TETRA Technologies(TTI) - 2024 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements Net income for H1 2024 decreased to $8.6 million, total assets rose to $499.7 million, and operating cash flow significantly declined to $11.0 million Consolidated Statements of Operations Highlights (Six Months Ended June 30) | Metric | 2024 (in thousands) | 2023 (in thousands) | Change | |---|---|---|---| | Total Revenues | $322,907 | $321,672 | +0.4% | | Gross Profit | $74,355 | $85,478 | -13.0% | | Income Before Taxes | $13,774 | $28,614 | -51.9% | | Net Income | $8,555 | $24,230 | -64.7% | | Diluted EPS | $0.06 | $0.19 | -68.4% | Consolidated Balance Sheet Highlights | Metric | June 30, 2024 (in thousands) | Dec 31, 2023 (in thousands) | |---|---|---| | Total Current Assets | $289,621 | $282,015 | | Total Assets | $499,725 | $478,961 | | Long-Term Debt, net | $179,670 | $157,505 | | Total Liabilities | $346,147 | $331,627 | | Total Equity | $153,578 | $147,334 | Consolidated Cash Flow Highlights (Six Months Ended June 30) | Activity | 2024 (in thousands) | 2023 (in thousands) | |---|---|---| | Net Cash from Operating Activities | $11,015 | $37,357 | | Net Cash used in Investing Activities | $(31,041) | $(22,004) | | Net Cash from Financing Activities | $10,978 | $(1,757) | Notes to Consolidated Financial Statements The company's two segments, new $265 million debt refinancing, and $13.2 million capitalization for Arkansas brine leases are detailed, alongside disaggregated revenue showing international growth - The company operates through two main divisions: Completion Fluids & Products, which manufactures and markets clear brine fluids and calcium chloride, and Water & Flowback Services, which provides water management for onshore oil and gas operators[19][20][21] - The company capitalized approximately $13.2 million in costs during H1 2024 for bromine and lithium property development in Arkansas, a shift from prior year expensing[29] - In January 2024, the company entered a new $265.0 million Term Credit Agreement to refinance its prior facility and fund the Arkansas bromine project, resulting in a $5.5 million loss on debt extinguishment[44] Revenue by Geography (Six Months Ended June 30) | Geography | 2024 (in thousands) | 2023 (in thousands) | Change | |---|---|---|---| | United States | $208,472 | $215,251 | -3.1% | | International | $114,435 | $106,421 | +7.5% | | Total | $322,907 | $321,672 | +0.4% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated H1 2024 revenue remained flat, with divisional shifts, while Q2 revenue grew 13.9% sequentially, driven by European sales, and liquidity stands strong at $180.0 million - Consolidated revenue for H1 2024 was $322.9 million, nearly flat compared to H1 2023, with growth in the Completion Fluids & Products division (up 6.0%) offset by declines in the Water & Flowback Services division (down 6.9%)[79][80][81] - The company is expanding into the low-carbon energy market, leveraging its mineral acreage in Arkansas for potential bromine and lithium production in a joint venture with Saltwerx (ExxonMobil)[82] - Sequentially, Q2 2024 revenue increased 13.9% from Q1 2024, primarily due to a 29.4% revenue increase in the Completion Fluids & Products Division from strong seasonal European industrial chemical sales[84][89] - As of the end of Q2 2024, the company's liquidity was $180.0 million, defined as unrestricted cash plus availability under its credit facilities[116] Results of Operations H1 2024 consolidated gross profit decreased 13.0% to $74.4 million due to divisional performance, while Q2 gross profit sequentially rose 39.1%, impacted by a $5.5 million debt extinguishment loss Q2 2024 vs Q1 2024 Performance | Metric | Q2 2024 (in thousands) | Q1 2024 (in thousands) | Change | |---|---|---|---| | Revenues | $171,935 | $150,972 | +13.9% | | Gross Profit | $43,253 | $31,102 | +39.1% | | Income Before Taxes | $12,479 | $1,295 | +863.6% | H1 2024 vs H1 2023 Performance | Metric | H1 2024 (in thousands) | H1 2023 (in thousands) | Change | |---|---|---|---| | Revenues | $322,907 | $321,672 | +0.4% | | Gross Profit | $74,355 | $85,478 | -13.0% | | Income Before Taxes | $13,774 | $28,614 | -51.9% | - The Completion Fluids & Products Division's H1 2024 revenue increased 6.0% YoY to $177.3 million due to higher European and North American industrial chemical sales volumes[102] - The Water & Flowback Services Division's H1 2024 revenue decreased 5.7% YoY to $145.6 million, primarily due to lower customer drilling and completion activity in North America[106] Liquidity and Capital Resources Liquidity remains strong at $180.0 million, despite operating cash flow decreasing to $11.0 million, with $31.2 million in capital expenditures, including $13.2 million for Arkansas brine development - Total capital expenditures for H1 2024 were $31.2 million, including $17.8 million for the Completion Fluids & Products Division (with $13.2 million for the Arkansas brine project) and $13.1 million for the Water & Flowback Services Division[119] - The company has rights to approximately 40,000 gross acres of brine leases in the Smackover Formation in Arkansas, focusing on extracting bromine and lithium, with an initial economic assessment for a lithium extraction plant expected in late 2024[121] - Financing activities in H1 2024 included $184.6 million in borrowings under the new Term Credit Agreement and $163.4 million in repayments of the prior agreement, with $6.0 million in associated debt issuance costs[123] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company faces interest rate risk from its $190.0 million variable-rate Term Credit Agreement and foreign currency exchange risk from international operations, with no hedging contracts in place - The company's primary interest rate risk is tied to its Term Credit Agreement, which has a variable rate of SOFR plus 5.75%, with an interest rate of 11.17% on $190.0 million of debt as of June 30, 2024[139][140] - The company is exposed to foreign currency exchange rate risk from its international operations but did not have any hedging contracts outstanding as of June 30, 2024[140] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal controls over financial reporting during the quarter - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2024[141] - No changes occurred during the quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, the company's internal controls over financial reporting[141] PART II—OTHER INFORMATION Item 1. Legal Proceedings A stockholder class action complaint regarding the Tax Benefits Preservation Plan, filed in April 2024, was dismissed without prejudice in May 2024 - A stockholder class action lawsuit filed on April 25, 2024, challenging the company's Tax Benefits Preservation Plan, was dismissed without prejudice on May 14, 2024[54] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - The company states that it continues to be subject to the risk factors disclosed in its 2023 Annual Report[144] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2024 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2024[144]