                                   (6,783)            (10,911)            (8,270)



              Less: Investment in CCLP Compressors                                                                               (2,830)             (8,740)  
     __





              Plus: Distributions from CSI Compressco LP                                                                             169                  168               3,037





              TETRA only adjusted free cash flow from continuing operations                                                       $9,749             $(3,117)             $(558)

                                                                                                                                                                             ---



     
                Schedule K: Non-GAAP Reconciliation to TETRA Adjusted EBITDA as a Percentage of Revenue (Unaudited)




                                                                                                                                   
       
         Three Months Ended


                                                                                                September 30, 2019                            June 30, 2019              September 30, 2018


                                                                                                                                     
       (In Thousands)



     
                Consolidated



     Revenue                                                                                                        $
        245,947                                                          $
         288,796            $
          256,851



     Income Before Tax                                                                                    (7,500)                                              (5,711)                                    (12,948)



     Adjusted EBITDA (Schedule G)                                                                          46,157                                                50,084                                       41,803



     Income Before Tax as a % of Revenue                                                                                (3.0) %                                                                (2.0) %                   (5.0) %



     Adjusted EBITDA as a % of Revenue                                                                                   18.8 %                                                                 17.3 %                    16.3 %





     
                Completion Fluids & Products



     Revenue                                                                                                         $
        59,340                                                           $
         79,767             $
          63,073



     Income Before Tax                                                                                     11,318                                                14,614                                        8,713



     Adjusted EBITDA (Schedule G)                                                                          14,042                                                17,891                                       12,489



     Income Before Tax as a % of Revenue                                                                                 19.1 %                                                                 18.3 %                    13.8 %



     Adjusted EBITDA as a % of Revenue                                                                                    23.7%                                                                  22.4%                    19.8 %







     
                Water & Flowback Services



     Revenue                                                                                                         $
        72,841                                                           $
         73,124             $
          78,568



     Income Before Tax                                                                                      2,578                                                 2,460                                        5,809



     Adjusted EBITDA (Schedule G)                                                                          11,220                                                10,923                                       15,919



     Income Before Tax as a % of Revenue                                                                                  3.5 %                                                                  3.4 %                     7.4 %



     Adjusted EBITDA as a % of Revenue                                                                                   15.4 %                                                                 14.9 %                    20.3 %







     
                Compression



     Revenue                                                                                                        $
        113,766                                                          $
         135,905            $
          115,261



     Income Before Tax                                                                                    (3,464)                                              (3,483)                                     (7,844)



     Adjusted EBITDA (Schedule G)                                                                          31,250                                                32,766                                       24,570



     Income Before Tax as a % of Revenue                                                                                (3.0) %                                                                (2.6) %                   (6.8) %



     Adjusted EBITDA as a % of Revenue                                                                                   27.5 %                                                                 24.1 %                    21.3 %

View original content to download multimedia:http://www.prnewswire.com/news-releases/tetra-technologies-inc-announces-third-quarter-2019-results-300953597.html

SOURCE TETRA Technologies, Inc.