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TETRA Technologies, Inc. Announces Third Quarter Results And Provides Update To Total Year Guidance

THE WOODLANDS, Texas, Nov. 8, 2018 /PRNewswire/ -- TETRA Technologies, Inc. ("TETRA") (NYSE:TTI) today announced consolidated third quarter 2018 net loss per share before discontinued operations attributable to TETRA stockholders of $0.06.  This compares to consolidated net loss of $0.05 per share before discontinued operations attributable to TETRA stockholders in the second quarter of 2018, and earnings per share before discontinued operations attributable to TETRA stockholders of $0.03 in the third quarter of 2017.

TETRA's adjusted per share results attributable to TETRA stockholders for the third quarter of 2018, before discontinued operations excluding special items, were net loss per share of $0.02.  This compares to adjusted earnings per share of $0.03 in the second quarter of 2018 and adjusted earnings per share of $0.04 in the third quarter of 2017, both before discontinued operations, which exclude special items detailed later in this news release.

Third quarter 2018 revenue before discontinued operations was $256.9 million, a decrease of 1% from the second quarter of 2018 and an increase of 40% from the third quarter of last year. 

(Adjusted earnings/loss per share is a non-GAAP financial measure that is reconciled to the nearest GAAP measure in the accompanying schedules.)

 

Third Quarter 2018 Results

 

Three Months Ended

 

September 30,
2018

 

June 30,
2018

 

September 30,
2017

 

(In Thousands, Except per Share Amounts)

Revenue

$

256,851

   

$

260,072

   

$

183,677

 

Loss before discontinued operations

(12,852)

   

(12,132)

   

(857)

 

Adjusted EBITDA before discontinued operations(1)

41,803

   

46,285

   

41,710

 

GAAP EPS before discontinued operations attributable to TETRA stockholders

(0.06)

   

(0.05)

   

0.03

 

Adjusted EPS attributable to TETRA stockholders(1)

(0.02)

   

0.03

   

0.04

 

GAAP net cash provided by operating activities

13,760

   

19,134

   

37,395

 

TETRA only adjusted free cash flow from continuing operations(1)

(558)

   

18,018

   

17,268

 
 

(1) Non-GAAP financial measures are reconciled to GAAP in the schedules below.

Third Quarter Highlights include:

  • Consolidated Adjusted EBITDA before discontinued operations of $41.8 million (16.3% of revenue) decreased sequentially by $4.5 million due to the benefit in the second quarter of an early production facility sale and seasonal Northern Europe industrial chemical sales. Profit before taxes from continuing operations was a loss of $12.9 million.
  • Water & Flowback Services Adjusted EBITDA of $15.9 million declined from $20.1 million in the second quarter primarily reflecting the benefit in the second quarter of an early production facility sale overseas. Revenue increased sequentially in the Company's US Water & Flowback Services business and generated Adjusted EBITDA margins above the segment margins. The Company continues to see strength in the Rockies, MidCon and Marcellus/Utica markets. Profit before taxes was $5.8 million, 7.4% of revenue.
  • Completion Fluids & Products Adjusted EBITDA of $12.5 million compares to $13.7 million in the second quarter. Improved offshore profitability (Gulf of Mexico and international) was offset by the decline following the second quarter peak activity levels of industrial chemical sales in Northern Europe. Profit before taxes was $8.7 million, 13.8% of revenue.
  • Compression Services Adjusted EBITDA increased to $24.6 million from $22.4 million in the second quarter due to higher equipment sales and stronger after-market activity. Loss before taxes was $7.8 million. The compression segment continues to see improving activity levels from equipment being deployed into gathering systems, new equipment orders and backlog and higher demand for aftermarket services. New equipment orders during the third quarter were $71 million, increasing the backlog to $140 million. Utilization of the service fleet increased from 85.0% in the second quarter to 86.3% in the third quarter.

Stuart M. Brightman, TETRA's Chief Executive Officer, stated, "In the third quarter we saw several of our segments perform at or above our expectations.  Water & Flowback Services revenue in the United States increased sequentially on the back of stronger activity outside the Permian Basin and with the traction we are gaining with our integrated water management offering.  Offshore completion fluids revenue increased significantly from the second quarter with stronger activity levels in the Gulf of Mexico and internationally. Compression revenue increased sequentially by 15% on higher equipment sales and stronger aftermarket services.  These improvements only partially offset the strong second quarter that included an early production facility sale overseas and the benefit of the seasonally strong North Europe industrial chemical sales.

"Water & Flowback Services third quarter 2018 revenue decreased 6.1% sequentially to $78.6 million primarily due to an early production facility sale in the second quarter.  Although rig count in the Permian was up only 4% quarter on quarter,  DUC's increased 19% and we experienced some shifting of customer completion schedules which impacted our utilization for the quarter while also ramping up for Integrated projects well ahead of schedule.  Our initiative to automate and integrate the water management requirements of our customers has gained traction following the acquisition of SwiftWater.  During the third and fourth quarter, we have or will be providing an integrated solution on 11 different projects across three different basins. These integrated solutions are allowing us to differentiate ourselves and to provide more cost effective and efficient solutions to our customers.  In preparation for these activities, we incurred costs in the third quarter to position us to capitalize on these integrated opportunities, which is contributing to the early part of the fourth quarter running at stronger levels than early in the third quarter. In the fourth quarter we are estimating that approximately 25% of our Permian Basin revenue will be from integrated projects.

"Completion Fluids & Products revenue was $63.1 million for the third quarter of 2018, a decrease of 17.6% from the second quarter of 2018 following the industrial chemical sales seasonal peak in Northern Europe.  During the third quarter we experienced stronger offshore volumes in the Gulf of Mexico and internationally than in the second quarter.  The TETRA CS Neptune® completion fluid projects that were expected for the fourth quarter have been delayed as the associated drilling programs have extended longer than anticipated by our customers as well as their decision to batch drill and then complete.  Our efforts working with Halliburton to identify additional TETRA CS Neptune® completion fluid opportunities continues to gain traction by expanding the pipeline of opportunities. Since last quarter two new joint Halliburton projects have moved into the customer testing and qualification phase for their projects.

"Third quarter 2018 Compression revenue increased 15% sequentially to $115.3 million and continues to show a strong market environment.  Compression Services gross margin, which excludes depreciation, improved to 47.2% in the third quarter from 46.2% in the second quarter of 2018.  New equipment orders of $71 million were received in the third quarter reflecting our customers' continued strong demand for compression to move associated gas.  Our backlog was $140 million at the end of the third quarter, up $38 million from the end of the second quarter.   Compression loss before taxes for the third quarter of 2018 was $7.8 million compared to an $8.7 million loss for the second quarter of 2018.  Adjusted EBITDA was $24.6 million in the third quarter, compared to $22.4 million in the second quarter.  On October 20, 2018, CSI Compressco LP declared a cash distribution attributable to the third quarter of 2018 of $0.1875 per outstanding common unit, which will be paid on November 14, 2018 to common unitholders of record as of the close of business on November 1, 2018.  The distribution coverage ratio for the third quarter of 2018 was 1.07X."

Free Cash Flow and Balance Sheet

Consolidated net cash from operating activities for the third quarter of 2018 was $13.8 million.  TETRA only adjusted free cash flow in the third quarter was a use of $558,000.  Consolidated net debt was $769 million, while TETRA only net debt was $162.7 million.  At the end of the third quarter TETRA only cash on hand was $28 million.  

Special items

Special items, including Discontinued Operations, incurred in the third quarter, as detailed on Schedule E, include the following:

  • $2.9 million non-cash asset impairment expense
  • $1.0 million financing costs charged to expense
  • $0.6 million non-cash gain for a fair value adjustment of the SwiftWater earn-out obligation.
  • $0.2 million non-cash gain for stock warrant fair value adjustments
  • $0.5 million non-cash expense for the fair value adjustment of the CSI Compressco Series A Convertible Preferred units
  • $0.4 million of other expenses

Additionally, a normalized tax rate of 21% is reflected in Adjusted Net Income, as shown on Schedule E.

Total Year 2018 Guidance Update

We expect total year 2018 revenue from continuing operations to be between $975 million and $1.0 billion.  We further expect consolidated Adjusted EBITDA of between $155 million and $165 million, down from the prior guidance of $170 million and $190 million. The updated Adjusted EBITDA reflects the delay of the TETRA CS Neptune® completion fluid projects that were previously anticipated to occur in the fourth quarter of this year and the weaker third quarter.  Total year 2018 projected loss before taxes is expected to be between $45 million and $53 million, compared to the prior guidance of $16.9 and $35.9 million. Total year 2018 projected loss before taxes includes impairments and special charges of $14.1 million.

Projected total year 2018 capital expenditures for TETRA only are expected to be between $40 million and $50 million. Total year 2018 CSI Compressco capital expenditures are expected to be between $110 million and $120 million inclusive of maintenance capital expenditures of between $18 million and $20 million.

Projected total year TETRA only free cash flow is expected to be between break-even and $5 million inclusive of distributions from CSI Compressco.

Schedule J reconciles projected adjusted EBITDA to profit before taxes.

Conference Call

TETRA will host a conference call to discuss these results today, November 8, 2018, at 10:30 a.m. ET. 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 10115964, 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
TETRA Technologies, Inc., The Woodlands, Texas
Stuart M. Brightman
Ph: 281-367-1983
www.tetratec.com

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

Schedule A: Consolidated Income Statement (unaudited)
Schedule B: Financial Results By Segment (unaudited)
Schedule C: Consolidated Balance Sheet (unaudited)
Schedule D: Long-Term Debt
Schedule E: Special Items
Schedule F: Non-GAAP Reconciliation to GAAP Financials
Schedule G: Non-GAAP Reconciliation of TETRA Net Debt
Schedule H: Non-GAAP Reconciliation to TETRA Only Adjusted Free Cash Flow
Schedule I: Non-GAAP Reconciliation to TETRA Only Adjusted Cash Flow From Continuing Operations
Schedule J: Non-GAAP Reconciliation to Projected 2018 Adjusted EBITDA

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," "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 benefits from the acquisition of SwiftWater Energy Services and expected results of operational business segments for 2018, including levels of 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 Report on Form 10-K for the year ended December 31, 2017, 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
September 30,

 

Nine Months Ended
September 30,

 

2018

 

2017

 

2018

 

2017

 

(In Thousands, Except per Share Amounts)

Revenues

$

256,851

   

$

183,677

   

$

716,304

   

$

523,017

 
               

Cost of sales, services, and rentals

183,121

   

117,436

   

511,370

   

355,279

 

Depreciation, amortization, and accretion

29,460

   

25,942

   

84,880

   

78,250

 

Impairments of long-lived assets

2,940

   

   

2,940

   

 

Insurance recoveries

   

(2,352)

   

   

(2,352)

 

Total cost of revenues

215,521

   

141,026

   

599,190

   

431,177

 

Gross profit

41,330

   

42,651

   

117,114

   

91,840

 
               

General and administrative expense

34,446

   

29,685

   

98,866

   

85,896

 

Interest expense, net

18,894

   

14,654

   

52,246

   

42,749

 

Warrants fair value adjustment (income) expense

(179)

   

(47)

   

22

   

(11,568)

 

CCLP Series A Preferred Units fair value adjustment (income) expense

498

   

(1,137)

   

1,344

   

(4,340)

 

Litigation arbitration award income

   

   

   

(12,816)

 

Other (income) expense, net

619

   

(425)

   

7,203

   

811

 

Loss before taxes and discontinued operations

(12,948)

   

(79)

   

(42,567)

   

(8,892)

 

Provision (benefit) for income taxes

(96)

   

778

   

3,474

   

4,176

 

Loss before discontinued operations

(12,852)

   

(857)

   

(46,041)

   

(13,068)

 

Discontinued operations:

             

Income (loss) from discontinued operations (including 2018 loss on disposal of $33.8 million), net of taxes

796

   

(481)

   

(40,931)

   

(14,141)

 

Net loss

(12,056)

   

(1,338)

   

(86,972)

   

(27,209)

 

Loss attributable to noncontrolling interest

5,120

   

4,483

   

20,423

   

16,900

 

Income (loss) attributable to TETRA stockholders

$

(6,936)

   

$

3,145

   

$

(66,549)

   

$

(10,309)

 
               

Basic per share information:

             

Income (loss) before discontinued operations attributable to TETRA stockholders

$

(0.06)

   

$

0.03

   

$

(0.21)

   

$

0.03

 

Income (loss) from discontinued operations attributable to TETRA stockholders

$

0.00

   

$

0.00

   

$

(0.33)

   

$

(0.12)

 

Net income (loss) attributable to TETRA stockholders

$

(0.06)

   

$

0.03

   

$

(0.54)

   

$

(0.09)

 

Weighted average shares outstanding

125,689

 

114,563

 

123,557

 

114,375

               

Diluted per share information:

             

Income (loss) before discontinued operations attributable to TETRA stockholders

$

(0.06)

   

$

0.03

   

$

(0.21)

   

$

0.03

 

Income (loss) from discontinued operations attributable to TETRA stockholders

$

0.00

   

$

0.00

   

$

(0.33)

   

$

(0.12)

 

Net income (loss) attributable to TETRA stockholders

$

(0.06)

   

$

0.03

   

$

(0.54)

   

$

(0.09)

 

Weighted average shares outstanding

125,689

   

114,569

 

123,557

   

114,375

 

 

Schedule B: Financial Results By Segment (Unaudited)

 
 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2018

 

2017

 

2018

 

2017

 

(In Thousands)

Revenues by segment:

             

Completion Fluids & Products Division

$

63,073

   

$

71,323

   

$

192,733

   

$

201,546

 

Water & Flowback Services Division

78,568

   

41,048

   

223,289

   

110,313

 

Compression Division

115,261

   

71,611

   

300,607

   

212,482

 

Eliminations and other

(51)

   

(305)

   

(325)

   

(1,324)

 

Total revenues

$

256,851

   

$

183,677

   

$

716,304

   

$

523,017

 
               

Gross profit (loss) by segment:

             

Completion Fluids & Products Division

$

13,129

   

$

26,415

   

$

34,211

   

$

60,104

 

Water & Flowback Services Division

11,522

   

5,348

   

41,556

   

7,350

 

Compression Division

16,847

   

11,015

   

41,820

   

24,711

 

Corporate overhead and eliminations

(168)

   

(127)

   

(473)

   

(325)

 

Total gross profit

$

41,330

   

$

42,651

   

$

117,114

   

$

91,840

 
               

Income (loss) before taxes by segment:

             

Completion Fluids & Products Division

$

8,713

   

$

21,398

   

$

21,143

   

$

57,486

 

Water & Flowback Services Division

5,809

   

2,088

   

20,668

   

(3,098)

 

Compression Division

(7,844)

   

(7,014)

   

(30,517)

   

(27,527)

 

Corporate overhead and eliminations

(19,626)

   

(16,551)

   

(53,861)

   

(35,753)

 

Total income (loss) before taxes

$

(12,948)

   

$

(79)

   

$

(42,567)

   

$

(8,892)

 
 

Please note that the above results by Segment include special charges and expenses. Please see Schedule E for details of those special charges and expenses.

 

Schedule C: Consolidated Balance Sheet (Unaudited)

 
 

September 30, 2018

 

December 31, 2017

 

(In Thousands)

Balance Sheet:

     

Cash (excluding restricted cash)

$

53,899

   

$

26,128

 

Accounts receivable, net

188,830

   

144,051

 

Inventories

150,638

   

115,438

 

Assets of discontinued operations

1,301

   

34,879

 

Other current assets

19,794

   

17,858

 

PP&E, net

845,181

   

809,432

 

Long-term assets of discontinued operations

   

86,255

 

Other assets

132,596

   

74,573

 

Total assets

$

1,392,239

   

$

1,308,614

 
       

Liabilities of discontinued operations

$

3,570

   

$

25,688

 

Other current liabilities

178,886

   

148,026

 

Long-term debt (1)

822,905

   

629,855

 

Asset retirement obligations, net of current portion

12,014

   

11,738

 

CCLP Series A Preferred

36,944

   

61,436

 

Warrant liability

13,224

   

13,202

 

Long-term liability of discontinued operations

   

48,225

 

Other long-term liabilities

18,507

   

17,883

 

Equity

306,189

   

352,561

 

Total liabilities and equity

$

1,392,239

   

$

1,308,614

 
 

(1) Please see Schedule D for the individual debt obligations of TETRA and CSI Compressco LP.

Schedule D: Long-Term Debt

TETRA Technologies Inc. and its subsidiaries, other than CSI Compressco LP and its subsidiaries, are obligated under a bank asset-based 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 bank credit agreement and senior notes, neither of which are obligations of TETRA and its other subsidiaries. Amounts presented are net of deferred financing costs.

 

September 30, 2018

 

December 31, 2017

 

(In Thousands)

TETRA

     

Asset-Based Credit Agreement

$

8,301

   

$

 

Term Credit Agreement

182,124

   

 

Bank revolving line of credit facility

   

 

TETRA 11% Senior Note

   

117,679

 

TETRA total debt

190,425

   

117,679

 

Less current portion

   

 

TETRA total long-term debt

$

190,425

   

$

117,679

 
       

CSI Compressco LP

     

Bank Credit Facility

$

   

$

223,985

 

New Credit Agreement

   

 

7.25% Senior Notes

289,391

   

288,191

 

7.50% Senior Notes

343,089

   

 

Total debt

632,480

   

512,176

 

Less current portion

   

 

CCLP total long-term debt

$

632,480

   

$

512,176

 

Consolidated total long-term debt

$

822,905

   

$

629,855

 

Non-GAAP Financial Measures

In addition to financial results determined in accordance with GAAP, this press release includes the following non-GAAP financial measures for the Company: net debt, adjusted consolidated and segment income (loss) before taxes, and special charges; consolidated and segment adjusted EBITDA; and TETRA only adjusted free cash flow and TETRA only free cash flow from continuing operations. 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 special charges, equity compensation, and allocated corporate overhead charges to our CSI Compressco LP subsidiary, pursuant to our Omnibus Agreement, which were reimbursed with CSI Compressco LP common units. 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, excluding cash settlements of Maritech AROs, 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 of companies.

TETRA only adjusted free cash flow and TETRA only adjusted free cash flow from continuing operations does not necessarily imply residual cash flow available for discretionary expenditures, as it excludes 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 E: Special Items

 
 

Three Months Ended

 

September 30, 2018

 

Income (loss)
before taxes
and
discontinued
operations

Provision
(Benefit) for
Tax

Noncont.
Interest

Net Income
Attributable
to TETRA
Stockholders

Diluted EPS

 

(In Thousands, Except per Share Amounts)

Income (loss) attributable to TETRA stockholders, excluding special items and discontinued operations

$

(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

 

Other costs and expenses

(426)

 

(89)

 

(112)

 

(225)

 

0.00

 

Earnout Adjustment

600

 

126

 

 

474

 

0.00

 

Financing costs

(1,040)

 

(218)

 

 

(822)

 

(0.01)

 

Asset Impairment

(2,940)

 

(617)

 

 

(2,323)

 

(0.02)

 

Effect of deferred tax valuation allowance and other related tax adj.

 

2,623

 

 

(2,623)

 

(0.02)

 

Net income (loss) before discontinued operations

(12,948)

 

(96)

 

(5,120)

 

(7,732)

 

(0.06)

 

Income from Discontinued operations

     

796

 

0.00

 

Net Income (loss) attributable to TETRA stockholders, as reported

     

$

(6,936)

 

$

(0.06)

 
 
 

Three Months Ended

 

June 30, 2018

 

Income (loss)
before taxes
and
discontinued
operations

Provision
(Benefit) for
Tax

Noncont.
Interest

Net Income
Attributable
to TETRA
Stockholders

Diluted EPS

 

(In Thousands, Except per Share Amounts)

Income (loss) attributable to TETRA stockholders, excluding special items and discontinued operations

$

(3,620)

 

$

(343)

 

$

(6,593)

 

$

3,316

 

$

0.03

 

Severance expense

(43)

 

(9)

 

(9)

 

(25)

 

0.00

 

Stock warrant fair value adjustment

(2,195)

 

(461)

 

 

(1,734)

 

(0.01)

 

Convertible Series A preferred fair value adjustments

512

 

108

 

414

 

(10)

 

0.00

 

Other costs and expenses

(40)

 

(8)

 

 

(32)

 

0.00

 

Earnout Adjustment

(4,300)

 

(903)

 

 

(3,397)

 

(0.03)

 

Effect of deferred tax valuation allowance and other related tax adj.

 

4,062

 

 

(4,062)

 

(0.03)

 

Net income (loss) before discontinued operations

(9,686)

 

2,446

 

(6,188)

 

(5,944)

 

(0.05)

 

Loss from Discontinued operations

     

(21)

 

(0.00)

 

Net Income (loss) attributable to TETRA stockholders, as reported

     

$

(5,965)

 

$

(0.05)

 
 
 

Three Months Ended

 

September 30, 2017

 

Income
(Loss) Before
Tax

Provision
(Benefit) for
Tax

Noncont.
Interest

Net Income
Attributable
to TETRA
Stockholders

Diluted EPS

 

(In Thousands, Except per Share Amounts)

Income (loss) attributable to TETRA stockholders, excluding unusual charges

$

(656)

 

$

(79)

 

$

(4,931)

 

$

4,354

 

$

0.04

 

Severance expense

(24)

 

(7)

 

(5)

 

(12)

 

0.00

 

Stock warrant fair value adjustment

47

 

14

 

 

33

 

0.00

 

Convertible Series A preferred offering cost and fair value adjustments

1,137

 

341

 

824

 

(28)

 

0.00

 

ERP implementation costs

(583)

 

(175)

 

(371)

 

(37)

 

0.00

 

Effect of deferred tax valuation allowance and other related tax adj.

684

 

(684)

 

(0.01)

 

Net income (loss) before discontinued operations

(79)

 

778

 

(4,483)

 

3,626

 

0.03

 

Loss from Discontinued Operations

     

(481)

 

0.00

 

Net Income (loss) attributable to TETRA stockholders, as reported

     

$              3,145

 

$

0.03

 

 

Schedule F: Non-GAAP Reconciliation to GAAP Financials

 
 

Three Months Ended

 

September 30, 2018

 

Net
Income
(Loss),
as
reported

Tax
Provision

Income
(Loss)
Before
Tax, as
Reported

Impairments
& Special
Charges

Adjusted
Income
(Loss)
Before
Tax

Interest
Expense

Adjusted
Depreciation
&
Amortization

Equity
Comp.
Expense

Adjusted
EBITDA

   

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

 
                   
 

Three Months Ended

 

June 30, 2018

 

Net
Income
(Loss),
as
reported

Tax
Provision

Income
(Loss)
Before
Tax, as
Reported

Impairments
& Special
Charges

Adjusted
Income
(Loss)
Before
Tax

Interest
Expense

Adjusted

Depreciation
&
Amortization

Equity
Comp.
Expense

Adjusted
EBITDA

   

Completion Fluids & Products Division

   

$

9,981

 

$

 

$

9,981

 

$

(131)

 

$

3,875

 

$

 

$

13,725

 

Water & Flowback Services Division

   

8,311

 

4,330

 

12,641

 

(1)

 

7,497

 

 

20,137

 

Compression Division

   

(8,655)

 

(499)

 

(9,154)

 

13,634

 

17,448

 

496

 

22,424

 

Eliminations and other

   

4

 

 

4

 

 

(5)

 

 

(1)

 

Subtotal

   

9,641

 

3,831

 

13,472

 

13,502

 

28,815

 

496

 

56,285

 

Corporate and other

   

(19,327)

 

2,236

 

(17,091)

 

4,877

 

164

 

2,050

 

(10,000)

 

TETRA excluding Discontinued Operations

$

(12,132)

 

$

2,446

 

$

(9,686)

 

$

6,067

 

$

(3,619)

 

$

18,379

 

$

28,979

 

$

2,546

 

$

46,285

 
                   
 

Three Months Ended

 

September 30, 2017

 

Net
Income
(Loss),
as
reported

Tax
Provision

Income
(Loss)
Before
Tax, as
Reported

Impairments
& Special
Charges

Adjusted
Income
(Loss)
Before
Tax

Interest
Expense

Adjusted

Depreciation
&
Amortization

Equity
Comp.
Expense

Adjusted
EBITDA

   

Completion Fluids & Products Division

   

$

21,398

 

$

12

 

$

21,410

 

$

(8)

 

$

4,055

 

$

 

$

24,457

 

Water & Flowback Services Division

   

2,088

 

 

2,088

 

(47)

 

4,400

 

 

6,441

 

Compression Division

   

(7,014)

 

(545)

 

(7,559)

 

10,811

 

17,361

 

261

 

20,874

 

Eliminations and other

   

 

 

 

 

(4)

 

 

(4)

 

Subtotal

   

16,472

 

(533)

 

15,939

 

10,756

 

28,812

 

261

 

52,768

 

Corporate and other

   

(16,551)

 

(47)

 

(16,598)

 

3,898

 

130

 

1,512

 

(11,058)

 

TETRA excluding Discontinued Operations

$

(857)

 

$

778

 

$

(79)

 

$

(580)

 

$

(659)

 

$

14,654

 

$

25,942

 

$

1,773

 

$

41,710

 
                                                       

Schedule G: Non-GAAP Reconciliation of TETRA Net Debt

The cash and debt positions of TETRA and CSI Compressco LP as of September 30, 2018, 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, 2018

 

TETRA

 

CCLP

 

Consolidated

 

(In Millions)

Non-restricted cash

$

27.7

   

$

26.2

   

$

53.9

 
           

Carrying value of long-term debt:

         

Asset-Based Credit Agreement

8.3

   

   

8.3

 

Term Credit Agreement

182.1

   

   

182.1

 

Senior Notes outstanding

   

632.5

   

632.5

 

Net debt

$

162.7

   

$

606.3

   

$

769.0

 

 

Schedule H: Non-GAAP Reconciliation to TETRA Only Adjusted Free Cash Flow

 
 

Three Months Ended

 

September 30,
2018

 

June 30, 2018

 

September 30,
2017

 

(In Thousands)

Consolidated

         

Net cash provided by operating activities

$

13,760

   

$

19,134

   

$

37,395

 

ARO settlements

   

   

53

 

Capital expenditures, net of sales proceeds

(39,172)

   

(38,318)

   

(11,538)

 

Consolidated adjusted free cash flow

$           (25,412)

   

$             (19,184)

   

$             25,910

 
           

CSI Compressco LP

         

Net cash provided (used) by operating activities

$             10,789

   

$               (3,908)

   

$             13,218

 

Capital expenditures, net of sales proceeds

(30,902)

   

(30,223)

   

(2,236)

 

CSI Compressco free cash flow

$            (20,113)

   

$             (34,131)

   

$             10,982

 
           

TETRA Only

         

Cash from operating activities

$               2,971

   

$               23,042

   

$             24,177

 

ARO settlements

   

   

53

 

Capital expenditures, net of sales proceeds

(8,270)

   

(8,095)

   

(9,302)

 

Free cash flow before ARO settlements

(5,299)

   

14,947

   

14,928

 

Distributions from CSI Compressco LP

3,037

   

2,992

   

2,890

 

Adjusted TETRA only free cash flow

$             (2,262)

   

$               17,939

   

$             17,818

 
 

* Includes the impact from discontinued operations.  See schedule I to exclude the impact from discontinued operations.

 

Schedule I: TETRA Only Adjusted Cash Flow From Continuing Operations

 
 

Three Months Ended

 

September 30,
2018

 

June 30,
2018

 

September 30,
2017

       
 

(In Thousands)

TETRA Only

         

Cash from operating activities

$             2,971

 

$         23,042

 

$             24,177

           

Less: Discontinued operations operating activities (adjusted EBITDA)(1)

(1,704)

 

(21)

 

2,796

           
           

Cash from continued operating activities

4,675

 

23,063

 

21,381

           

Less: Continuing operations capital expenditures(2)

(8,270)

 

(8,037)

 

(7,003)

           

Plus: Distributions from CSI Compressco LP

3,037

 

2,992

 

2,890

           

TETRA only adjusted free cash flow from continuing operations

$         (558)

 

$         18,018

 

$           17,268

 

 

(1) Reconciled to loss from discontinued operations as follows:

Three Months Ended

   

September 30,
2018

 

June 30,
2018

 

September 30,
2017

         
   

(In Thousands)

 

Income (Loss) from discontinued operations

796

 

(21)

 

(481)

 

Plus: Income tax provision

 

 

19

 

Plus: Depreciation & amortization

 

 

3,258

 

Less: non recurring legal settlement payment

2,500

 

 

 

Less: Discontinued operations adjusted EBITDA

(1,704)

 

(21)

 

2,796

             
             
 

(2) Reconciled to TETRA only capital expenditures as follows:

Three Months Ended

   

September 30,
2018

 

June 30,
2018

 

September 30,
2017

         
   

(In Thousands)

             
 

TETRA only capital expenditures

(8,270)

 

(8,095)

 

(9,302)

 

Less: Discontinued operations capital expenditures

 

(58)

 

(2,299)

 

Plus: Continuing operations capital expenditures

(8,270)

 

(8,037)

 

(7,003)

 

Schedule J: Non-GAAP Reconciliation to Projected 2018 Adjusted EBITDA

 

EBITDA Reconciliation Table for Adjusted EBITDA of $155 million

 

Adjusted
EBITDA

Equity
Comp
Expense

DD&A

Interest
Expense

Adj Income
Before Tax

Impairments
& Special
Charges

Income
(Loss)
Before Tax

 

 

(In Millions)

Total Adjusted EBITDA

$   155.0

$          9.0

$   110.5

$         74.5

$          (39.0)

$            14.1

$          (53.1)

 
 

EBITDA Reconciliation Table for Adjusted EBITDA of $165 million

 

Adjusted
EBITDA

Equity
Comp
Expense

DD&A

Interest
Expense

Adj Income
Before Tax

Impairments
& Special
Charges

Income
(Loss)
Before Tax

 

(In Millions)

Total Adjusted EBITDA

$   165.0

$          9.0

$   112.5

$         74.5

$          (31.0)

$            14.1

$          (45.1)

 

TETRA Technologies, Inc. logo. (PRNewsFoto/TETRA Technologies, Inc.)

 

 

SOURCE TETRA Technologies, Inc.