Acquisitions and Dispositions

3 Months Ended

Mar. 31, 2014

Notes to Financial Statements [Abstract]

Acquisitions and Dispositions

NOTE B – ACQUISITIONS

Acquisition of Limited Liability Company Interest

On January 16, 2014, we finalized the purchase of the 50% ownership interest of Ahmad Albinali & TETRA Arabia Company Ltd. (TETRA Arabia, a Saudi Arabian limited liability company) that we did not previously own for consideration of $25.2 million. The closing of this transaction was pursuant to the terms of the Share Sale and Purchase Agreement entered into as of October 1, 2013, with the other shareholder in TETRA Arabia. TETRA Arabia is a provider of production testing services, offshore rig cooling services, and clear brine fluids products and related services to its customer in Saudi Arabia. The acquisition of the other 50% interest of TETRA Arabia results in the Production Testing and Fluids segments owning a 100% interest in their Saudi Arabian operations, which they will operate directly through the TETRA Arabia entity. Prior to the transaction, our 50% ownership interest in TETRA Arabia was accounted for under the equity method of accounting, whereby our investment was classified as Other Assets in our consolidated balance sheets, and our share of company earnings was classified as Other Income in the consolidated statements of operations. Following the acquisition, TETRA Arabia was consolidated as a wholly owned subsidiary. The $25.2 million purchase price for the 50% ownership interest includes $15.0 million in cash that was paid at closing, and an additional $10.2 million in cash that will be payable July 16, 2014.

As a result of the purchase of the remaining 50% ownership interest of TETRA Arabia during the first quarter of 2014, we remeasured the fair value of our existing investment carrying value in TETRA Arabia based on estimated future cash flows which resulted in a calculated fair value of approximately $21.8 million (a Level 3 measurement). We allocated this calculated fair value to the consolidated balance sheet line items and recorded a remeasurement gain of approximately $5.7 million. Additionally, we recorded a charge to earnings of approximately $2.9 million associated with a similar fair value measurement related to the termination of our previous relationship with the other shareholder. The charge to earnings and the remeasurement gain were included in Other (Income) Expense in the accompanying Consolidated Statement of Operations for the period ended March 31, 2014. We allocated the purchase price as well as the remeasured value of our existing investment based on the fair values of the assets and liabilities acquired or remeasured, which consisted of a total of approximately $18.5 million of net working capital, $1.3 million of property, plant, and equipment, approximately $22.5 million of certain intangible assets (primarily a customer relationship asset), $4.5 million of deferred tax liabilities, and approximately $6.3 million of nondeductible goodwill (allocated between the Fluids and Production Testing segments). This allocation of the purchase price to TETRA Arabia’s net assets and liabilities is preliminary, and subject to the potential identification of additional assets and contingencies or revisions to the fair value calculations. These fair value calculations and allocations are expected to be finalized later during 2014, and could result in adjustments to the deferred tax liabilities and the calculated depreciation and amortization of the tangible and intangible assets, respectively. For the three month period ended March 31, 2014, our revenues, depreciation and amortization, and income before taxes included $6.8 million, $0.3 million, and $0.2 million, respectively, associated with the acquired operations of TETRA Arabia after the closing in January 2014.

Acquisition of TD Water Transfer

On January 29, 2014, we acquired the assets and operations of WIT Water Transfer, LLC (doing business as TD Water Transfer) for a cash purchase price of $15.0 million. In addition, contingent consideration ranging from $0 to $8.0 million in cash may be paid, depending on a defined measure of earnings over each of the two year periods subsequent to closing. TD Water Transfer is a provider of water management services to oil and gas operators in the South Texas and North Dakota regions, and the acquisition represented a strategic geographic expansion of our Fluids segment operations, allowing it to serve customers in additional basins in the U.S.

We allocated the purchase price to the fair value of the assets and liabilities acquired, which consisted of approximately $6.7 million of property, plant and equipment, approximately $1.8 million of certain intangible assets, approximately $8.9 million of nondeductible goodwill, and approximately $2.4 million of liabilities associated with the contingent purchase price consideration. This allocation of the purchase price to TD Water Transfer’s net assets and liabilities is preliminary, and subject to the potential identification of additional assets and contingencies or revisions to the fair value calculations. These fair value calculations and allocations are expected to be finalized later during 2014, and could result in adjustments to the calculated depreciation and amortization of the tangible and intangible assets, respectively.

Pro Forma Financial Information

The pro forma information presented below has been prepared to give effect to the acquisition of the remaining 50% ownership interest of TETRA Arabia as if it had occurred at the beginning of the periods presented and include the impact from the preliminary allocation of the purchase price on depreciation and amortization. The pro forma information also excludes the impact of the remeasurement gain and charge to earnings recorded during the 2014 period. The pro forma information is presented for illustrative purposes only and is based on estimates and assumptions we deemed appropriate. The impact of the acquisition of TD Water Transfer is not significant and is therefore not included in the pro forma information below. The following pro forma information is not necessarily indicative of the historical results that would have been achieved if the acquisition transaction had occurred in the past, and our operating results may have been different from those reflected in the pro forma information below. Therefore, the pro forma information should not be relied upon as an indication of the operating results that we would have achieved if the transaction had occurred at the beginning of the periods presented or the future results that we will achieve after the acquisition.

	Three Months Ended March 31,
	2014			2013
	(In Thousands, Except Per Share Amounts)
Revenues	$	214,451		$	216,102
Depreciation, depletion, amortization, and accretion	$	23,123		$	20,527
Gross profit	$	25,525		$	41,605
Income (loss) before discontinued operations	$	(8,903	)	$	2,228
Net income (loss)	$	(8,903	)	$	2,228
Net income (loss) attributable to TETRA stockholders	$	(9,747	)	$	1,470
Per share information:
Income (loss) before discontinued operations attributable to TETRA stockholders
Basic	$	(0.12	)	$	0.02
Diluted	$	(0.12	)	$	0.02
Net income (loss) attributable to TETRA stockholders
Basic	$	(0.12	)	$	0.02
Diluted	$	(0.12	)	$	0.02