TETRA Technologies, Inc. Announces Fourth Quarter And Full Year 2019 Results
THE WOODLANDS, Texas, Feb. 27, 2020 /PRNewswire/ -- TETRA Technologies, Inc. ("TETRA" or the "Company") (NYSE:TTI) today announced consolidated net loss before discontinued operations of $114 million in the fourth quarter 2019, compared to a loss of $9 million in the third quarter of 2019 and income of $3 million in the fourth quarter of 2018. Net loss per share before discontinued operations attributable to TETRA shareholders during the fourth quarter was $0.91, compared to a loss of $0.06 in the third quarter of 2019 and income of $0.04 in the fourth quarter of 2018.
TETRA's adjusted per share earnings before discontinued operations and excluding special items((1)), was $0.03 in the fourth quarter, compared to a loss of $0.02 in the third quarter 2019 and a loss of $0.01 in the fourth quarter of 2018.
Fourth quarter 2019 revenue was $259 million, an increase of 5% over the third quarter of 2019 but a decrease of 8% compared to the fourth quarter of 2018. Total year 2019 revenue was $1.038 billion, an increase of 4% over 2018.
Adjusted EBITDA((1)) on a consolidated basis was $55 million in the fourth quarter, up 18% from $46 million in the third quarter reflecting the benefit of a TETRA CS Neptune® completion fluids ("CS Neptune") project and overall strong completion fluids sales in international markets, partially offset by weaker U.S. land Water & Flowback Services activity. Profit (loss) before tax margin for the fourth quarter was negative 43.9% compared to a negative 3.0% for the third quarter. Fourth quarter results were impacted by $117 million non-cash expense for fixed assets, intangibles and goodwill impairments. Adjusted EBITDA on a consolidated basis as a percentage of revenue ("Adjusted EBITDA margin")((1)) improved to 21.0%, up from 18.8% in the third quarter of 2019.
Brady M. Murphy, TETRA's Chief Executive Officer, stated, "We ended the year in a very challenging energy services market with our best quarterly financial performance in over four years as reflected in Adjusted EBITDA, driven by the CS Neptune project in the Gulf of Mexico, continued strong international offshore completion fluid activity and near record Adjusted EBITDA from our Compression segment. While North America land drilling and completion activity saw a sharp decline in the fourth quarter of 2019 as evidenced by the rig count declining approximately 25% from year-end 2018, our vertically integrated business model in Completion Fluids & Products and in Compression plus our diverse business portfolio including offshore and international markets, helped us navigate this difficult environment. Our strategy to differentiate in areas where we compete is evident in our fourth quarter results and, coupled with continued capital discipline, has allowed us to achieve this strong performance.
"Our fourth quarter results reflect great progress on our key objectives, which we have highlighted during our previous calls. Our technology leadership in high-end completion fluids combined with our long-term key supply agreements helped us deliver one of the strongest quarters for our Completion Fluids & Products business based on our key financial measures. We continue to grow our international offshore business with the award of three major non-CS Neptune completion fluids projects in Asia-Pacific, West Africa and Brazil that are scheduled for completion in 2020. We are currently in various stages of testing and qualification of CS Neptune for seven different potential customer projects.
"Our Water and Flowback Services business is challenged with a more difficult market environment, but we continue to make progress with our strategic initiatives. We previously announced the introduction of our latest sand separation technology which we have branded as "SandStorm(TM)". During a major operator trial in the fourth quarter, the SandStorm(TM) system achieved greater than 95% sand removal efficiency, compared to the more traditional sand cyclones removal efficiency of roughly 50%. Upon completion of the trial we were immediately awarded a large service project in the Permian Basin, which we are deploying in the first quarter of this year. Despite a sequential revenue reduction of 20% from the third quarter to the fourth quarter, in line with overall completion activity, we increased the number of integrated water management projects to a record of 28 during the quarter as we continue to gain market share and customer acceptance with this solution. While we expect this segment to be challenged at least through the first half of 2020 given our expectations that operators' capital budgets will be down 10% to 15% year-over-year, we feel confident that we can continue to perform well in this market given our investments in and deployments of technology that create differentiation.
"Our fourth quarter Compression segment results demonstrated the continued growing strength of our compression business. The fourth quarter loss before tax of $1.3 million compares to a loss before tax of $3.5 million in the third quarter of 2019. Adjusted EBITDA of $32.6 million for the fourth quarter was a sequential improvement of $1.3 million and only $0.2 million less than our record high accomplished in the second quarter of 2019. Profit (loss) before tax margin for the fourth quarter was negative 1.0% compared to a negative 3.0% for the third quarter. This represents a 26.4% Adjusted EBITDA margin, underpinned by 90% equipment utilization, essentially flat from a record level of 90.1% in the third quarter of 2019. While the U.S. onshore market continues to experience volatility and natural gas prices have fallen below $2.00/Mcf, this business delivered very strong results. Almost 90% of our deployed compression services equipment in the fourth quarter was directed towards centralized gas lift applications for liquids or single well artificial lift applications for the growing inventory of late-life horizontal wells. Customers continue to trend more and more towards utilizing centralized gas lift as a cost effective and efficient means to drive liquids production, which drives demand for our equipment. While customer drilling activity and new well capital expenditures are expected to decrease in 2020, we see these applications continuing to grow.
"During the fourth quarter, consolidated cash provided by operations was $5.3 million and TETRA only adjusted free cash flow from continuing operations((1)) was $1.0 million, which was below our expectations due to the delays in collection of key receivables, including a CS Neptune receivable, and other notable completion fluid sales that occurred in the fourth quarter 2019. These key receivables, which were collected in the first two weeks of January, will positively impact the first quarter 2020 TETRA only adjusted free cash flow from continuing operations, offsetting the weaker than expected fourth quarter free cash flow. TETRA only liquidity at the end of 2019 improved approximately $28 million from the date of our last 10-K filing in March, 2019 and our first quarter 2020 TETRA only adjusted free cash flow from continuing operations is expected to improve by more than $25 million over first quarter 2019. TETRA only liquidity is defined as unrestricted cash on hand plus availability under our revolving credit facility. No reconciliation of the forecasted TETRA only adjusted free cash flow from continuing operations in the first quarter of 2020 to the nearest GAAP measure is included in this release because the reconciliation would require presenting forecasted information for CSI Compressco that is not otherwise publicly disclosed.
(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 fourth quarter is as follows:
Fourth Quarter 2019 Results
Three Months Ended
December 31, September 30, December 31,
2019 2019 2018
(In Thousands, Except per Share Amounts)
Revenue $
259,462 $
245,947 $
282,471
Income (loss)
before
discontinued
operations (114,333) (9,079) 3,316
Adjusted EBITDA
before
discontinued
operations(2) 54,532 46,157 46,609
GAAP EPS before
discontinued
operations
attributable to
TETRA
stockholders (0.91) (0.06) 0.04
Adjusted EPS
attributable to
TETRA
stockholders(2) 0.03 (0.02) (0.01)
GAAP net cash
provided (used)
by operating
activities 5,250 46,605 44,953
TETRA only
adjusted free
cash flow from
continuing
operations(2) $
982 $
9,749 $
15,598
---
(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 and J for
the reconciliations of these non-
GAAP financial measures to the
most directly comparable GAAP
measure.)
Operating Segments
Completion Fluids & Products Division
Completion Fluids & Products revenue was $79 million in the fourth quarter of 2019, an increase of 32% from the third quarter of 2019 aided by the completion of the CS Neptune project and very strong international offshore fluid sales. Completion Fluids & Products reported a loss before taxes of $66.1 in the fourth quarter of 2019 and profit (loss) before tax margin of negative 84.1%, which included a previously announced $91 million non-cash impairment to our El Dorado, Arkansas facility, which produces calcium chloride. Excluding the impairment, Completion Fluids & Products Division Adjusted income before taxes was $25.4 million, or 32.3% of revenue. Adjusted EBITDA of $27.7 million increased by $13.6 million sequentially and Adjusted EBITDA margin was 35.2%, an 1150 basis point improvement sequentially.
Water & Flowback Services Division
Water & Flowback Services fourth quarter 2019 revenue decreased 21% sequentially to $57.3 million. Water & Flowback Services loss before tax was $28.4 million, which included a non-cash goodwill impairment and other special charges of $26.3 million. Adjusted loss before tax((1)) was $2.1 million, resulting in Adjusted profit (loss) before tax margin of negative 3.7%((1)). Adjusted EBITDA decreased $5.6 million sequentially to $5.6 million. While results in this division declined primarily due to challenging U.S. land market conditions that impacted the entire oil and gas industry, this division performed well relative to our expectations.
Compression Division
Fourth quarter Compression revenue increased 9% from the third quarter of 2019 driven by strong year-end equipment sales and aftermarket services. Compression services gross margins were 51.5%, a 170 basis points decrease from the third quarter of 2019. Overall fleet utilization was 90.0%, compared to 90.1% at the end of the third quarter. As of December 31, 2019, total active operating horsepower was 1,059,590, a sequential improvement of over 16,200 horsepower that was all large horsepower additions targeted a centralized gas lift application. Compression Division net loss before taxes was $1.3 million, a $2.2 million improvement sequentially. Fourth quarter 2019 Adjusted EBITDA of $32.6 million increased 4% from the third quarter of 2019 primarily due to stronger aftermarket and higher equipment sales. We received new equipment orders of $4 million in the fourth quarter. New equipment sales backlog was $36 million at December 31, 2019, compared to $63 million at the end of the previous quarter. While we continue to see a healthy pipeline of new unit sales opportunities, several large orders which we expected to receive in the fourth quarter of 2019 or early 2020 have now been pushed towards the second half of 2020.
Free Cash Flow and Balance Sheet
Consolidated net cash from operating activities for the fourth quarter of 2019 was $5.3 million and for the full year was $90.2 million. Payments from several large projects that were expected before year-end were delayed into the first two weeks of January of 2020. As a result, TETRA only adjusted free cash flow from continuing operations for 2019 was a use of cash of $21 million, which includes funding approximately $15 million of equipment that TETRA bought and leased to CSI Compressco, supporting their high return opportunities. Had the payments from those large projects been received a few days earlier, we would have achieved positive TETRA only adjusted free cash flow from continuing operations for the full year 2019. TETRA only adjusted free cash flow from continuing operations in the fourth quarter 2019 was $1.0 million. Consolidated total debt was $843 million while consolidated net debt((1)) was $825 million, with TETRA only net debt((1)) of $189 million (see Schedules H and I for reconciliations of these non-GAAP financial measures). At the end of the fourth quarter TETRA only non-restricted cash was $15.3 million.
Special items
Special items, including Discontinued Operations, incurred in the fourth quarter, as detailed on Schedule F, include the following:
-- $117 million non-cash expense for fixed assets/intangible and goodwill
impairment, including $91 million for the previously announced El Dorado
calcium chloride plant
-- $0.6 million non-cash gain for TETRA stock warrant fair value adjustment
-- $0.5 million of restructuring expenses and severances and other charges
Additionally, a normalized tax rate of 21% is reflected in Adjusted Net Income, as shown on Schedule F.
A summary of key financial metrics for the full year of 2019 and 2018 is as follows:
Total 2019 Results
Twelve months ended
December 31, December 31,
2019 2018
(In Thousands, Except per Share Amounts)
Revenue $
1,037,933 $
998,775
Loss before
discontinued
operations (150,287) (42,725)
Adjusted EBITDA(3) 187,144 160,918
GAAP EPS before
discontinued
operations
attributable to
TETRA
stockholders (1.09) (0.16)
Adjusted diluted
EPS attributable
to TETRA
stockholders(3) (0.05) (0.05)
Consolidated net
cash provided
(used) by
operating
activities 90,232 46,586
TETRA only
adjusted free
cash flow from
continuing
operations(3) $
(21,072) $
3,101
---
(3) Non-GAAP financial
measures are reconciled to
GAAP in the schedules
below.
Conference Call
TETRA will host a conference call to discuss these results today, February 27, 2020, at 10:30 a.m. ET. The phone number for the call is 1-888-347-5303. The conference call will also be available by live audio webcast and may be accessed through the Company's website at www.tetratec.com. A replay of the conference call will be available at 1-877-344-7529 conference number 10138609, for one week following the conference call and the archived webcast will be available through the Company's website for thirty days following the conference call.
Investor Contact
For further information: Elijio Serrano, CFO, TETRA Technologies, Inc., The Woodlands, Texas, Phone: 281.367.1983, www.tetratec.com
Financial Statements, Schedules and Non-GAAP Reconciliation Schedules (Unaudited)
Schedule A: Consolidated Income Statement
Schedule B: Financial Results By Segment
Schedule C: Consolidated Balance Sheet
Schedule D: Long-Term Debt
Schedule E: Statement Regarding Use of Non-GAAP Financial Measures
Schedule F: Special Items
Schedule G: Non-GAAP Reconciliation to GAAP Financials
Schedule H: Non-GAAP Reconciliation of TETRA Net Debt
Schedule I: Non-GAAP Reconciliation to TETRA Only Adjusted Free Cash Flow
Schedule J: Non-GAAP Reconciliation to TETRA Only Adjusted Cash Flow From Continuing Operations
Schedule K: Non-GAAP Reconciliation to TETRA Adjusted EBITDA Margins and Adjusted Income Before Tax Margins
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.
Cautionary Statement Regarding Forward Looking Statements
This news release includes certain statements that are deemed to be forward-looking statements. Generally, the use of words such as "may," "see," "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 expected customer drilling activity and capital spending for 2020 and 2021, 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 Twelve Months Ended
December 31, December 31,
2019 2018 2019 2018
---
(In Thousands, Except per Share Amounts)
Revenues $
259,462 $
282,471 $
1,037,933 $
998,775
Cost of sales,
services, and
rentals 174,774 206,561 728,483 717,931
Depreciation,
amortization, and
accretion 30,914 30,045 124,226 114,925
Impairments and
other charges 91,890 681 95,196 3,621
Insurance recoveries (379) (1,771)
Total cost of
revenues 297,199 237,287 946,134 836,477
Gross profit (37,737) 45,184 91,799 162,298
General and
administrative
expense 34,249 33,580 139,747 132,446
Goodwill impairment 25,784 25,784
Interest expense,
net 18,176 18,700 73,230 70,946
(Gain) loss on sales
of assets (750) (275) (2,333) (729)
Warrants fair value
adjustment (income)
expense (589) (11,151) (1,624) (11,129)
CCLP Series A
Preferred Units
fair value
adjustment (income)
expense - (2,077) 1,309 (733)
Other (income)
expense, net (760) 266 (191) 7,923
Income (loss) before
taxes and
discontinued
operations (113,847) 6,141 (144,123) (36,426)
Provision (benefit)
for income taxes 486 2,825 6,164 6,299
Income (Loss) before
discontinued
operations (114,333) 3,316 (150,287) (42,725)
Discontinued operations:
Loss from
discontinued
operations, net of
taxes (312) (584) (10,213) (41,515)
Net income (loss) (114,645) 2,732 (160,500) (84,240)
Less: net (income)
loss attributable
to noncontrolling
interest 814 2,200 13,087 22,623
Net income (loss)
attributable to
TETRA stockholders $
(113,831) $
4,932 $
(147,413) $
(61,617)
Basic per share information:
---
Income (loss) before
discontinued
operations
attributable to
TETRA stockholders $
(0.91) $
0.04 $
(1.09) $
(0.16)
Income (loss) from
discontinued
operations
attributable to
TETRA stockholders 0.00 0.00 (0.08) (0.34)
Net income (loss)
attributable to
TETRA stockholders $
(0.91) $
0.04 $
(1.17) $
(0.50)
Weighted average
shares outstanding 125,541 125,717 125,600 124,101
Diluted per share information:
---
Income (loss) before
discontinued
operations
attributable to
TETRA stockholders $
(0.91) $
0.04 $
(1.09) $
(0.16)
Income (loss) from
discontinued
operations
attributable to
TETRA stockholders 0.00 0.00 (0.08) (0.34)
Net income (loss)
attributable to
TETRA stockholders $
(0.91) $
0.04 $
(1.17) $
(0.50)
Weighted average
shares outstanding 125,541 125,789 125,600 124,101
Schedule B: Financial Results By Segment (Unaudited)
Three Months Ended December 31, Twelve Months Ended December 31,
2019 2018 2019 2018
---
(In Thousands)
Revenues by segment:
---
Completion Fluids &
Products Division $
78,567 $
64,675 $
279,255 $
257,408
Water & Flowback
Services Division 57,343 79,783 281,986 303,072
Compression Division 123,552 138,066 476,692 438,673
Eliminations and
other - (53) (378)
Total revenues $
259,462 $
282,471 $
1,037,933 $
998,775
Gross profit (loss) by segment:
---
Completion Fluids &
Products Division $
(61,687) $
14,464 $
(15,034) $
48,675
Water & Flowback
Services Division 2,881 13,691 27,458 55,247
Compression Division 21,188 17,197 79,992 59,017
Eliminations and
other (119) (168) (617) (641)
Total gross profit $
(37,737) $
45,184 $
91,799 $
162,298
Income (loss) before taxes by segment:
---
Completion Fluids &
Products Division $
(66,087) $
9,480 $
(33,969) $
30,623
Water & Flowback
Services Division (28,442) 8,044 (21,173) 28,712
Compression Division (1,266) (3,280) (16,014) (33,797)
Eliminations and
other (18,052) (8,103) (72,967) (61,964)
Total income (loss)
before taxes $
(113,847) $
6,141 $
(144,123) $
(36,426)
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.
Schedule C: Consolidated Balance Sheet (Unaudited)
December 31, 2019 December 31, 2018
(In Thousands)
Balance Sheet:
---
Cash (excluding
restricted cash) $
17,704 $
40,038
Accounts
receivable, net 176,513 187,592
Inventories 136,510 143,571
Assets of
discontinued
operations 1,354
Note receivable,
including
accrued interest 7,544
Other current
assets 20,627 20,592
PP&E, net 758,637 853,931
Other assets 161,931 130,905
Total assets $
1,271,922 $
1,385,527
Liabilities of
discontinued
operations $
2,098 $
4,145
Other current
liabilities 186,625 196,206
Long-term debt
(1) 842,871 815,560
Long-term
portion of asset
retirement
obligations 12,762 12,202
CCLP Series A
Preferred 27,019
Warrants
liability 449 2,073
Operating lease
liabilities 53,919
Other long-term
liabilities 10,372 15,573
Equity 162,826 312,749
Total liabilities
and equity $
1,271,922 $
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.
December 31, 2019 December 31, 2018
(In Thousands)
TETRA
---
Asset-based credit
agreement
$
$
Term credit
agreement 204,633 182,547
TETRA total debt 204,633 182,547
Less current portion
TETRA total long-
term debt $
204,633 $
182,547
CSI Compressco LP
---
CCLP Credit
Agreement 2,622
7.25% Senior Notes 291,444 289,797
7.50% Senior Secured
Notes 344,172 343,216
Total debt 638,238 633,013
Less current portion
CCLP total long-
term debt $
638,238 $
633,013
Consolidated total
long-term debt $
842,871 $
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; net income (loss) before taxes, Adjusted income (loss) before tax, Adjusted income (loss) before tax as a % of revenue, TETRA only adjusted free cash flow and TETRA only free cash flow from continuing operations; and segment adjusted EBITDA as a percent of revenue ("Adjusted EBITDA margin"). 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 margin) 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.
Adjusted income before tax is defined as earnings (loss) before interest, taxes, impairments and certain non-cash charges and non-recurring adjustments. Adjusted income before tax (and Adjusted income before tax as a percent of revenue or Adjusted income before tax margin which is Adjusted income before tax divided by revenue) is used by management as a supplemental financial measure to assess the financial performance of the Company's normalized profitability while excluding any unusual, non-recurring items and tax benefits or detriment.
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
December 31, 2019
Income Provision Noncont. Net Income EPS
(Loss) Before (Benefit) for Interest Attributable to
Tax Tax TETRA
Stockholders
(In Thousands, Except per Share Amounts)
Income (loss)
attributable to TETRA
stockholders,
excluding special
items and discontinued
operations $
3,574 $
752 $
(814) $
3,636 $
0.03
Stock Warrant fair
value adjustment 588 123 465 0.00
Earnout Adjustment 200 42 158 0.00
Lee Plant Facility
Vandalism 202 42 160 0.00
Transaction Expense (185) (39) (146) 0.00
Impairments and other
charges (91,890) (19,297) (72,593) (0.58)
Goodwill Impairment (25,784) (5,415) (20,369) (0.16)
Restructuring charges (552) (116) (436) 0.00
Effect of deferred tax
valuation allowance
and other related tax
adjustments 24,394 (24,394) (0.19)
Net income (loss)
before discontinued
operations (113,847) 486 (814) (113,519) (0.91)
Loss from discontinued
operations (312) 0.00
Net Income (loss)
attributable to TETRA
stockholders, as
reported $
(113,831) $
(0.91)
Three Months Ended
September 30, 2019
Income Provision Noncont. Net Income EPS
(Loss) Before (Benefit) for Interest Attributable to
Tax Tax TETRA
Stockholders
(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
Severance (339) (71) (70) (198) 0.00
Bad debt (1,844) (387) (1,057) (400) 0.00
Impairments and other
charges (848) (178) (507) (163) 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
December 31, 2018
Income Provision Noncont. Net Income EPS
(Loss) Before (Benefit) for Interest Attributable to
Tax Tax TETRA
Stockholders
(In Thousands, Except per Share Amounts)
Income (loss)
attributable to TETRA
stockholders,
excluding special
items and discontinued
operations $
(3,822) $
(803) $
(1,909) $
(1,110) $
(0.01)
Stock Warrant fair
value adjustment 11,150 2,342 8,808 0.07
Convertible Series A
preferred fair value
adjustments 2,077 436 1,662 (21) 0.00
Other costs and
expenses (773) (162) (611) 0.00
Earnout adjustment 300 63 237 0.00
Sales tax adjustment (2,110) (443) (1,476) (191) 0.00
Intangible Impairment (681) (143) (477) (61) 0.00
Effect of deferred tax
valuation allowance
and other related tax
adjustments 1,535 (1,535) (0.01)
Net income (loss)
before discontinued
operations 6,141 2,825 (2,200) 5,516 0.04
Loss from discontinued
operations (584) 0.00
Net Income (loss)
attributable to TETRA
stockholders, as
reported $
4,932 $
0.04
Twelve Months Ended
December 31, 2019
Income Provision Noncont. Net Income EPS
(Loss) (Benefit) for Interest Attributable
Before Tax Tax to TETRA
Stockholders
(In Thousands, Except per Share Amounts)
Income (loss)
attributable to TETRA
stockholders,
excluding special
items and discontinued
operations $
(17,955) $
(3,765) $
(7,649) $
(6,541) $
(0.05)
Stock Warrant fair
value adjustment 1,624 341 1,283 0.01
Convertible Series A
preferred fair value
adjustments (1,309) (279) (1,408) 378 0.00
5% Cash Redemption on
CCLP Series A
Preferred (1,259) (265) (974) (20) 0.00
Earnout adjustment 1,000 210 790 0.01
Lee Plant Facility
Vandalism 691 145 546 0.00
Lee Plant Asset
Impairment (146) (31) (115) 0.00
CEO Retirement (1,843) (387) (1,456) (0.01)
Transaction Expense (1,204) (253) (320) (631) (0.01)
Inventory Adjustment (153) (32) (68) (53) 0.00
Asset Impairment (95,050) (19,960) (1,541) (73,549) (0.59)
Severance (339) (71) (70) (198) 0.00
Bad Debt (1,844) (387) (1,057) (400) 0.00
Goodwill Impairment (25,784) (5,415) (20,369) (0.16)
Restructuring charges (552) (116) (436) 0.00
Effect of Deferred Tax
Valuation Allowance
and other related tax
adjustments 36,429 (36,429) (0.29)
Net Income (loss)
before discontinued
operations (144,123) 6,164 (13,087) (137,200) (1.09)
Loss from discontinued
operations (10,213) (0.08)
Net Income (loss)
attributable to TETRA
stockholders, as
reported $
(147,413) $
(1.17)
Twelve Months Ended
December 31, 2018
Income Provision Noncont. Net Income EPS
(Loss) (Benefit) for Interest Attributable
Before Tax Tax to TETRA
Stockholders
(In Thousands, Except per Share Amounts)
Income (loss)
attributable to TETRA
stockholders,
excluding special
items and discontinued
operations $
(32,334) $
(6,734) $
(19,044) $
(6,556) $
(0.05)
Severance expense (116) (24) (9) (83) 0.00
Stock Warrant fair
value adjustment 11,129 2,338 1,662 7,129 0.06
Convertible Series A
preferred fair value
adjustments 733 154 (929) 1,508 0.01
Prior debt issuance
costs (3,541) (744) (2,238) (559) 0.00
Other costs and
expenses (2,126) (445) (112) (1,569) (0.01)
Earnout adjustment (3,400) (714) (2,686) (0.02)
Financing costs (1,040) (218) (822) (0.01)
Sales tax adjustment (2,110) (443) (1,476) (191) 0.00
Asset Impairment (3,621) (760) (477) (2,384) (0.02)
Effect of deferred tax
valuation allowance
and other related tax
adjustments 13,889 (13,889) (0.11)
Net Income (loss)
before discontinued
operations (36,426) 6,299 (22,623) (20,102) (0.16)
Loss from discontinued
operations (41,515) (0.34)
Net Income (loss)
attributable to TETRA
stockholders, as
reported $
(61,617) $
(0.50)
Schedule G: Non-GAAP Reconciliation to GAAP Financials (Unaudited)
Three Months Ended
December 31, 2019
Net Tax
Income Impairments Adjusted Adjusted Adjusted Equity Adjusted
Income Provision (Loss) & Special Income Interest Depreciation Comp. EBITDA
(Loss), as Before Charges (Loss) Expense, & Expense
reported Tax, as Before Net Amortization
Reported Tax
---
(In Thousands)
Completion Fluids & Products Division $
(66,086) $
91,482 $
25,396 $
(167) $
2,454
$ $
27,683
Water & Flowback Services Division (28,441) 26,343 (2,098) 5 7,717 5,624
Compression Division (1,265) (1,265) 12,894 20,618 320 32,567
Eliminations and other 5 5 (4) 1
Subtotal (95,787) 117,825 22,038 12,732 30,785 320 65,875
Corporate and other (18,060) (403) (18,463) 5,444 129 1,547 (11,343)
TETRA excluding
Discontinued
Operations $
(114,333) $
486 $
(113,847) $
117,422 $
3,575 $
18,176 $
30,914 $
1,867 $
54,532
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), as Before Charges (Loss) & Expense
reported Tax, as Before Amortization
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
Three Months Ended
---
December 31, 2018
Net
Tax Income Impairments Adjusted Adjusted Depreciation Adjusted Adjusted
Income Provision (Loss) & Special Income Interest & Equity EBITDA
(Loss), as Before Charges (Loss) Expense, Amortization Comp.
reported Tax, as Before Net Expense
Reported Tax
(In Thousands)
Completion Fluids &
Products Division $
9,480
$ $
9,480 $
(164) $
3,723
$ $
13,039
Water & Flowback
Services Division 8,043 (300) 7,743 10 8,151 15,904
Compression Division (3,282) 714 (2,568) 13,367 18,004 380 29,183
Eliminations and other 4 4 (4)
Subtotal 14,245 414 14,659 13,213 29,874 380 58,126
Corporate and other (8,104) (10,377) (18,481) 5,487 171 1,306 (11,517)
TETRA excluding
Discontinued
Operations $
3,316 $
2,825 $
6,141 $
(9,963) $
(3,822) $
18,700 $
30,045 $
1,686 $
46,609
Twelve Months Ended
December 31, 2019
Net
Tax
Income Impairments Adjusted Adjusted Adjusted Equity Adjusted
Income Provision (Loss) & Special Income Interest Comp. EBITDA
(Loss), as Before Charges (Loss) Expense, Depreciation & Expense
reported Tax, as Before Net Amortization
Reported Tax
(In Thousands)
Completion Fluids &
Products Division $
(33,969) $
91,140 $
57,171 $
(720) $
13,518
$ $
69,969
Water & Flowback
Services Division (21,173) 25,619 4,446 (1) 33,424 37,869
Compression Division (16,014) 8,814 (7,200) 51,974 76,663 1,064 122,501
Eliminations and other 14 14 (14)
Subtotal (71,142) 125,573 54,431 51,253 123,591 1,064 230,339
Corporate and other (72,981) 111 (72,870) 21,977 635 7,063 (43,195)
TETRA excluding
Discontinued
Operations $
(150,287) $
6,164 $
(144,123) $
125,684 $
(18,439) $
73,230 $
124,226 $
8,127 $
187,144
Twelve Months Ended
---
December 31, 2018
Net
Tax
Income Impairments Adjusted Adjusted Depreciation & Adjusted Adjusted
Income Provision (Loss) & Special Income Interest Amortization Equity EBITDA
(Loss), as Before Charges (Loss) Expense, Comp.
reported Tax, as Before Net Expense
Reported Tax
(In Thousands)
Completion Fluids &
Products Division $
30,623 $
70 $
30,693 $
(599) $
15,345
$ $
45,439
Water & Flowback
Services Division 28,712 6,373 35,085 28,439 63,524
Compression Division (33,797) 5,788 (28,009) 51,905 70,500 639 95,035
Eliminations and other 11 11 (17) (6)
Subtotal 25,549 12,231 37,780 51,306 114,267 639 203,992
Corporate and other (61,975) (8,137) (70,112) 19,640 658 6,740 (43,074)
TETRA excluding
Discontinued
Operations $
(42,725) $
6,299 $
(36,426) $
4,094 $
(32,332) $
70,946 $
114,925 $
7,379 $
160,918
Schedule H: Non-GAAP Reconciliation of TETRA Net Debt (Unaudited)
The cash and debt positions of TETRA and CSI Compressco LP as of December 31, 2019, are shown below. TETRA and CSI Compressco LP's debt agreements are distinct and separate with no cross-default provisions. 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.
December 31, 2019
TETRA CCLP Consolidated
(In Millions)
Non-restricted cash $
15.3 $
2.4 $
17.7
Carrying value of long-term debt:
Asset-Based Credit Agreement 2.6 2.6
Term Credit Agreement 204.6 204.6
Senior Notes outstanding 635.6 635.6
Net debt $
189.3 $
635.8 $
825.1
Schedule I: Non-GAAP Reconciliation to TETRA Only Adjusted Free Cash Flow (Unaudited)
Three Months Ended Twelve Months Ended
Dec 31, Sep 30, Dec 31, Dec 31, Dec 31,
2019 2019 2018 2019 2018
---
(In Thousands)
Consolidated
Net cash provided (used) by operating activities $
5,250 $
46,605 $
44,953 $
90,232 $
46,586
ARO settlements - 35 35
Capital expenditures, net of sales proceeds (8,348) (27,650) (34,487) (95,388) (140,793)
Consolidated adjusted free cash flow (3,098) 18,955 10,501 (5,156) (94,172)
CSI Compressco LP
Net cash provided by operating activities (90) 27,444 23,605 67,696 30,121
Capital expenditures, net of sales proceeds (4,320) (20,867) (25,325) (64,773) (103,489)
CSI Compressco free cash flow (4,410) 6,577 (1,720) 2,923 (73,368)
TETRA Only
Cash from operating activities 5,340 19,161 21,348 22,536 16,465
ARO settlements - 35 35
Investment in CCLP Compressors (810) (2,830) (14,782)
Capital expenditures, net of sales proceeds (4,028) (6,783) (9,162) (30,615) (37,304)
Free cash flow before ARO settlements 502 9,548 12,221 (22,861) (20,804)
Distributions from CSI Compressco LP 168 169 3,087 674 12,070
Adjusted free cash flow 670 9,717 15,308 (22,187) (8,734)
Schedule J: Non-GAAP Reconciliation to TETRA Only Adjusted Cash Flow From Continuing Operations (Unaudited)
Three Months Ended
Twelve Months Ended
Dec 31, 2019 Sep 30, 2019 Dec 31, 2018 Dec 31, 2019 Dec 31, 2018
---
TETRA Only
Cash from
operating
activities 5,340 19,161 21,348 22,536 16,465
Less: Discontinued
operations
operating
activities
(adjusted EBITDA) (312) (32) (325) (1,115) (10,184)
Cash from
continued
operating
activities 5,652 19,193 21,673 23,651 26,649
Less: Continuing
operations
capital
expenditures (4,028) (6,783) (9,162) (30,615) (35,618)
Less: Investment
in CCLP
Compressors (810) (2,830) (14,782)
Plus:
Distributions
from CSI
Compressco LP 168 169 3,087 674 12,070
TETRA only
adjusted free
cash flow from
continuing
operations 982 9,749 15,598 (21,072) 3,101
Schedule K: Non-GAAP Reconciliation to TETRA Adjusted EBITDA Margins and Adjusted Income (Loss) before tax margins (Unaudited)
Three Months Ended Twelve Months Ended
Dec 31, Sep 30, Dec 31, Dec 31, 2019 Dec 31, 2018
2019 2019 2018
(In Thousands)
Consolidated
Revenue $
259,462 $
245,947 $
282,471 $
1,037,933 $
998,775
Income (Loss) Before Tax (113,847) (7,500) 6,141 (144,123) (36,426)
Adjusted income (loss)
before tax (Schedule G) 3,575 (4,184) (3,822) (18,724) (32,332)
Adjusted EBITDA (Schedule G) 54,532 46,157 46,609 187,144 160,918
Income (Loss) Before Tax (43.9) (3.0) 2.2
% (13.9) (3.6)
Margin % % % %
Adjusted Income (Loss) 1.4
% (1.7) (1.4) (1.8)
% (3.2)
Before Tax Margin % % %
Adjusted EBITDA Margin 21.0
% 18.8
% 16.5
% 18.0
% 16.1
%
Completion Fluids & Products
Revenue $
78,567 $
59,340 $
64,675 $
279,255 $
257,408
Income Before Tax (66,087) 11,318 9,480 (33,969) 30,623
Adjusted income before tax
(Schedule G) 25,396 10,582 9,480 57,171 30,693
Adjusted EBITDA (Schedule G) 27,683 14,042 13,039 69,969 45,439
Income (Loss) Before Tax 32.3
% 19.1
% 14.7
% (12.2)
Margin % 11.9
%
Adjusted Income (Loss) (84.1)
Before Tax Margin % 17.8
% 14.7
% 20.5
% 11.9
%
Adjusted EBITDA Margin 35.2
% 23.7
% 20.2
% 25.1
% 17.7
%
Water & Flowback Services
Revenue $
57,343 $
72,841 $
79,783 $
281,986 $
303,072
Income Before Tax (28,442) 2,578 8,044 (21,173) 28,712
Adjusted income before tax
(Schedule G) (2,098) 2,654 7,743 4,161 35,085
Adjusted EBITDA (Schedule G) 5,624 11,220 15,904 37,584 63,524
Income (Loss) Before Tax (49.6)
Margin % 3.5
% 10.1
% (7.5)
% 9.5
%
Adjusted Income (Loss) (3.7)
Before Tax Margin % 3.6
% 9.7
% 1.5
% 11.6
%
Adjusted EBITDA Margin 9.8
% 15.4
% 19.9
% 13.3
% 21.0
%
Compression
Revenue $
123,552 $
113,766 $
138,066 $
476,692 $
438,673
Income Before Tax (1,266) (3,464) (3,280) (16,014) (33,797)
Adjusted Income Before Tax
(Schedule G) (1,265) 133 (2,568) (7,200) (28,009)
Adjusted EBITDA (Schedule G) 32,567 31,250 29,183 122,501 95,035
Income (Loss) Before Tax (1.0) (3.0) (2.4) (3.4)
% (7.7)
Margin % % % %
Adjusted Income (Loss) (1.0) 0.1
% (1.9) (1.5)
% (6.4)
Before Tax Margin % % %
Adjusted EBITDA Margin 26.4
% 27.5
% 21.1
% 25.7
% 21.7
%
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SOURCE TETRA Technologies, Inc.
