Exhibit 99.1

FOR IMMEDIATE RELEASE

 

 

 

 

 

 

 

 

 

TETRA TECHNOLOGIES, INC. ANNOUNCES

THIRD QUARTER 2020 RESULTS

 

THE WOODLANDS, Texas, November 3, 2020 / PR Newswire / - 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 teams 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 BlueLinxTM 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 SandStormTM 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 SandStormTM 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)

 

Three Months Ended

 

Nine Months Ended

 

Sep 30, 2020

 

Jun 30, 2020

 

Sep 30, 2019

 

Sep 30, 2020

 

Sep 30, 2019

 

(In Thousands)

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, 2020

 

December 31, 2019

 

September 30, 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) before taxes and discontinued operations

Provision (Benefit) for Tax

Noncontrolling 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

$

(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) before taxes and discontinued operations

Provision (Benefit) for Tax

Noncontrolling 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

$

(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) before taxes and discontinued operations

Provision (Benefit) for Tax

Noncontrolling Interest

Net Income Attributable to TETRA Stockholders

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 (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
Compensation
Expense

Adjusted EBITDA

 

(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)

 

— 

 

— 

 

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 (Loss), as reported

Tax Provision

Income (Loss) Before Tax, as Reported

Impairments & Special Charges

Adjusted Income (Loss) Before Tax

Adjusted Interest Expense, Net

Adjusted
Depreciation & Amortization

Equity
Compensation
Expense

Adjusted EBITDA

 

(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

 

 

 

— 

 

 

— 

 

— 

 

— 

 

 

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 (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
Compensation
Expense

Adjusted EBITDA

 

(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 Tax Margin

 

(13.6)

%

 

(18.3)

%

 

(3.0)

%

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 Tax Margin

 

(36.0)

%

 

(34.0)

%

 

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)