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Form 8-K TETRA TECHNOLOGIES INC For: Aug 07

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August 7, 2015 9:05 AM EDT



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549




FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (date of earliest event reported): August 7, 2015


TETRA Technologies, Inc.
(Exact name of registrant as specified in its charter)

Delaware
1-13455
74-2148293
(State or other jurisdiction
(Commission File Number)
(IRS Employer
of incorporation)
 
Identification No.)
 
 
 
24955 Interstate 45 North
The Woodlands, Texas 77380
(Address of Principal Executive Offices and Zip Code)
 
 
 
Registrant’s telephone number, including area code: (281) 367-1983


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


1


Item 2.02. Results of Operations and Financial Condition.

On August 7, 2015, TETRA Technologies, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter of 2015. The press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

The information furnished in this Item 2.02 and in Exhibit 99.1 to this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Use of Non-GAAP Financial Information

In addition to the quarterly and year-to-date financial information determined in accordance with generally accepted accounting principles (GAAP) that are included in the attached press release, the press release includes certain non-GAAP financial measures. Management believes that these non-GAAP financial measures are helpful in understanding the Company’s past financial performance and future financial performance. The attached press release includes the following non-GAAP financial measures:
•
Consolidated and Segment income before taxes, excluding the Company’s Maritech segment and unusual charges. Management believes that following the sale of essentially all of Maritech’s oil and gas properties, it is helpful to show the Company’s results excluding the impact of the costs and charges relating to the decommissioning of Maritech’s remaining properties since these results will show TETRA’s historical results of operations on a basis consistent with expected future operations. Management also believes that the exclusion of the unusual 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 EBITDA. Adjusted EBITDA is defined as adjusted earnings before interest, taxes, depreciation, amortization and equity compensation expenses. Adjusted EBITDA may be presented on a consolidated and segment basis. Management uses Adjusted EBITDA as a supplemental financial measure to assess the financial performance of the Company’s assets, without regard to financing methods, capital structure or cost basis, and to assess the Company’s ability to incur and service debt and fund capital expenditures.
•
Net Debt. Net Debt is defined as the sum of long-term and short-term debt on the Company’s consolidated balance sheet less cash, excluding restricted cash on the consolidated balance sheet and excluding the debt and cash of CSI Compressco LP. Management believes that Net Debt provides information concerning the Company’s ability to reduce debt, add to cash balances, pay dividends, repurchase stock, and fund investing and financing activities.
•
Free cash flow. Free cash flow is cash from operations, excluding cash settlements of Maritech’s asset retirement obligations, less capital expenditures. Management believes this is an important supplemental financial measure because it allows management to assess the Company’s ability to retire debt, evaluate the capacity to further invest and grow and determine the ability to pay dividends.

The methods the Company uses to produce these non-GAAP financial measures may differ from methods used by other companies. The foregoing 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. Reconciliations to the nearest GAAP financial measure of each non-GAAP financial measure is included in the press release attached hereto as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.
Exhibit Number
 
Description
99.1
 
Press Release, dated August 7, 2015, issued by TETRA Technologies, Inc.


1


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 
TETRA Technologies, Inc.
 
 
By:
/s/Stuart M. Brightman
 
Stuart M. Brightman
 
President & Chief Executive Officer
Date: August 7, 2015
 






2


EXHIBIT INDEX

Exhibit Number
 
Description
99.1
 
Press Release, dated August 7, 2015, issued by TETRA Technologies, Inc.







3


EXHIBIT 99.1
FOR IMMEDIATE RELEASE

TETRA TECHNOLOGIES, INC.
ANNOUNCES SECOND QUARTER 2015 RESULTS

The Woodlands, Texas (August 7, 2015) - TETRA Technologies, Inc. (NYSE: TTI) today announced second quarter 2015 earnings per share of $0.16, excluding Maritech and other charges, which compares to earnings of $0.10 per share in the second quarter of 2014, also excluding Maritech and other charges. Second quarter 2015 revenue excluding Maritech of $315.9 million increased 31% from the second quarter of 2014 primarily as a result of the acquisition of Compressor Systems, Inc. (“CSI”) on August 4, 2014 by CSI Compressco LP.

Consolidated GAAP second quarter 2015 earnings per share attributable to TETRA stockholders including Maritech and other charges were earnings of $0.19, which compares to a loss of $(0.03) in the second quarter of 2014.

Highlights include:
•
Record second quarter 2015 revenue, adjusted EBITDA, and operating income for the Fluids Division (adjusted EBITDA is a non-GAAP financial measure that is reconciled to the nearest GAAP measure in Schedule F).
•
Second quarter free cash flow of $43 million(1), excluding the impact of $4 million of Maritech asset retirement obligation expenditures.
•
A $38 million reduction in TETRA net debt(2) compared to the end of the first quarter of 2015, and an improvement in debt leverage ratio to 2.38x(3), marking the third consecutive quarter of debt improvements.
•
The successful launch and completion of the first commercial application of our heavy zinc-free completion fluid.
•
All TETRA Divisions excluding Maritech were profitable at the pretax income level in 2Q 2015, excluding the impact of a reserve for bad debts in Production Testing.
•
DSOs improved by 13 days from 68 days at the end of March 2015.
•
Continued reduction in operating expenses through staff reductions, multiple cost management initiatives including supplier consolidations and price reductions, and efficiency improvements driven by recent systems implementation initiatives.
(1)
Refer to Schedule G for reconciliation.
(2)
Refer to Schedule H for reconciliation.
(3)
Leverage ratio is defined by TETRA’s credit agreement as outstanding debt plus letters of credit, divided by trailing twelve-month EBITDA excluding unusual charges, Maritech losses, and CSI Compressco distributions.
Second Quarter 2015 Results, Excluding Unusual Charges and Maritech
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Change
 
June 30, 2015
 
June 30, 2014
 
2015 vs. 2014
 
(In Thousands, Except per Share Amounts)
 
 
Revenue
$
315,925

 
$
240,942

 
31%
Income before taxes(1)
18,741

 
12,792

 
47%
Net income attributable to TETRA shareholders(2)
12,654

 
8,356

 
51%
Diluted EPS attributable to TETRA shareholders(3)
$
0.16

 
$
0.10

 
60%
Adjusted pretax operating margin
5.9
%
 
5.3
%
 
62 bps
Adjusted EBITDA
$
72,463

 
$
40,783

 
78%
(1)
Income before taxes, including unusual charges and Maritech was $18.1 million in the second quarter of 2015 and a loss of $(2.5) million in the second quarter of 2014.
(2)
Net income attributable to TETRA shareholders, including unusual charges and Maritech was $14.9 million in the second quarter of 2015, and a loss of $(2.5) million in the second quarter of 2014.
(3)
Diluted EPS, including unusual charges and Maritech, was $0.19 in the second quarter of 2015, and a loss of $(0.03) in the second quarter of 2014. See Schedule E for details.

1



Analysis of Second Quarter 2015 Results
    
Stuart M. Brightman, TETRA's President and Chief Executive Officer, stated, “Our second quarter results were clearly exceptional in a very challenging market environment. I attribute these results to our diversification of our customer base and introduction of new products into the market, as well as our continued focus on cost reductions across the organization.

“Revenues in our Fluids Division for the second quarter of 2015 increased 23.9% sequentially, and 5.4% compared to the second quarter of 2014. Adjusted pretax margins for the Division improved sequentially on pretax profits of $32.8 million in the second quarter of 2015. Similar to the first quarter of this year, the exceptional second quarter improvement was driven by completion products and services in the Gulf of Mexico, continued strength in our U.S. land operations, and strength in our chemicals manufacturing segment sales, as well as the Division’s international operations. Our Gulf of Mexico fluids business benefitted in the second quarter from the expansion of our customer base, sales of new products, and the accelerated timing of a couple of projects. All of these items contributed to a record quarter for the Fluids Division in both revenues and pretax profits, despite the challenging market environment for our water management business. Second quarter results for this Division were also favorably impacted by a $2.6 million insurance settlement.

“Excluding the impact of an adjustment for bad debt, our Production Testing Division’s second quarter 2015 pretax earnings represent a modest sequential improvement over the first quarter of this year, in an even more challenging market. This improvement was driven by ongoing cost reductions, profitable new business, and the strength of our international business. We expect Production Testing to continue to operate in a challenging domestic market environment for the balance of 2015. We will continue to take necessary cost actions as required to manage this impact.

“For the second quarter of 2015 our Compression Division reported adjusted pretax earnings of $1.5 million, a decrease from the $6.4 million of adjusted pretax earnings reported in the second quarter of 2014. During the current year’s quarter our equipment and parts sales revenues increased to $49.0 million, a 170% increase sequentially over the first quarter of this year. Utilization for compression services trended down during the second quarter, reflecting lower oil-related activity, mainly in lower horsepower applications. On July 21, we declared a distribution of $0.50 per unit attributable to the second quarter of 2015, an increase of 10.5% over the second quarter 2014 distribution.

“Our Offshore Services segment reported an adjusted pretax profit of $2.1 million for the second quarter of 2015. This sequential improvement is typical of the second quarter compared to the seasonally-slower first quarter. However, in a continuing very challenging market environment with weak demand, and despite second quarter 2015 revenues that were 36.5% lower than revenues for the comparable quarter of 2014, we have been able to report a modest profit almost entirely due to the cumulative beneficial impact of cost reductions.

“During the second quarter we had $42.9 million of consolidated free cash flow, which includes distributions from CSI Compressco but excludes amounts spent on Maritech asset retirement obligations (see schedule G for a reconciliation to GAAP cash from operations). This result was driven by improvement in our cash earnings and continued reductions in capital expenditures, as well as a cash expense of only $3.8 million on Maritech abandonment and decommissioning projects during the second quarter of 2015. We continue to be focused on generation of free cash flow and reduction of our debt. Both of these metrics continue to improve in a challenging market due to the effectiveness of our customer diversification and cost reductions, as well as increased revenues from new products.”


2


Divisional revenues, adjusted pretax earnings/(loss), adjusted pretax margins, and adjusted EBITDA for the three months ended June 30, 2015 and June 30, 2014 are summarized in the table below:
Segment Results

Three Months Ended
 
June 30, 2015
 
June 30, 2014
 
Revenue
Income Before Taxes(1)
Pretax Margin(2)
Adjusted EBITDA(3)
 
Revenue
Income Before Taxes(1)
Pretax Margin(2)
Adjusted EBITDA(3)
 
(In Thousands)
Fluids Division
$
122,973

$
32,754

26.6
 %
$
41,491

 
$
116,650

$
17,082

14.6
 %
$
24,185

Production Testing Division
34,842

(425
)
(1.2
)%
5,757

 
42,377

(238
)
(0.6
)%
6,839

Compression Division
126,456

9,504

7.5
 %
30,917

 
32,015

6,527

20.4
 %
10,550

Offshore Services segment
35,731

2,127

6.0
 %
5,015

 
56,241

3,929

7.0
 %
7,255

Eliminations and other
(4,077
)
(12
)
0.3
 %
(14
)
 
(6,341
)
3

—

—

Subtotal
315,925

43,948

13.9
 %
83,166

 
240,942

27,303

11.3
 %
48,829

Corporate and other
—

(12,831
)
—

(10,703
)
 
—

(9,756
)
—

(8,046
)
Interest expense, net - Compression Division
—

(7,961
)
—

—

 
—

(145
)
—

—

Interest expense, net - TTI, excluding Compression Division
—

(4,415
)
—

—

 
—

(4,610
)
—

—

Unusual charges and Maritech(4)
394

(633
)
—

—

 
1,547

(15,286
)
—

—

As reported
316,319

18,108

5.7
 %
72,463

 
242,489

(2,494
)
(1.0
)%
40,783

(1)
Segment Income Before Taxes are adjusted. Refer to Schedule F for reconciliation.
(2)
GAAP pre-tax margins for second quarter 2015 are: Fluids Division, 26.5%; Production Testing Division, (1.4)%; Compression Division, 1.2%; and, Offshore Services segment, 5.9%. GAAP pretax margins for second quarter 2014 are: Fluids Division, 14.6%; Production Testing Division, (0.6)%; Compression Division, 17.1%; and, Offshore Services segment, 3.3%. Refer to Schedule B for GAAP dollar amounts.
(3)
Adjusted EBITDA is a non-GAAP financial measure that is defined and reconciled to the nearest GAAP financial measure in Schedule F.
(4)
Refer to Schedule E for unusual charges and reconciliations.
    
Unusual and Other Charges and Maritech

During the second quarter of 2015, TETRA incurred $320,000 of severance expense as staffing levels were adjusted to reflect the lower activity levels. From June a year ago to June this year and excluding CSI Compressco, the total number of TETRA employees was reduced by 24%.

Second quarter 2015 earnings were favorably impacted by approximately $2.8 million related to the valuation allowance on U.S. deferred tax assets for predominately U.S. income tax loss carry-forwards that impacted earnings per share by $0.03. The Company remains in a position to utilize its carry-forwards to offset future cash taxes.

Maritech reported a pre-tax loss of $313,000 in the second quarter of 2015.

Net Debt

At June 30, 2015, the cash and debt positions of TETRA and CSI Compressco LP 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 as noted below:



3


 
As of June 30, 2015
 
TETRA
 
CSI Compressco LP
 
(In Millions)
Non-restricted cash
$
8.7

 
$
33.3

 
 
 
 
Revolver debt outstanding
92.9

 
233.0

Current portion of long-term debt
90.0

 
—

Senior Notes outstanding
175.0

 
345.2

Net debt
$
349.2

 
$
544.9


Third Quarter 2015 Guidance

TETRA expects third quarter 2015 earnings to be within a range of $0.07 to $0.09 per share.

Conference Call

TETRA will host a conference call to discuss second quarter 2015 results today, August 7, 2015, at 10:30 am ET. The phone number for the call is (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.

Investor Contacts

TETRA Technologies, Inc., The Woodlands, Texas
Stuart M. Brightman, 281/367-1983
Fax: 281/364-4346
www.tetratec.com

Financial Statements, Schedules and Non-GAAP Reconciliation Schedules

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: Second Quarter and YTD Unusual Charges
Schedule F: Non-GAAP Reconciliation to GAAP Financials
Schedule G: Non-GAAP Reconciliation to Free Cash Flow
Schedule H: Reconciliation of TETRA Net Debt

Company Overview and Forward Looking Statements

TETRA 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, offshore rig cooling, compression services and equipment, and selected offshore services including well plugging and abandonment, decommissioning, and diving.

This press 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 expected results of operational business segments for 2015, anticipated benefits from CSI Compressco following the CSI acquisition, including increases in 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,

4


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, including the ability of CSI Compressco to successfully integrate the operations of CSI and recognize the anticipated benefits of the acquisition. 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, 2014, 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
June 30,
 
Six Months Ended
June 30,
 
2015
 
2014
 
2015
 
2014
 
(In Thousands)
Revenues
$
316,319

 
$
242,489

 
$
567,411

 
$
455,346

 
 
 
 
 
 
 
 
Cost of sales, services, and rentals
207,391

 
185,007

 
374,054

 
349,974

Depreciation, amortization, and accretion
39,067

 
22,007

 
77,410

 
45,047

Total cost of revenues
246,458

 
207,014

 
451,464

 
395,021

Gross profit
69,861

 
35,475

 
115,947

 
60,325

 
 
 
 
 
 
 
 
General and administrative expense
37,472

 
32,270

 
72,741

 
65,690

Interest expense, net
12,340

 
4,604

 
25,226

 
9,315

Other (income) expense, net
1,941

 
1,095

 
1,927

 
(1,503
)
Income (loss) before taxes and discontinued operations
18,108

 
(2,494
)
 
16,053

 
(13,177
)
Provision (benefit) for income taxes
2,741

 
(944
)
 
4,310

 
(5,537
)
Net income (loss)
15,367

 
(1,550
)
 
11,743

 
(7,640
)
Less: net income attributable to noncontrolling interest
(442
)
 
(907
)
 
(1,266
)
 
(1,751
)
Net income (loss) attributable to TETRA stockholders
$
14,925

 
$
(2,457
)
 
$
10,477

 
$
(9,391
)
 
 
 
 
 
 
 
 
Basic per share information:
 
 
 
 
 
 
 
Net income (loss) attributable to TETRA stockholders
$
0.19

 
$
(0.03
)
 
$
0.13

 
$
(0.12
)
Weighted average shares outstanding
79,165
 
78,525
 
79,037
 
78,416
 
 
 
 
 
 
 
 
Diluted per share information:
 
 
 
 
 
 
 
Net income (loss) attributable to TETRA stockholders
$
0.19

 
$
(0.03
)
 
$
0.13

 
$
(0.12
)
Weighted average shares outstanding
79,915
 
78,525
 
79,506
 
78,416


5


Schedule B: Financial Results By Segment (Unaudited)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(In Thousands)
Revenues by segment:
 
 
 
 
 
 
 
Fluids Division
$
122,973

 
$
116,650

 
$
222,261

 
$
221,795

Production Testing Division
34,842

 
42,377

 
71,944

 
86,015

Compression Division
126,456

 
32,015

 
229,344

 
61,779

Offshore Division
 
 
 
 
 
 
 
Offshore Services
35,731

 
56,241

 
47,515

 
91,571

Maritech
394

 
1,547

 
1,900

 
2,923

Intersegment eliminations
(2,909
)
 
(4,934
)
 
(3,180
)
 
(6,721
)
Offshore Division total
33,216

 
52,854

 
46,235

 
87,773

Eliminations and other
(1,168
)
 
(1,407
)
 
(2,373
)
 
(2,016
)
Total revenues
$
316,319

 
$
242,489

 
$
567,411

 
$
455,346

 
 
 
 
 
 
 
 
Gross profit (loss) by segment:
 
 
 
 
 
 
 
Fluids Division
$
40,354

 
$
26,273

 
$
65,720

 
$
50,664

Production Testing Division
3,918

 
4,221

 
6,777

 
6,375

Compression Division
21,150

 
11,085

 
43,937

 
21,050

Offshore Division
 
 
 
 
 
 
 
Offshore Services
4,690

 
4,780

 
(1,279
)
 
(204
)
Maritech
3

 
(10,358
)
 
1,301

 
(16,484
)
Intersegment eliminations
—

 
—

 
—

 
—

Offshore Division total
4,693

 
(5,578
)
 
22

 
(16,688
)
Corporate overhead and eliminations
(254
)
 
(526
)
 
(509
)
 
(1,076
)
Total gross profit
$
69,861

 
$
35,475

 
$
115,947

 
$
60,325

 
 
 
 
 
 
 
 
Income (loss) before taxes by segment:
 
 
 
 
 
 
 
Fluids Division
$
32,583

 
$
17,059

 
$
50,320

 
$
35,536

Production Testing Division
(472
)
 
(249
)
 
(433
)
 
(3,047
)
Compression Division
1,498

 
5,477

 
3,904

 
10,664

Offshore Division
 

 
 
 
 
 
 
Offshore Services
2,095

 
1,833

 
(6,553
)
 
(6,139
)
Maritech
(313
)
 
(10,698
)
 
662

 
(17,237
)
Intersegment eliminations
—

 
—

 
—

 
—

Offshore Division total
1,782

 
(8,865
)
 
(5,891
)
 
(23,376
)
Corporate overhead and eliminations
(17,283
)
 
(15,916
)
 
(31,847
)
 
(32,954
)
Total income (loss) before taxes
$
18,108

 
$
(2,494
)
 
$
16,053

 
$
(13,177
)

Please note that the above results by Segment are inclusive of the unusual charges and expenses. Please see Schedule E for details of those unusual charges and expenses.




6


Schedule C: Consolidated Balance Sheet (Unaudited)
 
June 30, 2015
 
December 31, 2014
 
(In Thousands)
Balance Sheet:
 
 
 
Cash (excluding restricted cash)
$
41,941

 
$
48,384

Accounts receivable, net
190,908

 
226,966

Inventories
181,942

 
189,357

Other current assets
36,682

 
36,144

PP&E, net
1,120,814

 
1,124,192

Other assets
431,358

 
442,590

Total assets
$
2,003,645

 
$
2,067,633

 
 
 
 
Current portion of decommissioning liabilities
$
11,521

 
$
12,758

Other current liabilities
315,590

 
365,683

Long-term debt
846,112

 
844,961

Long-term portion of decommissioning liabilities
47,887

 
49,983

Other long-term liabilities
27,491

 
28,647

Equity
755,044

 
765,601

Total liabilities and equity
$
2,003,645

 
$
2,067,633


Note: 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, excluding CSI Compressco LP and its subsidiaries, are obligated under a bank credit agreement and senior notes, 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.
 
June 30, 2015
 
December 31, 2014
 
(In Thousands)
TETRA
 
 
 
Bank revolving line of credit facility
$
92,900

 
$
90,000

TETRA Senior Notes at various rates
265,000

 
305,000

Other debt
—

 
74

TETRA total debt
357,900

 
395,074

Less current portion
(90,000
)
 
(90,074
)
TETRA total long-term debt
$
267,900

 
$
305,000

 
 
 
 
CSI Compressco LP
 
 
 
CCLP Bank Credit Facility
$
233,000

 
$
195,000

CCLP 7.25% Senior Notes
345,212

 
344,961

CCLP total debt
578,212

 
539,961

Less current portion
—

 
—

CCLP total long-term debt
$
578,212

 
$
539,961

Consolidated total long-term debt
$
846,112

 
$
844,961





7


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, consolidated and segment income before taxes, excluding the Maritech segment and unusual charges; Adjusted EBITDA; and free cash flow. 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 following the sale of essentially all of Maritech’s oil and gas properties, it is helpful to show the Company’s results excluding the impact of the costs and charges relating to the decommissioning of Maritech’s remaining properties since these results will show the Company’s historical results of operations on a basis consistent with expected future operations. Management also believes that the exclusion of the unusual 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 EBITDA is defined as the Company’s adjusted income before interest, taxes, depreciation, amortization and equity compensation. Adjusted EBITDA 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.

Free Cash Flow is a non-GAAP measure that the Company defines as cash from operations, excluding cash settlements of Maritech ARO, less 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;
•
to measure the performance of the Company as compared to its peer group of companies; and
•
to determine the ability of the Company to pay dividends to shareholders.






8


Schedule E: Second Quarter and YTD Unusual Charges
 
Three Months Ended
 
June 30, 2015
 
Income Before Tax
Tax
Noncont. Interest
Net Income
Diluted EPS
 
(In Thousands, Except per Share Amounts)
Adjusted
$
18,741

$
5,623

$
464

$
12,654

$
0.16

Transaction related costs
—

—

—

—

—

Severance expense
(320
)
(40
)
(22
)
(258
)
—

Deferred tax valuation allowance and other related tax adj.
—

(2,842
)
—

2,842

0.03

Maritech profit (loss)
(313
)
—

—

(313
)
—

As reported
$
18,108

$
2,741

$
442

$
14,925

$
0.19

 
 
 
 
 
 
 
June 30, 2014
 
Income (Loss) Before Tax
 Tax
Noncont. Interest
Net Income (Loss)
 Diluted EPS
 
(In Thousands, Except per Share Amounts)
Adjusted
$
12,792

$
3,194

$
1,242

$
8,356

$
0.10

Transaction related costs
(2,048
)
(175
)
(257
)
(1,616
)
(0.02
)
Severance expense
(115
)
(10
)
—

(105
)
—

Maritech profit (loss)
(10,698
)
(3,745
)
—

(6,953
)
(0.09
)
Other
(2,425
)
(208
)
(78
)
(2,139
)
(0.02
)
As reported
$
(2,494
)
$
(944
)
$
907

$
(2,457
)
$
(0.03
)

 
Six Months Ended
 
June 30, 2015
 
Income Before Tax
Tax
Noncont. Interest
Net Income
Diluted EPS
 
(In Thousands, Except per Share Amounts)
Adjusted
$
16,662

$
4,948

$
1,451

$
10,263

$
0.13

Transaction related costs
(208
)
(78
)
(73
)
(57
)
—

Severance expense
(1,063
)
(195
)
(112
)
(756
)
(0.01
)
Effect of Deferred Tax Valuation Allowance and other related tax adj
—

(365
)
—

365

—

Maritech profit (loss)
662

—

—

662

0.01

As reported
$
16,053

$
4,310

$
1,266

$
10,477

$
0.13

 
 
 
 
 
 
 
June 30, 2014
 
Income (Loss)Before Tax
 Tax
 Noncont. Interest
Net Income (Loss)
 Diluted EPS
 
(In Thousands, Except per Share Amounts)
Adjusted
$
8,673

$
1,824

$
2,008

$
4,841

$
0.06

Transaction related costs
595

(243
)
(257
)
1,095

0.01

Severance expense
(784
)
(249
)
—

(535
)
(0.01
)
Maritech profit (loss)
(17,237
)
(6,033
)
—

(11,204
)
(0.14
)
Other
(4,424
)
(836
)
—

(3,588
)
(0.04
)
As reported
$
(13,177
)
$
(5,537
)
$
1,751

$
(9,391
)
$
(0.12
)

9


Schedule F: Non-GAAP Reconciliation to GAAP Financials
 
Three Months Ended
 
June 30, 2015
 
Income (Loss) Before Tax, as Reported
Impairments & Unusual Charges
Adjusted Income Before Tax
Interest Expense, Net
Depreciation & Amortization
Stock Option Expense
Adjusted EBITDA
 
(In Thousands)
Fluids Division
$
32,583

$
171

$
32,754

$
(76
)
$
8,813

$
—

$
41,491

Production Testing Division
(472
)
47

(425
)
14

6,168

—

5,757

Compression Division
1,498

45

1,543

7,961

20,686

727

30,917

Offshore Services Segment
2,095

32

2,127

—

2,888

—

5,015

Eliminations and other
(12
)
—

(12
)
—

(2
)
—

(14
)
Subtotal
35,692

295

35,987

7,899

38,553

727

83,166

Corporate and other
(17,271
)
25

(17,246
)
4,415

254

1,874

(10,703
)
TETRA excl Maritech
18,421

320

18,741

12,314

38,807

2,601

72,463

Maritech
(313
)
—

(313
)
26

260

—

(27
)
Total TETRA
$
18,108

$
320

$
18,428

$
12,340

$
39,067

$
2,601

$
72,436

 
 
 
 
 
 
 
 
 
June 30, 2014
 
Income (loss) Before Tax, As Reported
Impairments & Unusual Charges
Adjusted Income Before Tax
Interest Expense, net
Depreciation & Amortization
Stock Option Expense
Adjusted EBITDA
 
(In Thousands)
Fluids Division
$
17,059

$
23

$
17,082

$
(103
)
$
7,206

$
—

$
24,185

Production Testing Division
(249
)
11

(238
)
(57
)
7,134

—

6,839

Compression Division
5,477

905

6,382

145

3,788

235

10,550

Offshore Services Segment
1,833

2,096

3,929

9

3,317

—

7,255

Eliminations and other
3

—

3

—

(3
)
—

—

Subtotal
24,123

3,035

27,158

(6
)
21,442

235

48,829

Corporate and other
(15,919
)
1,553

(14,366
)
4,610

526

1,184

(8,046
)
TETRA excl Maritech
8,204

4,588

12,792

4,604

21,968

1,419

40,783

Maritech
(10,698
)
—

(10,698
)
—

39

—

(10,659
)
Total TETRA
$
(2,494
)
$
4,588

$
2,094

$
4,604

$
22,007

$
1,419

$
30,124



















10


 
Six Months Ended
 
June 30, 2015
 
Income (Loss) Before Tax, as Reported
Impairments & Unusual Charges
Adjusted Income Before Tax
Interest Expense, Net
Depreciation & Amortization
Stock Option Expense
Adjusted EBITDA
 
(In Thousands)
Fluids Division
$
50,320

$
284

$
50,604

$
(84
)
$
17,532

$
—

$
68,052

Production Testing Division
(433
)
433

—

5

12,431

—

12,436

Compression Division
3,904

452

4,356

15,867

40,731

1,204

62,158

Offshore Services Segment
(6,553
)
42

(6,511
)
—

5,692

—

(819
)
Eliminations and other
(10
)
—

(10
)
—

(9
)
—

(9
)
Subtotal
47,228

1,211

48,439

15,788

76,377

1,204

141,808

Corporate and other
(31,837
)
60

(31,777
)
9,412

512

2,993

(18,860
)
TETRA excl Maritech
15,391

1,271

16,662

25,200

76,889

4,197

122,948

Maritech
662

—

662

26

521

—

1,209

Total TETRA
$
16,053

$
1,271

$
17,324

$
25,226

$
77,410

$
4,197

$
124,157

 
 
 
 
 
 
 
 
 
June 30, 2014
 
Income (Loss) Before Tax, as Reported
Impairments & Unusual Charges
Adjusted Income Before Tax
Interest Expense, Net
Depreciation & Amortization
Stock Option Expense
Adjusted EBITDA
 
(In Thousands)
Fluids Division
$
35,536

$
(2,252
)
$
33,284

$
(107
)
$
15,036

$
—

$
48,213

Production Testing Division
(3,047
)
1,758

(1,289
)
(59
)
14,697

—

13,349

Compression Division
10,664

905

11,569

304

7,508

437

19,818

Offshore Services Segment
(6,139
)
2,130

(4,009
)
36

6,649

—

2,676

Eliminations and other
6

—

6

—

(6
)
—

—

Subtotal
37,020

2,541

39,561

174

43,884

437

84,056

Corporate and other
(32,960
)
2,072

(30,888
)
9,141

1,080

2,836

(17,831
)
TETRA excl Maritech
4,060

4,613

8,673

9,315

44,964

3,273

66,225

Maritech
(17,237
)
—

(17,237
)
—

83

—

(17,154
)
Total TETRA
$
(13,177
)
$
4,613

$
(8,564
)
$
9,315

$
45,047

$
3,273

$
49,071



11


Schedule G: Non-GAAP Reconciliation to Free Cash Flow
 
Three Months Ended
 
Six Months Ended
 
June 30, 2015
 
June 30, 2014
 
June 30, 2015
 
June 30, 2014
 
(In Thousands)
TTI Consolidated
 
 
 
 
 
 
 
Cash from operations
$
54,347

 
$
4,551

 
$
82,162

 
$
40,620

ARO settlements
3,845

 
16,459

 
4,411

 
29,766

Capital expenditures, net of sales proceeds
(23,188
)
 
(23,154
)
 
(69,326
)
 
(47,990
)
Free cash flow before ARO settlements
35,004

 
(2,144
)
 
17,247

 
22,396

 
 
 
 
 
 
 
 
CSI Compressco LP
 
 
 
 
 
 
 
Cash from operations
19,721

 
4,722

 
52,202

 
20,956

Capital expenditures, net of sales proceeds
(19,934
)
 
(4,878
)
 
(57,092
)
 
(10,882
)
Free cash flow
(213
)
 
(156
)
 
(4,890
)
 
10,074

 
 
 
 
 
 
 
 
TTI Only
 
 
 
 
 
 
 
Cash from operations
34,626

 
(171
)
 
29,960

 
19,665

ARO settlements
3,845

 
16,459

 
4,411

 
29,766

Capital expenditures, net of sales proceeds
(3,254
)
 
(18,276
)
 
(12,234
)
 
(37,108
)
Free cash flow before ARO settlements
35,217

 
(1,988
)
 
22,137

 
12,323

Distributions from CSI Compressco LP
7,651

 
6,049

 
14,992

 
11,750

Free cash flow before ARO settlements and after distributions from CSI Compressco LP
$
42,868

 
$
4,061

 
$
37,129

 
$
24,073


Schedule H: Reconciliation of TETRA Net Debt

The following reconciliation of net debt is presented as a supplement to financial results prepared in accordance with GAAP. The Company defines net debt as the sum 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 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. A reconciliation of total debt to net debt as of June 30, 2015 and December 31, 2014 is provided below.
 
June 30, 2015
 
December 31, 2014
 
(In Thousands)
TETRA Net Debt:
 
 
 
Total debt, excluding CSI Compressco LP debt
$
357,900

 
$
395,074

Less: cash, excluding CSI Compressco LP cash
(8,662
)
 
(14,318
)
Net debt
$
349,238

 
$
380,756




12

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