Tetra Technologies, Inc. Announces Third Quarter 2020 Results
THE WOODLANDS, Texas, Nov. 3, 2020 /PRNewswire/ -- TETRA Technologies, Inc. ("TETRA" or the "Company") (NYSE: TTI) today announced third quarter 2020 results.
Third quarter 2020 revenue of $153 million decreased 21% from the second quarter of 2020 and compares to a 36% decline in US onshore rig activity. Net loss before discontinued operations for the third quarter of 2020 was $21 million, inclusive of $2.9 million of non-recurring charges and expenses. This compares to a net loss before discontinued operations of $37 million in the second quarter of 2020, inclusive of $20.9 million of non-recurring charges and expenses. Net loss per share attributable to TETRA stockholders in the third quarter of 2020 was $0.10. Excluding the non-recurring charges and expenses, the net loss per share attributable to TETRA stockholders was $0.09. Consolidated Adjusted EBITDA before discontinued operations was $30.3 million and compares to $35.3 million in the second quarter of 2020. Consolidated cash provided by operating activities in the third quarter of 2020 was $4.4 million, compared to $38.2 million in the second quarter of 2020. TETRA only cash from operating activities was $8.9 million, compared to $33.4 million in the second quarter of 2020, while TETRA only adjusted free cash flow from continuing operations was $7.7 million, compared to $31.2 million in the second quarter of 2020.
Financial Highlights
-- Completion Fluids & Products income before taxes was $11.8 million, or
22.6% of revenue, while Adjusted EBITDA was $13.9 million, or 26.8% of
revenue.
-- Water & Flowback Services loss before taxes was $7.7 million, while
Adjusted EBITDA was positive at $35,000 despite North America land
completion activity hitting historical lows during the quarter.
-- Compression loss before taxes was $11.3 million, or (14.3)% of revenue,
while Adjusted EBITDA was $22.9 million, or 29.0% of revenue.
-- TETRA only adjusted third quarter free cash flow from continuing
operations was $7.7 million, which is the sixth quarter in a row with
positive TETRA only adjusted free cash flow. TETRA only cash from
operating activities for the nine months ended September 30, 2020 was
$51.1 million. TETRA only adjusted free cash flow for the first nine
months of 2020 is $43.5 million, an improvement of $66.6M over the same
period a year ago.
This press release includes the following financial measures that are not presented in accordance with generally accepted accounting principles in the United States ("GAAP"): Adjusted earnings per share attributable to TETRA stockholders, Adjusted EBITDA, and Adjusted EBITDA Margin (Adjusted EBITDA as a percent of revenue) on consolidated and segment basis, Adjusted income (loss) before tax, TETRA-only adjusted free cash flow from continuing operations, and net debt. Please see Schedules E through K for reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures.
Brady Murphy, TETRA's Chief Executive Officer, stated, "Third quarter activity continued to decline from the impacts of COVID-19 while hurricanes in the Gulf of Mexico added to this challenging environment. Despite these challenges we continued to deliver strong Adjusted EBITDA margins of 26.8% for our Completion Fluids & Products Segment and 29.0% for our Compression Segment. Additionally, our onshore Water and Flowback Services segment remained Adjusted EBITDA positive despite a historic decline on US onshore completion activity levels. All these contributed towards another quarter where we generated positive free cash flow despite the headwinds faced by our industry. I am pleased with our team's focus on executing the plans we have put in place to mitigate the unprecedented market challenges. Our vertically integrated fluids model and introduction of automation and technology for the onshore businesses has allowed us to perform well relative to the market and continue to deliver cost effective solutions to our customers. Consolidated Adjusted EBITDA margins before discontinued operations improved 150 basis points compared to the second quarter of 2020 despite revenue decreasing 21% sequentially. Completion Fluids & Products segment and the Compression segment improved Adjusted EBITDA margins both sequentially and year on year. Water & Flowback Services revenue decreased 13% in the third quarter compared to the second quarter but activity in September and for the balance of the year is showing a meaningful increase as incremental frac crews are deployed. By being disciplined on capital spending while continuing to aggressively manage working capital, we generated positive TETRA Only adjusted free cash flow for the sixth consecutive quarter.
"Completion Fluids & Products segment third quarter income before tax margin was 22.6% while Adjusted EBITDA margin was 26.8% despite revenue decreasing sequentially 27%. The revenue drop was mainly due to the seasonality of the Northern European business, which peaks in the second quarter of each year, and from delays in Gulf of Mexico projects due to the two hurricanes that occurred in the third quarter. Our vertically integrated business model and diverse revenue stream continues to produce strong Adjusted EBITDA margins at or above our internal targets. Higher international sales, mainly in the Middle East and Europe, offset weaker Gulf of Mexico activity. During the third quarter our Lake Charles calcium chloride chemical plant production was impacted by hurricane Laura, however we have been able to meet our customer needs by fulfilling orders from other facilities, mitigating any potential negative impact.
"Water & Flowback Services third quarter 2020 revenue of $21.5 million, decreased 13% from the second quarter of 2020 and compares to the 36% decrease in U.S. onshore rig activity. Through ongoing cost management, aggressive deployment of new technologies and focus on automation and remote monitoring, third quarter Adjusted EBITDA was slightly above breakeven despite the lower revenue. Our BlueLinx(TM) automated control system solution continues to be deployed on all of our integrated water management projects. The number of integrated projects increased progressively throughout the quarter. In September, 63% of our water management projects were integrated projects, and we expect this to increase further as activity slowly recovers in North America. Through most of the quarter, we achieved maximum utilization for our TETRA SandStorm(TM) Advanced Cyclone Technology ("SandStorm") for sand separation, while continuously introducing this technology to new customers. As an example, in the third quarter 2020, we were asked by a new customer in the Appalachian region to trial our SandStorm(TM) head-to-head against their current service provider's technology. During this trial, SandStorm was able to achieve 99.4% sand filtration, far exceeding their existing solution, with zero wash downstream and at peak rate of 40Mscfpd. We are now working with this customer to displace our competitor's technology. Furthermore, these results showcase that our SandStorm technology works equally well on high pressure gas wells as it does in liquid plays.
"Our Compression segment's performance for third quarter 2020 was in line with our expectations with a loss before taxes of $11.3 million and Adjusted EBITDA of $22.9 million. Compression Services gross margins decreased sequentially by 200 basis points mainly due to revenue decreasing 5% sequentially. Utilization declined from 82.1% at the end of the second quarter of 2020 to 80.3% at the end of the third quarter. We exited the third quarter of 2020 with only 8% of our US domestic fleet on standby rates, compared to a high of 20% during the second quarter, a major improvement as most of our large, well-capitalized customers started bringing wells back online. Aftermarket Services gross margins modestly improved 20 basis points sequentially despite a 12% decline in revenue. Aftermarket Services should gain momentum in 2021 as customers deferred maintenance in 2020 due to capital constraints. CSI Compressco completed the sale of their Midland, Texas fabrication facility and real estate in July for $17 million in gross cash proceeds. CSI Compressco announced that it has completed or expects to complete the sale of non-strategic and underutilized assets in three separate transactions for a total of $13 million during the third and fourth quarters of this year, further strengthening its liquidity.
A summary of key financial metrics for the third quarter are as follows:
Third Quarter 2020 Results
Three Months Ended
Sep 30, 2020 Jun 30, 2020 Sep 30, 2019
(In Thousands, Except per Share Amounts)
Revenue $
152,601 $
192,441 $
245,947
Loss before
discontinued
operations (21,425) (37,130) (9,079)
Adjusted EBITDA
before
discontinued
operations 30,302 35,259 46,157
GAAP EPS before
discontinued
operations
attributable to
TETRA
stockholders (0.10) (0.17) (0.06)
Adjusted EPS
attributable to
TETRA
stockholders (0.09) (0.09) (0.02)
GAAP net cash
provided (used)
by operating
activities 4,440 38,211 46,605
TETRA only
adjusted free
cash flow from
continuing
operations $
7,672 $
31,187 $
9,749
---
Operating Segments
Completion Fluids & Products Division
Completion Fluids & Products revenue was $52.0 million in the third quarter of 2020, a decrease of 27% from the second quarter of 2020, primarily driven by decreased activity in the Gulf of Mexico and reflects the seasonally high second quarter Northern European industrial sales. Completion Fluids & Products income before taxes was $11.8 million in the third quarter (22.6% of revenue), and adjusted income before taxes was $12.5 million (24.0% of revenue). Adjusted EBITDA of $13.9 million (26.8% of revenue - a 110 basis point sequential increase) decreased by $4.4 million sequentially.
Water & Flowback Services Division
Water & Flowback Services third quarter 2020 revenue of $21.5 million decreased 13% from the second quarter of 2020, driven by the reduction in U.S. land activity. Water & Flowback Services loss before tax was $7.7 million, primarily due to extremely low activity across all US land basins, where frac spread counts bottomed out at approximately 70, down from the peak of approximately 298 in the first quarter. The frac crew count is currently estimated to be 120. Adjusted EBITDA decreased $0.4 million sequentially to slightly above breakeven. With the continued success of implementing our technology and automation to meet our customer's needs, we continue to gain market share and expand our customer base.
Compression Division
Third quarter Compression revenue decreased 18% from the second quarter of 2020 driven by lower equipment sales. Compression Services gross margins decreased 200 basis points from the second quarter of 2020. Overall fleet utilization was 80.3%, down from 82.1% at the end of the second quarter. As of September 30, 2020, total active operating horsepower decreased 25,758 sequentially from 967,505 in the second quarter to 941,747. Net loss before taxes was $11.3 million, an improvement of $11.7 million sequentially. Third quarter 2020 Adjusted EBITDA of $22.9 million decreased 13% from the second quarter of 2020.
Free Cash Flow and Balance Sheet
During the third quarter of 2020, consolidated cash provided by operations was $4.4 million. TETRA only adjusted free cash flow from continuing operations was $7.7 million. TETRA only adjusted free cash flow has now been positive for six consecutive quarters reflecting aggressive management of operating cost and working capital. Year-to-date adjusted free cash flow for TETRA Only is $43.5 million, an improvement of $66.6 million over the same period a year ago. TETRA Only liquidity at the end of third quarter 2020 was $84 million, an improvement of $22 million from the same period last year, positioning the Company to safely maneuver through this downturn. TETRA only liquidity is defined as unrestricted cash on hand plus availability under our revolving credit facility.
Consolidated total debt was $843 million while consolidated net debt was $768 million. TETRA only net debt is $148 million. At the end of the third quarter TETRA Only non-restricted cash was $59 million. Schedules D and H summarizes consolidated cash and debt for TETRA on a consolidated basis and for TETRA Only (excluding CSI Compressco). TETRA's debt agreements do not include any cross defaults or cross guarantees for CSI Compressco's debt.
Non-recurring charges and expenses items
Non-recurring charges and expenses including discontinued operations incurred in the third quarter, as detailed on Schedule F, include $2.9 million of restructuring expenses and severance, $0.1 million of asset impairments and $0.1 million of other income.
Conference Call
TETRA will host a conference call to discuss these results today, November 3, 2020, at 9:30 a.m. Eastern Time. 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 10148819, 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 Free Cash Flow From Continuing Operations
Schedule K: Non-GAAP Reconciliation to TETRA Adjusted EBITDA Margins and Adjusted Income (Loss) 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 economic and operating conditions that are outside of our control, including the trading price of our common stock; the current significant surplus in the supply of oil and the ability of the OPEC and other oil producing nations to agree on and comply with supply limitations; the duration and magnitude of the unprecedented disruption in the oil and gas industry currently, which is negatively impacting our business; the availability of adequate sources of capital to us; expected customer drilling activity, resumption of shut-in oil production and capital spending and maintenance spending for 2020 and 2021, the planned sale of idle compression equipment; the availability of raw materials and labor at reasonable prices; risks related to acquisitions and our growth strategy; restrictions under our debt agreements and the consequences of any failure to comply with debt covenants; the effect and results of litigation, regulatory matters, settlements, audits, assessments, and contingencies; risks related to our foreign operations; information technology risks including the risk of cyber-attacks; the severity and duration of the COVID-19 pandemic and related economic repercussions and the resulting negative impact on the demand for oil and gas; operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts, and supply chain disruptions; other global or national health concerns; and 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
Sep 30, 2020 Jun 30, 2020 Sep 30, 2019 Sep 30, 2020 Sep 30, 2019
(In Thousands, Except per Share Amounts)
Revenues $
152,601 $
192,441 $
245,947 $
567,984 $
778,471
Cost of sales, services,
and rentals 102,982 133,892 170,313 385,568 553,709
Depreciation,
amortization, and
accretion 29,604 29,842 30,867 88,906 93,312
Impairments and other
charges 97 8,977 849 14,445 3,306
Insurance recoveries (52) (591) (1,042) (643) (1,392)
Total cost of revenues 132,631 172,120 200,987 488,276 648,935
Gross profit 19,970 20,321 44,960 79,708 129,536
General and
administrative expense 25,256 34,014 34,926 88,807 105,498
Interest expense, net 17,631 17,586 18,146 53,073 55,054
Warrants fair value
adjustment (income)
expense 11 78 (327) (1,035)
CCLP Series A Preferred
Units fair value
adjustment expense 1,309
Other (income) expense,
net (2,137) 3,839 (690) 2,141 (1,014)
Loss before taxes and
discontinued operations (20,780) (35,129) (7,500) (64,986) (30,276)
Provision for income
taxes 645 2,001 1,579 3,800 5,678
Loss before discontinued
operations (21,425) (37,130) (9,079) (68,786) (35,954)
Discontinued operations:
Loss from discontinued
operations, net of taxes (173) 163 (9,130) (155) (9,901)
Net loss (21,598) (36,967) (18,209) (68,941) (45,855)
Less: loss attributable
to noncontrolling
interest 8,296 15,712 2,378 32,833 12,273
Net loss attributable to
TETRA stockholders $
(13,302) $
(21,255) $
(15,831) $
(36,108) $
(33,582)
Basic per share
information:
---
Loss before discontinued
operations attributable
to TETRA stockholders $
(0.10) $
(0.17) $
(0.06) $
(0.29) $
(0.19)
Loss from discontinued
operations attributable
to TETRA stockholders $
0.00 $
0.00 $
(0.07) $
0.00 $
(0.08)
Net loss attributable to
TETRA stockholders $
(0.10) $
(0.17) $
(0.13) $
(0.29) $
(0.27)
Weighted average shares
outstanding 125,893 125,886 125,568 125,789 125,620
Diluted per share
information:
---
Loss before discontinued
operations attributable
to TETRA stockholders $
(0.10) $
(0.17) $
(0.06) $
(0.29) $
(0.19)
Loss from discontinued
operations attributable
to TETRA stockholders $
0.00 $
0.00 $
(0.07) $
0.00 $
(0.08)
Net loss attributable to
TETRA stockholders $
(0.10) $
(0.17) $
(0.13) $
(0.29) $
(0.27)
Weighted average shares
outstanding 125,893 125,886 125,568 125,789 125,620
Schedule B: Financial Results By Segment (Unaudited)
Revenues by segment:
---
Completion Fluids &
Products Division $
51,950 $
71,346 $
59,340 $
198,533 $
200,688
Water & Flowback
Services Division 21,534 24,723 72,841 103,724 224,643
Compression Division 79,117 96,372 113,766 265,727 353,140
Eliminations and
other
Total revenues $
152,601 $
192,441 $
245,947 $
567,984 $
778,471
Gross profit (loss)
by segment:
---
Completion Fluids &
Products Division $
16,196 $
20,819 $
16,181 $
62,979 $
46,653
Water & Flowback
Services Division (5,714) (4,836) 8,236 (7,283) 24,577
Compression Division 9,755 4,511 20,710 24,645 58,804
Corporate overhead
and eliminations (267) (173) (167) (633) (498)
Total gross profit $
19,970 $
20,321 $
44,960 $
79,708 $
129,536
Income (loss) before
taxes by segment:
---
Completion Fluids &
Products Division $
11,756 $
13,202 $
11,318 $
44,354 $
32,118
Water & Flowback
Services Division (7,746) (8,418) 2,578 (18,408) 7,269
Compression Division (11,321) (23,006) (3,464) (47,117) (14,748)
Corporate overhead
and eliminations (13,469) (16,907) (17,932) (43,815) (54,915)
Total income (loss)
before taxes $
(20,780) $
(35,129) $
(7,500) $
(64,986) $
(30,276)
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 (September 30, 2020 Unaudited)
September 30,
2020 December 31, 2019
(In Thousands)
Balance Sheet:
---
Cash (excluding
restricted cash) $
75,165 $
17,704
Accounts
receivable, net 108,222 175,918
Inventories 113,020 136,510
Other current
assets 21,235 21,222
PP&E, net 674,568 758,637
Operating lease
right-of-use
assets 78,867 68,131
Other assets 90,463 93,800
Total assets $
1,161,540 $
1,271,922
Liabilities of
discontinued
operations $
1,852 $
2,098
Other current
liabilities 130,216 186,625
Long-term debt
(1) 843,216 842,871
Long-term
portion of asset
retirement
obligations 12,973 12,762
Warrants
liability 123 449
Operating lease
liabilities 64,200 53,919
Other long-term
liabilities 13,785 10,372
Equity 95,175 162,826
Total liabilities
and equity $
1,161,540 $
1,271,922
(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 a 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, September 30,
2020 2019 2019
(In Thousands)
TETRA
---
Asset-Based Credit
Agreement
$
$ $
8,585
Term Credit
Agreement 206,273 204,633 204,112
TETRA total debt 206,273 204,633 212,697
Less current portion
TETRA total long-
term debt $
206,273 $
204,633 $
212,697
CSI Compressco LP
---
CCLP Credit
Agreement 2,622 10,559
7.25% Senior Notes 79,893 291,444 291,028
7.50% Senior Notes 399,640 344,172 343,988
Second Lien Notes 157,410
Total debt 636,943 638,238 645,575
Less current portion
CCLP total long-
term debt $
636,943 $
638,238 $
645,575
Consolidated total
long-term debt $
843,216 $
842,871 $
858,272
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). 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
September 30, 2020
Income (loss) Provision Noncontrolling Net Income
before taxes (Benefit) for Interest Attributable to
and Tax TETRA
discontinued Stockholders
operations Diluted EPS
(In Thousands, Except per Share Amounts)
Income (loss) attributable to TETRA
stockholders, excluding special items and
discontinued operations $
(17,867) $
645 $
(7,678) $
(10,834) $
(0.09)
Stock warrant fair value adjustment 0.00
Transaction and other expenses 78 (25) 103 0.00
Impairments and other charges (97) (97) 0.00
Bad Debt 0.00
Restructuring charges (1,061) (190) (871) (0.01)
Debt refinancing 0.00
Severance (1,833) (403) (1,430) (0.01)
Net income (loss) before discontinued
operations $
(20,780) $
645 $
(8,296) $
(13,129) $
(0.10)
Loss from discontinued operations (173) (0.00)
Net Income (loss) attributable to TETRA
stockholders, as reported $
(13,302) $
(0.10)
Three Months Ended
June 30, 2020
Income (loss) Provision Noncontrolling Net Income
before taxes (Benefit) for Interest Attributable to
and Tax TETRA
discontinued Stockholders
operations Diluted EPS
(In Thousands, Except per Share Amounts)
Income (loss) attributable to TETRA
stockholders, excluding special items and
discontinued operations $
(14,258) $
2,001 $
(5,171) $
(11,088) $
(0.09)
Stock warrant fair value adjustment (11) (11) 0.00
Transaction and other expenses (895) (475) (420) 0.00
Impairments and other charges (8,922) (5,977) (2,945) (0.02)
Restructuring charges (486) (179) (307) 0.00
Severance (3,003) (726) (2,277) (0.02)
Bad debt (2,800) (2,800) (0.02)
Debt refinancing (4,754) (3,184) (1,570) (0.01)
Net income (loss) before discontinued
operations $
(35,129) $
2,001 $
(15,712) $
(21,418) $
(0.17)
Loss from discontinued operations 163 0.00
Net Income (loss) attributable to TETRA
stockholders, as reported $
(21,255) $
(0.17)
Three Months Ended
September 30, 2019
Income (loss) Provision Noncontrolling Net Income
before taxes (Benefit) for Interest Attributable to
and Tax TETRA
discontinued Stockholders
operations Diluted EPS
(In Thousands, Except per Share Amounts)
Income (loss) attributable to TETRA
stockholders, excluding unusual charges $
(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)
Schedule G: Non-GAAP Reconciliation to GAAP Financials (Unaudited)(*)
Three Months Ended
September 30, 2020
Net Income Tax Provision Income (Loss) Impairments & Adjusted Income
(Loss), as Before Tax, as Special Charges (Loss) Before
reported Reported Tax Interest Expense Adjusted Equity Adjusted EBITDA
Depreciation &
Amortization Compensation
Expense
(In Thousands)
Completion Fluids &
Products Division $
11,756 $
729 $
12,485 $
(291) $
1,710
$ $
13,904
Water & Flowback
Services Division (7,746) 274 (7,472) (77) 7,584 35
Compression Division (11,321) 879 (10,442) 13,293 19,948 143 22,942
Eliminations and other 3 3 (3)
Subtotal (7,308) 1,882 (5,426) 12,925 29,239 143 36,881
Corporate and other (13,472) 1,031 (12,441) 4,706 173 983 (6,579)
TETRA excluding
Discontinued
Operations $
(21,425) $
645 $
(20,780) $
2,913 $
(17,867) $
17,631 $
29,412 $
1,126 $
30,302
Three Months Ended
June 30, 2020
Net Income Tax Provision Income (Loss) Impairments & Adjusted Income Adjusted
(Loss), as Before Tax, as Special Charges (Loss) Before Interest
reported Reported Tax Expense, Net Adjusted Equity Adjusted EBITDA
Depreciation &
Amortization Compensation
Expense
(In Thousands)
Completion Fluids &
Products Division $
13,202 $
3,310 $
16,512 $
(143) $
1,934
$ $
18,303
Water & Flowback
Services Division (8,418) 1,203 (7,215) (2) 7,617 400
Compression Division (23,006) 15,736 (7,270) 12,982 20,116 488 26,316
Eliminations and other 2 2 2
Subtotal (18,220) 20,249 2,029 12,837 29,667 488 45,021
Corporate and other (16,909) 621 (16,288) 4,749 175 1,602 (9,762)
TETRA excluding
Discontinued
Operations $
(37,130) $
2,001 $
(35,129) $
20,870 $
(14,259) $
17,586 $
29,842 $
2,090 $
35,259
Three Months Ended
September 30, 2019
Net Income Tax Provision Income (Loss) Impairments & Adjusted Income
(Loss), as Before Tax, as Special Charges (Loss) Before
reported Reported Tax Interest Expense Adjusted Equity Adjusted EBITDA
Depreciation &
Amortization Compensation
Expense
(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
* 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, 2020, 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. Amounts presented are net of deferred financing costs.
September 30, 2020
TETRA CCLP Consolidated
(In Millions)
Non-restricted
cash $
58.5 $
16.7 $
75.2
Carrying value
of long-term
debt:
Asset-Based
Credit
Agreement
Term Credit
Agreement 206.3 206.3
Senior Notes
outstanding 636.9 636.9
Net debt $
147.8 $
620.2 $
768.0
Schedule I: Non-GAAP Reconciliation to TETRA Only Adjusted Free Cash Flow (Unaudited)
Three Months Ended Nine Months Ended
Sep 30, 2020 Jun 30, 2020 Sep 30, 2019 Sep 30, 2020 Sep 30, 2019
(In Thousands)
Consolidated
Net cash provided
(used) by operating
activities $
4,440 $
38,211 $
46,605 $
64,827 $
83,590
Capital expenditures,
net of sales
proceeds 16,990 (3,332) (27,650) 2,693 (87,040)
Consolidated adjusted
free cash flow $
21,430 $
34,879 $
18,955 67,520 (3,450)
CSI Compressco LP
Net cash provided
(used) by operating
activities $
(4,451) $
4,823 $
27,444 13,729 67,461
Capital expenditures,
net of sales
proceeds 18,550 (1,125) (20,867) 10,942 (60,453)
CSI Compressco free
cash flow $
14,099 $
3,698 $
6,577 24,671 7,008
TETRA Only
Cash from operating
activities $
8,891 $
33,388 $
19,161 51,098 16,129
Investment in CCLP
Compressors (2,830) (13,972)
Capital expenditures,
net of sales
proceeds (1,560) (2,207) (6,783) (8,249) (26,587)
Free cash flow 7,331 31,181 9,548 42,849 (24,430)
Distributions from
CSI Compressco LP 168 169 169 506 506
TETRA Only Adjusted
Free Cash Flow $
7,499 $
31,350 $
9,717 43,355 (23,924)
Schedule J: Non-GAAP Reconciliation to TETRA Only Adjusted Free Cash Flow From Continuing Operations (unaudited)
Three Months Ended Nine Months Ended
Sep 30, 2020 Jun 30, 2020 Sep 30, 2019 Sep 30, 2020 Sep 30, 2019
(In Thousands)
TETRA Only
Cash from operating
activities $
8,891 $
33,388 $
19,161 $
51,098 $
16,129
Less: Discontinued
operations operating
activities (adjusted
EBITDA) (173) 163 (32) (155) (803)
Cash from continued
operating activities 9, 064 33,225 19,193 51,253 16,932
Less: Continuing
operations capital
expenditures (1,560) (2,207) (6,783) (8,249) (26,587)
Less: Investment in
CCLP Compressors (2,830) (13,972)
Distributions from
CSI Compressco LP 168 169 169 506 506
TETRA Only Adjusted
Free Cash Flow From
Continuing
Operations $
7,672 $
31,187 $
9,749 $
43,510 $
(23,121)
Schedule K: Non-GAAP Reconciliation to TETRA Adjusted EBITDA Margins and Adjusted Income (Loss) before tax margins (Unaudited)
Three Months Ended
Sep 30, 2020 Jun 30, 2020 Sep 30, 2019
(In Thousands)
Consolidated
Revenue $
152,601 $
192,441 $
245,947
Income (loss) before
tax (20,780) (35,129) (7,500)
Adjusted income
(loss) before tax
(Schedule G) (17,867) (14,259) (4,184)
Adjusted EBITDA
(Schedule G) 30,302 35,259 46,157
Income (Loss) Before (13.6) (18.3) (3.0)
Tax Margin % % %
Adjusted Income
(Loss) Before Tax % % %
Margin (11.7) (7.4) (1.7)
Adjusted EBITDA
Margin 19.9
% 18.3
% 18.8
%
Completion Fluids &
Products
Revenue $
51,950 $
71,346 $
59,340
Income (loss) before
tax 11,756 13,202 11,318
Adjusted income
(loss) before tax
(Schedule G) 12,485 16,512 10,582
Adjusted EBITDA
(Schedule G) 13,904 18,303 14,042
Income (Loss) Before
Tax Margin 22.6
% 18.5
% 19.1
%
Adjusted Income
(Loss) Before Tax
Margin 24.0
% 23.1
% 17.8
%
Adjusted EBITDA
Margin 26.8
% 25.7
% 23.7
%
Water & Flowback
Services
Revenue $
21,534 $
24,723 $
72,841
Income (loss) before
tax (7,746) (8,418) 2,578
Adjusted income
(loss) before tax
(Schedule G) (7,472) (7,215) 2,654
Adjusted EBITDA
(Schedule G) 35 400 11,220
Income (Loss) Before (36.0) (34.0)
Tax Margin % % 3.5
%
Adjusted Income
(Loss) Before Tax % %
Margin (34.7) (29.2) 3.6
%
Adjusted EBITDA
Margin 0.2
% 1.6
% 15.4
%
Compression
Revenue $
79,117 $
96,372 $
113,766
Income (loss) before
tax (11,321) (23,006) (3,464)
Adjusted income
(loss) before tax
(Schedule G) (10,442) (7,270) 133
Adjusted EBITDA
(Schedule G) 22,942 26,316 31,250
Income (Loss) Before (14.3) (23.9) (3.0)
Tax Margin % % %
Adjusted Income
(Loss) Before Tax % %
Margin (13.2) (7.5) 0.1
%
Adjusted EBITDA
Margin 29.0
% 27.3
% 27.5
%
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SOURCE TETRA Technologies, Inc.
