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Form 8-K TETRA TECHNOLOGIES INC For: Aug 08

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August 8, 2016 7:31 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 8, 2016


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))




Item 2.02. Results of Operations and Financial Condition.

On August 8, 2016, TETRA Technologies, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2016. 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 adjusted income before taxes, excluding the Company’s Maritech segment and special 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 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 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.
•
Adjusted free cash flow. Adjusted free cash flow is cash from operations, excluding cash settlements of Maritech’s asset retirement obligations, less capital expenditures net of sales proceeds, and including cash distributions to TETRA from CSI Compressco LP. Management believes this is an important supplemental financial measure because it allows management to assess the Company’s ability to retire debt, and evaluate the capacity to further invest and grow.

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 8, 2016, 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 8, 2016
 






2


EXHIBIT INDEX

Exhibit Number
 
Description
99.1
 
Press Release, dated August 8, 2016, issued by TETRA Technologies, Inc.










3


EXHIBIT 99.1
FOR IMMEDIATE RELEASE


TETRA TECHNOLOGIES, INC.
ANNOUNCES SECOND QUARTER 2016 RESULTS

The Woodlands, Texas (August 8, 2016) - TETRA Technologies, Inc. (NYSE: TTI) (TETRA or the Company) today announced a consolidated second quarter 2016 net loss per share attributable to TETRA stockholders of $(0.32), which compares to earnings of $0.19 in the second quarter of 2015.

TETRA's adjusted per share results attributable to TETRA stockholders for the second quarter of 2016, excluding Maritech and other charges, were a loss of $(0.15), which compares to adjusted diluted earnings per share attributable to TETRA stockholders of $0.17 in the second quarter of 2015, also excluding Maritech and other charges. Second quarter 2016 revenue of $175.7 million declined 44% from the second quarter of 2015 primarily as a result of a 50% reduction in the North American rig count. (Adjusted diluted earnings (loss) per share is a non-GAAP financial measure that is reconciled to the nearest GAAP measure in the accompanying schedules.
Second Quarter 2016 Results
 
Three Months Ended
 
June 30, 2016
 
March 31, 2016
 
June 30, 2015
 
(In Thousands, Except per Share Amounts)
Revenue
$
175,660

 
$
169,329

 
$
316,319

Net income (loss) attributable to TETRA stockholders
(26,574
)
 
(88,325
)
 
14,925

Adjusted EBITDA(1)
32,949

 
19,424

 
74,542

Diluted EPS attributable to TETRA stockholders
(0.32
)
 
(1.11
)
 
0.19

Adjusted diluted EPS attributable to TETRA stockholders(1)
(0.15
)
 
(0.24
)
 
0.17

Consolidated net cash provided by operating activities
8,336

 
25,261

 
54,347

TETRA only adjusted free cash flow(1)
$
(8,773
)
 
$
18,488

 
$
42,868

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

Highlights of the 2016 second quarter include:
•
Completion of public equity offering, raising $60 million in net proceeds to repay outstanding debt.
•
Amendment of credit facility and debt agreements, providing enhanced financial flexibility.
•
For our Compression Division, net cash provided by operating activities was $20.5 million, loss before tax was $(4.0) million, and adjusted EBITDA(1) was $24.7 million.
•
A growing backlog in our Offshore Services segment as we exited the second quarter.
•
Continued aggressive reduction of expenses across the company, including salary reductions and reduced workweek schedules.
(1)
Non-GAAP financial measures are reconciled to GAAP in the schedules below.

Analysis of Second Quarter Results
    
Stuart M. Brightman, TETRA's President and Chief Executive Officer, stated, “During the second quarter of 2016, most of our markets continued to experience a decline in activity and high levels of competitiveness. Even with this unfavorable environment, our results improved sequentially, compared to the first quarter of 2016, as a result of seasonal improvements in several of our businesses combined with the ongoing positive impact of cost reductions.

“Also during the second quarter we completed a public equity offering, raising $60 million in net proceeds that were used primarily to repay outstanding debt, and we successfully negotiated the amendment of our primary debt agreements, providing us with enhanced financial flexibility. These two actions represent important steps for our long-




term success, as they strengthen our balance sheet, provide additional liquidity, and better position us to respond rapidly when activity levels rebound.

“Our Fluids Division’s revenues for the second quarter of 2016 were $60.8 million compared to $123.0 million in the second quarter of 2015. Similar to what we saw in the first quarter of this year, the decrease was predominately the result of continued lower demand in North America, a lack of major projects in the Gulf of Mexico, and continued pricing pressure in many international markets. Our seasonal increase in activity in the European chemical business somewhat mitigated this trend. Overall, this resulted in pretax income of $0.4 million and adjusted pretax income of $1.0 million for the Fluids Division in the second quarter of 2016, compared to pretax income of $32.6 million and adjusted pretax income of $32.8 million in the second quarter of 2015. Going forward into the second half of this year, our expectations for the Fluids Division are that we will see slightly improved activity in North America and an increase in offshore activity associated with projects currently in our backlog.

“Second quarter 2016 results for our Production Testing Division represent a sequential decrease from the first quarter of 2016, with a pretax loss of $(4.3) million and an adjusted pretax loss of $(4.2) million in this year’s second quarter compared to a pretax loss of $(19.3) million and an adjusted pretax loss of $(2.3) million in this year’s first quarter. Similar to the Fluids Division, this was driven primarily by a continued reduction in activity in North America and in certain international markets. Also similar to the Fluids Division, we expect to see a slight increase in activity for Production Testing in the second half of this year with a modest increase in completions activity.

“For the second quarter of 2016 our Compression Division reported a pretax loss of $(4.0) million and an adjusted pretax loss of $(3.1) million compared to a pretax loss of $(104.7) million and an adjusted pretax loss of $(4.3) million in the first quarter of 2016. During the second quarter, the Division experienced a continued decrease in utilization of our compression services and a continued reduction in equipment sales. Adjusted EBITDA of $24.7 million for the second quarter of this year represented an improvement over adjusted EBITDA of $23.6 million in the first quarter of this year, primarily due to the continued benefit of cost reduction actions. On July 22, 2016, CSI Compressco LP declared a distribution attributable to the second quarter of 2016 of $0.3775 per unit, unchanged from the distribution attributable to the first quarter of this year. This distribution resulted in a coverage ratio of 1.19x for the second quarter of 2016.

“Our Offshore Service segment reported pretax income of $37,000 and adjusted pretax income of $93,000 in the second quarter of 2016 compared to pretax income of $2.1 million in the second quarter of 2015. The segment’s improvement on a sequential basis, compared to the pretax loss of $(7.7) million reported in the first quarter of 2016, is due to the normal seasonal activity of the second quarter. In addition, the backlog for our major assets continued to firm-up during the second quarter, and we expect the third quarter to show a typical seasonal improvement over the second quarter, sequentially.”
  
Special Charges and Maritech

Maritech reported a pre-tax loss of $(3.4) million in the second quarter of 2016. The primary contributor to this loss was the write-off of a receivable of $2.8 million associated with the uncertainty of our ability to collect future reimbursements for P&A work performed on certain Maritech properties.

Financial Guidance

Given the operating environment and expectations of a prolonged downturn, the management team remains focused on adjusted free cash flow. The forecast for full year 2016 TETRA only adjusted free cash flow is a range of $30 to $50 million. No reconciliation of the forecasted range of adjusted free cash flow for the full year 2016 is included in this release because the reconciliation would require presenting forecasted information for CSI Compressco that is not publicly disclosed.

Conference Call

TETRA will host a conference call to discuss second quarter 2016 results today, August 8, 2016, 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 (Unaudited)

Schedule A: Consolidated Income Statement
Schedule B: Financial Results By Segment
Schedule C: Consolidated Balance Sheet
Schedule D: Long-Term Debt
Schedule E: Second Quarter Special Charges
Schedule F: Non-GAAP Reconciliation to GAAP Financials
Schedule G: Non-GAAP Reconciliation to Adjusted Free Cash Flow
Schedule H: Non-GAAP 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. TETRA owns an equity interest, including all of the general partner interest, in CSI Compressco LP (NADAQ:CCLP), a master limited partnership.

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 2016, anticipated benefits from CSI Compressco following the acquisition of CSI in 2014, 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, 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, 2015, 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,
 
2016
 
2015
 
2016
 
2015
 
(In Thousands)
Revenues
$
175,660

 
$
316,319

 
$
344,989

 
$
567,411

 
 
 
 
 
 
 
 
Cost of sales, services, and rentals
125,593

 
207,391

 
246,034

 
374,054

Depreciation, amortization, and accretion
33,538

 
39,067

 
67,145

 
77,410

Impairments of long-lived assets
257

 
—

 
10,927

 
—

Total cost of revenues
159,388

 
246,458

 
324,106

 
451,464

Gross profit
16,272

 
69,861

 
20,883

 
115,947

 
 
 
 
 
 
 
 
General and administrative expense
27,181

 
37,472

 
60,792

 
72,741

Goodwill impairment
—

 
—

 
106,205

 
—

Interest expense, net
14,335

 
13,319

 
28,974

 
27,035

Other (income) expense, net
2,210

 
962

 
1,506

 
118

Income (loss) before taxes
(27,454
)
 
18,108

 
(176,594
)
 
16,053

Provision (benefit) for income taxes
1,770

 
2,741

 
361

 
4,310

Net income (loss)
(29,224
)
 
15,367

 
(176,955
)
 
11,743

Net (income) loss attributable to noncontrolling interest
2,650

 
(442
)
 
62,056

 
(1,266
)
Net income (loss) attributable to TETRA stockholders
$
(26,574
)
 
$
14,925

 
$
(114,899
)
 
$
10,477

 
 
 
 
 
 
 
 
Basic per share information:
 
 
 
 
 
 
 
Net income (loss) attributable to TETRA stockholders
$
(0.32
)
 
$
0.19

 
$
(1.42
)
 
$
0.13

Weighted average shares outstanding
81,842
 
79,165
 
80,631
 
79,037
 
 
 
 
 
 
 
 
Diluted per share information:
 
 
 
 
 
 
 
Net income (loss) attributable to TETRA stockholders
$
(0.32
)
 
$
0.19

 
$
(1.42
)
 
$
0.13

Weighted average shares outstanding
81,842

 
79,915
 
80,631
 
79,506




Schedule B: Financial Results By Segment (Unaudited)

 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2016
 
2015
 
2016
 
2015
 
(In Thousands)
Revenues by segment:
 
 
 
 
 
 
 
Fluids Division
$
60,833

 
$
122,974

 
$
119,946

 
$
222,263

Production Testing Division
13,384

 
34,842

 
33,255

 
71,943

Compression Division
76,091

 
126,455

 
157,786

 
229,344

Offshore Division
 
 
 
 
 
 
 
Offshore Services
26,119

 
35,731

 
36,365

 
47,514

Maritech
248

 
394

 
337

 
1,900

Intersegment eliminations
7

 
(2,909
)
 
(516
)
 
(3,180
)
Offshore Division total
26,374

 
33,216

 
36,186

 
46,234

Eliminations and other
(1,022
)
 
(1,168
)
 
(2,184
)
 
(2,373
)
Total revenues
$
175,660

 
$
316,319

 
$
344,989

 
$
567,411

 
 
 
 
 
 
 
 
Gross profit (loss) by segment:
 
 
 
 
 
 
 
Fluids Division
$
6,585

 
$
40,354

 
$
14,076

 
$
65,720

Production Testing Division
(2,598
)
 
3,918

 
(6,022
)
 
6,777

Compression Division
13,727

 
21,150

 
20,682

 
43,937

Offshore Division
 
 
 
 
 
 
 
Offshore Services
1,767

 
4,690

 
(4,222
)
 
(1,279
)
Maritech
(3,097
)
 
3

 
(3,412
)
 
1,301

Intersegment eliminations
—

 
—

 
—

 
—

Offshore Division total
(1,330
)
 
4,693

 
(7,634
)
 
22

Corporate overhead and eliminations
(112
)
 
(255
)
 
(219
)
 
(509
)
Total gross profit
$
16,272

 
$
69,861

 
$
20,883

 
$
115,947

 
 
 
 
 
 
 
 
Income (loss) before taxes by segment:
 
 
 
 
 
 
 
Fluids Division
$
454

 
$
32,583

 
$
96

 
$
50,320

Production Testing Division
(4,328
)
 
(472
)
 
(23,702
)
 
(433
)
Compression Division
(4,040
)
 
1,498

 
(108,740
)
 
3,904

Offshore Division
 

 
 
 
 
 
 
Offshore Services
37

 
2,095

 
(7,671
)
 
(6,553
)
Maritech
(3,401
)
 
(313
)
 
(4,021
)
 
662

Intersegment eliminations
—

 
—

 
—

 
—

Offshore Division total
(3,364
)
 
1,782

 
(11,692
)
 
(5,891
)
Corporate overhead and eliminations
(16,176
)
 
(17,283
)
 
(32,556
)
 
(31,847
)
Total income (loss) before taxes
$
(27,454
)
 
$
18,108

 
$
(176,594
)
 
$
16,053


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








Schedule C: Consolidated Balance Sheet (Unaudited)
 
June 30, 2016
 
December 31, 2015
 
(In Thousands)
Balance Sheet:
 
 
 
Cash (excluding restricted cash)
$
23,917

 
$
23,057

Accounts receivable, net
110,685

 
184,172

Inventories
124,315

 
117,009

Other current assets
28,753

 
29,791

PP&E, net
1,000,169

 
1,048,004

Other assets
98,584

 
234,169

Total assets
$
1,386,423

 
$
1,636,202

 
 
 
 
Current portion of decommissioning liabilities
$
3,291

 
$
14,570

Other current liabilities
128,139

 
170,676

Long-term debt (1)
788,222

 
853,228

Long-term portion of decommissioning liabilities
51,732

 
42,879

Other long-term liabilities
27,255

 
40,669

Equity
387,784

 
514,180

Total liabilities and equity
$
1,386,423

 
$
1,636,202

(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, 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. Amounts presented are net of deferred financing costs.
 
June 30, 2016
 
December 31, 2015
 
(In Thousands)
TETRA
 
 
 
Bank revolving line of credit facility
$
101,604

 
$
21,572

TETRA Senior Notes at various rates
117,446

 
264,998

Other debt
—

 
50

TETRA total debt
219,050

 
286,620

Less current portion
—

 
(50
)
TETRA total long-term debt
$
219,050

 
$
286,570

 
 
 
 
CSI Compressco LP
 
 
 
CCLP Bank Credit Facility
$
231,171

 
$
229,555

CCLP 7.25% Senior Notes
338,001

 
337,103

CCLP total debt
569,172

 
566,658

Less current portion
—

 
—

CCLP total long-term debt
$
569,172

 
$
566,658

Consolidated total long-term debt
$
788,222

 
$
853,228








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, excluding the Maritech segment and special charges; adjusted EBITDA; and adjusted 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 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 its Segments’) 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 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 is defined as adjusted income before interest, taxes, depreciation, amortization, impairments and special charges, 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.

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 including cash distributions to TETRA from CSI Compressco LP. 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 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 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: Second Quarter Special Charges
 
Three Months Ended
 
June 30, 2016
 
Income (Loss) Before Tax
Provision (Benefit) for Tax
Noncont. Interest
Net Income Attributable to TETRA Stockholders
EPS
 
(In Thousands, Except per Share Amounts)
Income (loss) attributable to TETRA stockholders, excluding unusual charges and Maritech
$
(20,511
)
$
(6,154
)
$
(2,011
)
$
(12,346
)
$
(0.15
)
Asset impairments and writeoffs
(365
)
(109
)
—

(256
)
0.00

Severance expense
(595
)
(179
)
(170
)
(246
)
0.00

Debt refinancing cost
(2,582
)
(775
)
(469
)
(1,338
)
(0.02
)
Effect of deferred tax valuation allowance and other related tax adj.
—

8,987

—

(8,987
)
(0.11
)
Maritech profit (loss)
(3,401
)
—

—

(3,401
)
(0.04
)
Net income (loss) attributable to TETRA stockholders, as reported
$
(27,454
)
$
1,770

$
(2,650
)
$
(26,574
)
$
(0.32
)
 
 
 
 
 
 
 
March 31, 2016
 
Income (Loss) Before Tax
Provision (Benefit) for Tax
Noncont. Interest
Net Income Attributable to TETRA Stockholders
EPS
 
 
Income (loss) attributable to TETRA stockholders, excluding unusual charges and Maritech
$
(30,890
)
$
(9,266
)
$
(2,391
)
$
(19,233
)
$
(0.24
)
Asset impairments and writeoffs
(10,670
)
(3,201
)
(4,465
)
(3,004
)
(0.04
)
Severance expense
(755
)
(226
)
(138
)
(391
)
0.00

Goodwill writeoff
(106,205
)
(31,862
)
(52,412
)
(21,931
)
(0.28
)
Effect of deferred tax valuation allowance and other related tax adj.
—

43,146

—

(43,146
)
(0.54
)
Maritech profit (loss)
(620
)
—

—

(620
)
(0.01
)
Net Income (loss) attributable to TETRA stockholders, as reported
$
(149,140
)
$
(1,409
)
$
(59,406
)
$
(88,325
)
$
(1.11
)
 
 
 
 
 
 
 
June 30, 2015
 
Income (Loss) Before Tax
Provision (Benefit) for Tax
Noncont. Interest
Net Income Attributable to TETRA Stockholders
EPS
 
 
 
 
 
 
Income (loss) attributable to TETRA stockholders, excluding unusual charges and Maritech
$
19,841

$
5,953

$
464

$
13,424

$
0.17

Severance expense
(320
)
(96
)
(22
)
(202
)
0.00

Allowance for bad debt
(1,100
)
(330
)
—

(770
)
(0.01
)
Effect of deferred tax valuation allowance and other related tax adj.
—

(2,786
)
—

2,786

0.03

Maritech profit (loss)
(313
)
—

—

(313
)
0.00

Net Income (loss) attributable to TETRA stockholders, as reported
$
18,108

$
2,741

$
442

$
14,925

$
0.19






Schedule F: Non-GAAP Reconciliation to GAAP Financials
 
Three Months Ended
 
June 30, 2016
 
Income (Loss) Before Tax, as Reported
Impairments & Special Charges
Adjusted Income (Loss) Before Tax
Adjusted Interest Expense, Net(1)
Depreciation & Amortization
Equity Comp. Expense
Adjusted EBITDA
 
(In Thousands)
Fluids Division
$
454

$
501

$
955

$
2

$
7,326

$
—

$
8,283

Production Testing Division
(4,328
)
131

(4,197
)
(143
)
4,176

—

(164
)
Compression Division
(4,040
)
984

(3,056
)
8,148

18,753

825

24,670

Offshore Services Segment
37

56

93

—

2,865

—

2,958

Eliminations and other
3

—

3

—

(3
)
—

—

Subtotal
(7,874
)
1,672

(6,202
)
8,007

33,117

825

35,747

Corporate and other
(16,179
)
1,870

(14,309
)
5,596

112

5,803

(2,798
)
TETRA excluding Maritech
(24,053
)
3,542

(20,511
)
13,603

33,229

6,628

32,949

Maritech
(3,401
)
—

(3,401
)
10

309

—

(3,082
)
Total TETRA
$
(27,454
)
$
3,542

$
(23,912
)
$
13,613

$
33,538

$
6,628

$
29,867

 
 
 
 
 
 
 
 
 
March 31, 2016
 
Income (Loss) Before Tax, as Reported
Impairments & Special Charges
Adjusted Income (Loss) Before Tax
Adjusted Interest Expense, Net(1)
Depreciation & Amortization
Equity Comp. Expense
Adjusted EBITDA
 
 
Fluids Division
$
(358
)
$
114

$
(244
)
$
(26
)
$
7,396

$
—

$
7,126

Production Testing Division
(19,374
)
17,073

(2,301
)
(189
)
4,592

—

2,102

Compression Division
(104,700
)
100,443

(4,257
)
8,802

18,464

636

23,645

Offshore Services Segment
(7,708
)
—

(7,708
)
—

2,739

—

(4,969
)
Eliminations and other
4

—

4

—

(4
)
—

—

Subtotal
(132,136
)
117,630

(14,506
)
8,587

33,187

636

27,904

Corporate and other
(16,384
)
—

(16,384
)
6,052

115

1,737

(8,480
)
TETRA excluding Maritech
(148,520
)
117,630

(30,890
)
14,639

33,302

2,373

19,424

Maritech
(620
)
—

(620
)
—

305

—

(315
)
Total TETRA
$
(149,140
)
$
117,630

$
(31,510
)
$
14,639

$
33,607

$
2,373

$
19,109

 
 
 
 
 
 
 
 
 
June 30, 2015
 
Income (Loss) Before Tax, as Reported
Impairments & Special Charges
Adjusted Income (Loss) Before Tax
Interest Expense, Net
Depreciation & Amortization
Equity Comp. Expense
Adjusted EBITDA
 
 
 
 
 
 
 
 
Fluids Division
$
32,583

$
171

$
32,754

$
(76
)
$
8,813

$
—

$
41,491

Production Testing Division
(472
)
1,147

675

14

6,168

—

6,857

Compression Division
1,498

45

1,543

8,658

20,686

727

31,614

Offshore Services Segment
2,095

32

2,127

—

2,888

—

5,015

Eliminations and other
(12
)
—

(12
)
—

(3
)
—

(15
)
Subtotal
35,692

1,395

37,087

8,596

38,552

727

84,962

Corporate and other
(17,271
)
25

(17,246
)
4,697

255

1,874

(10,420
)
TETRA excluding Maritech
18,421

1,420

19,841

13,293

38,807

2,601

74,542

Maritech
(313
)
—

(313
)
26

260

—

(27
)
Total TETRA
$
18,108

$
1,420

$
19,528

$
13,319

$
39,067

$
2,601

$
74,515

(1)
Adjusted interest expense, net, for the three month period ended June 30, 2016, excludes $0.7 million of interest expense related to CCLP debt refinancing.




Schedule G: Non-GAAP Reconciliation to Free Cash Flow
 
Three Months Ended
 
June 30, 2016
 
March 31, 2016
 
June 30, 2015
 
(In Thousands)
Consolidated
 
 
 
 
 
Net cash provided by operating activities
$
8,336

 
$
25,261

 
$
54,347

ARO settlements
64

 
3,379

 
3,845

Capital expenditures, net of sales proceeds
(4,732
)
 
(1,985
)
 
(23,188
)
Consolidated adjusted free cash flow
3,668

 
26,655

 
35,004

 
 
 
 
 
 
CSI Compressco LP
 
 
 
 
 
Net cash provided by operating activities
20,469

 
15,095

 
19,721

Capital expenditures, net of sales proceeds
(2,453
)
 
(1,353
)
 
(19,934
)
  CSI Compressco free cash flow
18,016

 
13,742

 
(213
)
 
 
 
 
 
 
TETRA Only
 
 
 
 
 
Cash from operating activities
(12,133
)
 
10,166

 
34,626

ARO settlements
64

 
3,379

 
3,845

Capital expenditures, net of sales proceeds
(2,279
)
 
(632
)
 
(3,254
)
Free cash flow before ARO settlements
(14,348
)
 
12,913

 
35,217

Distributions from CSI Compressco LP
5,575

 
5,575

 
7,651

Adjusted free cash flow
(8,773
)
 
18,488

 
42,868


Schedule H: Non-GAAP Reconciliation of TETRA Net Debt

The cash and debt positions of TETRA and CSI Compressco LP as of June 30, 2016, 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. 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 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.

 
June 30, 2016
 
TETRA
 
CCLP
 
(In Millions)
Non-restricted cash
$
7.2

 
$
16.7

 
 
 
 
Revolver debt outstanding
101.6

 
231.2

Senior Notes outstanding
117.4

 
338.0

Net debt
$
211.8

 
$
552.5





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