TETRA Technologies(TTI) - 2020 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements The company reported decreased revenue but a significantly improved net loss in Q1 2020 compared to the prior year Consolidated Statements of Operations Q1 2020 operations resulted in lower revenue but higher gross profit and a reduced net loss year-over-year Consolidated Statements of Operations (In Thousands) | Financial Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Total Revenues | $222,942 | $243,728 | | Gross Profit | $39,417 | $36,210 | | Loss before taxes | $(9,077) | $(17,065) | | Net Loss | $(10,376) | $(19,100) | | Net loss attributable to TETRA stockholders | $(1,551) | $(10,838) | | Net loss per common share (Basic & Diluted) | $(0.01) | $(0.09) | Consolidated Balance Sheets The balance sheet reflects stable total assets at approximately $1.27 billion alongside a slight increase in total liabilities Consolidated Balance Sheets (In Thousands) | Balance Sheet Item | March 31, 2020 (Unaudited) | December 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $363,980 | $351,354 | | Net Property, Plant, and Equipment | $740,247 | $758,637 | | Total Assets | $1,269,764 | $1,271,922 | | Total Current Liabilities | $195,196 | $188,723 | | Long-term Debt, net | $845,842 | $842,871 | | Total Liabilities | $1,122,833 | $1,109,096 | | Total TETRA Stockholders' Equity | $27,628 | $34,373 | | Total Equity | $146,931 | $162,826 | Consolidated Statements of Cash Flows Operating cash flow increased significantly, while cash used in investing and provided by financing activities decreased Consolidated Statements of Cash Flows (In Thousands) | Cash Flow Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $22,176 | $7,412 | | Net cash used in investing activities | $(10,615) | $(31,726) | | Net cash provided by financing activities | $1,138 | $21,312 | | Increase (decrease) in cash and cash equivalents | $11,759 | $(3,169) | Notes to Consolidated Financial Statements Notes detail divisional performance, a $5.4 million impairment charge, facility shutdowns, and subsidiary debt structures - The company operates through three divisions: Completion Fluids & Products, Water & Flowback Services, and Compression, and consolidates its subsidiary CSI Compressco LP (CCLP)[25][27][91] - The company recorded a $5.4 million impairment charge related to its Compression Division's Midland manufacturing facility due to the COVID-19 pandemic and declining oil prices[59] - Subsequent to quarter-end, the company announced plans to shut down its Midland manufacturing facility and its El Dorado chemical production facility to rationalize its manufacturing base[93][96] - CCLP, a subsidiary, commenced an exchange offer for its 7.25% Senior Notes due 2022 in April 2020[97] Segment Performance (In Thousands) | Segment | Q1 2020 Revenue | Q1 2019 Revenue | Q1 2020 Income (Loss) Before Taxes | Q1 2019 Income (Loss) Before Taxes | | :--- | :--- | :--- | :--- | :--- | | Completion Fluids & Products | $75,237 | $61,581 | $19,396 | $6,186 | | Water & Flowback Services | $57,467 | $78,678 | $(2,244) | $2,231 | | Compression | $90,238 | $103,469 | $(12,790) | $(7,801) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses market impacts from COVID-19, divisional performance variations, and implemented cost-cutting measures - The COVID-19 pandemic and oil price decline negatively impacted the Water & Flowback and Compression divisions, prompting reductions in capital expenditures and workforce adjustments[101][102][106] - The Completion Fluids & Products division experienced strong demand, with revenue increasing 22.2% YoY to $75.2 million, driven by a TETRA CS Neptune sale[100][121] - The company maintains separate capital structures for TETRA and its subsidiary CCLP, with $40.8 million and $20.4 million available under their respective credit facilities[68][135][136] Key Financial Metrics | Metric | Q1 2020 | Q1 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $222.9M | $243.7M | (8.5)% | | Gross Profit | $39.4M | $36.2M | 8.9% | | Gross Profit Margin | 17.7% | 14.9% | +2.8 ppt | | G&A Expense | $30.5M | $34.3M | (10.9)% | Quantitative and Qualitative Disclosures about Market Risk No applicable quantitative and qualitative disclosures about market risk were reported for this period - The company states that there are no applicable quantitative and qualitative disclosures about market risk for this reporting period[171] Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2020[172] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[173] PART II—OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal proceedings not expected to have a material adverse impact - The company is a defendant in several lawsuits and governmental proceedings from the ordinary course of business, but management does not expect a material adverse impact[175] Risk Factors Key risks include the adverse impact of COVID-19 and potential delisting from the NYSE due to low stock price - The COVID-19 pandemic and oil oversupply have materially reduced demand for the company's products and services, negatively impacting financial condition[177][178] - On March 26, 2020, the company was notified by the NYSE of non-compliance with the minimum $1.00 average closing price requirement, facing potential delisting[181][182] - The company is also at risk of violating other NYSE listing criteria, such as the minimum average market capitalization requirement of $15.0 million[184] Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the formal program, though some were acquired via employee equity awards - No shares were purchased under the publicly announced repurchase program during the quarter; 73,436 shares were acquired in connection with employee equity awards[186][187] - As of March 31, 2020, approximately $14.3 million remains available for future repurchases under the authorized stock buyback program[186] Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None[188] Mine Safety Disclosures No mine safety disclosures were reported for the period - None[189] Other Information No other information was reported for the period - None[190] Exhibits This section lists filed exhibits, including required CEO/CFO certifications and interactive XBRL data files - The exhibits filed with the report include certifications from the CEO and CFO as required by the Sarbanes-Oxley Act of 2002[192] - Interactive data files (XBRL) containing the company's financial statements and notes are also included as exhibits[194]