Delaware | 74-2148293 |
(State of incorporation) | (I.R.S. Employer Identification No.) |
24955 Interstate 45 North | |
The Woodlands, Texas | 77380 |
(Address of principal executive offices) | (zip code) |
Large accelerated filer [ ] | Accelerated filer [ X ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [ ] |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Revenues: | |||||||
Product sales | $ | 57,697 | $ | 84,886 | |||
Services and rentals | 111,632 | 166,206 | |||||
Total revenues | 169,329 | 251,092 | |||||
Cost of revenues: | |||||||
Cost of product sales | 45,259 | 63,579 | |||||
Cost of services and rentals | 75,182 | 103,084 | |||||
Depreciation, amortization, and accretion | 33,607 | 38,342 | |||||
Impairments of long-lived assets | 10,670 | — | |||||
Total cost of revenues | 164,718 | 205,005 | |||||
Gross profit | 4,611 | 46,087 | |||||
General and administrative expense | 33,611 | 35,269 | |||||
Goodwill impairment | 106,205 | — | |||||
Interest expense, net | 14,639 | 13,793 | |||||
Other (income) expense, net | (704 | ) | (921 | ) | |||
Income (loss) before taxes | (149,140 | ) | (2,054 | ) | |||
Provision (benefit) for income taxes | (1,409 | ) | 1,568 | ||||
Net income (loss) | (147,731 | ) | (3,622 | ) | |||
(Income) loss attributable to noncontrolling interest | 59,406 | (825 | ) | ||||
Net income (loss) attributable to TETRA stockholders | $ | (88,325 | ) | $ | (4,447 | ) | |
Basic net income (loss) per common share: | |||||||
Net income (loss) attributable to TETRA stockholders | $ | (1.11 | ) | $ | (0.06 | ) | |
Average shares outstanding | 79,421 | 78,907 | |||||
Diluted net income (loss) per common share: | |||||||
Net income (loss) attributable to TETRA stockholders | $ | (1.11 | ) | $ | (0.06 | ) | |
Average diluted shares outstanding | 79,421 | 78,907 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Net income (loss) | $ | (147,731 | ) | $ | (3,622 | ) | |
Foreign currency translation adjustment | 518 | (9,787 | ) | ||||
Comprehensive income (loss) | (147,213 | ) | (13,409 | ) | |||
Comprehensive (income) loss attributable to noncontrolling interest | 59,859 | (924 | ) | ||||
Comprehensive income (loss) attributable to TETRA stockholders | $ | (87,354 | ) | $ | (14,333 | ) |
March 31, 2016 | December 31, 2015 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 25,833 | $ | 23,057 | |||
Restricted cash | 6,686 | 6,721 | |||||
Trade accounts receivable, net of allowances of $7,511 in 2016 and $7,847 in 2015 | 109,724 | 184,172 | |||||
Inventories | 126,682 | 117,009 | |||||
Assets held for sale | 730 | 772 | |||||
Prepaid expenses and other current assets | 24,658 | 22,298 | |||||
Total current assets | 294,313 | 354,029 | |||||
Property, plant, and equipment: | |||||||
Land and building | 79,519 | 79,462 | |||||
Machinery and equipment | 1,351,985 | 1,345,969 | |||||
Automobiles and trucks | 41,055 | 43,536 | |||||
Chemical plants | 184,020 | 181,014 | |||||
Construction in progress | 4,978 | 6,505 | |||||
Total property, plant, and equipment | 1,661,557 | 1,656,486 | |||||
Less accumulated depreciation | (634,642 | ) | (608,482 | ) | |||
Net property, plant, and equipment | 1,026,915 | 1,048,004 | |||||
Other assets: | |||||||
Goodwill | 6,636 | 112,945 | |||||
Patents, trademarks and other intangible assets, net of accumulated amortization of $56,969 in 2016 and $44,695 in 2015 | 73,622 | 86,375 | |||||
Deferred tax assets, net | 25 | 25 | |||||
Other assets | 35,793 | 34,824 | |||||
Total other assets | 116,076 | 234,169 | |||||
Total assets | $ | 1,437,304 | $ | 1,636,202 |
March 31, 2016 | December 31, 2015 | ||||||
(Unaudited) | |||||||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Trade accounts payable | $ | 46,191 | $ | 62,114 | |||
Unearned income | 22,689 | 27,542 | |||||
Accrued liabilities | 69,638 | 80,970 | |||||
Current portion of long-term debt | — | 50 | |||||
Decommissioning and other asset retirement obligations | 3,716 | 14,570 | |||||
Total current liabilities | 142,234 | 185,246 | |||||
Long-term debt, net of current portion | 841,366 | 853,228 | |||||
Deferred income taxes | 9,796 | 9,467 | |||||
Decommissioning and other asset retirement obligations, net of current portion | 50,875 | 42,879 | |||||
Other liabilities | 30,936 | 31,202 | |||||
Total long-term liabilities | 932,973 | 936,776 | |||||
Commitments and contingencies | |||||||
Equity: | |||||||
TETRA stockholders' equity: | |||||||
Common stock, par value $0.01 per share; 100,000,000 shares authorized; 83,032,028 shares issued at March 31, 2016 and 83,023,628 shares issued at December 31, 2015 | 830 | 830 | |||||
Additional paid-in capital | 257,948 | 256,184 | |||||
Treasury stock, at cost; 2,771,588 shares held at March 31, 2016, and 2,766,958 shares held at December 31, 2015 | (16,843 | ) | (16,837 | ) | |||
Accumulated other comprehensive income (loss) | (42,164 | ) | (43,135 | ) | |||
Retained earnings (deficit) | (44,150 | ) | 44,175 | ||||
Total TETRA stockholders' equity | 155,621 | 241,217 | |||||
Noncontrolling interests | 206,476 | 272,963 | |||||
Total equity | 362,097 | 514,180 | |||||
Total liabilities and equity | $ | 1,437,304 | $ | 1,636,202 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Operating activities: | |||||||
Net income (loss) | $ | (147,731 | ) | $ | (3,622 | ) | |
Reconciliation of net income (loss) to cash provided by operating activities: | |||||||
Depreciation, amortization, and accretion | 33,606 | 38,342 | |||||
Impairment of long-lived assets | 10,670 | — | |||||
Impairment of goodwill | 106,205 | — | |||||
Provision (benefit) for deferred income taxes | 333 | 122 | |||||
Equity-based compensation expense | 2,373 | 1,596 | |||||
Provision for doubtful accounts | 198 | 242 | |||||
Excess decommissioning and abandoning costs | 37 | 152 | |||||
Amortization of deferred financing costs | 1,110 | 907 | |||||
Other non-cash charges and credits | (593 | ) | (1,390 | ) | |||
Gain on sale of assets | (1,019 | ) | (1,650 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 74,328 | 32,698 | |||||
Inventories | (15,042 | ) | (12,637 | ) | |||
Prepaid expenses and other current assets | (1,650 | ) | 773 | ||||
Trade accounts payable and accrued expenses | (33,176 | ) | (26,310 | ) | |||
Decommissioning liabilities | (3,379 | ) | (566 | ) | |||
Other | (1,009 | ) | (842 | ) | |||
Net cash provided by operating activities | 25,261 | 27,815 | |||||
Investing activities: | |||||||
Purchases of property, plant, and equipment | (3,231 | ) | (49,024 | ) | |||
Proceeds on sale of property, plant, and equipment | 1,246 | 2,886 | |||||
Other investing activities | (7 | ) | (211 | ) | |||
Net cash used in investing activities | (1,992 | ) | (46,349 | ) | |||
Financing activities: | |||||||
Proceeds from long-term debt | 117,600 | 51,954 | |||||
Principal payments on long-term debt | (130,951 | ) | (37,329 | ) | |||
CCLP distributions | (7,209 | ) | (9,274 | ) | |||
Proceeds from exercise of stock options | 28 | 285 | |||||
Excess tax benefit from equity compensation | — | — | |||||
Other financing activities | (6 | ) | — | ||||
Net cash provided by (used in) financing activities | (20,538 | ) | 5,636 | ||||
Effect of exchange rate changes on cash | 45 | (970 | ) | ||||
Decrease in cash and cash equivalents | 2,776 | (13,868 | ) | ||||
Cash and cash equivalents at beginning of period | 23,057 | 48,384 | |||||
Cash and cash equivalents at end of period | $ | 25,833 | $ | 34,516 | |||
Supplemental cash flow information: | |||||||
Interest paid | $ | 19,822 | $ | 16,358 | |||
Income taxes paid | 740 | 2,923 |
March 31, 2016 | December 31, 2015 | ||||||
(In Thousands) | |||||||
Finished goods | $ | 69,109 | $ | 54,587 | |||
Raw materials | 2,752 | 1,731 | |||||
Parts and supplies | 37,476 | 37,379 | |||||
Work in progress | 17,345 | 23,312 | |||||
Total inventories | $ | 126,682 | $ | 117,009 |
Fluids | Production Testing | Compression | Offshore Services | Maritech | Total | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Balance as of December 31, 2014 | 6,636 | 53,682 | 233,548 | — | — | 293,866 | ||||||||||||||||||
Goodwill adjustments | — | (39,775 | ) | (141,146 | ) | — | — | (180,921 | ) | |||||||||||||||
Balance as of December 31, 2015 | 6,636 | 13,907 | 92,402 | — | — | 112,945 | ||||||||||||||||||
Goodwill adjustments | — | (13,907 | ) | (92,402 | ) | — | — | (106,309 | ) | |||||||||||||||
Balance as of March 31, 2016 | $ | 6,636 | $ | — | $ | — | $ | — | $ | — | $ | 6,636 |
Three Months Ended March 31, | |||||
2016 | 2015 | ||||
(In Thousands) | |||||
Number of weighted average common shares outstanding | 79,421 | 78,907 | |||
Assumed exercise of stock awards | — | — | |||
Average diluted shares outstanding | 79,421 | 78,907 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
(In Thousands) | |||||||
Rental revenue | $ | 14,101 | $ | 50,524 | |||
Cost of rental revenue | $ | 12,974 | $ | 24,523 |
Fair Value Measurements Using | ||||||||||||
Total as of | Quoted Prices in Active Markets for Identical Assets or Liabilities | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||
Description | March 31, 2016 | (Level 1) | (Level 2) | (Level 3) | ||||||||
(In Thousands) | ||||||||||||
Asset for foreign currency derivative contracts | $ | 453 | — | 453 | — | |||||||
Liability for foreign currency derivative contracts | (69 | ) | — | (69 | ) | — | ||||||
Net liability | $ | 384 |
Fair Value Measurements Using | |||||||||||||
Total as of | Quoted Prices in Active Markets for Identical Assets or Liabilities | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||
Description | Dec 31, 2015 | (Level 1) | (Level 2) | (Level 3) | |||||||||
(In Thousands) | |||||||||||||
Asset for foreign currency derivative contracts | $ | 23 | $ | — | 23 | — | |||||||
Liability for foreign currency derivative contracts | (385 | ) | — | (385 | ) | — | |||||||
Acquisition contingent consideration liability | — | — | — | — | |||||||||
Net liability | $ | (362 | ) |
Fair Value Measurements Using | |||||||||||||||||
Total as of | Quoted Prices in Active Markets for Identical Assets or Liabilities | Significant Other Observable Inputs | Significant Unobservable Inputs | Year-to-Date Impairment | |||||||||||||
Description | Mar 31, 2016 | (Level 1) | (Level 2) | (Level 3) | Losses | ||||||||||||
(In Thousands) | |||||||||||||||||
Compression intangible assets | $ | 20,600 | — | — | 20,600 | $ | 7,865 | ||||||||||
Compression goodwill | — | — | — | — | 92,333 | ||||||||||||
Production Testing intangible assets | 2,900 | — | — | 2,900 | 2,804 | ||||||||||||
Production Testing goodwill | — | — | — | — | 13,871 | ||||||||||||
Other | — | — | — | — | — | ||||||||||||
Total | $ | 23,500 | $ | 116,873 |
March 31, 2016 | December 31, 2015 | ||||||||
(In Thousands) | |||||||||
TETRA | Scheduled Maturity | ||||||||
Bank revolving line of credit facility (presented net of the unamortized deferred financing costs of $1.2 million as of March 31, 2016 and $1.3 million as of December 31, 2015) | September 30, 2019 | $ | 19,363 | $ | 21,572 | ||||
5.09% Senior Notes, Series 2010-A (presented net of unamortized deferred financing costs of $0.1 million as of March 31, 2016 and $0.1 million as of December 31, 2015) | December 15, 2017 | 46,827 | 46,809 | ||||||
5.67% Senior Notes, Series 2010-B (presented net of unamortized deferred financing costs of $0.1 million as of March 31, 2016 and $0.1 million as of December 31, 2015) | December 15, 2020 | 17,968 | 17,964 | ||||||
4.00% Senior Notes, Series 2013 (presented net of unamortized deferred financing costs of $0.2 million as of March 31, 2016 and $0.2 million as of December 31, 2015) | April 29, 2020 | 34,767 | 34,753 | ||||||
11.00% Senior Notes, Series 2015 (presented net of the unamortized discount of $4.8 million as of March 31, 2016 and $4.9 million as of December 31, 2015 and net of unamortized deferred financing costs of $3.0 million as of March 31, 2016 and $3.2 million as of December 31, 2015) | November 5, 2022 | 117,218 | 116,837 | ||||||
Senior Secured Notes (presented net of unamortized deferred financing costs of $1.3 million as of March 31, 2016 and $1.4 million as of December 31, 2015) | April 1, 2019 | 38,737 | 48,635 | ||||||
Other | — | 50 | |||||||
TETRA Total debt | 274,880 | 286,620 | |||||||
Less current portion | — | (50 | ) | ||||||
TETRA Total long-term debt | $ | 274,880 | $ | 286,570 | |||||
CCLP | |||||||||
CCLP Bank Credit Facility (presented net of the unamortized deferred financing costs of $5.1 million as of March 31, 2016 and $5.4 million as of December 31, 2015) | August 4, 2019 | 228,933 | 229,555 | ||||||
CCLP 7.25% Senior Notes (presented net of the unamortized discount of $4.4 million as of March 31, 2016 and $4.5 million as of December 31, 2015 and net of unamortized deferred financing costs of $8.1 million as of March 31, 2016 and $8.4 million as of December 31, 2015) | August 15, 2022 | 337,552 | 337,103 | ||||||
CCLP total long-term debt | 566,485 | 566,658 | |||||||
Consolidated total long-term debt | $ | 841,365 | $ | 853,228 |
Three Months Ended March 31, 2016 | |||
Beginning balance for the period, as reported | $ | 57,449 | |
Activity in the period: | |||
Accretion of liability | 402 | ||
Retirement obligations incurred | — | ||
Revisions in estimated cash flows | 121 | ||
Settlement of retirement obligations | (3,381 | ) | |
Ending balance | $ | 54,591 |
Derivative Contracts | US Dollar Notional Amount | Traded Exchange Rate | Settlement Date | |||||
(In Thousands) | ||||||||
Forward purchase Euro | $ | 2,766 | 1.11 | 4/18/2016 | ||||
Forward purchase pounds sterling | 7,940 | 1.42 | 4/18/2016 | |||||
Forward sale Mexican peso | 7,709 | 17.90 | 4/18/2016 | |||||
Forward sale Mexican peso | 2,011 | 17.90 | 4/18/2016 |
Foreign currency derivative instruments | Balance Sheet Location | Fair Value at March 31, 2016 | Fair Value at December 31, 2015 | |||||||
(In Thousands) | ||||||||||
Forward sale contracts | Current assets | $ | 263 | $ | 23 | |||||
Forward purchase contracts | Current assets | 190 | — | |||||||
Forward sale contracts | Current liabilities | (69 | ) | (31 | ) | |||||
Forward purchase contracts | Current liabilities | — | (354 | ) | ||||||
Net asset (liability) | $ | 384 | $ | (362 | ) |
Three Months Ended March 31, | |||||||||||||||||||||||
2016 | 2015 | ||||||||||||||||||||||
TETRA | Non- controlling Interest | Total | TETRA | Non- controlling Interest | Total | ||||||||||||||||||
(In Thousands) | |||||||||||||||||||||||
Beginning balance for the period | $ | 241,217 | $ | 272,963 | $ | 514,180 | $ | 369,713 | $ | 395,888 | $ | 765,601 | |||||||||||
Net income (loss) | (88,325 | ) | (59,406 | ) | (147,731 | ) | (4,447 | ) | 825 | (3,622 | ) | ||||||||||||
Foreign currency translation adjustment | 971 | (453 | ) | 518 | (9,886 | ) | 99 | (9,787 | ) | ||||||||||||||
Comprehensive Income (loss) | (87,354 | ) | (59,859 | ) | (147,213 | ) | (14,333 | ) | 924 | (13,409 | ) | ||||||||||||
Exercise of common stock options | 25 | — | 25 | 285 | — | 285 | |||||||||||||||||
Distributions to public unitholders | — | (7,209 | ) | (7,209 | ) | — | (9,274 | ) | (9,274 | ) | |||||||||||||
Equity-based compensation | 1,738 | 618 | 2,356 | 1,119 | 477 | 1,596 | |||||||||||||||||
Treasury stock and other | (5 | ) | (37 | ) | (42 | ) | — | — | — | ||||||||||||||
Tax adjustment upon cancellation of stock options | — | — | — | (204 | ) | — | (204 | ) | |||||||||||||||
Ending balance as of March 31 | $ | 155,621 | $ | 206,476 | $ | 362,097 | $ | 356,580 | $ | 388,015 | $ | 744,595 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
(In Thousands) | |||||||
Revenues from external customers | |||||||
Product sales | |||||||
Fluids Division | $ | 42,331 | $ | 64,994 | |||
Production Testing Division | — | — | |||||
Compression Division | 15,161 | 18,151 | |||||
Offshore Division | |||||||
Offshore Services | 116 | 235 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
(In Thousands) | |||||||
Maritech | 89 | 1,506 | |||||
Total Offshore Division | 205 | 1,741 | |||||
Consolidated | $ | 57,697 | $ | 84,886 | |||
Services and rentals | |||||||
Fluids Division | $ | 16,697 | $ | 34,282 | |||
Production Testing Division | 18,794 | 35,909 | |||||
Compression Division | 66,534 | 84,738 | |||||
Offshore Division | |||||||
Offshore Services | 10,130 | 11,548 | |||||
Maritech | — | — | |||||
Intersegment eliminations | (523 | ) | (271 | ) | |||
Total Offshore Division | 9,607 | 11,277 | |||||
Consolidated | $ | 111,632 | $ | 166,206 | |||
Interdivision revenues | |||||||
Fluids Division | $ | 85 | $ | 10 | |||
Production Testing Division | 1,077 | 1,192 | |||||
Compression Division | — | — | |||||
Offshore Division | |||||||
Offshore Services | — | — | |||||
Maritech | — | — | |||||
Intersegment eliminations | — | — | |||||
Total Offshore Division | — | — | |||||
Interdivision eliminations | (1,162 | ) | (1,202 | ) | |||
Consolidated | $ | — | $ | — | |||
Total revenues | |||||||
Fluids Division | $ | 59,113 | $ | 99,286 | |||
Production Testing Division | 19,871 | 37,101 | |||||
Compression Division | 81,695 | 102,889 | |||||
Offshore Division | |||||||
Offshore Services | 10,246 | 11,783 | |||||
Maritech | 89 | 1,506 | |||||
Intersegment eliminations | (523 | ) | (271 | ) | |||
Total Offshore Division | 9,812 | 13,018 | |||||
Interdivision eliminations | (1,162 | ) | (1,202 | ) | |||
Consolidated | $ | 169,329 | $ | 251,092 | |||
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
(In Thousands) | |||||||
Income (loss) before taxes | |||||||
Fluids Division | $ | (358 | ) | $ | 17,736 | ||
Production Testing Division | (19,374 | ) | 39 | ||||
Compression Division | (104,700 | ) | 2,404 | ||||
Offshore Division | |||||||
Offshore Services | (7,708 | ) | (8,648 | ) | |||
Maritech | (620 | ) | 975 | ||||
Intersegment eliminations | — | — | |||||
Total Offshore Division | (8,328 | ) | (7,673 | ) | |||
Interdivision eliminations | 4 | 3 | |||||
Corporate Overhead(1) | (16,384 | ) | (14,563 | ) | |||
Consolidated | $ | (149,140 | ) | $ | (2,054 | ) |
March 31, | |||||||
2016 | 2015 | ||||||
(In Thousands) | |||||||
Total assets | |||||||
Fluids Division | $ | 347,324 | $ | 413,623 | |||
Production Testing Division | 109,519 | 216,952 | |||||
Compression Division | 873,435 | 1,274,697 | |||||
Offshore Division | |||||||
Offshore Services | 109,603 | 124,856 | |||||
Maritech | 18,452 | 22,925 | |||||
Total Offshore Division | 128,055 | 147,781 | |||||
Corporate Overhead and eliminations | (21,029 | ) | (24,178 | ) | |||
Consolidated | $ | 1,437,304 | $ | 2,028,875 |
(1) | Amounts reflected include the following general corporate expenses: |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
(In Thousands) | |||||||
General and administrative expense | $ | 9,929 | $ | 8,850 | |||
Depreciation and amortization | 114 | 253 | |||||
Interest expense | 6,052 | 4,997 | |||||
Other general corporate (income) expense, net | 289 | 463 | |||||
Total | $ | 16,384 | $ | 14,563 |
March 31, 2016 | |||||||||||||||
Condensed Consolidating Balance Sheet | TETRA | CCLP | Eliminations | Consolidated | |||||||||||
Cash, excluding restricted cash | $ | 15,543 | $ | 10,290 | $ | — | $ | 25,833 | |||||||
Affiliate receivables | 5,561 | — | (5,561 | ) | — | ||||||||||
Other current assets | 173,436 | 95,044 | — | 268,480 | |||||||||||
Property, plant and equipment, net | 338,160 | 688,755 | — | 1,026,915 | |||||||||||
Other assets, including investment in CCLP | 83,428 | 40,011 | (7,363 | ) | 116,076 | ||||||||||
Total assets | $ | 616,128 | $ | 834,100 | $ | (12,924 | ) | $ | 1,437,304 | ||||||
Affiliate payables | $ | — | $ | 5,561 | $ | (5,561 | ) | $ | — | ||||||
Current portion of long-term debt | — | — | — | — | |||||||||||
Other current liabilities | 95,138 | 47,096 | — | 142,234 | |||||||||||
Long-term debt, net | 274,881 | 566,485 | — | 841,366 | |||||||||||
Other non-current liabilities | 90,488 | 1,119 | — | 91,607 | |||||||||||
Total equity | 155,621 | 213,839 | (7,363 | ) | 362,097 | ||||||||||
Total liabilities and equity | $ | 616,128 | $ | 834,100 | $ | (12,924 | ) | $ | 1,437,304 |
Three Months Ended March 31, | Period to Period Change | |||||||||||||
2016 | 2015 | 2016 vs 2015 | % Change | |||||||||||
(In Thousands, Except Percentages) | ||||||||||||||
Revenues | $ | 169,329 | $ | 251,092 | $ | (81,763 | ) | (32.6 | )% | |||||
Gross profit | 4,611 | 46,087 | (41,476 | ) | (90.0 | )% | ||||||||
Gross profit as a percentage of revenue | 2.7 | % | 18.4 | % | ||||||||||
General and administrative expense | 33,611 | 35,269 | (1,658 | ) | (4.7 | )% | ||||||||
General and administrative expense as a percentage of revenue | 19.8 | % | 14.0 | % | ||||||||||
Goodwill impairment | 106,205 | — | 106,205 | 100.0 | % | |||||||||
Interest expense, net | 14,639 | 13,793 | 846 | 6.1 | % | |||||||||
Other (income) expense, net | (704 | ) | (921 | ) | 217 | (23.6 | )% | |||||||
Income (loss) before taxes | (149,140 | ) | (2,054 | ) | (147,086 | ) | ||||||||
Income (loss) before taxes as a percentage of revenue | (88.1 | )% | (0.8 | )% | ||||||||||
Provision (benefit) for income taxes | (1,409 | ) | 1,568 | (2,977 | ) | (189.9 | )% | |||||||
Net income (loss) | (147,731 | ) | (3,622 | ) | (144,109 | ) | ||||||||
Net (income) loss attributable to noncontrolling interest | 59,406 | (825 | ) | 60,231 | ||||||||||
Net income (loss) attributable to TETRA stockholders | $ | (88,325 | ) | $ | (4,447 | ) | $ | (83,878 | ) |
Three Months Ended March 31, | Period to Period Change | |||||||||||||
2016 | 2015 | 2016 vs 2015 | % Change | |||||||||||
(In Thousands, Except Percentages) | ||||||||||||||
Revenues | $ | 59,113 | $ | 99,286 | $ | (40,173 | ) | (40.5 | )% | |||||
Gross profit | 7,491 | 25,365 | (17,874 | ) | (70.5 | )% | ||||||||
Gross profit as a percentage of revenue | 12.7 | % | 25.5 | % | ||||||||||
General and administrative expense | 8,492 | 8,022 | 470 | 5.9 | % | |||||||||
General and administrative expense as a percentage of revenue | 14.4 | % | 8.1 | % | ||||||||||
Interest (income) expense, net | (26 | ) | (8 | ) | (18 | ) | ||||||||
Other (income) expense, net | (618 | ) | (385 | ) | (233 | ) | ||||||||
Income (loss) before taxes | $ | (357 | ) | $ | 17,736 | $ | (18,093 | ) | (102.0 | )% | ||||
Income (loss) before taxes as a percentage of revenue | (0.6 | )% | 17.9 | % |
Three Months Ended March 31, | Period to Period Change | |||||||||||||
2016 | 2015 | 2016 vs 2015 | % Change | |||||||||||
(In Thousands, Except Percentages) | ||||||||||||||
Revenues | $ | 19,871 | $ | 37,101 | $ | (17,230 | ) | (46.4 | )% | |||||
Gross profit (loss) | (3,417 | ) | 2,859 | (6,276 | ) | (219.5 | )% | |||||||
Gross profit as a percentage of revenue | (17.2 | )% | 7.7 | % | ||||||||||
General and administrative expense | 2,934 | 4,094 | (1,160 | ) | (28.3 | )% | ||||||||
General and administrative expense as a percentage of revenue | 14.8 | % | 11.0 | % | ||||||||||
Goodwill impairment | 13,871 | — | 13,871 | 100.0 | % | |||||||||
Interest (income) expense, net | (189 | ) | (9 | ) | (180 | ) | ||||||||
Other (income) expense, net | (664 | ) | (1,265 | ) | 601 | |||||||||
Income (loss) before taxes | $ | (19,369 | ) | $ | 39 | $ | (19,408 | ) | ||||||
Income (loss) before taxes as a percentage of revenue | (97.5 | )% | 0.1 | % |
Three Months Ended March 31, | Period to Period Change | |||||||||||||
2016 | 2015 | 2016 vs 2015 | % Change | |||||||||||
(In Thousands, Except Percentages) | ||||||||||||||
Revenues | $ | 81,695 | $ | 102,889 | $ | (21,194 | ) | (20.6 | )% | |||||
Gross profit | 6,955 | 22,787 | (15,832 | ) | (69.5 | )% | ||||||||
Gross profit as a percentage of revenue | 8.5 | % | 22.1 | % | ||||||||||
General and administrative expense | 10,232 | 11,238 | (1,006 | ) | (9.0 | )% | ||||||||
General and administrative expense as a percentage of revenue | 12.5 | % | 10.9 | % | ||||||||||
Goodwill Impairment | 92,334 | — | 92,334 | |||||||||||
Interest (income) expense, net | 8,802 | 8,679 | 123 | |||||||||||
Other (income) expense, net | 288 | 466 | (178 | ) | ||||||||||
Income (loss) before taxes | $ | (104,701 | ) | $ | 2,404 | $ | (107,105 | ) | ||||||
Income before taxes as a percentage of revenue | (128.2 | )% | 2.3 | % |
Three Months Ended March 31, | Period to Period Change | |||||||||||||
2016 | 2015 | 2016 vs 2015 | % Change | |||||||||||
(In Thousands, Except Percentages) | ||||||||||||||
Revenues | $ | 10,246 | $ | 11,783 | $ | (1,537 | ) | (13.0 | )% | |||||
Gross loss | (5,989 | ) | (5,970 | ) | (19 | ) | (0.3 | )% | ||||||
Gross profit as a percentage of revenue | (58.5 | )% | (50.7 | )% | ||||||||||
General and administrative expense | 1,718 | 2,743 | (1,025 | ) | (37.4 | )% | ||||||||
General and administrative expense as a percentage of revenue | 16.8 | % | 23.3 | % | ||||||||||
Interest (income) expense, net | — | — | — | |||||||||||
Other (income) expense, net | — | (65 | ) | 65 | ||||||||||
Loss before taxes | $ | (7,707 | ) | $ | (8,648 | ) | $ | 941 | 10.9 | % | ||||
Loss before taxes as a percentage of revenue | (75.2 | )% | (73.4 | )% |
Three Months Ended March 31, | Period to Period Change | |||||||||||||
2016 | 2015 | 2016 vs 2015 | % Change | |||||||||||
(In Thousands, Except Percentages) | ||||||||||||||
Revenues | $ | 89 | $ | 1,506 | $ | (1,417 | ) | (94.1 | )% | |||||
Gross profit (loss) | (315 | ) | 1,299 | (1,614 | ) | (124.2 | )% | |||||||
General and administrative expense | 305 | 324 | (19 | ) | (5.9 | )% | ||||||||
General and administrative expense as a percentage of revenue | 342.7 | % | 21.5 | % | ||||||||||
Interest (income) expense, net | — | — | — | |||||||||||
Other (income) expense, net | — | — | — | |||||||||||
Income (loss) before taxes | $ | (620 | ) | $ | 975 | $ | (1,595 | ) | (163.6 | )% |
Three Months Ended March 31, | Period to Period Change | |||||||||||||
2016 | 2015 | 2016 vs 2015 | % Change | |||||||||||
(In Thousands, Except Percentages) | ||||||||||||||
Gross profit (loss) (depreciation expense) | $ | (114 | ) | $ | (253 | ) | $ | 139 | 54.9 | % | ||||
General and administrative expense | 9,929 | 8,850 | 1,079 | 12.2 | % | |||||||||
Interest (income) expense, net | 6,052 | 5,131 | 921 | |||||||||||
Other (income) expense, net | 289 | 329 | (40 | ) | ||||||||||
Loss before taxes | $ | (16,384 | ) | $ | (14,563 | ) | $ | (1,821 | ) | (12.5 | )% |
Three Months Ended March 31, 2016 | Three months ended March 31, 2015 | ||||||
(In Thousands) | |||||||
Operating activities | $ | 25,261 | $ | 27,815 | |||
Investing activities | (1,992 | ) | (46,349 | ) | |||
Financing activities | (20,538 | ) | 5,636 |
• | economic and operating conditions that are outside of our control, including the supply, demand, and prices of crude oil and natural gas; |
• | the levels of competition we encounter; |
• | the activity levels of our customers; |
• | the availability of adequate sources of capital to us; |
• | our ability to comply with contractual obligations, including those under our financing arrangements; |
• | our operational performance; |
• | risks related to acquisitions and our growth strategy; |
• | the availability of raw materials and labor at reasonable prices; |
• | risks related to our foreign operations; |
• | the effect and results of litigation, regulatory matters, settlements, audits, assessments, and contingencies; |
• | information technology risks including the risk from cyberattack, and |
• | other risks and uncertainties under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, those set forth in Item 1A "Risk Factors" in Part II of this Quarterly Report on Form 10-Q, and as included in our other filings with the U.S. Securities and Exchange Commission (“SEC”), which are available free of charge on the SEC website at www.sec.gov. |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Publicly Announced Plans or Programs(1) | |||||||||
January 1 – January 31, 2016 | — | (2) | $ | — | — | $ | 14,327,000 | ||||||
February 1 – February 29, 2016 | — | (2) | — | — | 14,327,000 | ||||||||
March 1 – March 31, 2016 | 917 | (2) | 6.47 | — | 14,327,000 | ||||||||
Total | 917 | — | $ | 14,327,000 |
(1) | In January 2004, our Board of Directors authorized the repurchase of up to $20 million of our common stock. Purchases will be made from time to time in open market transactions at prevailing market prices. The repurchase program may continue until the authorized limit is reached, at which time the Board of Directors may review the option of increasing the authorized limit. |
(2) | Shares we received in connection with the exercise of certain employee stock options or the vesting of certain shares of employee restricted stock. These shares were not acquired pursuant to the stock repurchase program. |
10.1 | Amendment No. 2 to the TETRA Technologies, Inc. Cash Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on February 26, 2016 (SEC File No. 001-13455)). |
31.1* | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1** | Certification Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2** | Certification Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS+ | XBRL Instance Document. |
101.SCH+ | XBRL Taxonomy Extension Schema Document. |
101.CAL+ | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.LAB+ | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE+ | XBRL Taxonomy Extension Presentation Linkbase Document. |
101.DEF+ | XBRL Taxonomy Extension Definition Linkbase Document. |
* | Filed with this report. |
** | Furnished with this report. |
+ | Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Operations for the three month periods ended March 31, 2016 and 2015; (ii) Consolidated Statements of Comprehensive Income for the three month periods ended March 31, 2016 and 2015; (iii) Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015; (iv) Consolidated Statements of Cash Flows for the three month periods ended March 31, 2016 and 2015; and (v) Notes to Consolidated Financial Statements for the three months ended March 31, 2016. |
TETRA Technologies, Inc. | |||
Date: | May 10, 2016 | By: | /s/Stuart M. Brightman |
Stuart M. Brightman | |||
President | |||
Chief Executive Officer | |||
Date: | May 10, 2016 | By: | /s/Elijio V. Serrano |
Elijio V. Serrano | |||
Senior Vice President | |||
Chief Financial Officer | |||
Date: | May 10, 2016 | By: | /s/Ben C. Chambers |
Ben C. Chambers | |||
Vice President – Accounting | |||
Principal Accounting Officer |
10.1 | Amendment No. 2 to the TETRA Technologies, Inc. Cash Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on February 26, 2016 (SEC File No. 001-13455)). |
31.1* | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1** | Certification Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2** | Certification Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS+ | XBRL Instance Document. |
101.SCH+ | XBRL Taxonomy Extension Schema Document. |
101.CAL+ | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.LAB+ | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE+ | XBRL Taxonomy Extension Presentation Linkbase Document. |
101.DEF+ | XBRL Taxonomy Extension Definition Linkbase Document. |
* | Filed with this report. |
** | Furnished with this report. |
+ | Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Operations for the three month periods ended March 31, 2016 and 2015; (ii) Consolidated Statements of Comprehensive Income for the three month periods ended March 31, 2016 and 2015; (iii) Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015; (iv) Consolidated Statements of Cash Flows for the three month periods ended March 31, 2016 and 2015; and (v) Notes to Consolidated Financial Statements for the three months ended March 31, 2016. |
1. | I have reviewed this report on Form 10-Q for the fiscal quarter ended March 31, 2016, of TETRA Technologies, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Date: | May 10, 2016 | /s/Stuart M. Brightman |
Stuart M. Brightman | ||
President and | ||
Chief Executive Officer |
1. | I have reviewed this report on Form 10-Q for the fiscal quarter ended March 31, 2016, of TETRA Technologies, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Date: | May 10, 2016 | /s/Elijio V. Serrano |
Elijio V. Serrano | ||
Senior Vice President and | ||
Chief Financial Officer |
Dated: | May 10, 2016 | /s/Stuart M. Brightman |
Stuart M. Brightman | ||
President and | ||
Chief Executive Officer | ||
TETRA Technologies, Inc. |
Dated: | May 10, 2016 | /s/Elijio V. Serrano |
Elijio V. Serrano | ||
Senior Vice President and | ||
Chief Financial Officer | ||
TETRA Technologies, Inc. |
Document And Entity Information - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2016 |
May. 10, 2016 |
Jun. 30, 2015 |
|
Document Information [Line Items] | |||
Entity Registrant Name | TETRA TECHNOLOGIES INC | ||
Entity Central Index Key | 0000844965 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Accelerated Filer | ||
Entity Public Float | $ 469,749,193 | ||
Entity Common Stock Shares Outstanding | 80,441,557 | ||
Document Fiscal Year Focus | 2016 | ||
Document Fiscal Period Focus | Q1 | ||
Document Type | 10-Q | ||
Amendment Flag | false | ||
Document Period End Date | Mar. 31, 2016 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income (loss) | $ (147,731) | $ (3,622) |
Foreign currency translation adjustment, including taxes of $0 and $0 in 2015 and $1,198 and $1,644 in 2014 | 518 | (9,787) |
Comprehensive income | (147,213) | (13,409) |
Comprehensive (income) loss attributable to noncontrolling interest | 59,859 | (924) |
Comprehensive income (loss) attributable to TETRA stockholders | $ (87,354) | $ (14,333) |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Current assets: | ||
Trade accounts receivable, allowances for doubtful accounts | $ 7,511 | $ 7,847 |
Other assets: | ||
Patents, trademarks, and other intangible assets, accumulated amortization | $ 56,969 | $ 44,695 |
Equity: | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 83,032,028 | 83,023,628 |
Treasury stock, shares held | 2,771,588 | 2,766,958 |
Basis of Presentation and Significant Accounting Policies |
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Notes to Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Significant Accounting Policies | NOTE A – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES We are 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. We also have a limited domestic oil and gas production business. We were incorporated in Delaware in 1981 and are composed of five reporting segments organized into four divisions – Fluids, Production Testing, Compression, and Offshore. Unless the context requires otherwise, when we refer to “we,” “us,” and “our,” we are describing TETRA Technologies, Inc. and its consolidated subsidiaries on a consolidated basis. Our consolidated financial statements include the accounts of our wholly owned subsidiaries. Our interests in oil and gas properties are proportionately consolidated. All intercompany accounts and transactions have been eliminated in consolidation. The information furnished reflects all normal recurring adjustments, which are, in the opinion of management, necessary to provide a fair statement of the results for the interim periods. Operating results for the period ended March 31, 2016 are not necessarily indicative of results that may be expected for the twelve months ended December 31, 2016. We consolidate the financial statements of CSI Compressco LP and its subsidiaries ("CCLP") as part of our Compression Division, as we determined that CCLP is a variable interest entity and we are the primary beneficiary. We control the financial interests of CCLP and have the ability to direct the activities of CCLP that most significantly impact its economic performance through our ownership of its general partner. The share of CCLP net assets and earnings that is not owned by us is presented as noncontrolling interest in our consolidated financial statements. Our cash flows from our investment in CCLP are limited to the quarterly distributions we receive and the amounts collected for services we perform on behalf of CCLP, as TETRA's capital structure and CCLP's capital structure are separate, as we have no cross default provisions, cross collateralization provisions, or cross guarantees with CCLP's debt, nor does CCLP with TETRA's debt. The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission ("SEC") and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in connection with the financial statements for the year ended December 31, 2015, and notes thereto included in our Annual Report on Form 10-K, which we filed with the SEC on March 4, 2016. Certain previously reported financial information has been reclassified to conform to the current year period’s presentation. The impact of such reclassifications was not significant to the prior year period’s overall presentation. These reclassifications include the presentation of deferred financing costs in accordance with the adoption of Accounting Standards Update ("ASU") No. 2015-03 and ASU No. 2015-15 as further discussed below and the allocation of deferred financing costs from Other Expense, net to Interest Expense, net. See Note B - Long-Term Debt and Other Borrowings for further discussion and presentation. Throughout 2015 and continuing into early 2016, significant decreases in oil and natural gas commodity prices lowered the capital expenditure and operating plans of many of our customers, creating uncertainty regarding the expected demand for many of our products and services and the resulting cash flows from operating activities for the foreseeable future. In addition, the availability of new borrowings in current capital markets is more limited and costly. Accordingly, we and CCLP have implemented and continue to implement measures designed to lower our respective cost structures and improve our respective operating cash flows. These measures include headcount reductions and wage reductions. We and CCLP also continue to negotiate with our suppliers and service providers to reduce costs. We and CCLP continue to critically review all capital expenditure activities and are deferring a significant portion of our growth and maintenance capital expenditure plans until they may be justified by expected activity levels. We and CCLP believe the steps taken have enhanced our capital structures and operating cash flows and additional steps may be taken to enhance our respective operating cash flows in the future. However, considering financial forecasts based on current market conditions as of May 10, 2016, it is reasonably possible that we will not be in compliance with one of our bank credit agreement (the "Credit Agreement") financial covenants as of September 30, 2016. With regard to CCLP, also considering financial forecasts based on current market conditions, it is also reasonably possible that CCLP will not be in compliance with one of the financial covenants of its bank credit agreement (the "CCLP Credit Agreement") as of September 30, 2016. See Note B - Long-Term Debt and Other Borrowings for further discussion. We and CCLP are currently in discussions with the respective lenders to amend our respective credit agreements to, among other provisions, favorably adjust these financial covenants. However, there is no assurance that we or CCLP will be successful in obtaining any favorable amendment to our respective credit agreements. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses, and impairments during the reporting period. Actual results could differ from those estimates, and such differences could be material. Cash Equivalents We consider all highly liquid cash investments with a maturity of three months or less when purchased to be cash equivalents. Restricted Cash Restricted cash is classified as a current asset when it is expected to be repaid or settled in the next twelve month period. Restricted cash reported on our balance sheet as of March 31, 2016 consists primarily of escrowed cash associated with our July 2011 purchase of a heavy lift derrick barge. The escrowed cash is expected to be released to the sellers in early 2017. Inventories Inventories are stated at the lower of cost or market value. Except for work in progress inventory discussed below, cost is determined using the weighted average method. Components of inventories as of March 31, 2016, and December 31, 2015, are as follows:
Finished goods inventories include newly manufactured clear brine fluids as well as used brines that are repurchased from certain customers for recycling. Recycled brines are recorded at cost, using the weighted average method. Work in progress inventory consists primarily of new compressor packages located in the CCLP fabrication facility in Midland, Texas. The cost of work in process is determined using the specific identification method. We write down the value of inventory by an amount equal to the difference between its cost and its estimated realizable value. Goodwill Goodwill represents the excess of cost over the fair value of the net assets of businesses acquired in purchase transactions. We perform a goodwill impairment test on an annual basis or whenever indicators of impairment are present. We perform the annual test of goodwill impairment following the fourth quarter of each year. The assessment for goodwill impairment begins with a qualitative assessment of whether it is “more likely than not” that the fair value of each reporting unit is less than its carrying value. This qualitative assessment requires the evaluation, based on the weight of evidence, of the significance of all identified events and circumstances for each reporting unit. During 2015, and continuing into 2016, global oil and natural gas commodity prices, particularly crude oil, decreased significantly. These decreases in commodity prices have had, and are expected to continue to have, a negative impact on industry drilling and capital expenditure activity, which affects the demand for a portion of our products and services. Due to the decrease in the price of our common stock and the price per common unit of CCLP during the first three months of 2016, our and CCLP's market capitalizations as of March 31, 2016, were below their respective recorded net book values, including goodwill. In addition, the continuing low oil and natural gas commodity price environment has resulted in a further negative impact on demand for the products and services for each of our reporting units. As a result of these factors, we determined that it was “more likely than not” that the fair values of certain of our reporting units were less than their respective carrying values as of March 31, 2016. When the qualitative analysis indicates that it is “more likely than not” that a reporting unit’s fair value is less than its carrying value, the resulting goodwill impairment test consists of a two-step accounting test performed on a reporting unit basis. The first step of the impairment test is to compare the estimated fair value with the recorded net book value (including goodwill) of our business. If the estimated fair value of the reporting unit is higher than the recorded net book value, no impairment is deemed to exist and no further testing is required. If, however, the estimated fair value of the reporting unit is below the recorded net book value, then a second step must be performed to determine the goodwill impairment required, if any. In this second step, the estimated fair value from the first step is used as the purchase price in a hypothetical acquisition of the reporting unit. Business combination accounting rules are followed to determine a hypothetical purchase price allocation to the reporting unit’s assets and liabilities. The residual amount of goodwill that results from this hypothetical purchase price allocation is compared to the recorded amount of goodwill for the reporting unit, and the recorded amount is written down to the hypothetical amount, if lower. The application of this second step under goodwill impairment testing may also result in impairments of other long-lived assets, including identified intangible assets. See Impairment of Long-Lived Assets section below for a discussion of other asset impairments that were identified as part of the testing of goodwill as of March 31, 2016. Because quoted market prices for our reporting units other than Compression are not available, our management must apply judgment in determining the estimated fair value of these reporting units for purposes of performing the goodwill impairment test. Management uses all available information to make these fair value determinations, including the present value of expected future cash flows using discount rates commensurate with the risks involved in the assets. The resultant fair values calculated for the reporting units are then compared to observable metrics for other companies in our industry or to mergers and acquisitions in our industry to determine whether those valuations, in our judgment, appear reasonable. The accounting principles regarding goodwill acknowledge that the observed market prices of individual trades of a company’s stock (and thus its computed market capitalization) may not be representative of the fair value of the company as a whole. Substantial value may arise from the ability to take advantage of synergies and other benefits that flow from control over another entity. Consequently, measuring the fair value of a collection of assets and liabilities that operate together in a controlled entity is different from measuring the fair value of a single share of that entity’s common stock. Therefore, once the fair value of the reporting units was determined, we also added a control premium to the calculations. This control premium is judgmental and is based on observed mergers and acquisitions in our industry. As part of our internal annual business outlook for each of our reporting units that we performed during the fourth quarter of 2015, we considered changes in the global economic environment that affected our stock price and market capitalization. As part of the first step of goodwill impairment testing as of March 31, 2016, we updated our annual assessment of the future cash flows for each of our reporting units, applying expected long-term growth rates, discount rates, and terminal values that we consider reasonable for each reporting unit. We have calculated a present value of the respective cash flows for each of the reporting units to arrive at an estimate of fair value under the income approach, and then used the market approach to corroborate these values. Goodwill Impairment as of March 31, 2016. During the first three months of 2016, continued low oil and natural gas commodity prices have resulted in decreased demand for many of the products and services of each of our reporting units. However, based on updated assumptions as of March 31, 2016, we determined that the fair value of our Fluids Division was significantly in excess of its carrying value, which includes approximately $6.6 million of goodwill. Our Offshore Services and Maritech Divisions had no remaining goodwill as of March 31, 2016. With regard to our Compression Division, demand for low-horsepower wellhead compression services and for sales of compressor equipment has decreased significantly and is expected to continue to be decreased for the foreseeable future. In addition, the price per common unit of CCLP as of March 31, 2016 has decreased compared to December 31, 2015. Accordingly, the fair value, including the market capitalization for CCLP, for the Compression reporting unit was less than its carrying value as of March 31, 2016, despite impairments recorded as of December 31, 2015. For our Production Testing Division, demand for production testing services has decreased in each of the market areas in which we operate, resulting in decreased estimated future cash flows. As a result, the fair value of the Production Testing reporting unit was also less than its carrying value as of March 31, 2016, despite impairments recorded as of December 31, 2015. After making the hypothetical purchase price adjustments as part of the second step of the goodwill impairment test, there was $0.0 million residual purchase price to be allocated to the goodwill of both the Compression and Production Testing reporting units. Based on this analysis, we concluded that full impairments of the $92.4 million of recorded goodwill for Compression and $13.9 million of recorded goodwill for Production Testing were required. Accordingly, during the three month period ended March 31, 2016, $106.2 million was charged to Goodwill Impairment expense in the accompanying consolidated statement of operations. As of March 31, 2016, the carrying amounts of goodwill for the Fluids, Production Testing, Compression, and Offshore Services reporting units are net of $23.8 million, $111.8 million, $231.8 million, and $27.2 million, respectively, of accumulated impairment losses. The changes in the carrying amount of goodwill are as follows:
Impairments of Long-Lived Assets Impairments of long-lived assets, including identified intangible assets, are determined periodically when indicators of impairment are present. If such indicators are present, the determination of the amount of impairment is based on our judgments as to the future undiscounted operating cash flows to be generated from these assets throughout their remaining estimated useful lives. If these undiscounted cash flows are less than the carrying amount of the related asset, an impairment is recognized for the excess of the carrying value over its fair value. Fair value of intangible assets is generally determined using the discounted present value of future cash flows. Assets held for sale are recorded at the lower of carrying value or estimated fair value less estimated selling costs. During the first quarter of 2016, as a result of continuing decreased demand due to current market conditions, our Compression and Production Testing segments recorded approximately $7.9 million and $2.8 million, respectively, of impairments associated with certain identified intangible assets. These amounts were charged to Impairments of Long-Lived Assets expense in the accompanying consolidated statement of operations. Net Income (Loss) per Share The following is a reconciliation of the weighted average number of common shares outstanding with the number of shares used in the computations of net income (loss) per common and common equivalent share:
For the three month periods ended March 31, 2016 and March 31, 2015, the average diluted shares outstanding excludes the impact of all outstanding stock awards, as the inclusion of these shares would have been antidilutive due to the net losses recorded during the periods. Services and Rentals Revenues and Costs A portion of our services and rentals revenues consist of income pursuant to operating lease arrangements for compressor packages and other equipment assets. For the three month periods ended March 31, 2016 and 2015, the following operating lease revenues and associated costs were included in services and rentals revenues and cost of services and rentals, respectively, in the accompanying consolidated statements of operations.
Foreign Currency Translation We have designated the euro, the British pound, the Norwegian krone, the Canadian dollar, the Brazilian real, the Argentine peso, and the Mexican peso, respectively, as the functional currency for our operations in Finland and Sweden, the United Kingdom, Norway, Canada, Brazil, Argentina, and certain of our operations in Mexico. The U.S. dollar is the designated functional currency for all of our other foreign operations. The cumulative translation effects of translating the applicable accounts from the functional currencies into the U.S. dollar at current exchange rates are included as a separate component of equity. Foreign currency exchange gains and (losses) are included in Other Expense and totaled $(0.3) million and $0.7 million during the three month periods ended March 31, 2016 and March 31, 2015, respectively. Income Taxes Our consolidated effective tax rate for the three month period ended March 31, 2016 of 0.9% was primarily the result of losses generated in entities for which no related tax benefit has been recorded. The losses generated by these entities do not result in tax benefits due to offsetting valuation allowances being recorded against the related net deferred tax assets. We establish a valuation allowance to reduce the deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Included in our deferred tax assets are net operating loss carryforwards and tax credits that are available to offset future income tax liabilities in the U.S. as well as in certain foreign jurisdictions. Further, the effective tax rate is negatively impacted by the nondeductible portion of our goodwill impairments recorded during the three month period ended March 31, 2016. Our consolidated provision for income taxes during the first quarter of 2015 and 2016 is primarily attributable to taxes in certain foreign jurisdictions and Texas gross margins taxes. Fair Value Measurements Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” within an entity’s principal market, if any. The principal market is the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity, regardless of whether it is the market in which the entity will ultimately transact for a particular asset or liability or if a different market is potentially more advantageous. Accordingly, this exit price concept may result in a fair value that may differ from the transaction price or market price of the asset or liability. Under U.S. generally accepted accounting principles ("GAAP"), the fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value. Fair value measurements should maximize the use of observable inputs and minimize the use of unobservable inputs, where possible. Observable inputs are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs may be needed to measure fair value in situations where there is little or no market activity for the asset or liability at the measurement date and are developed based on the best information available in the circumstances, which could include the reporting entity’s own judgments about the assumptions market participants would utilize in pricing the asset or liability. We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements are utilized in the allocation of purchase consideration for acquisition transactions to the assets and liabilities acquired, including intangible assets and goodwill (a level 3 fair value measurement). In addition, we utilize fair value measurements in the initial recording of our decommissioning and other asset retirement obligations. Fair value measurements may also be utilized on a nonrecurring basis, such as for the impairment of long-lived assets, including goodwill (a level 3 fair value measurement). The fair value of certain of our financial instruments, which include cash, restricted cash, accounts receivable, short-term borrowings, and long-term debt pursuant to our bank credit agreements, approximate their carrying amounts. The aggregate fair values of our long-term Senior Unsecured Notes and Senior Secured Notes (as such terms are herein defined) at March 31, 2016 and December 31, 2015, were approximately $216.8 million and $229.8 million, respectively, compared to carrying amounts of $265.0 million and $275.0 million, respectively, as current interest rates on those dates were different than the stated interest rates on the Senior Unsecured Notes and Senior Secured Notes. The fair values of the publicly tradable CCLP Senior Notes (as herein defined) at March 31, 2016 and December 31, 2015, were approximately $244.1 million and $259.9 million (a level 2 fair value measurement) compared to a face amount of $350.0 million (See Note C - Long-Term Debt and Other Borrowings, for further discussion), as current rates on those dates were different from the stated interest rates on the CCLP Senior Notes. We calculated the fair values of our Senior Unsecured Notes and our Senior Secured Notes as of March 31, 2016 and December 31, 2015, internally, using current market conditions and average cost of debt (a level 2 fair value measurement). We also utilize fair value measurements on a recurring basis in the accounting for our foreign currency forward sale derivative contracts. For these fair value measurements, we utilize the quoted value as determined by our counterparty financial institution (a level 2 fair value measurement). A summary of these fair value measurements as of March 31, 2016 and December 31, 2015, is as follows:
During the first quarter of 2016, in connection with the review of goodwill impairment of our Compression and Production Testing Divisions, these segments recorded total impairment charges of approximately $116.9 million, reflecting the decreased fair value for certain assets. For further discussion, see "Goodwill" and "Impairment of Long-Lived Assets" section above. The fair values used in these impairment calculations were estimated based on a variety of measurements, including current replacement cost and discounted estimated future cash flows, all of which are based on significant unobservable inputs (a level 3 fair value measurement) in accordance with the fair value hierarchy. A summary of these nonrecurring fair value measurements as of March 31, 2016, using the fair value hierarchy is as follows:
New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") 605, Revenue Recognition, and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those years, under either full or modified retrospective adoption. We are currently assessing the potential effects of these changes to our consolidated financial statements. Additionally in March 2016, the FASB issued ASU 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)" to clarify the guidance on principal versus agent considerations. This ASU does not change the effective date or adoption method under ASU 2014-09 which is noted above. In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern.” The ASU provides guidance on management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and in certain circumstances to provide related footnote disclosures. The ASU is effective for annual periods ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” The ASU requires entities that have historically presented debt financing costs as an asset to present those costs as a direct deduction from the carrying amount of the related debt liability. This presentation will result in the debt issuance costs being presented the same way debt discounts have historically been handled. The ASU does not change the recognition, measurement, or subsequent measurement guidance for debt issuance costs. The ASU is effective for annual periods beginning after December 15, 2015, and interim periods within those annual periods and is to be applied retrospectively. As a result of the retrospective adoption of this guidance during the quarter, deferred financing costs of $12.7 million and $13.5 million at March 31, 2016 and December 31, 2015, respectively, are netted against the carrying values of the Senior Notes of TETRA and CCLP. Additionally, in accordance with ASU No. 2015-15, "Interest-Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements", issued in August 2015, we elected to present the deferred financing costs associated with the bank credit facilities of $6.3 million and $6.7 million at March 31, 2016 and December 31, 2015, respectively, as netted against the outstanding amount of the bank credit facilities of TETRA and CCLP. In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory” (Topic 330), which simplifies the subsequent measurement of inventory by requiring entities to measure inventory at the lower of cost or net realizable value, except for inventory measured using the last-in, first-out (LIFO) or the retail inventory methods. The ASU requires entities to compare the cost of inventory to one measure - net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, and is to be applied prospectively with early adoption permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, "Leases" (Topic 842), which was issued to increase comparability and transparency among different organizations. Organizations are required to recognize lease assets and lease liabilities on the balance sheet and disclose key information about the leasing arrangements and cash flows. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods, under a modified retrospective adoption with early adoption permitted. We are currently assessing the potential effects of these changes to our consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" as part of the Simplification Initiative. The update addresses and simplifies several aspects of accounting for share-based payment transactions. The ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted, and is to be applied using either modified retrospective, retrospective, or prospective transition method based on which amendment is being applied. We are currently assessing the potential effects of these changes to our consolidated financial statements. |
Long-Term Debt and Other Borrowings |
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Notes to Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt and Other Borrowings | NOTE B – LONG-TERM DEBT AND OTHER BORROWINGS It is important to consider TETRA's capital structure and CCLP's capital structure separately, as we have no cross default provisions, cross collateralization provisions, or cross guarantees with CCLP's debt, nor does CCLP with TETRA's debt. Long-term debt consists of the following:
As a result of the retrospective adoption of ASU 2015-03 during the three months ended March 31, 2016, deferred financing costs of $19.0 million and $20.2 million at March 31, 2016 and December 31, 2015, respectively, were reclassified out of long-term other assets and are netted against the carrying values of the bank credit facilities and Senior Notes of TETRA and CCLP. In addition, $1.1 million and $0.9 million of expense for the amortization of deferred financing costs for the three month periods ended March 31, 2016 and 2015, respectively, were reclassified from Other Expense, net to Interest Expense, net in the accompanying consolidated statements of operations. We and CCLP are in compliance with all covenants and conditions of our respective credit agreements and senior note agreements as of March 31, 2016. However, considering financial forecasts based on current market conditions as of May 10, 2016, it is reasonably possible that we will not be in compliance with one of our Credit Agreement financial covenants as of September 30, 2016. If any such non-compliance event occurs and is not remedied in a timely manner, a default will occur under our Credit Agreement. Any event of default on our Credit Agreement, if not timely remedied, could result in a termination of all commitments of our lenders thereunder and an acceleration of all amounts owed thereunder and of our outstanding senior notes. With regard to CCLP, also considering financial forecasts based on current market conditions, it is also reasonably possible that CCLP will not be in compliance with one of the financial covenants of the CCLP Credit Agreement as of September 30, 2016. If any such non-compliance event occurs with respect to CCLP and is not remedied in a timely manner, a default will occur under the CCLP Credit Agreement. Any event of default by CCLP, if not timely remedied, could result in a termination of all commitments of CCLP's lenders thereunder and an acceleration of all amounts owed thereunder and of CCLP's outstanding senior notes. We and CCLP are currently in discussions with the respective lenders to amend our respective credit agreements to, among other provisions, favorably adjust these financial covenants. However, there is no assurance that we or CCLP will be successful in obtaining any favorable amendment to our respective credit agreements. On April 26, 2016, we announced the commencement of tender offers (the “Tender Offers”) to purchase for cash any and all of the outstanding Series 2010-A Senior Notes, Series 2010-B Senior Notes, and Series 2013 Senior Notes (together the "Tender Offer Senior Notes"), which total $100 million in the aggregate. The Tender Offers are scheduled to expire immediately after 11:59 p.m., Eastern Time, on May 24, 2016, unless extended by us in our sole discretion or if we terminate the Tender Offers earlier (the "Expiration Time"). The offered consideration for the Tender Offer Senior Notes is an amount, payable in cash, equal to $100,000 per $100,000 principal amount of the Tender Offer Senior Notes validly tendered prior to the Expiration Time, and validly accepted for purchase by us, plus accrued and unpaid interest on such Senior Notes up to, but not including, the date of payment for such notes. Our obligation to consummate each of the Tender Offers is contingent upon the satisfaction of (i) a financing condition, which may include borrowings under our Credit Agreement, a new credit facility and/or the proceeds of offerings of our debt or equity securities, and (ii) certain general conditions, each as further discussed in the related Offers to Purchase. As of March 31, 2016, TETRA (excluding CCLP) had an outstanding balance on its Credit Agreement of $20.6 million, and had $7.6 million in letters of credit and guarantees against the revolving credit facility, leaving a net availability of $196.9 million. As of March 31, 2016, CCLP had a balance outstanding under the CCLP Credit Agreement of $234.0 million, had $2.1 million letters of credit and performance bonds outstanding, leaving a net availability under the CCLP Credit Agreement of $163.9 million. Availability under each of the TETRA Credit Agreement and the CCLP Credit Agreement is subject to compliance with the respective financial covenants and other provisions in the respective credit agreements that may limit borrowings thereunder. |
Decommissioning and Other Asset Retirement Obligations |
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Decommissioning and Other Asset Retirement Obligations | NOTE C – DECOMMISSIONING AND OTHER ASSET RETIREMENT OBLIGATIONS The large majority of our asset retirement obligations consists of the remaining future well abandonment and decommissioning costs for offshore oil and gas properties and platforms owned by our Maritech subsidiary, including the decommissioning and debris removal costs associated with its remaining offshore platforms previously destroyed by hurricanes. The amount of decommissioning liabilities recorded by Maritech is reduced by amounts allocable to joint interest owners in these properties and platforms. We also operate facilities in various U.S. and foreign locations that are used in the manufacture, storage, and sale of our products, inventories, and equipment. These facilities are a combination of owned and leased assets. The values of our asset retirement obligations for non-Maritech properties were approximately $9.3 million and $9.1 million as of March 31, 2016 and December 31, 2015, respectively. We are required to take certain actions in connection with the retirement of these assets. We have reviewed our obligations in this regard in detail and estimated the cost of these actions. The original estimates are the fair values that have been recorded for retiring these long-lived assets. The associated asset retirement costs are capitalized as part of the carrying amount of these long-lived assets. The costs for non-oil and gas assets are depreciated on a straight-line basis over the life of the assets. The changes in the values of our asset retirement obligations during the three month period ended March 31, 2016, are as follows:
We review the adequacy of our asset retirement obligation liabilities whenever indicators suggest that the estimated cash flows underlying the liabilities have changed. For our Maritech segment, the timing and amounts of these cash flows are subject to changes in the oil and gas industry environment and other factors and may result in additional liabilities to be recorded. Asset retirement obligations are recorded in accordance with FASB ASC 410, whereby the estimated fair value of a liability for asset retirement obligations be recorded in the period in which it is incurred and in which a reasonable estimate can be made. Such estimates are based on relevant assumptions that we believe are reasonable. The cost estimates for our Maritech asset retirement obligations are considered reasonable estimates consistent with current market conditions, and we believe reflect the amount of work legally obligated to be performed in accordance with Bureau of Safety and Environmental Enforcement ("BSEE") standards, as revised from time to time. |
Market Risks and Derivative Hedge Contracts |
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Hedge Contracts | NOTE D – MARKET RISKS AND DERIVATIVE CONTRACTS We are exposed to financial and market risks that affect our businesses. We have concentrations of credit risk as a result of trade receivables owed to us by companies in the energy industry. We have currency exchange rate risk exposure related to transactions denominated in foreign currencies as well as to investments in certain of our international operations. As a result of our variable rate bank credit facilities, including the variable rate credit facility of CCLP, we face market risk exposure related to changes in applicable interest rates. Our financial risk management activities may at times involve, among other measures, the use of derivative financial instruments, such as swap and collar agreements, to hedge the impact of market price risk exposures. Derivative Contracts Foreign Currency Derivative Contracts. We and CCLP enter into 30-day foreign currency forward derivative contracts as part of a program designed to mitigate the currency exchange rate risk exposure on selected transactions of certain foreign subsidiaries. As of March 31, 2016, we and CCLP had the following foreign currency derivative contracts outstanding relating to portions of our foreign operations:
Under this program, we and CCLP may enter into similar derivative contracts from time to time. Although contracts pursuant to this program will serve as an economic hedge of the cash flow of our currency exchange risk exposure, they are not formally designated as hedge contracts or qualify for hedge accounting treatment. Accordingly, any change in the fair value of these derivative instruments during a period will be included in the determination of earnings for that period. The fair value of foreign currency derivative instruments are based on quoted market values as reported to us by our counterparty (a level 2 fair value measurement). The fair values of our and CCLP's foreign currency derivative instruments as of March 31, 2016 and December 31, 2015, are as follows:
None of the foreign currency derivative contracts contain credit risk related contingent features that would require us to post assets or collateral for contracts that are classified as liabilities. During the three month periods ended March 31, 2016 and March 31, 2015 , we recognized approximately $0.1 million of net losses and $0.5 million of net gains, respectively, reflected in other income (expense) associated with our foreign currency derivative program. |
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Equity | NOTE E – EQUITY Changes in equity for the three month periods ended March 31, 2016 and 2015 are as follows:
Activity within the foreign currency translation adjustment account during the periods includes no reclassifications to net income. |
Commitments and Contingencies |
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Notes to Financial Statements [Abstract] | |
Commitments and Contingencies | NOTE F – COMMITMENTS AND CONTINGENCIES Litigation We are named defendants in several lawsuits and respondents in certain governmental proceedings arising in the ordinary course of business. While the outcome of lawsuits or other proceedings against us cannot be predicted with certainty, management does not consider it reasonably possible that a loss resulting from such lawsuits or other proceedings in excess of any amounts accrued has been incurred that is expected to have a material adverse impact on our financial condition, results of operations, or liquidity. Environmental One of our subsidiaries, TETRA Micronutrients, Inc. ("TMI"), previously owned and operated a production facility located in Fairbury, Nebraska. TMI is subject to an Administrative Order on Consent issued to American Microtrace, Inc. (n/k/a/ TETRA Micronutrients, Inc.) in the proceeding styled In the Matter of American Microtrace Corporation, EPA I.D. No. NED00610550, Respondent, Docket No. VII-98-H-0016, dated September 25, 1998 (the "Consent Order"), with regard to the Fairbury facility. TMI is liable for ongoing environmental monitoring at the Fairbury facility under the Consent Order; however, the current owner of the Fairbury facility is responsible for costs associated with the closure of that facility. While the outcome cannot be predicted with certainty, management does not consider it reasonably possible that a loss in excess of any amounts accrued has been incurred or is expected to have a material adverse impact on our financial condition, results of operations, or liquidity. Other Contingencies During 2011, in connection with the sale of a significant majority of Maritech’s oil and gas producing properties, the buyers of the properties assumed the associated decommissioning liabilities pursuant to the purchase and sale agreements. For those oil and gas properties Maritech previously operated, the buyers of the properties assumed the financial responsibilities associated with the properties' operations, including abandonment and decommissioning, and generally became the successor operator. Some buyers of these Maritech properties subsequently sold certain of these properties to other buyers who also assumed these financial responsibilities associated with the properties' operations, and these buyers also typically became the successor operator of the properties. To the extent that a buyer of these properties fails to perform the abandonment and decommissioning work required, the previous owner, including Maritech, may be required to perform the abandonment and decommissioning obligation. A significant portion of the decommissioning liabilities that were assumed by the buyers of the Maritech properties in 2011 remains unperformed and we believe the amounts of these remaining liabilities are significant. We monitor the financial condition of the buyers of these properties from Maritech, and if current oil and natural gas pricing levels continue, we expect that one or more of these buyers may be unable to perform the decommissioning work required on the properties acquired from Maritech. During the three months ended March 31, 2016, continued low oil and natural gas prices have resulted in reduced revenues and cash flows for all oil and gas producing companies, including those companies that bought Maritech properties in the past. Certain of these oil and gas producing companies that bought Maritech properties are currently experiencing severe financial difficulties. With regard to certain of these properties, Maritech has security in the form of bonds or cash escrows intended to secure the buyers' obligations to perform the decommissioning work. One company that bought, and subsequently sold, Maritech properties filed for Chapter 11 bankruptcy protection in August 2015. Maritech and its legal counsel monitor the status of these companies. As of March 31, 2016, we do not consider the likelihood of Maritech becoming liable for decommissioning liabilities on sold properties to be probable. Maritech has encountered situations where previously plugged and abandoned wells on its properties have later exhibited a buildup of pressure, which is evidenced by gas bubbles coming from the plugged well head. We refer to this situation as “wells under pressure” and this can either be discovered when performing additional work at the property or by notification from a third party. Wells under pressure require Maritech to return to the site to perform additional plug and abandonment procedures that were not originally anticipated and included in the estimate of the asset retirement obligation for such property. Remediation work at previously abandoned well sites is particularly costly, due to the lack of a platform from which to base these activities. Maritech is the last operator of record for its plugged wells, and bears the risk of additional future work required as a result of wells becoming pressurized in the future. |
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Industry Segments | NOTE G – INDUSTRY SEGMENTS We manage our operations through five reporting segments organized into four divisions: Fluids, Production Testing, Compression, and Offshore. Our Fluids Division manufactures and markets clear brine fluids, additives, and associated products and services to the oil and gas industry for use in well drilling, completion, and workover operations in the United States and in certain countries in Latin America, Europe, Asia, the Middle East, and Africa. The Division also markets liquid and dry calcium chloride products manufactured at its production facilities or purchased from third-party suppliers to a variety of markets outside the energy industry. The Fluids Division also provides domestic onshore oil and gas operators with comprehensive water management services. Our Production Testing Division provides frac flowback, production well testing, offshore rig cooling, and other associated services in many of the major oil and gas producing regions in the United States, Mexico, and Canada, as well as in basins in certain regions in South America, Africa, Europe, the Middle East, and Australia. The Compression Division is a provider of compression services and equipment for natural gas and oil production, gathering, transportation, processing, and storage. The Compression Division's equipment sales business includes the fabrication and sale of standard compressor packages, custom-designed compressor packages, and oilfield pump systems designed and fabricated at the Division's facilities. The Compression Division's aftermarket services business provides compressor package reconfiguration and maintenance services as well as providing compressor package parts and components manufactured by third-party suppliers. The Compression Division provides its services and equipment to a broad base of natural gas and oil exploration and production, midstream, transmission, and storage companies operating throughout many of the onshore producing regions of the United States as well as in a number of foreign countries, including Mexico, Canada, and Argentina. Our Offshore Division consists of two operating segments: Offshore Services and Maritech. The Offshore Services segment provides (1) downhole and subsea services such as well plugging and abandonment and workover services, (2) decommissioning and certain construction services utilizing heavy lift barges and various cutting technologies with regard to offshore oil and gas production platforms and pipelines, and (3) conventional and saturation diving services. The Maritech segment is a limited oil and gas production operation. During 2011 and the first quarter of 2012, Maritech sold substantially all of its oil and gas producing property interests. Maritech’s operations consist primarily of the ongoing abandonment and decommissioning associated with its remaining offshore wells and production platforms. Maritech intends to acquire a portion of these services from the Offshore Services segment. We generally evaluate the performance of and allocate resources to our segments based on profit or loss from their operations before income taxes and nonrecurring charges, return on investment, and other criteria. Transfers between segments and geographic areas are priced at the estimated fair value of the products or services as negotiated between the operating units. “Corporate overhead” includes corporate general and administrative expenses, corporate depreciation and amortization, interest income and expense, and other income and expense. Summarized financial information concerning the business segments is as follows:
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Basis of Presentation and Significant Accounting Policies (Policies) |
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Principles of consolidation policy | Our consolidated financial statements include the accounts of our wholly owned subsidiaries. Our interests in oil and gas properties are proportionately consolidated. All intercompany accounts and transactions have been eliminated in consolidation. The information furnished reflects all normal recurring adjustments, which are, in the opinion of management, necessary to provide a fair statement of the results for the interim periods. Operating results for the period ended March 31, 2016 are not necessarily indicative of results that may be expected for the twelve months ended December 31, 2016. We consolidate the financial statements of CSI Compressco LP and its subsidiaries ("CCLP") as part of our Compression Division, as we determined that CCLP is a variable interest entity and we are the primary beneficiary. We control the financial interests of CCLP and have the ability to direct the activities of CCLP that most significantly impact its economic performance through our ownership of its general partner. The share of CCLP net assets and earnings that is not owned by us is presented as noncontrolling interest in our consolidated financial statements. Our cash flows from our investment in CCLP are limited to the quarterly distributions we receive and the amounts collected for services we perform on behalf of CCLP, as TETRA's capital structure and CCLP's capital structure are separate, as we have no cross default provisions, cross collateralization provisions, or cross guarantees with CCLP's debt, nor does CCLP with TETRA's debt. The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission ("SEC") and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in connection with the financial statements for the year ended December 31, 2015, and notes thereto included in our Annual Report on Form 10-K, which we filed with the SEC on March 4, 2016. |
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Reclassifications policy | Certain previously reported financial information has been reclassified to conform to the current year period’s presentation. The impact of such reclassifications was not significant to the prior year period’s overall presentation. These reclassifications include the presentation of deferred financing costs in accordance with the adoption of Accounting Standards Update ("ASU") No. 2015-03 and ASU No. 2015-15 as further discussed below and the allocation of deferred financing costs from Other Expense, net to Interest Expense, net. See Note B - Long-Term Debt and Other Borrowings for further discussion and presentation. |
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Use of estimates policy | Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses, and impairments during the reporting period. Actual results could differ from those estimates, and such differences could be material. |
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Cash and cash equivalents policy | Cash Equivalents We consider all highly liquid cash investments with a maturity of three months or less when purchased to be cash equivalents. |
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Restricted cash policy | Restricted Cash Restricted cash is classified as a current asset when it is expected to be repaid or settled in the next twelve month period. Restricted cash reported on our balance sheet as of March 31, 2016 consists primarily of escrowed cash associated with our July 2011 purchase of a heavy lift derrick barge. The escrowed cash is expected to be released to the sellers in early 2017. |
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Inventories policy | Inventories Inventories are stated at the lower of cost or market value. Except for work in progress inventory discussed below, cost is determined using the weighted average method. Components of inventories as of March 31, 2016, and December 31, 2015, are as follows:
Finished goods inventories include newly manufactured clear brine fluids as well as used brines that are repurchased from certain customers for recycling. Recycled brines are recorded at cost, using the weighted average method. Work in progress inventory consists primarily of new compressor packages located in the CCLP fabrication facility in Midland, Texas. The cost of work in process is determined using the specific identification method. We write down the value of inventory by an amount equal to the difference between its cost and its estimated realizable value. |
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Goodwill policy | Goodwill Goodwill represents the excess of cost over the fair value of the net assets of businesses acquired in purchase transactions. We perform a goodwill impairment test on an annual basis or whenever indicators of impairment are present. We perform the annual test of goodwill impairment following the fourth quarter of each year. The assessment for goodwill impairment begins with a qualitative assessment of whether it is “more likely than not” that the fair value of each reporting unit is less than its carrying value. This qualitative assessment requires the evaluation, based on the weight of evidence, of the significance of all identified events and circumstances for each reporting unit. During 2015, and continuing into 2016, global oil and natural gas commodity prices, particularly crude oil, decreased significantly. These decreases in commodity prices have had, and are expected to continue to have, a negative impact on industry drilling and capital expenditure activity, which affects the demand for a portion of our products and services. Due to the decrease in the price of our common stock and the price per common unit of CCLP during the first three months of 2016, our and CCLP's market capitalizations as of March 31, 2016, were below their respective recorded net book values, including goodwill. In addition, the continuing low oil and natural gas commodity price environment has resulted in a further negative impact on demand for the products and services for each of our reporting units. As a result of these factors, we determined that it was “more likely than not” that the fair values of certain of our reporting units were less than their respective carrying values as of March 31, 2016. When the qualitative analysis indicates that it is “more likely than not” that a reporting unit’s fair value is less than its carrying value, the resulting goodwill impairment test consists of a two-step accounting test performed on a reporting unit basis. The first step of the impairment test is to compare the estimated fair value with the recorded net book value (including goodwill) of our business. If the estimated fair value of the reporting unit is higher than the recorded net book value, no impairment is deemed to exist and no further testing is required. If, however, the estimated fair value of the reporting unit is below the recorded net book value, then a second step must be performed to determine the goodwill impairment required, if any. In this second step, the estimated fair value from the first step is used as the purchase price in a hypothetical acquisition of the reporting unit. Business combination accounting rules are followed to determine a hypothetical purchase price allocation to the reporting unit’s assets and liabilities. The residual amount of goodwill that results from this hypothetical purchase price allocation is compared to the recorded amount of goodwill for the reporting unit, and the recorded amount is written down to the hypothetical amount, if lower. The application of this second step under goodwill impairment testing may also result in impairments of other long-lived assets, including identified intangible assets. See Impairment of Long-Lived Assets section below for a discussion of other asset impairments that were identified as part of the testing of goodwill as of March 31, 2016. Because quoted market prices for our reporting units other than Compression are not available, our management must apply judgment in determining the estimated fair value of these reporting units for purposes of performing the goodwill impairment test. Management uses all available information to make these fair value determinations, including the present value of expected future cash flows using discount rates commensurate with the risks involved in the assets. The resultant fair values calculated for the reporting units are then compared to observable metrics for other companies in our industry or to mergers and acquisitions in our industry to determine whether those valuations, in our judgment, appear reasonable. The accounting principles regarding goodwill acknowledge that the observed market prices of individual trades of a company’s stock (and thus its computed market capitalization) may not be representative of the fair value of the company as a whole. Substantial value may arise from the ability to take advantage of synergies and other benefits that flow from control over another entity. Consequently, measuring the fair value of a collection of assets and liabilities that operate together in a controlled entity is different from measuring the fair value of a single share of that entity’s common stock. Therefore, once the fair value of the reporting units was determined, we also added a control premium to the calculations. This control premium is judgmental and is based on observed mergers and acquisitions in our industry. As part of our internal annual business outlook for each of our reporting units that we performed during the fourth quarter of 2015, we considered changes in the global economic environment that affected our stock price and market capitalization. As part of the first step of goodwill impairment testing as of March 31, 2016, we updated our annual assessment of the future cash flows for each of our reporting units, applying expected long-term growth rates, discount rates, and terminal values that we consider reasonable for each reporting unit. We have calculated a present value of the respective cash flows for each of the reporting units to arrive at an estimate of fair value under the income approach, and then used the market approach to corroborate these values. Goodwill Impairment as of March 31, 2016. During the first three months of 2016, continued low oil and natural gas commodity prices have resulted in decreased demand for many of the products and services of each of our reporting units. However, based on updated assumptions as of March 31, 2016, we determined that the fair value of our Fluids Division was significantly in excess of its carrying value, which includes approximately $6.6 million of goodwill. Our Offshore Services and Maritech Divisions had no remaining goodwill as of March 31, 2016. With regard to our Compression Division, demand for low-horsepower wellhead compression services and for sales of compressor equipment has decreased significantly and is expected to continue to be decreased for the foreseeable future. In addition, the price per common unit of CCLP as of March 31, 2016 has decreased compared to December 31, 2015. Accordingly, the fair value, including the market capitalization for CCLP, for the Compression reporting unit was less than its carrying value as of March 31, 2016, despite impairments recorded as of December 31, 2015. For our Production Testing Division, demand for production testing services has decreased in each of the market areas in which we operate, resulting in decreased estimated future cash flows. As a result, the fair value of the Production Testing reporting unit was also less than its carrying value as of March 31, 2016, despite impairments recorded as of December 31, 2015. After making the hypothetical purchase price adjustments as part of the second step of the goodwill impairment test, there was $0.0 million residual purchase price to be allocated to the goodwill of both the Compression and Production Testing reporting units. Based on this analysis, we concluded that full impairments of the $92.4 million of recorded goodwill for Compression and $13.9 million of recorded goodwill for Production Testing were required. Accordingly, during the three month period ended March 31, 2016, $106.2 million was charged to Goodwill Impairment expense in the accompanying consolidated statement of operations. As of March 31, 2016, the carrying amounts of goodwill for the Fluids, Production Testing, Compression, and Offshore Services reporting units are net of $23.8 million, $111.8 million, $231.8 million, and $27.2 million, respectively, of accumulated impairment losses. The changes in the carrying amount of goodwill are as follows:
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Impairment of Long-Lived Assets policy | Impairments of Long-Lived Assets Impairments of long-lived assets, including identified intangible assets, are determined periodically when indicators of impairment are present. If such indicators are present, the determination of the amount of impairment is based on our judgments as to the future undiscounted operating cash flows to be generated from these assets throughout their remaining estimated useful lives. If these undiscounted cash flows are less than the carrying amount of the related asset, an impairment is recognized for the excess of the carrying value over its fair value. Fair value of intangible assets is generally determined using the discounted present value of future cash flows. Assets held for sale are recorded at the lower of carrying value or estimated fair value less estimated selling costs. During the first quarter of 2016, as a result of continuing decreased demand due to current market conditions, our Compression and Production Testing segments recorded approximately $7.9 million and $2.8 million, respectively, of impairments associated with certain identified intangible assets. These amounts were charged to Impairments of Long-Lived Assets expense in the accompanying consolidated statement of operations. |
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Net income per share policy | Net Income (Loss) per Share The following is a reconciliation of the weighted average number of common shares outstanding with the number of shares used in the computations of net income (loss) per common and common equivalent share:
For the three month periods ended March 31, 2016 and March 31, 2015, the average diluted shares outstanding excludes the impact of all outstanding stock awards, as the inclusion of these shares would have been antidilutive due to the net losses recorded during the periods. |
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Services and rentals revenues policy | Services and Rentals Revenues and Costs A portion of our services and rentals revenues consist of income pursuant to operating lease arrangements for compressor packages and other equipment assets. For the three month periods ended March 31, 2016 and 2015, the following operating lease revenues and associated costs were included in services and rentals revenues and cost of services and rentals, respectively, in the accompanying consolidated statements of operations.
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Foreign currency translation policy | Foreign Currency Translation We have designated the euro, the British pound, the Norwegian krone, the Canadian dollar, the Brazilian real, the Argentine peso, and the Mexican peso, respectively, as the functional currency for our operations in Finland and Sweden, the United Kingdom, Norway, Canada, Brazil, Argentina, and certain of our operations in Mexico. The U.S. dollar is the designated functional currency for all of our other foreign operations. The cumulative translation effects of translating the applicable accounts from the functional currencies into the U.S. dollar at current exchange rates are included as a separate component of equity. Foreign currency exchange gains and (losses) are included in Other Expense and totaled $(0.3) million and $0.7 million during the three month periods ended March 31, 2016 and March 31, 2015, respectively. |
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Income taxes policy | Income Taxes Our consolidated effective tax rate for the three month period ended March 31, 2016 of 0.9% was primarily the result of losses generated in entities for which no related tax benefit has been recorded. The losses generated by these entities do not result in tax benefits due to offsetting valuation allowances being recorded against the related net deferred tax assets. We establish a valuation allowance to reduce the deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Included in our deferred tax assets are net operating loss carryforwards and tax credits that are available to offset future income tax liabilities in the U.S. as well as in certain foreign jurisdictions. Further, the effective tax rate is negatively impacted by the nondeductible portion of our goodwill impairments recorded during the three month period ended March 31, 2016. Our consolidated provision for income taxes during the first quarter of 2015 and 2016 is primarily attributable to taxes in certain foreign jurisdictions and Texas gross margins taxes. |
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Fair value measurements policy | Fair Value Measurements Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” within an entity’s principal market, if any. The principal market is the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity, regardless of whether it is the market in which the entity will ultimately transact for a particular asset or liability or if a different market is potentially more advantageous. Accordingly, this exit price concept may result in a fair value that may differ from the transaction price or market price of the asset or liability. Under U.S. generally accepted accounting principles ("GAAP"), the fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value. Fair value measurements should maximize the use of observable inputs and minimize the use of unobservable inputs, where possible. Observable inputs are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs may be needed to measure fair value in situations where there is little or no market activity for the asset or liability at the measurement date and are developed based on the best information available in the circumstances, which could include the reporting entity’s own judgments about the assumptions market participants would utilize in pricing the asset or liability. We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements are utilized in the allocation of purchase consideration for acquisition transactions to the assets and liabilities acquired, including intangible assets and goodwill (a level 3 fair value measurement). In addition, we utilize fair value measurements in the initial recording of our decommissioning and other asset retirement obligations. Fair value measurements may also be utilized on a nonrecurring basis, such as for the impairment of long-lived assets, including goodwill (a level 3 fair value measurement). The fair value of certain of our financial instruments, which include cash, restricted cash, accounts receivable, short-term borrowings, and long-term debt pursuant to our bank credit agreements, approximate their carrying amounts. The aggregate fair values of our long-term Senior Unsecured Notes and Senior Secured Notes (as such terms are herein defined) at March 31, 2016 and December 31, 2015, were approximately $216.8 million and $229.8 million, respectively, compared to carrying amounts of $265.0 million and $275.0 million, respectively, as current interest rates on those dates were different than the stated interest rates on the Senior Unsecured Notes and Senior Secured Notes. The fair values of the publicly tradable CCLP Senior Notes (as herein defined) at March 31, 2016 and December 31, 2015, were approximately $244.1 million and $259.9 million (a level 2 fair value measurement) compared to a face amount of $350.0 million (See Note C - Long-Term Debt and Other Borrowings, for further discussion), as current rates on those dates were different from the stated interest rates on the CCLP Senior Notes. We calculated the fair values of our Senior Unsecured Notes and our Senior Secured Notes as of March 31, 2016 and December 31, 2015, internally, using current market conditions and average cost of debt (a level 2 fair value measurement). We also utilize fair value measurements on a recurring basis in the accounting for our foreign currency forward sale derivative contracts. For these fair value measurements, we utilize the quoted value as determined by our counterparty financial institution (a level 2 fair value measurement). A summary of these fair value measurements as of March 31, 2016 and December 31, 2015, is as follows:
During the first quarter of 2016, in connection with the review of goodwill impairment of our Compression and Production Testing Divisions, these segments recorded total impairment charges of approximately $116.9 million, reflecting the decreased fair value for certain assets. For further discussion, see "Goodwill" and "Impairment of Long-Lived Assets" section above. The fair values used in these impairment calculations were estimated based on a variety of measurements, including current replacement cost and discounted estimated future cash flows, all of which are based on significant unobservable inputs (a level 3 fair value measurement) in accordance with the fair value hierarchy. A summary of these nonrecurring fair value measurements as of March 31, 2016, using the fair value hierarchy is as follows:
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New Accounting Pronouncements policy | New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") 605, Revenue Recognition, and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those years, under either full or modified retrospective adoption. We are currently assessing the potential effects of these changes to our consolidated financial statements. Additionally in March 2016, the FASB issued ASU 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)" to clarify the guidance on principal versus agent considerations. This ASU does not change the effective date or adoption method under ASU 2014-09 which is noted above. In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern.” The ASU provides guidance on management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and in certain circumstances to provide related footnote disclosures. The ASU is effective for annual periods ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” The ASU requires entities that have historically presented debt financing costs as an asset to present those costs as a direct deduction from the carrying amount of the related debt liability. This presentation will result in the debt issuance costs being presented the same way debt discounts have historically been handled. The ASU does not change the recognition, measurement, or subsequent measurement guidance for debt issuance costs. The ASU is effective for annual periods beginning after December 15, 2015, and interim periods within those annual periods and is to be applied retrospectively. As a result of the retrospective adoption of this guidance during the quarter, deferred financing costs of $12.7 million and $13.5 million at March 31, 2016 and December 31, 2015, respectively, are netted against the carrying values of the Senior Notes of TETRA and CCLP. Additionally, in accordance with ASU No. 2015-15, "Interest-Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements", issued in August 2015, we elected to present the deferred financing costs associated with the bank credit facilities of $6.3 million and $6.7 million at March 31, 2016 and December 31, 2015, respectively, as netted against the outstanding amount of the bank credit facilities of TETRA and CCLP. In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory” (Topic 330), which simplifies the subsequent measurement of inventory by requiring entities to measure inventory at the lower of cost or net realizable value, except for inventory measured using the last-in, first-out (LIFO) or the retail inventory methods. The ASU requires entities to compare the cost of inventory to one measure - net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, and is to be applied prospectively with early adoption permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, "Leases" (Topic 842), which was issued to increase comparability and transparency among different organizations. Organizations are required to recognize lease assets and lease liabilities on the balance sheet and disclose key information about the leasing arrangements and cash flows. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods, under a modified retrospective adoption with early adoption permitted. We are currently assessing the potential effects of these changes to our consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" as part of the Simplification Initiative. The update addresses and simplifies several aspects of accounting for share-based payment transactions. The ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted, and is to be applied using either modified retrospective, retrospective, or prospective transition method based on which amendment is being applied. We are currently assessing the potential effects of these changes to our consolidated financial statements. |
Basis of Presentation and Significant Accounting Policies (Tables) |
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Summary of Significant Accounting Policies (Tables) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories Table |
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Weighted Average Shares Outstanding Table |
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Services and Rentals Revenues Table |
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Schedule of Goodwill Table |
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Fair Value Measurements on a Recurring Basis Table |
During the first quarter of 2016, in connection with the review of goodwill impairment of our Compression and Production Testing Divisions, these segments recorded total impairment charges of approximately $116.9 million, reflecting the decreased fair value for certain assets. For further discussion, see "Goodwill" and "Impairment of Long-Lived Assets" section above. The fair values used in these impairment calculations were estimated based on a variety of measurements, including current replacement cost and discounted estimated future cash flows, all of which are based on significant unobservable inputs (a level 3 fair value measurement) in accordance with the fair value hierarchy. A summary of these nonrecurring fair value measurements as of March 31, 2016, using the fair value hierarchy is as follows:
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Long-Term Debt and Other Borrowings (Tables) |
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Long-Term Debt (Tables) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt Table |
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Decommissioning and Other Asset Retirement Obligations (Tables) |
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||
Decommissioning and Other Asset Retirement Obligations (Tables) | |||||||||||||||||||||||||||||||||||||||||||||
Decommissioning and Other Asset Retirement Obligations Table |
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Market Risks and Derivative Hedge Contracts Market Risks and Derivative Hedge Contracts (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Notional Amounts of Outstanding Derivative Positions Table |
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Derivatives Designated as Hedging Instruments Table |
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Equity (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Equity Table |
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Industry Segments (Tables) |
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Industry Segments (Tables) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Table |
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Decommissioning and Other Asset Retirement Obligations (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2016 |
Dec. 31, 2015 |
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Decommissioning and Other Asset Retirement Obligations Detail [Table] | ||
Beginning balance for the period, as reported | $ 57,449 | |
Activity in the period: | ||
Accretion of liability | 402 | |
Retirement obligations incurred | 0 | |
Revisions in estimated cash flows | 121 | |
Settlement of retirement obligations | (3,381) | |
Ending balance as of June 30 | 54,591 | |
Value of asset retirement obligations associated with non-operated properties | $ 9,300 | $ 9,100 |
Industry Segments (Details 2) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2016 |
Mar. 31, 2015 |
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Corporate Overhead Footnote | ||
General and administrative expense | $ 9,929 | $ 8,850 |
Depreciation and amortization | 114 | 253 |
Interest expense | 6,052 | 4,997 |
Other general corporate (income) expense, net | 289 | 463 |
Total | $ 16,384 | $ 14,563 |
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