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TETRA Technologies, Inc. Announces Fourth Quarter And Full Year 2015 Results
PR Newswire
THE WOODLANDS, Texas

THE WOODLANDS, Texas, Feb. 26, 2016 /PRNewswire/ -- TETRA Technologies, Inc. (NYSE: TTI) today announced fourth quarter 2015 adjusted earnings per share of $0.01, excluding Maritech and other charges, which compares to $0.09 per share in the fourth quarter of 2014, also excluding Maritech and other charges.  Fourth quarter 2015 revenue of $258 million declined 18% from the fourth quarter of 2014 primarily as a result of a 61% reduction in the North American rig count.

Consolidated GAAP fourth quarter 2015 earnings per share attributable to TETRA stockholders including Maritech and other charges was a loss of $(1.84), which compares to a loss of $(1.90) in the fourth quarter of 2014. (Adjusted earnings per share is a non-GAAP financial measure that is reconciled to the nearest GAAP measure in the schedule.)

Highlights of the 2015 fourth quarter include:

  • TETRA fourth quarter free cash flow(1) of $52 million, excluding CSI Compressco and $5 million of Maritech asset retirement obligation (ARO) expenditures, and $3 million of costs associated with the issuance of $125 million of 11% Senior Notes completed in the fourth quarter. For the full year ending December 31, 2015, TETRA free cash flow(1) was $120 million, excluding CSI Compressco and $10 million of Maritech ARO expenditures, and $3 million of costs associated with the note issuance.
  • During 2015, TETRA reduced total debt outstanding by $102 million and improved its debt to EBITDA leverage ratio(3) from a high of 3.38x in 2014 to 1.86x at year-end 2015.
  • Continued strength in our Fluids Division driven by offshore activities and the continued success of our zinc-free heavy completion fluid.
  • Adjusted EBITDA(2) of $28.4 million for CSI Compressco LP, demonstrating continued profitability in the current environment.
  • Continued reduction in operating expenses across all of our businesses.
  • Robust earnings in our Offshore Services segment during what is typically a seasonally slow quarter.

(1)

Non-GAAP financial measure that is reconciled to GAAP in Schedule G.

(2)

Adjusted EBITDA is a non-GAAP financial measure that is reconciled to GAAP in Schedule F.

(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.

 

Adjusted Fourth Quarter 2015 Results, Excluding Special Charges and Maritech

   

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

   
 

Three Months Ended

 

Change

 

Dec. 31, 2015

 

Dec. 31, 2014

 

2015 vs. 2014

 

(In Thousands, Except per Share Amounts)

   

Adjusted revenue

$

257,527

 

$

315,092

 

(18)%

Adjusted income before taxes(1)

658

 

14,203

 

(95)%

Adjusted net income attributable to TETRA shareholders(2)

950

 

7,047

 

(87)%

Adjusted diluted EPS attributable to TETRA shareholders(3)

$

0.01

 

$

0.09

 

(87)%

Adjusted free cash flow

$

52,448

 

$

57,042

 

(8)%

Adjusted pretax operating margin

0.3%

 

4.5%

 

-418 bps

Adjusted EBITDA

$

54,306

 

$

67,566

 

(20)%

   

(1)

Income before taxes, including special charges and Maritech was a loss of $(233) million in the fourth quarter of 2015 and a loss of $(120) million in the fourth quarter of 2014. 

(2)

Net income attributable to TETRA shareholders, including special charges and Maritech was a loss of $(146) million in the fourth quarter of 2015, and a loss of $(150) million in the fourth quarter of 2014. 

(3)

Diluted EPS, including special charges and Maritech, was a loss of $(1.84) in the fourth quarter of 2015, and a loss of $(1.90) in the fourth quarter of 2014. See Schedule E  for details.

Analysis of Fourth Quarter Results

Stuart M. Brightman, TETRA's President and Chief Executive Officer, stated, "The markets we serve became increasingly challenging as we exited the fourth quarter of 2015 and moved into 2016. Despite this unfavorable environment, in the fourth quarter we were able to generate adjusted earnings per share of $0.01 and adjusted free cash flow of $52 million (see schedule G for a reconciliation of free cash flow to GAAP cash from operations). We continue to take the actions necessary to ensure the long-term health of the company and continue to generate free cash flow.

"Our Fluids Division generated $17.2 million of adjusted income before taxes in the fourth quarter of 2015 compared to $19.1 million in the fourth quarter of 2014. The Division's results for 2015's fourth quarter included a $3.5 million favorable benefit from the resolution of a completion fluids project completed in the third quarter of 2015. We continue to benefit from positive results for our completion fluids business in the Gulf of Mexico, driven by the introduction of our zinc-free heavy completion fluids. Our chemicals business continues to be an area of strength due to the diversity of our end-user markets. On a sequential basis, compared to the third quarter of 2015, our onshore completion fluids businesses continued to suffer from decreased demand in a very challenging market. Certain areas of our international operations in the Fluids Division began to evidence the impact of market pressures in the fourth quarter, and we expect this to be a more challenging environment in 2016.

"Our Production Testing Division's fourth quarter results were a sequential improvement over the third quarter of 2015, with an adjusted pretax loss of $(0.9) million compared to an adjusted pretax loss of $(1.4) million in the third quarter of 2015. Our U.S. activity continued to decrease and the market continued to be more challenging in the fourth quarter. Despite this, we were able to generate sequentially improved results due to several international projects that occurred during the fourth quarter. We expect this business to continue to experience reduced demand during the first half of 2016, and we will continue to focus on offsetting the impact with our international operations.

"For the fourth quarter of 2015, our Compression Division reported an adjusted pretax loss of $(0.9) million, compared to adjusted income before taxes of $2.1 million in the third quarter of 2015. During the fourth quarter of 2015, the Division benefited from spot sales of compression equipment as well as continued demand for our large horsepower compression services. Adjusted EBITDA of $28.4 million for the fourth quarter of 2015 is slightly below adjusted EBITDA of $31.4 million for the third quarter of 2015. Aggressive cost actions have been taken in areas of reduced demand, most notably, resources associated with our fabrication business. On January 22, 2016, CSI Compressco LP declared a decreased distribution of $0.3775 attributable to the fourth quarter of 2015. This proactive decision to decrease the distribution was taken to provide a buffer against anticipated lower activity levels over the course of 2016.

"Our Offshore Services segment reported adjusted income before taxes of $2.6 million for the fourth quarter of 2015, compared to an adjusted pretax loss of $(3.1) million in the fourth quarter of 2014. This significant improvement was driven by benefits from ongoing cost actions and the execution of several small projects during the quarter. Our responsiveness to our customers enabled us to secure this business during a season in which activity is typically reduced.

"During the fourth quarter TETRA, excluding the operations of CSI Compressco, had $52 million of free cash flow, which includes distributions from CSI Compressco but excludes $5 million spent on Maritech asset retirement obligations (see schedule G for a reconciliation to GAAP cash from operations). For the full year 2015, such free cash flow was $120 million. As we noted throughout 2015, our ability to generate cash in this very challenging environment was driven by earnings, our minimization of capital expenditures, and continued improvements in working capital. We exited 2015 with a leverage ratio of 1.86x, representing our fifth consecutive quarter of improvement in the leverage ratio."

Divisional revenues, adjusted income (loss) before taxes, adjusted income (loss) before taxes as a percent of revenue, and adjusted EBITDA (all of which are non-GAAP financial measures that are reconciled to GAAP in the schedules below) for the three months ended December 31, 2015 and December 31, 2014 are summarized in the table below:

Segment Results

Three Months Ended

 

December 31, 2015

 

December 31, 2014

 

Revenue

Adjusted
(Loss)
Income
Before
Taxes(1)

Adjusted
Income
(Loss)
Before
Taxes as a
Percent of
Revenue(2)

Adjusted
EBITDA(3)

 

Revenue

Adjusted
Income
Before
Taxes(1)

Adjusted
Income
(Loss)
Before
Taxes as a
Percent of
Revenue(2)

Adjusted
EBITDA(3)

 

(In Thousands)

Fluids Division

$

91,194

 

$

17,213

 

18.9%

 

$

25,911

   

$

110,271

 

$

19,109

 

17.3%

 

$

27,523

 

Production Testing Division

33,017

 

(866)

 

(2.6)%

 

4,679

   

56,633

 

8,790

 

15.5%

 

15,499

 

Compression Division

99,369

 

7,234

 

7.3%

 

28,382

   

124,829

 

13,812

 

11.1%

 

34,492

 

Offshore Services segment

36,798

 

2,577

 

7.0%

 

5,505

   

42,296

 

(3,059)

 

(7.2)%

 

92

 

Eliminations and other

(1,108)

 

4

 

(0.4)%

 

   

(1,392)

 

3

 

 

 

Subtotal

259,270

 

26,162

 

10.1%

 

64,477

   

332,637

 

38,655

 

11.6%

 

77,606

 

Corporate and other

(1,743)

 

(12,164)

   

(10,171)

   

(17,545)

 

(11,631)

   

(10,040)

 

Interest expense, net - Compression Division

 

(8,110)

   

   

 

(7,662)

   

 

Interest expense, net - TTI, excluding Compression Division

 

(5,230)

   

   

 

(5,159)

   

 

Special charges and Maritech(4)

63

 

(233,897)

   

   

758

 

(134,070)

   

 

As reported

257,590

 

(233,239)

 

(90.5)%

 

54,306

   

315,850

 

(119,867)

 

(38.0)%

 

67,566

 
   

(1)

See Schedule F for reconciliation.

(2)

GAAP income (loss) before taxes as a percent of revenue for fourth quarter 2015 are: Fluids Division, 3.0%; Production Testing Division, (153.7)%; Compression Division, (153.7)%; and, Offshore Services segment, 4.8%. GAAP income (loss) before taxes as a percent of revenue for fourth quarter 2014 are: Fluids Division, 11.5%; Production Testing Division, (117.5)%; Compression Division, 2.6%; and, Offshore Services segment, 49.0%. Refer to Schedule B for GAAP dollar amounts.

(3)

Adjusted income before taxes and adjusted EBITDA are non-GAAP financial measures that are defined and reconciled to the nearest GAAP financial measures in Schedule F.

(4)

See Schedule E for special charges and reconciliations.

Debt, Cost, and Cash Actions

Given the uncertain market environment and despite our strong 2015 cash generation and improvements in our capital structure, over the past 90 days the Company has implemented an incremental series of actions to ensure we remain strong through a prolonged downturn.  These actions have included:

  • During the fourth quarter we secured $125.0 million of 11% senior notes maturing in seven years. The proceeds from this transaction were used to pay down $115.0 million of senior notes due from April 2016 through December 2020, and associated transaction fees. Following this transaction, TETRA has $46.9 of outstanding debt maturing in December 2017, with no subsequent maturities until 2019. The strength of our balance sheet and ongoing actions to support it continue to be a primary focus for our management group.
  • Since October 1, 2015, we have reduced headcount by 9.5% for TETRA, and 16% for CSI Compressco. In addition, we have recently implemented salary reductions in North America that approximate 5% of annual base pay, to counter continued pricing pressures.
  • A 25% reduction in CSI Compressco LP's distribution attributable to the fourth quarter of 2015, and a reduction of total capital expenditures from $95 million in 2015 to $20 to $30 million in 2016. Given the pricing pressures in our industry, we remain focused on capital returns and will resume investments in growth capital when market pricing supports appropriate returns.

Special Charges and Maritech

During the fourth quarter of 2015, due to changes in the current market environment, the fair value of certain of our identified assets and goodwill has decreased. As a result, we recorded $231 million of impairments and other charges, primarily for our Compression and Production Testing Divisions.

Maritech reported a pre-tax loss of $(2.8) million in the fourth quarter of 2015.

First Quarter Financial Guidance

Given the continued weakness in commodity prices and the seasonality of our operations, we expect a first quarter GAAP loss attributable to TETRA stockholders of between $0.21 to $0.29 per share and first quarter adjusted EPS to be a loss of between $0.15 to $0.20 per share reflecting a normalized tax rate of 30%.  Additionally, we expect first quarter TETRA only free cash flow of between break-even and $10 million (TETRA only cash flow from operations of $1 million to $11 million, less anticipated TETRA only capital expenditures of $6 million, plus $5 million of distributions from CSI Compressco LP) as the first quarter has historically been TETRA's weakest quarter given the seasonality of our operations.

Conference Call

TETRA will host a conference call to discuss fourth quarter 2015 results today, February 26, 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.

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: Fourth Quarter Special Charges
Schedule F: Non-GAAP Reconciliation to GAAP Financials
Schedule G: Non-GAAP Reconciliation to 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 2015, 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, 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
December 31,

 

Twelve Months Ended
December 31,

 

2015

 

2014

 

2015

 

2014

 

(In Thousands)

Revenues

$

257,590

   

$

315,850

   

$

1,130,145

   

$

1,077,567

 
               

Cost of sales, services, and rentals

171,981

   

242,402

   

741,736

   

830,769

 

Depreciation, amortization, and accretion

38,696

   

38,631

   

155,015

   

116,912

 

Impairments of long-lived assets

44,158

   

34,842

   

44,158

   

34,842

 

Total cost of revenues

254,835

   

315,875

   

940,909

   

982,523

 

Gross profit (loss)

2,755

   

(25)

   

189,236

   

95,044

 
               

General and administrative expense

44,161

   

39,900

   

157,812

   

142,689

 

Goodwill impairment

177,006

   

64,295

   

177,006

   

64,295

 

Interest expense, net

13,087

   

12,805

   

50,514

   

31,998

 

Other (income) expense, net

1,740

   

2,842

   

5,667

   

13,933

 

Income (loss) before taxes

(233,239)

   

(119,867)

   

(201,763)

   

(157,871)

 

Provision (benefit) for income taxes

(1,293)

   

27,601

   

7,704

   

9,704

 

Net income (loss)

(231,946)

   

(147,468)

   

(209,467)

   

(167,575)

 

Net income (loss) attributable to noncontrolling interest

85,531

   

(2,282)

   

83,284

   

(2,103)

 

Net income (loss) attributable to TETRA stockholders

$

(146,415)

   

$

(149,750)

   

$

(126,183)

   

$

(169,678)

 
               

Basic per share information:

             

Net income (loss) attributable to TETRA stockholders

$

(1.84)

   

$

(1.90)

   

$

(1.59)

   

$

(2.16)

 

Weighted average shares outstanding

79,380

   

78,877

   

79,169

   

78,600

 
               

Diluted per share information:

             

Net income (loss) attributable to TETRA stockholders

$

(1.84)

   

$

(1.90)

   

$

(1.59)

   

$

(2.16)

 

Weighted average shares outstanding

79,380

   

78,877

   

79,169

   

78,600

 

Schedule B: Financial Results By Segment (Unaudited)

 

Three Months Ended
December 31, 2015

 

Twelve Months Ended
December 31, 2015

 

2015

 

2014

 

2015

 

2014

 

(In Thousands)

Revenues by segment:

             

Fluids Division

$

91,194

   

$

110,271

   

$

424,044

   

$

437,362

 

Production Testing Division

33,017

   

56,633

   

133,904

   

192,824

 

Compression Division

99,369

   

124,829

   

457,639

   

282,505

 

Offshore Division

             

Offshore Services

36,798

   

42,296

   

122,194

   

195,372

 

Maritech

63

   

758

   

2,438

   

4,722

 

Intersegment eliminations

(1,108)

   

(17,542)

   

(4,669)

   

(30,595)

 

Offshore Division total

35,753

   

25,512

   

119,963

   

169,499

 

Eliminations and other

(1,743)

   

(1,395)

   

(5,405)

   

(4,623)

 

Total revenues

$

257,590

   

$

315,850

   

$

1,130,145

   

$

1,077,567

 
               

Gross profit (loss) by segment:

             

Fluids Division

$

4,545

   

$

21,161

   

$

111,969

   

$

97,806

 

Production Testing Division

(10,749)

   

(1,959)

   

(3,046)

   

12,610

 

Compression Division

7,035

   

25,606

   

73,135

   

66,527

 

Offshore Division

             

Offshore Services

4,585

   

(13,943)

   

10,602

   

(10,314)

 

Maritech

(2,493)

   

(30,634)

   

(2,523)

   

(69,861)

 

Intersegment eliminations

   

   

   

 

Offshore Division total

2,092

   

(44,577)

   

8,079

   

(80,175)

 

Corporate overhead and eliminations

(168)

   

(256)

   

(901)

   

(1,724)

 

Total gross profit

$

2,755

   

$

(25)

   

$

189,236

   

$

95,044

 
               

Income (loss) before taxes by segment:

             

Fluids Division

$

(2,746)

   

$

12,628

   

$

80,789

   

$

64,705

 

Production Testing Division

(50,759)

   

(66,547)

   

(55,720)

   

(66,156)

 

Compression Division

(152,772)

   

3,237

   

(146,798)

   

7,340

 

Offshore Division

             

Offshore Services

1,782

   

(20,713)

   

(195)

   

(26,251)

 

Maritech

(2,846)

   

(30,948)

   

(3,833)

   

(71,154)

 

Intersegment eliminations

   

   

   

 

Offshore Division total

(1,064)

   

(51,661)

   

(4,028)

   

(97,405)

 

Corporate overhead and eliminations

(25,898)

   

(17,524)

   

(76,005)

   

(66,355)

 

Total income (loss) before taxes

$

(233,239)

   

$

(119,867)

   

$

(201,763)

   

$

(157,871)

 

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)

 

December 31, 2015

 

December 31, 2014

 

(In Thousands)

Balance Sheet:

     

Cash (excluding restricted cash)

$

23,057

   

$

48,384

 

Accounts receivable, net

182,343

   

226,966

 

Inventories

117,009

   

189,357

 

Other current assets

31,166

   

35,752

 

PP&E, net

1,048,004

   

1,124,192

 

Other assets

239,413

   

444,182

 

Total assets

$

1,640,992

   

$

2,068,833

 
       

Current portion of decommissioning liabilities

$

14,570

   

$

12,758

 

Other current liabilities

168,847

   

365,702

 

Long-term debt (1)

873,402

   

844,961

 

Long-term portion of decommissioning liabilities

42,879

   

49,983

 

Other long-term liabilities

27,114

   

29,828

 

Equity

514,180

   

765,601

 

Total liabilities and equity

$

1,640,992

   

$

2,068,833

 
   

(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.

 

December 31, 2015

 

December 31, 2014

 

(In Thousands)

TETRA

     

Bank revolving line of credit facility

$

22,850

   

$

90,000

 

TETRA Senior Notes at various rates

270,071

   

305,000

 

Other debt

50

   

74

 

TETRA total debt

292,971

   

395,074

 

Less current portion

(50)

   

(90,074)

 

TETRA total long-term debt

$

292,921

   

$

305,000

 
       

CSI Compressco LP

     

CCLP Bank Credit Facility

$

235,000

   

$

195,000

 

CCLP 7.25% Senior Notes

345,481

   

344,961

 

CCLP total debt

580,481

   

539,961

 

Less current portion

   

 

CCLP total long-term debt

$

580,481

   

$

539,961

 

Consolidated total long-term debt

$

873,402

   

$

844,961

 

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 before taxes, excluding the Maritech segment and special 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 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 before taxes (and adjusted income before taxes as a percent of revenue) is defined as the Company's (or its Segments') income before taxes excluding certain special or other charges (or credits). Adjusted income before taxes (and adjusted income 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 per share is defined as the Company's diluted earnings per share excluding certain special or other charges (or credits) and using a normalized effective income tax rate. Adjusted diluted earnings 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 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; and
  • to measure the performance of the Company as compared to its peer group of companies.

TETRA 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 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: Fourth Quarter Special Charges

 

Three Months Ended

 

December 31, 2015

 

Income
(Loss) Before
Tax

Provision
(Benefit) for
Tax

Noncont.
Interest

Net Income
Attributable
to TETRA
Stockholders

Diluted EPS

 

(In Thousands, Except per Share Amounts)

Income attributable to TETRA stockholders, excluding special charges and Maritech

658

 

199

 

(491)

 

950

 

0.01

 

Transaction related costs

 

 

 

 

 

Asset impairment, including inventory adjustments

(44,182)

 

(13,255)

 

(6,612)

 

(24,315)

 

(0.30)

 

Goodwill impairment

(177,006)

 

(53,102)

 

(78,151)

 

(45,753)

 

(0.57)

 

Effect of deferred tax valuation allowance and other related tax adjustment

 

67,824

 

 

(67,824)

 

(0.84)

 

Other charges

(9,862)

 

(2,959)

 

(277)

 

(6,626)

 

(0.10)

 

Maritech profit (loss)

(2,847)

 

 

 

(2,847)

 

(0.04)

 

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

(233,239)

 

(1,293)

 

(85,531)

 

(146,415)

 

(1.84)

 
           
 

December 31, 2014

 

Income
(Loss) Before
Tax

Provision
(Benefit) for
Tax

Noncont.
Interest

Net Income
Attributable
to TETRA
Stockholders

 Diluted EPS

 

(In Thousands, Except per Share Amounts)

Income attributable to TETRA stockholders, excluding Special charges and Maritech

14,203

 

4,324

 

2,832

 

7,047

 

0.09

 

Transaction related costs

(1,687)

 

(597)

 

(550)

 

(540)

 

(0.01)

 

Asset impairment, including inventory adjustments

(37,140)

 

(12,784)

 

 

(24,356)

 

(0.31)

 

Goodwill impairment

(64,295)

 

(15,682)

 

 

(48,613)

 

(0.62)

 

Effect of deferred tax valuation allowance and other related adjustments

 

63,172

 

 

(63,172)

 

(0.79)

 

Maritech loss

(30,948)

 

(10,832)

 

 

(20,116)

 

(0.26)

 

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

(119,867)

 

27,601

 

2,282

 

(149,750)

 

(1.90)

 
           
 

Twelve Months Ended

 

December 31, 2015

 

Income
(Loss) Before
Tax

Provision
(Benefit) for
Tax

Noncont.
Interest

Net Income
Attributable
to TETRA
Stockholders

Diluted EPS

Income attributable to TETRA stockholders, excluding Special charges and Maritech

39,512

 

11,802

 

1,962

 

25,748

 

0.32

 

Transaction related costs

(208)

 

(62)

 

(73)

 

(73)

 

 

Asset impairment, including inventory adjustments

(44,158)

 

(13,247)

 

(6,612)

 

(24,299)

 

(0.30)

 

Goodwill impairment

(177,006)

 

(53,102)

 

(78,193)

 

(45,711)

 

(0.57)

 

Effect of deferred tax valuation allowance and other related tax adjustments

 

67,082

 

 

(67,082)

 

(0.85)

 

Other charges

(16,071)

 

(4,769)

 

(368)

 

(10,934)

 

(0.14)

 

Maritech profit (loss)

(3,832)

 

 

 

(3,832)

 

(0.05)

 

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

(201,763)

 

7,704

 

(83,284)

 

(126,183)

 

(1.59)

 
 
 

December 31, 2014

 

Income
(Loss) Before
Tax

Provision
(Benefit) for
Tax

 Noncont.
Interest

Net Income
Attributable
to TETRA
Stockholders

 Diluted EPS

Income attributable to TETRA stockholders, excluding Special charges and Maritech

34,968

 

6,325

 

6,822

 

21,821

 

0.27

 

Transaction related costs

(15,060)

 

(5,389)

 

(4,719)

 

(4,952)

 

(0.06)

 

Asset impairment, including inventory adjustments

(37,140)

 

(12,784)

 

 

(24,356)

 

(0.31)

 

Goodwill impairment

(64,295)

 

(15,682)

 

 

(48,613)

 

(0.61)

 

Severance expense

(784)

 

(290)

 

 

(494)

 

(0.01)

 

Federal and State deferred tax valuation allowance and other related adjustments

 

60,500

 

 

(60,500)

 

(0.76)

 

Maritech loss

(71,154)

 

(21,346)

 

 

(49,808)

 

(0.63)

 

Other

(4,406)

 

(1,630)

 

 

(2,776)

 

(0.05)

 

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

(157,871)

 

9,704

 

2,103

 

(169,678)

 

(2.16)

 

Schedule F: Non-GAAP Reconciliation to GAAP Financials   

 

Three Months Ended

 

December 31, 2015

 

Income
(Loss)
Before Tax,
as Reported

Impairments
& Special
Charges

Adjusted
Income
Before Tax

Interest
Expense,
Net

Depreciation
&
Amortization

Equity
Comp.
Expense

Adjusted
EBITDA

 

(In Thousands)

Fluids Division

$

(2,745)

 

$

19,958

 

$

17,213

 

$

(158)

 

$

8,856

 

$

 

$

25,911

 

Production Testing Division

(50,759)

 

49,893

 

(866)

 

(98)

 

5,643

 

 

4,679

 

Compression Division

(152,772)

 

151,896

 

(876)

 

8,110

 

20,643

 

505

 

28,382

 

Offshore Services Segment

1,782

 

795

 

2,577

 

2,928

 

 

5,505

 

Eliminations and other

4

 

4

 

(4)

 

 

 

Subtotal

(204,490)

 

222,542

 

18,052

 

7,854

 

38,066

 

505

 

64,477

 

Corporate and other

(25,902)

 

8,508

 

(17,394)

 

5,230

 

171

 

1,822

 

(10,171)

 

TETRA excl Maritech

(230,392)

 

231,050

 

658

 

13,084

 

38,237

 

2,327

 

54,306

 

Maritech

(2,847)

 

 

(2,847)

 

3

 

435

 

 

(2,409)

 

Consolidated

$

(233,239)

 

$

231,050

 

$

(2,189)

 

$

13,087

 

$

38,672

 

$

2,327

 

$

51,897

 
               
 

December 31, 2014

 

Income
(Loss)
Before Tax,
as Reported

Impairments
& Special
Charges

Adjusted
Income
Before Tax

Interest
Expense,
Net

Depreciation
&
Amortization

Equity
Comp.
Expense

Adjusted
EBITDA

 

(In Thousands)

Fluids Division

$

12,628

 

$

6,481

 

$

19,109

 

$

(14)

 

$

8,428

 

$

 

$

27,523

 

Production Testing Division

(66,547)

 

75,337

 

8,790

 

(2)

 

6,711

 

 

15,499

 

Compression Division

3,237

 

2,913

 

6,150

 

7,662

 

20,055

 

625

 

34,492

 

Offshore Services Segment

(20,713)

 

17,654

 

(3,059)

 

 

3,151

 

 

92

 

Eliminations and other

3

 

 

3

 

 

(3)

 

 

 

Subtotal

(71,392)

 

102,385

 

30,993

 

7,646

 

38,342

 

625

 

77,606

 

Corporate and other

(17,527)

 

737

 

(16,790)

 

5,159

 

250

 

1,341

 

(10,040)

 

TETRA excl Maritech

(88,919)

 

103,122

 

14,203

 

12,805

 

38,592

 

1,966

 

67,566

 

Maritech

(30,948)

 

 

(30,948)

 

 

39

 

 

(30,909)

 

Consolidated

$

(119,867)

 

$

103,122

 

$

(16,745)

 

$

12,805

 

$

38,631

 

$

1,966

 

$

36,657

 
   
 

Year Ended

 

December 31, 2015

 

Income
(Loss)
Before Tax,
as Reported

Impairments
& Special
Charges

Adjusted
Income
Before Tax

Interest
Expense,
Net

Depreciation
&
Amortization

Equity
Comp.
Expense

Adjusted
EBITDA

 

(In Thousands)

Fluids Division

$

80,789

 

$

20,599

 

$

101,388

 

$

(258)

 

$

35,125

 

$

 

$

136,255

 

Production Testing Division

(55,720)

 

54,530

 

(1,190)

 

(89)

 

24,094

 

 

22,815

 

Compression Division

(146,798)

 

152,390

 

5,592

 

32,178

 

82,024

 

2,164

 

121,958

 

Offshore Services Segment

(195)

 

1,344

 

1,149

 

 

11,500

 

 

12,649

 

Eliminations and other

(1)

 

 

(1)

 

 

(14)

 

 

(15)

 

Subtotal

(121,925)

 

228,863

 

106,938

 

31,831

 

152,729

 

2,164

 

293,662

 

Corporate and other

(76,005)

 

8,579

 

(67,426)

 

18,654

 

911

 

7,978

 

(39,883)

 

TETRA excl Maritech

(197,930)

 

237,442

 

39,512

 

50,485

 

153,640

 

10,142

 

253,779

 

Maritech

(3,833)

 

 

(3,833)

 

29

 

1,375

 

 

(2,429)

 

Consolidated

$

(201,763)

 

$

237,442

 

$

35,679

 

$

50,514

 

$

155,015

 

$

10,142

 

$

251,350

 
               
 

December 31, 2014

 

Income
(Loss)
Before Tax,
as Reported

Impairments
& Special
Charges

Adjusted
Income
Before Tax

Interest
Expense,
Net

Depreciation
&
Amortization

Equity
Comp.
Expense

Adjusted
EBITDA

 

(In Thousands)

Fluids Division

$

64,705

 

$

4,229

 

$

68,934

 

$

(250)

 

$

31,279

 

$

 

$

99,963

 

Production Testing Division

(66,168)

 

77,095

 

10,927

 

(31)

 

29,336

 

 

40,232

 

Compression Division

7,340

 

17,022

 

24,362

 

12,964

 

41,097

 

1,544

 

79,967

 

Offshore Services Segment

(26,251)

 

19,784

 

(6,467)

 

36

 

13,327

 

 

6,896

 

Eliminations and other

12

 

 

12

 

 

(12)

 

 

 

Subtotal

(20,362)

 

118,130

 

97,768

 

12,719

 

115,027

 

1,544

 

227,058

 

Corporate and other

(66,355)

 

3,554

 

(62,801)

 

19,268

 

1,725

 

5,231

 

(36,577)

 

TETRA excl Maritech

(86,717)

 

121,684

 

34,967

 

31,987

 

116,752

 

6,775

 

190,481

 

Maritech

(71,154)

 

 

(71,154)

 

11

 

160

 

 

(70,983)

 

Consolidated

$

(157,871)

 

$

121,684

 

$

(36,187)

 

$

31,998

 

$

116,912

 

$

6,775

 

$

119,498

 

Schedule G: Non-GAAP Reconciliation to Free Cash Flow

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

 

2015

 

2014

 

2015

 

2014

 

(In Thousands)

TETRA Consolidated

             

Cash from operations

$

77,724

   

$

56,708

   

$

195,951

   

$

108,645

 

ARO settlements

5,109

   

23,010

   

10,305

   

63,319

 

Capital expenditures, net of sales proceeds

(22,221)

   

(34,994)

   

(113,462)

   

(114,082)

 

Free cash flow before ARO settlements

60,612

   

44,724

   

92,794

   

57,882

 
               

CSI Compressco LP

             

Cash from operations

38,351

   

13,478

   

101,893

   

44,819

 

Capital expenditures, net of sales proceeds

(19,274)

   

(19,317)

   

(95,272)

   

(48,137)

 

Free cash flow

19,077

   

(5,839)

   

6,621

   

(3,318)

 
               

TTI Only

             

Cash from operations

39,373

   

43,230

   

94,058

   

63,826

 

ARO settlements

5,109

   

23,010

   

10,305

   

63,319

 

Capital expenditures, net of sales proceeds

(2,947)

   

(15,677)

   

(18,190)

   

(65,945)

 

Free cash flow before ARO settlements

41,535

   

50,563

   

86,173

   

61,200

 

Distributions from CSI Compressco LP

7,877

   

6,479

   

30,544

   

24,118

 

Free cash flow before ARO settlements and after distributions from CSI Compressco LP

49,412

   

57,042

   

116,717

   

85,318

 

Debt restructuring costs

$

3,036

   

$

   

$

3,036

   

$

 

Adjusted free cash flow before ARO  settlements and after distributions from CSI Compressco LP

52,448

   

57,042

   

119,753

   

85,318

 

Schedule H: Non-GAAP Reconciliation of TETRA Net Debt

The cash and debt positions of TETRA and CSI Compressco LP as of December 31, 2015, 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 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.

 

December 31, 2015

 

December 31, 2014

 

TETRA

 

CCLP

 

TETRA

 

CCLP

 

(In Millions)

Non-restricted cash

$

12.4

   

$

10.6

   

$

14.3

   

$

34.1

 
               

Revolver debt outstanding

22.9

   

235.0

   

90.0

   

195.0

 

Senior Notes outstanding

270.1

   

345.5

   

305.0

   

345.0

 

Net debt

$

280.6

   

$

569.9

   

$

380.7

   

$

505.9

 

 

 

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SOURCE TETRA Technologies, Inc.