-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Mfd/+g7wCP8WwPvG5DDDjxgoiHuaviAWLA6KiBGNewWgW0BYbLUP7Ec0WZqzIwaF xkiGjjp6bdNGjF1sKp932A== 0000890566-00-000406.txt : 20000331 0000890566-00-000406.hdr.sgml : 20000331 ACCESSION NUMBER: 0000890566-00-000406 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TETRA TECHNOLOGIES INC CENTRAL INDEX KEY: 0000844965 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INORGANIC CHEMICALS [2810] IRS NUMBER: 742148293 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-13455 FILM NUMBER: 584279 BUSINESS ADDRESS: STREET 1: 25025 I-45N CITY: WOODLANDS STATE: TX ZIP: 77380 BUSINESS PHONE: 7133671983 MAIL ADDRESS: STREET 1: 25025 I-45 NORTH CITY: WOODLANDS STATE: TX ZIP: 77380 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1999 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____________________ to _____________________ Commission File No. 0-18335 TETRA Technologies, Inc. (Exact name of registrant as specified in its charter) Delaware 74-2148293 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 25025 I-45 North The Woodlands, Texas 77380 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (Registrant's Telephone Number, Including Area Code): (281) 367-1983 Securities Registered Pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 per share New York Stock Exchange (Title of class) (Name of Exchange on Which Registered) Rights to purchase Series One New York Stock Exchange Junior Participating Preferred Stock (Name of Exchange on Which Registered) (Title of Class) Securities Registered Pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the common stock of TETRA Technologies, Inc. held by non-affiliates (based upon the March 28, 2000 closing sale price as reported by the New York Stock Exchange) ($12.44 per share) was approximately $167,568,455. For purposes of the preceding sentence only, all directors, executive officers and beneficial owners of 10% or more of the common stock are assumed to be "affiliates". Number of shares outstanding of each of the issuer's classes of common stock, as of March 28, 2000 was 13,470,133 shares. Part III information is incorporated by reference from the proxy statement for the annual meeting of stockholders to be held May 19, 2000. TABLE OF CONTENTS PART 1 Item 1. Business...................................................... 2 Item 2. Properties.................................................... 13 Item 3. Legal Proceedings............................................. 14 Item 4. Submission of Matters to a Vote of Security Holders........... 14 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters................................. 14 Item 6. Selected Financial Data....................................... 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 16 Item 7A. Quantitative and Qualitative Disclosures About Markets Risks.. 20 Item 8. Financial Statements and Supplementary Data................... 20 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................... 20 PART III Item 10. Directors and Executive Officers of the Registrant............ 20 Item 11. Executive Compensation........................................ 20 Item 12. Security Ownership of Certain Beneficial Owners and Management 21 Item 13. Certain Relationships and Related Transactions................ 21 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ................................................... 22 THIS ANNUAL REPORT ON FORM 10-K CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, INCLUDING, WITHOUT LIMITATION, STATEMENTS CONCERNING FUTURE SALES, EARNINGS, COSTS, EXPENSES, ACQUISITIONS OR CORPORATE COMBINATIONS, ASSET RECOVERIES, WORKING CAPITAL, CAPITAL EXPENDITURES, FINANCIAL CONDITION AND OTHER RESULTS OF OPERATION. SUCH STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS, INCLUDING THOSE DISCUSSED IN "ITEM 1. DESCRIPTION OF BUSINESS -- CERTAIN BUSINESS RISKS." SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED OR PROJECTED. PART I Item 1. Business. GENERAL TETRA Technologies, Inc. ("TETRA" or "the Company") is an energy services company with an integrated chemicals operation that supplies feedstocks to energy markets, as well as other markets. The Company's Oil & Gas Services Division markets chemical products, including those produced by the Chemicals Division, and systems to the oil and gas industry for use in well completion and workover operations in both domestic and international markets. It also provides associated on-site fluid engineering, fluid management and handling, and filtration services for completion and workover applications, as well as a line of specialty drilling fluids products. The Oil & Gas Services Division also offers oil and gas well abandonment/decommissioning services, production testing services and systems for minimizing or eliminating oil related wastes. The Company's Chemicals Division manufactures and markets chemicals to the energy, agriculture, water treatment, industrial, cement, food processing, ice melt and consumer products markets. The Division uses proprietary technologies to convert low-cost feedstocks into high quality commercial products. The Division's Chlorides group produces liquid and dry calcium chloride and also markets hydrochloric acid. The Micronutrients group manufactures and distributes zinc and manganese products to the feed and fertilizer markets, as well as calcium chloride-based agricultural products. The Division also markets a line of desiccant products, predominantly calcium chloride based, to the consumer products market under the trademark Damp Rid(R). The Bromine group manufactures and distributes calcium bromide, zinc bromide and sodium bromide to the energy and water treatment markets. During the fourth quarter of 1999, the Company implemented a strategic restructuring program to refocus its effort in the energy services business. This program will concentrate the Company's efforts on developing its oil and gas services business and will sell or consolidate non-core chemical operations. To achieve this strategy, the Company is actively pursuing the disposition of its micronutrients business, as well as several smaller chemicals-related operations. Additionally, the Company has implemented plans to exit certain product lines and businesses which are not core to its new strategic direction. The remaining chemicals business will consist of a commodity products based operation, which principally supports the energy service markets. The Company has also embarked on an aggressive program to reorganize its overhead structure to reduce costs and improve operating efficiencies in support of the energy services operations. TETRA Technologies, Inc. was incorporated in Delaware in 1981. All references to the Company or TETRA include TETRA Technologies, Inc. and its subsidiaries. The Company's corporate headquarters are located at 25025 Interstate 45 North in The Woodlands, Texas, and its phone number is 281/367-1983. - 2 - PRODUCTS AND SERVICES OIL & GAS SERVICES DIVISION. The Company's Oil & Gas Services Division markets its clear brine fluids systems to the oil and gas industry for use in well drilling, completion and workover operations in the United States and in international markets. The Division also provides associated on-site fluid engineering, fluid management and handling, and filtration services. The Oil & Gas Services Division also offers oil and gas well abandonment/decommissioning, production testing services and process services. DRILLING AND COMPLETION FLUIDS SYSTEMS The liquid calcium chloride, zinc bromide and calcium bromide produced by the Chemicals Division are referred to as clear brine fluids ("CBFs") in the oil and gas industry. CBFs are solids-free, clear salt solutions that, like conventional drilling "muds", have high specific gravities and are used as weighting fluids to control bottom-hole pressures during oil and gas completion and workover activities. The use of CBFs increases production by reducing the likelihood of damage to the well bore and productive pay zone. CBFs are particularly important in offshore completion and workover operations due to the increased formation sensitivity, much greater investment necessary to drill offshore, and the consequent higher cost of error. CBFs are distributed through the Company's Oil & Gas Services Division and they are also sold to other companies who service customers in the oil and gas industry. The Oil & Gas Services Division provides basic and custom blended CBFs to domestic and international oil and gas well operators, based on the specific need of the customer and the proposed application of the product. In addition, the Division provides these customers a broad range of associated services, including on-site fluid filtration, handling and recycling, fluid engineering consultation, and fluid management. The Company also repurchases used CBFs from operators and recycles and reconditions these materials. Selling used CBFs to the Company reduces the net cost of the CBFs to the operator and minimizes the need for disposal of those fluids. The Company recycles the CBFs through filtration, blending and the addition of chemicals, and then markets the recycled CBFs. The Oil & Gas Services Division's fluid engineering and management personnel use proprietary technology to determine the proper blend for a particular application to maximize the effectiveness and life span of the CBFs. The specific volume, density, crystallization point and chemical composition of the CBFs are modified by the Company to satisfy a customer's requirements. The Company's filtration services use a variety of techniques and equipment for the on-site removal of particulates from CBFs so that those CBFs can be recirculated back into the well. The Company's filtration systems reduce fluid loss, which allows operators to complete and workover wells in environmentally sensitive areas with greater safety. This also enables recovery of a greater percentage of used CBFs for recycling. The Division's PayZone(R) Drill-In Fluids systems use clear brine fluids as the basis for this line of specialized drilling fluid systems, some of which were recently patented. These systems are used during drilling, completing, underreaming, reentry and workover operations through the sensitive pay zone of the well, to increase oil and gas recovery. The Division's ACT clean-up systems (patent pending) are designed to quickly and uniformly clean up drill-in fluids filtercake from the payzone to increase oil and gas production. WELL ABANDONMENT/DECOMMISSIONING The Oil & Gas Services Division's well abandonment business provides services for depleted oil and gas wells onshore, in inland waters, and offshore Texas and Louisiana. The Division first entered this business in 1994 in an effort to expand the services offered to its customers and to capitalize on existing personnel, equipment and facilities along the Louisiana and Texas Gulf Coast. The well abandonment business was significantly expanded in 1996 with the purchase of the assets of Culberson Well Service in Texas and Inland Rigs in Louisiana. This business, which has operating hubs in Bryan, Rosenberg and Victoria, Texas and Lafayette and Houma, Louisiana, operates onshore rigs, barge-mounted rigs, a jack-up rig, a platform rig, and offshore rigless packages. In 1997, the Division - 3 - further expanded this business through the acquisitions of Perfco Wireline, Inc. and a related company, which were involved in the electric wireline service business. These operations provide pressure transient testing, reservoir evaluation, well performance evaluation, cased hole and memory production logging, perforating, bridge plug and packer service, and pipe recovery to major oil companies operating in the Gulf of Mexico. The Company continued to expand its well abandonment services business in 1997 by acquiring an oilfield tubular goods sales, reconditioning and service business from Posey Pipe and Equipment Company. Well abandonment services are marketed through nine service facilities in Houma and Lafayette, Louisiana and Alice, Bryan, Rosenberg, Edinburg, Laredo, Midland and Victoria, Texas. PRODUCTION TESTING These operations provide pressure and volume testing of oil and gas wells, predominantly in the South Texas and Northern Mexico areas, which facilitate the sophisticated evaluation techniques needed for reservoir management and optimization of well work-over programs. Management of the Company believes that the Division's Production Testing group maintains the largest fleet of high pressure production testing equipment in the South Texas area, with operations in Alice, Edinburg and Laredo, Texas, as well as Reynosa, Mexico. PROCESS SERVICES The Division also provides oil recovery and residuals separation and recycling services to approximately 17% of the existing petroleum refining capacity in the United States. This group utilizes various technologies, including a proprietary thermal desorption and recovery technology and various separation technologies, such as centrifuges and filter presses. These technologies are used to separate, collect and recycle oil and water from petroleum residuals. The Process Services Group typically builds, owns and operates fixed systems on its customers' sites to provide these services under long-term contracts. The group has begun to offer these services internationally, and to related domestic and international markets including hydrocarbon exploration, production and transportation. CHEMICALS DIVISION. The principal operations of the Chemicals Division are the manufacture and marketing of various commercial chemical products. The Division has eleven chemical facilities that focus on three primary product lines: calcium chloride, bromine products and micronutrients. These plants primarily convert low-cost, low-value raw materials produced by industrial chemical manufacturing processes into high quality products. The Division also markets a line of desiccant products that incorporates dry calcium chloride to the consumer products market to reduce mold and mildew odors. CHLORIDES The Chlorides group has four facilities that convert co-product hydrochloric acid from nearby sources into various liquid and dry calcium chloride products. These operations are located near Lyondell's Lake Charles, Louisiana TDI plant; Shell's Norco, Louisiana epoxy resins plant; Vulcan's Wichita, Kansas chlorinated solvents plant; and DuPont's Parkersburg, West Virginia fluoromonomer plant. Some of these facilities consume feedstock from other sources as well. Dry calcium chloride is produced at the Company's Lake Charles plant. With production capacity of at least 100,000 tons of dry product per year, the Lake Charles plant can produce both 80% and 97% calcium chloride products. The Company also has a solar evaporation plant located in Amboy, California, which produces liquid calcium chloride from underground brine reserves to supply the Western States markets. The Chemicals Division also manufactures a line of desiccant products at its Orlando, Florida plant for distribution into the consumer products market. These products, marketed under the trademark DampRid(R), reduce mold and mildew odors. The primary ingredient in these products is dry calcium chloride. This acquisition has enabled the Division to vertically integrate its dry calcium chloride business and access the consumer products markets. - 4 - BROMINE The Bromine group manufactures and distributes elemental bromine, zinc bromide, calcium bromide and sodium bromide. The West Memphis, Arkansas facility produces calcium bromide and zinc bromide using zinc-containing sludges from electroplating operations and low-cost hydrobromic acid. The West Memphis facility was recently expanded and can now use bromine and other sources of zinc as raw materials. The Company was awarded a U.S. patent on this new production process. The expanded plant became operational during the first quarter of 1999, substantially increasing the facility's capacity while producing a higher quality product. In late 1996, the Company entered into a joint venture with Dow Chemical Company to build a facility at Dow's Ludington, Michigan chemical facility to convert a crude bromine stream from Dow's calcium/magnesium chemicals operation into merchant bromine, calcium bromide and sodium bromide. This facility started producing calcium bromide and sodium bromide in mid 1998 and merchant bromine in the fourth quarter of 1998. The Company also owns a plant in Magnolia, Arkansas that is designed to produce calcium bromide. Approximately 33,000 gross acres of bromine containing brine reserves are under lease in the area of the plant to support its production. The plant is not currently in operation, and the Company continues to evaluate its strategy related to these assets and its developing bromine and derivatives business. MICRONUTRIENTS The Division's Micronutrients group manufactures and distributes calcium chloride-based agricultural products and zinc and manganese sulfate micronutrients. These micronutrients are widely used to provide trace minerals to meet the nutritional needs of animals and plants. Production facilities are located in Tampico, Mexico, Fairbury, Nebraska, and Cheyenne, Wyoming. The Tampico plant produces manganese sulfate using manganous oxide and sulfuric acid. The Fairbury and Cheyenne plants produce zinc sulfate using secondary zinc raw materials and sulfuric acid. In January 1999, the Company expanded its presence in the micronutrients business with the acquisition of WyZinCo Inc., which has a zinc sulfate manufacturing plant in Cheyenne, Wyoming, and certain assets of Cozinco, Inc. These newly acquired assets manufacture zinc sulfate from secondary zinc sources and sulfuric acid. Expansion of the Tampico plant was completed in early 1999 to include a new manganous oxide production facility, which the Company believes will provide lower-cost raw material manganous oxide to the manganese sulfate plant, and will also produce a higher assayed manganese sulfate product. This expansion is designed to increase the manganese sulfate production capacity by 20%, provide a higher grade 32% manganese sulfate product, and permit the sale of manganous oxide. This group also markets calcium chloride-based agricultural products that is an efficient vehicle for delivering calcium to plants and, when combined with nitrogen-based fertilizers, increases the efficiency of nitrogen fertilizers. These calcium chloride and nitrogen products are sold as liquid blends under a variety of trademarks, including N-CAL(R), Hi-Cal(R) and Sodex(R). In early 1999 the Company was awarded a US patent on a moisture-resistant dry calcium chloride and urea product. The Micronutrients group is evaluating the market potential of this new product. SOURCES OF RAW MATERIALS OIL & GAS SERVICES DIVISION. The Oil & Gas Services Division purchases calcium chloride, calcium bromide and zinc bromide CBFs from the Chemicals Division for resale to its oil and gas customers. The Oil & Gas Services Division recycles zinc and calcium bromide CBFs repurchased from its oil and gas customers. The Division also purchases CBFs from two domestic and one foreign manufacturer. - 5 - CHEMICAL DIVISION. Some of the primary sources of raw materials for the Chemicals Division are low-cost chemical co-product streams obtained from chemical manufacturers. At the Norco, Louisiana, Wichita, Kansas, Lake Charles, Louisiana, and Parkersburg, West Virginia calcium chloride production plants, the principal raw material is co-product hydrochloric acid produced by other chemical companies. The Company has written agreements with those chemical companies regarding the supply of this raw material, but believes that there are numerous alternative sources of supply. During 1999, the Company received written notice to terminate the Shell Norco plant supply agreement with the Company, which will run through December 2001. The Company plans on using alternate production facilities and sources to meet their market demands of liquid calcium chloride. The Company produces calcium chloride at its Amboy facility from brine recovered from underground wells. These brines are deemed adequate to supply the Company's foreseeable need for calcium chloride in that market area. Substantial quantities of limestone are also consumed when converting hydrochloric acid into calcium chloride. The Company uses a proprietary process that permits the use of less expensive limestone, while maintaining end-use product quality. The Company purchases limestone from several different sources. To produce zinc bromide and calcium bromide at its West Memphis facility, the Company uses hydrobromic acid, bromine, zinc sludges, and other sources of zinc raw materials. The Company has one internal source of bromine and several external sources of co-product hydrobromic acid. The Company uses a proprietary and patented process that permits the use of cost advantaged raw materials, while maintaining high product quality. In 1997, the Company entered into a series of agreements with the Dow Chemical Company to purchase crude bromine, build a bromine derivatives plant at Dow's magnesium and calcium chloride facility in Ludington, Michigan, and toll produce purified bromine and various brominated chemical products at that plant. The new Ludington plant, which started operations during 1998, gives the Company the flexibility to produce purified bromine (for use at the West Memphis facility or for sale), sodium bromide and calcium bromide. The Company's need for bromine and its derivatives has increased steadily. The Company also owns a calcium bromide manufacturing plant near Magnolia, Arkansas, that was constructed in 1985 and has a production capacity of 100 million pounds of calcium bromide per year. This plant was acquired in 1988 and is not in operation. The Company currently has approximately 33,000 gross acres of bromine containing brine reserves under lease. While this plant is designed to produce calcium bromide, it could be modified to produce elemental bromine or select bromine compounds. The Company believes it has sufficient brine reserves under lease to operate a world-scale bromine facility for 25 to 30 years. Development of the brine field, construction of necessary pipelines and reconfiguration of the plant would take several years and require a substantial additional capital investment. During 1996, the Company entered into a long-term supply agreement with a foreign producer of calcium bromide. This agreement, coupled with production of zinc bromide and bromine and derivatives from the new Ludington plant and the West Memphis, Arkansas facility, should afford the Company additional flexibility in its development of the Magnolia plant, allowing it to consider manufacturing other bromine derivatives at that facility. The Division's Micronutrients' plants purchase co-product sulfuric acid from a variety of sources, one of which is under a long-term contract. The Fairbury plant and the Cheyenne plant are capable of utilizing various forms of secondary zinc, primarily co-products of the galvanizing industry, which it obtains from a variety of sources. The Tampico plant utilizes manganous oxide, which it obtains from one internal and numerous external sources. MARKET OVERVIEW AND COMPETITION OIL & GAS SERVICES DIVISION. The Oil & Gas Services Division markets and sells clear brine fluids, drilling and completion fluids systems, and related products and services to major oil and gas exploration and production areas worldwide. Current foreign areas of market presence include the North Sea, Mexico, South America, the Far East and West Africa. The - 6 - Division's principal competitors in the sale of CBFs to the oil and gas industry are Baroid Corporation, a subsidiary of Halliburton, Inc., M.I. Drilling Fluids, a subsidiary of Smith International, Inc., Ambar Chemical, Inc. and OSCA, Inc., a subsidiary of Great Lakes Chemical Corporation. This market is highly competitive and competition is based primarily on service, availability and price. Although all competitors provide fluid handling, filtration and recycling services, the Company believes that its historical focus on providing these and other value-added services to its customers has enabled it to compete very successfully with all companies. Because of the significant use of CBFs in deeper natural gas and offshore well completions and workovers, a modest change in drilling in these areas could have a material impact on the profitability of both the Chemicals and Oil & Gas Services Divisions. Major customers of the Oil & Gas Services Division include Shell Oil Company, Texaco, Baker Hughes Inteq, Amerada Hess, BP Amoco, Oryx Energy, Elf Acquitane, Chevron USA, Phillips Petroleum Company, Conoco USA, Vastar Resources and Coastal Oil & Gas. The Division's well abandonment/decommissioning services group markets its services to major oil and gas companies, independent operators, and state governmental agencies. Major customers include Texaco, Exxon/Mobil, Shell, Chevron, BP Amoco, Fina, Conoco, Union Pacific Resources, El Paso, Louisiana Conservation Commission and the Railroad Commission of the State of Texas. The geographical scope of these services include the upper and lower Gulf Coast regions of Texas, South Texas, West Texas, East Texas, Louisiana, Gulf Coast inland waterways and the shallow, state waters of the Gulf of Mexico. The Company's principal competitors in this business include Superior Energy Services, Inc., Apollo and Cross Offshore Corp. This market is highly competitive and competition is based primarily on service, availability and price. The Division believes its focus on core competency in well abandonment operations has allowed it to better provide the complete portfolio of equipment, experience and administration required to manage its customers' needs. Competitors of the Division's Production Testing group include Fesco, Key Energy Group, TriTech and Clemenson. Major customers include Conoco, Pioneer, Fina, Shell, Chevron, Coastal, Enron, Houston Exploration, Texaco, Union Pacific Resources and Pemex, the national oil company in Mexico. CHEMICALS DIVISION. Markets for the Company's liquid and dry calcium chloride products include the oil and gas exploration industry, industrial, municipal, mining, janitorial and consumer markets for snow and ice melt products, dust control, cement curing, and road stabilization markets, and certain agricultural and food industry businesses. Most of these markets are highly competitive. Damp Rid(R) products are marketed to the consumer products industry. The Company's major competitors in the dry calcium chloride market include Dow Chemical Company, General Chemical Company, a Canadian company, and Ambar Chemical, Inc. The Bromine group sells elemental bromine and several brominated derivative products in North America to customers in the oil and gas industry (as completion fluids) and the water treatment industry (as biocides). Major competitors include Great Lakes Chemical Company, Albermarle and Dead Sea Bromine. The Micronutrients group sells zinc and manganese sulfate as plant micronutrients to numerous agricultural distributors, including fertilizer manufacturers, in the United States and in Mexico and several other foreign countries. The group sells zinc sulfate and manganese sulfate as animal feed micronutrients to major trace mineral pre-mix manufacturers in the United States, as well as to a number of smaller distributors. These markets are highly competitive, with major domestic competitors including Fritt Industries, Old Bridge, Bay Zinc and Sims. The Company also competes against Chinese and Mexican producers of these products. OTHER BUSINESS MATTERS MARKETING AND DISTRIBUTION - 7 - The Oil & Gas Services Division markets its domestic products and services through its distribution facilities located principally in the United States' Gulf Coast region that are in close proximity to both product supplies and customer concentrations. Since transportation costs can represent a large percentage of the total delivered cost of chemical products, particularly liquid chemicals, the Division believes that its strategic locations make it one of the lowest cost suppliers of liquid calcium chloride and other CBFs in the southern United States. International markets that are served include the U.K. and Norwegian sectors of the North Sea, Colombia, Mexico, Venezuela, Western Africa, the C.I.S. and the Far East. The Chemicals Division markets its products and services through offices and sales agents in Arizona, California, Colorado, Connecticut, Florida, Georgia, Nebraska, Pennsylvania, Texas, Wyoming and Mexico, as well as through a network of distributors located throughout the Midwest, West, Northeast, Southeast and Southwest. To service these distributors, the Division has over two dozen distribution facilities strategically located to provide efficient, low-cost product availability. Damp Rid(R) products are marketed through sales agents to various mass merchandisers, hardware and home centers and grocery and drug stores in the U.S. and internationally through distributors. The Bromine group markets its products directly and through distributors and sales agents. BACKLOG In most of the Company's operations, its products are shipped or services rendered shortly after receipt of the order; accordingly, the level of backlog is not indicative of corporate sales activity. On December 31, 1999, the Company had an estimated backlog of work of $44.6 million, of which approximately $20.6 million is expected to be billed during 2000. On December 31, 1998, the Company had an estimated backlog of $30.1 million. EMPLOYEES As of December 31, 1999, the Company had 1,383 employees. None of the Company's U.S. employees are presently covered by a collective bargaining agreement. However, in 1998 the employees of the Company's Lake Charles, Louisiana calcium chloride production facility elected to be represented by the Paper, Allied Industrial, Chemical and Energy Workers International union, and representatives of the Company and that union are in the process of negotiating a collective bargaining agreement. The Company believes that its relations with its employees are good. PATENTS, PROPRIETARY TECHNOLOGY AND TRADEMARKS The Company actively pursues a policy of seeking patent protection both in the U.S. and abroad for appropriate technology. As of December 31, 1999, the Company owned or licensed 16 issued U.S. patents, had 10 patents pending in the U.S., had 1 issued foreign patent and 9 foreign patents pending. The foreign patents and patent applications are primarily foreign counterparts to U.S. patents or patent applications. The issued patents expire at various times through 2017. The Company has elected to maintain certain other internally developed technologies, know-how and inventions as trade secrets. While the Company believes that the protection of its patents and trade secrets is important to its competitive positions in its businesses, the Company does not believe any one patent or trade secret is essential to the success of the Company. It is the practice of the Company to enter into confidentiality agreements with key employees, consultants and third parties to whom the Company discloses its confidential and proprietary information. There can be no assurance, however, that these measures will prevent the unauthorized disclosure or use of the Company's trade secrets and expertise or that others may not independently develop similar trade secrets or expertise. Management of the Company believes, however, that it would require a substantial period of time, and substantial resources, to develop similar know- how or technology independently. As a policy, the Company uses all possible legal means to protect its patents, trade secrets and other proprietary information. The Company sells various products and services under a variety of trade marks and service marks, some of which are registered in the U.S. or certain foreign countries. - 8 - ENVIRONMENTAL REGULATION Various environmental protection laws and regulations have been enacted and amended during the past three decades in response to public concerns over the environment. The operations of the Company and its customers are subject to the various evolving environmental laws and corresponding regulations, which are enforced by the US Environmental Protection Agency and various other federal, state and local environmental authorities. Similar laws and regulations designed to protect the health and safety of the Company's employees and visitors to its facilities are enforced by the US Occupational Safety and Health Administration and other state and local agencies and authorities. The Company must comply with the requirements of environmental laws and regulations applicable to its operations, including the Federal Water Pollution Control Act of 1972, the Resource Conservation and Recovery Act of 1976 ("RCRA"), the Clean Air Act of 1977, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Insecticide, Fungicide, and Rodenticide Act of 1947, Hazardous Materials Transportation Act of 1975, and Pollution Prevention Act of 1990. The Company is also subject to the applicable environmental and health and safety rules and regulations of the local, state and federal agencies in Mexico for its Sulfamex operation in Tampico, Mexico and in those foreign countries in which its Oil & Gas Services Division operates. Many state and local agencies have imposed environmental laws and regulations with stricter standards than their federal counterparts. The Company and its customers and suppliers are affected by all these regulatory programs. At the Company's Lake Charles, West Memphis, Parkersburg, Cheyenne, Fairbury and Amboy production plants, the Company holds various permits regulating air emissions, wastewater and storm water discharges, the disposal of certain hazardous and non-hazardous wastes, and/or wetlands. The Company has also submitted a RCRA Part B storage permit application for its Fairbury facility. In addition, the Company is subject to certain federal, state and local community-right-to-know regulations. The Company believes that its chemical manufacturing plants and other facilities are in general compliance with all the applicable environmental and health and safety laws and regulations. Since its inception, the Company has not had a history of any significant fines or claims in connection with environmental or health and safety matters. However, risks of substantial costs and liabilities are inherent in certain plant operations and certain products produced at the Company's plants and there can be no assurance that significant costs and liabilities will not be incurred. Changes in the environmental and health and safety regulations could subject the Company's handling, manufacture, use, reuse, or disposal of materials at plants to stricter scrutiny. The Company cannot predict the extent to which its operations may be affected by future regulatory and enforcement policies. CERTAIN BUSINESS RISKS The Company identifies the following important risk factors, which could affect the Company's actual results and cause actual results to differ materially from any such results that might be projected, forecast, estimated or budgeted by the Company in this report: MARKETS The Company's operations are materially dependent on the level of oil and gas well completion and workover activity, both in the United States and internationally. Such activity level is affected both by short-term and long-term trends in oil and gas prices. In recent years, oil and gas prices and, therefore, the level of well completion and workover activity, have been volatile. Worldwide military, political and economic events, including initiatives by the Organization of Petroleum Exporting Countries, have contributed to, and are likely to continue to contribute to, price volatility. Any prolonged reduction in oil and gas prices may depress the level of well completion and workover activity and result in a corresponding decline in the demand for the Company's products and services and, therefore, have a material adverse effect on the Company's revenues and profitability. - 9 - Much of the Company's growth strategy, particularly in its chemicals operations, depends upon its ability to sell its products in markets in which it is not now well-established or to customers it does not now serve. There is no assurance that the Company's efforts to penetrate these markets will be successful. The Company's micronutrients business can also be significantly affected by fluctuations in farming activity and weather conditions throughout the farm belt. Worldwide commodity prices can influence what crops are planted and, accordingly, the types of fertilizer applications that are employed. Extreme weather conditions can also delay and sometimes postpone crop planting. COMPETITION The Company encounters and expects to continue to encounter intense competition in the sale of its products. The Company competes with numerous companies in its chemicals and oil and gas operations and with numerous companies in its process technologies operations. Many of the Company's competitors have substantially greater financial and other resources than the Company, including certain governmentally owned or operated competitors. To the extent these competitors offer comparable products or services at lower prices, or higher quality and more cost-effective products or services, the Company's business could be materially adversely affected. SUPPLY OF RAW MATERIALS The Company sells a variety of clear brine fluids, including brominated clear brine fluids such as calcium bromide, zinc bromide and sodium bromide, and other brominated products, some of which are manufactured by the Company and some of which are purchased from third parties. The Company also sells calcium chloride, as a clear brine fluid and in other forms and for other applications. Sales of calcium chloride and brominated products contribute significantly to the Company's revenues. In its manufacture of calcium chloride, the Company uses hydrochloric acid and other raw materials purchased from third parties. In its manufacture of brominated products, the Company uses bromine, hydrobromic acid and other raw materials, including various forms of zinc, that are purchased from third parties. The Company acquires brominated products from a variety of third party suppliers. In its manufacture of zinc and manganese sulfate, the Company uses sulfuric acid and various sources of zinc and manganese. If the Company was unable to acquire the brominated products, sulfuric, hydrobromic or hydrochloric acid, zinc or any other raw material supplies for a prolonged period, the Company's business could be materially adversely affected. POTENTIAL LIABILITY FOR ENVIRONMENTAL OPERATIONS; ENVIRONMENTAL REGULATION The Company's operations are subject to extensive and evolving Federal, state and local laws and regulatory requirements, including permits, relating to environmental affairs, health and safety, waste management and the manufacture, storage, handling, transportation, use and sale of chemical products. Governmental authorities have the power to enforce compliance with these regulations and permits, and violators are subject to civil and criminal penalties, including civil fines, injunctions or both. Third parties may also have the right to pursue legal actions to enforce compliance. It is possible that increasingly strict environmental laws, regulations and enforcement policies could result in substantial costs and liabilities to the Company and could subject the Company's handling, manufacture, use, reuse, or disposal of substances or pollutants to scrutiny. The Company's business exposes it to risks such as the potential for harmful substances escaping into the environment and causing damages or injuries, which could be substantial. Although the Company maintains general liability insurance, this insurance is subject to coverage limits and generally excludes coverage for losses or liabilities relating to environmental damage or pollution. The Company maintains a limited amount of environmental liability insurance covering named locations and environmental risks associated with contract services for oil and gas operations and refinery waste treatment operations. The Company could be materially adversely affected by an enforcement proceeding or a claim that was not covered or was only partially covered by insurance. In addition to increasing the Company's risk of environmental liability, the promulgation of stricter environmental laws, regulations and enforcement policies has accelerated the growth of some of the markets served by the Company. Decreased regulation and enforcement could materially adversely affect the demand for the types of - 10 - systems offered by the Company's process technologies operations and, therefore, materially adversely affect the Company's business. RISKS RELATED TO ACQUISITIONS AND INTERNAL GROWTH The Company's aggressive growth strategy includes both internal growth and growth by acquisitions. Acquisitions require significant financial and management resources both at the time of the transaction and during the process of integrating the newly acquired business into the Company's operations. Internal growth requires both financial and management resources as well as hiring additional personnel. The Company's operating results could be adversely affected if it is unable to successfully integrate such new companies into its operations or is unable to hire adequate personnel. Future acquisitions by the Company could also result in issuances of equity securities or the rights associated with the equity securities, which could potentially dilute earnings per share. In addition, future acquisitions could result in the incurrence of additional debt or contingent liabilities and amortization expenses related to goodwill and other intangible assets. These factors could adversely affect the Company's future operating results and financial position. RELIANCE ON SIGNIFICANT CUSTOMERS In 1999 and 1998, no customers accounted for more than 10% of consolidated revenues. In 1997 one customer who generated revenues of $22 million accounted for more than 10% of consolidated revenues. WEATHER RELATED FACTORS Demand for the Company's Oil and Gas Services Division's products and services are subject to seasonal fluctuation due in part to weather conditions, which cannot be predicted. Demand for the Company's Specialty Chemical Division's products, especially calcium chloride used for ice and snow melt and its agricultural products, also fluctuates due to weather conditions. The Company's operating results may vary from quarter to quarter depending on weather conditions in applicable areas in the United States and in international markets. RISKS RELATED TO GROSS MARGIN The Company's operating results in general, and gross margin percentage in particular, are functions of the product mix sold in any period. Other factors, such as unit volumes, heightened price competition, changes in sales and distribution channels, shortages in raw materials due to timely supplies or ability to obtain items at reasonable prices, and availability of skilled labor, may also continue to affect the cost of sales and the fluctuation of gross margin percentages in future periods. PATENT AND TRADE SECRET PROTECTION The Company owns numerous patents, patent applications and unpatented trade secret technologies in the U.S. and certain foreign countries. There can be no assurance that the steps taken by the Company to protect its proprietary rights will be adequate to deter misappropriation of its proprietary rights. In addition, independent third parties may develop competitive or superior technologies. DEPENDENCE ON PERSONNEL The Company's success depends upon the continued contributions of its personnel, many of whom would be difficult to replace. The success of the Company will depend on the ability of the Company to attract and retain skilled employees. Changes in personnel, therefore, could adversely affect operating results. - 11 - THE FOREGOING REVIEW OF FACTORS PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SHOULD NOT BE CONSTRUED AS EXHAUSTIVE. IN ADDITION TO THE FOREGOING, THE COMPANY WISHES TO REFER READERS TO THE COMPANY'S OTHER FILINGS AND REPORTS WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING ITS RECENT REPORTS ON FORM 10-Q, FOR A FURTHER DISCUSSION OF THE COMPANY'S BUSINESS AND OPERATIONS AND RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN FORWARD-LOOKING STATEMENTS, SUCH AS THIS REPORT. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULT OF ANY REVISIONS TO ANY SUCH FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT THE EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. - 12 - ITEM 2. PROPERTIES. The following table sets forth certain information concerning facilities leased or owned by the Company as of December 31, 1999. The Company believes its facilities are adequate for its present needs. DESCRIPTION LOCATION APPROXIMATE SQUARE FOOTAGE(1) ----------- -------- ----------------------------- Oil and gas distribution facilities. Texas - eleven locations 1,262,700 Louisiana - six locations 732,200 United Kingdom - various locations 92,000 Mexico - various locations 30,000 Nigeria 28,000 Venezuela 16,000 Norway - various locations 15,000 Colombia 11,500 Process Services offices and service center................ The Woodlands, Texas 6,000 Houston, Texas 23,000 Process Services facilities......... Texas - six locations 92,000 Delaware 20,000 Louisiana 12,000 Illinois 7,400 Chemical plant facilities........... Amboy, California 59 square miles(2) Cheyenne, Wyoming 14 acres Lake Charles, Louisiana 751,500 West Memphis, Arkansas 697,800 Tampico, Mexico 353,800 Magnolia, Arkansas 120,000 Parkersburg, West Virginia 106,300 Fairbury, Nebraska 90,000 Norco, Louisiana 85,200 Orlando, Florida 35,800 Wichita, Kansas 19,500 Ludington, Michigan 10,000 Laboratory.......................... The Woodlands, Texas 26,000 Headquarters........................ The Woodlands, Texas 55,000 - ------------- (1) Includes real property and buildings unless otherwise noted. (2) Includes solar evaporation ponds. - 13 - ITEM 3. LEGAL PROCEEDINGS. The Company is a named defendant in numerous lawsuits and a respondent in certain other governmental proceedings arising in the ordinary course of business. While the outcome of such lawsuits and other proceedings cannot be predicted with certainty, management does not expect those matters to have a material adverse impact on the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of security holders of the Company, through solicitation of proxies or otherwise, during the fourth quarter of the year ended December 31, 1999. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. PRICE RANGE OF COMMON STOCK The Common Stock traded on the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") from the Company's initial public offering on April 3, 1990 through October 13, 1997 under the trading symbol "TTRA." On October 15, 1997 the Common Stock began trading on the New York Stock Exchange under the symbol "TTI." As of March 24, 2000 there were approximately 3,130 holders of record of the Common Stock. The following table sets forth the high and low closing sale prices of the Common Stock for each calendar quarterly period in the two years ended December 31, 1999, as reported by the New York Stock Exchange. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. HIGH LOW 1999 ------ ------ First Quarter.................... $10.63 6.38 Second Quarter................... 9.75 6.80 Third Quarter.................... 11.99 8.06 Fourth Quarter................... 10.20 6.40 1998 First Quarter.................... $24.75 $19.75 Second Quarter................... 25.38 16.00 Third Quarter.................... 16.25 11.50 Fourth Quarter................... 13.75 8.00 DIVIDEND POLICY The Company has never paid cash dividends on its Common Stock. The Company currently intends to retain earnings to finance the growth and development of its business and does not anticipate paying cash dividends in the foreseeable future. Any payment of cash dividends in the future will depend upon the financial condition, capital requirements and earnings of the Company as well as other factors the Board of Directors may deem relevant. - 14 - ITEM 6. SELECTED FINANCIAL DATA.
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------- 1999 1998 1997 1996 1995 --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA: Revenues ............................... $ 215,301 $ 238,468 $ 219,413 $ 160,790 $ 113,468 Gross profit ........................... 45,937 60,435 62,982 48,644 37,655 Operating income (loss) ................ (3,022)(1) 21,380 25,037(2) 20,781 13,430 Interest expense ....................... (7,756) (6,458) (3,305) (1,250) (159) Interest income ........................ 388 172 305 198 959 Other income (expense), net ............ (81) (478) 1,065 779 330 Net income, before cumulative effect of accounting change ................. 16,014(3) 8,898 13,936 13,137 9,366 Net income per share, before cumulative effect of accounting change .......... $ 1.18 $ 0.66 $ 1.05 $ 1.02 $ 0.74 Average shares ......................... 13,524 13,561 13,297 12,873 12,693 Net income per diluted share, before cumulative effect of accounting change $ 1.18 $ 0.64 $ 0.98 $ 0.97 $ 0.72 Average diluted shares ................. 13,576 13,994 14,189 13,545 13,069
(1) Includes special charge of $4,745 and restructuring charge of $2,320. (2) Includes unusual charges of $3.0 million. (3) Includes gain on the sale of administrative building of $6,731 and gain of sale of business of $29,629.
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------- 1999 1998 1997 1996 1995 --------- --------- --------- --------- --------- BALANCE SHEET DATA Working capital ........................ $ 74,706 $ 88,299 $ 68,076 $ 37,398 $ 30,088 Total assets ........................... 290,636 311,008 263,792 178,506 129,921 Long-term liabilities .................. 94,313 129,066 92,364 31,756 9,364 Stockholders' equity ................... 149,421 139,322 129,580 108,022 89,286
The net income per share amounts prior to 1997 have been restated as required to comply with Statement of Financial Accounting Standards No. 128, Earnings Per Share. For further discussion of earnings per share, see the notes to the consolidated financial statements. - 15 - ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS The following table presents, for the periods indicated, the percentage relationship which certain items in the Company's statement of operations bear to revenues, and the percentage increase or decrease in the dollar amount of such items. The following data should be read in conjunction with the Consolidated Financial Statements and the associated Notes contained elsewhere in this document.
PERCENTAGE OF REVENUES PERIOD-TO- YEAR ENDED DECEMBER 31, PERIOD CHANGE ------------------------- --------------- 1999 1998 VS VS 1999 1998 1997 1998 1997 ---- ---- ---- ---- ---- Revenues ........................ 100.0% 100.0% 100.0% (9.7)% (8.7)% Cost of Revenues ................ 78.7 74.7 71.3 (4.9) (13.8) Gross profit .................... 21.3 23.3 28.7 (24.0) 4.0 General & administrative expenses 19.4 16.4 17.3 7.3 (2.9) Special and restructuring charges 3.3 -- -- 100.0 -- Operating income ................ (1.4) 9.0 11.4 (114.1) 14.6 Gain of sale of building and TPT business ...................... 16.8 -- -- 100.0 -- Interest expense ................ 3.6 2.7 1.5 20.0 (95.4) Interest income ................. 0.2 0.1 0.1 125.6 43.6 Other income/expense, net ....... -- 0.2 0.5 (83.1) (144.9) Income before income taxes and cumulative effect of accounting change .......................... 12.0 6.1 10.5 77.1 36.7 Income before cumulative effect of accounting change ......... 7.4 3.7 6.4 80.0 36.2 Cumulative effect of accounting change, net of tax .............. 2.6 -- -- 100.0 -- Net income ...................... 4.8 3.7 6.4 15.0 36.2
1999 COMPARED TO 1998 Total revenues for the year ended December 31, 1999 were $215.3 million compared to $238.5 million in 1998, a decrease of $23.2 million or 9.7%. Revenues from the Oil & Gas Services Division were $120.6 million, down $28.4 million or 19.1%, from the 1998 level of $149.0 million. The Division's revenue decline is the direct result of the reduction in drilling activity throughout the energy industry and the resulting pricing pressures that accompany it. The international operations and the Gulf Coast offshore business were both off approximately 30% from the prior year. The onshore business was down only about 10%, primarily on the strength of the Inland Water plug and abandon and wireline businesses. Chemicals Division revenues for the year were $108.2 million, including inter company, compared to $106.7 million in 1998. During the year, the Company sold its Process Technologies business (TPT), which generated $4.1 million in revenues in 1999 and $15.6 million in 1998. Revenues of the Division improved approximately $13.0 million, excluding TPT, with the majority coming in the Micronutrients group. With the acquisition of the CoZinCo assets and WyZinCo stock, the micronutrients business expanded significantly. Additionally, production volumes at the Fairbury, Nebraska plant also improved substantially from prior years. The Division's calcium chloride business also showed improved revenues over the prior year. Gross profits for the year were $45.9 million, down $14.5 million or 24% from $60.4 million in 1998. Gross profits in the Oil & Gas Services Division were down significantly as volumes declined and pricing pressures were realized from the general industry slow down. The Division's gross profits percentages also suffered significantly from these business conditions. The Chemicals Division gross profits, excluding TPT, increased slightly year-to-year. Most of this increase was in the Micronutrients group, which benefitted from lower production costs and the WyZinCo/CoZinCo acquisitions. Gross profits in the calcium chloride products was down slightly due to the planned shutdown of the Lake Charles dry plant to reduce inventory levels. - 16 - General and Administrative expenses were $41.9 million in 1999 compared to $39.1 in 1998, an increase of $2.8 million. Oil & Gas Services Division expenses were relatively flat year-to-year. Chemicals Division expenses increased in the Micronutrients group due to the CoZinCo/WyZinCo acquisition and in the Damp Rid consumer products group due to additional expenses related to an expanded advertising program. In March 1999, the Company was verbally notified of the early termination of a significant liquid calcium chloride contract. The Company was subsequently notified in writing. Under the terms of the contract, the Company is required to terminate its operations at that location and vacate the facility within two years from the date of written notification. The Company is also required to remove all of its equipment and fixtures, at its own cost. As a result of the early termination of the contract, the Company recorded an impairment of these Chemicals Division assets of approximately $1.4 million. These assets are currently in service through the end of the contract. Also during the first quarter of 1999, the Company committed to certain actions that resulted in the impairment of other plant assets in the Company's Chemicals Division. As a result of increased production volumes achieved at the new calcium chloride dry plant in Lake Charles, Louisiana, the Company no longer needs the previously existing dry plant and has subsequently dismantled it, resulting in an impairment charge of approximately $1.8 million. In addition, the Company recently completed modifications on the West Memphis, Arkansas bromine plant. The assets related to the old zinc bromide production unit, which had a carrying value of approximately $0.4 million, were taken out of service in the first quarter. The abandoned assets of both plant facilities were written off during the first quarter. Finally, the Company recognized the impairment of certain micronutrients' assets totaling approximately $1.1 million. These assets were deemed impaired with the acquisition of the WyZinCo Company and the CoZinCo assets and were written off during the first quarter. During the fourth quarter of 1999, the Company implemented a strategic restructuring program to refocus its effort in the energy services business. This program will concentrate the Company's efforts on developing its oil and gas services business and will sell or consolidate non-core chemical operations. To achieve this strategy, the Company is actively pursuing the disposition of its micronutrients business, as well as several smaller chemicals-related operations. Additionally, the Company has implemented plans to exit certain product lines and businesses which are not core to its new strategic direction. The remaining chemicals business will consist of a commodity products based operations, which significantly supports the energy service markets. The Company has also embarked on an aggressive program to reorganize its overhead structure to reduce costs and improve operating efficiencies in support of the energy services operations. As a result of this change in strategy, the Company recorded a $2.3 million, pretax, restructuring charge in the fourth quarter of 1999, as detailed below: DECEMBER 31, 1999 ------------------- (IN THOUSANDS) LIABILITY EXPENSE BALANCE ------- ------ Involuntary termination costs $1,170 $1,170 Contractual costs ........... 760 760 Exit costs .................. 390 390 ------ ------ $2,320 $2,320 ====== ====== Involuntary termination costs consist of severance costs associated with the termination of six management level employees associated with the Company's restructuring. Contractual costs include obligations triggered in two chemicals product lines when the Company decided to exit these businesses. The remaining exit costs are additional liabilities realized by exiting certain portions of the specialty chemicals business. Of the total restructuring charge, approximately $1.8 million is associated with the Chemicals Division, $0.1 million with the Oil & Gas Services Division and $0.6 million with corporate administrative activities. The majority of the costs are expected to be paid within the next 18 months and will be funded using cashflow from operations. These restructuring activities may result in additional expenses to be incurred in 2000, which the Company is unable to quantify at this time. Operating income for the year ended December 31, 1999 was a loss of $3.0 million compared to $21.4 million of income in 1998. The drop in earnings year-to-year reflects the significant drop in the energy services markets, loss of earnings associated with the sale of TPT, special charges of $4.7 million and a restructuring charge of $2.3 million. In March 1999, the Company sold its corporate headquarters building realizing a pretax gain of approximately $6.7 million. The Company subsequently signed a ten-year lease agreement for space within the building. - 17 - In July 1999, the Company sold its Process Technologies business for $38.8 million. Of these proceeds, $2.0 million was escrowed and could be used to satisfy certain claims asserted by the buyer within the first year after the sale. The Company does not anticipate any such claims. The sale, which was effective May 1, generated a pretax gain of $29.6 million. The proceeds were used to reduce long-term bank debt. TPT is in the waste and potable water treatment business and was operated as part of the Chemicals Division. It had sales of $4.1 million in 1999, $15.6 million in 1998 and $11.4 million in 1997. Interest expense increased in 1999 to $7.8 million, reflecting an increase in long-term debt during the first half of the year and a reduction in capitalized interest in 1999 due to a reduction in constructed assets. Proceeds from the TPT and building sale were used to reduce long-term debt. Income before cumulative effect of accounting change was $16.0 million in 1999 compared to $8.9 million in 1998, an increase of $7.1 million. Net income per diluted share before cumulative effect of accounting change was $1.18 in 1999 on 13,576,000 average diluted shares outstanding and $0.64 in 1998 on 13,994,000 average diluted shares outstanding. In April 1998, the American Institute of Certified Public Accounts issued Statement of Position 98-5, REPORTING THE COSTS OF START-UP ACTIVITIES ("SOP 98-5"), which requires that costs related to start-up activities be expensed as incurred. Prior to 1999, the Company capitalized those costs incurred in connection with opening a new production facility. The Company adopted the provisions of the SOP 98-5 in its financial statements for the year ended December 31, 1999. The effect of adoption of SOP 98-5 was to record a charge for the cumulative effect of an accounting change of $5.8 million ($0.43 per share), net of taxes of $3.9 million, to expense costs that had been previously capitalized prior to 1999. Net income for the year was $10.2 million compared to $8.9 million in the prior year. Net income per diluted share was $0.75 in 1999 on 13,576,000 average diluted shares outstanding and $0.64 in 1998 on 13,994,000 average diluted shares outstanding. 1998 COMPARED TO 1997 For the year ended December 31, 1998, total revenues were $238.4 million, up $19.0 million or 9% over the 1997 total of $219.4 million. The Oil & Gas Services Division's revenues of $149.0 million were up slightly over the prior year's total of $147.8 million. While the entire Division suffered from the current dramatic decline in the oil and gas industry, the Division's well abandonment business was significantly impacted as the major oil companies initiated substantial delays in well abandonment operations. Offshore revenues also dropped year-to-year, reflecting the slow down in drilling activity in the Gulf. The Division's international operations showed a slight increase in revenues due to increased activity in Norway, Venezuela and Mexico. The production testing business also generated increased revenues over last year. Revenues of the Chemicals Division were up approximately 23% over 1997 from $87.0 million, including intercompany, to $106.7 million in 1998. Despite weak winter snow and ice melt demand and the decline in the oil and gas markets, the Division's 1998 chloride and bromide revenues matched 1997 levels. The Division's micronutrients operations, particularly the American Microtrace Fairbury plant, showed significant improvement in revenues as product volumes are approaching planned capacity levels and the customer base is re-established following the EPA related disruptions in 1997. The Division's consumer products business also reflected revenue increases resulting from new product introduction and market penetration. The Process Technologies business increased over the prior year as well, reflecting a significant increase in wastewater, deep bed filtration and denitrification business. The Division's revenues were also impacted favorably from the inclusion of the now wholly-owned TETRA Process Services. Gross profits were $60.4 million in 1998 compared to $63.0 million in 1997, for a decrease of $2.6 million or 4%. The gross profit margin percentage from operations was 25.3% in 1998 versus 28.7% in 1997. The Chemicals Division's gross profit percentage was comparable to the prior year. Substantially improved volumes and pricing at American Microtrace helped offset reduced margins in the calcium chloride product line, which were caused by market pricing pressures and product mix. The profit percentage was also down in the Process Technologies group due to project and revenue mix. The gross profit percentage of the Oil & Gas Services Division declined in response to the slowdown in the well abandonment business and pricing pressures in the offshore Gulf Coast business. General and administrative expenses were $39.1 million in 1998 compared to $37.9 million in 1997, for an increase of $1.2 million or 3%. The 1997 period includes the write-off of $2.2 million associated with American - 18 - Microtrace operations. General and administrative costs increased predominantly in support of expanded international operations of the Oil & Gas Services Division and for increased advertising of consumer products in the Chemicals Division. The Oil & Gas Services Division has continued to implement various cost-cutting and expense control measures, including personnel reduction, in an effort to keep its G & A costs in line with its anticipated revenue levels. These measures are reflected in the fact that the Division's 1998 fourth quarter G & A costs, excluding international operations, are down from the prior year's quarter. The inclusion of expenses associated with acquired operations also accounted for a portion of the increase. G & A expenses as a percentage of revenues decreased from 17% in 1997 to 16% in 1998. Operating income for the twelve months ended December 31, 1998 was $21.4 million, down $3.6 million or 14% from $25.0 million in 1997. This decrease is the combined result of a gross margin increase of $5.5 million due to increased volume, a $7.9 million decrease due to the lower gross margin rates, and a $1.2 million increase in general and administrative expenses. Interest expense increased approximately $3.1 million during the current year compared to the prior year period due to increased long-term debt over the past twelve months in support of the Company's acquisition and internal growth programs. For the twelve months ending December 31, 1998, net income was $8.9 million, down 36% from the $13.9 million reported in 1997. Net income per diluted share was $0.64 in 1998 on 13,994,000 average diluted shares outstanding compared to earnings in 1997 of $0.98 based on 14,189,000 average diluted shares outstanding LIQUIDITY AND CAPITAL RESOURCES The Company's investment in working capital, excluding cash, cash equivalents and restricted cash , decreased to $68.5 million at December 31, 1999 from $85.5 million at December 31, 1998. Working capital decreased $6.7 million with the sale of TETRA Process Technologies. Trade payables and accrued expenses increased $3.0 million during the period as a result of an increase in federal income taxes payable associated with the TPT sale and liabilities assumed with the WyZinCo/CoZinCo acquisition. Accounts receivable decreased $2.2 million due to reduced business in the energy services markets and reduced 1999 year-end activity in Micronutrients. Inventories were reduced $2.4 million, principally in the calcium chlorides group. Changes in trade payable and expenses, accounts receivable and inventories are net of 1999 acquisitions. To fund its capital and working capital requirements, the Company uses cash flow as well as its general purpose, unsecured, prime rate/LIBOR-based line-of-credit with a syndicate of banks led by Bank of America. As of December 31, 1999, the Company has $1.6 million in letters of credit and $75.2 million in long-term debt outstanding against a $120 million line-of-credit. The line-of-credit matures in 2002. The Company's credit facility, which is unsecured, is subject to common financial ratio covenants. These include, among others, a debt to EBITDA ratio, a fixed charge coverage ratio, a net worth minimum and dollar limits on the total amount of capital expenditures and acquisitions the Company may undertake in any given year. As of December 31, 1999, the Company was in violation of certain financial covenants of its credit agreement but has received a waiver agreement from the banks. The Company has a binding commitment from the banks to amend its current credit facility. This amended credit line will include an asset-based component of up to $50 million and a $50 million term component secured with property and equipment. The Company believes this new credit facility will meet all its capital and working capital requirements. The new financial covenants, which are effective December 31, 1999, are consistent with its 2000 business plan. In January 1999, the Company purchased the assets of WyZinCo and CoZinCo, Inc. for approximately $11.7 million in cash and notes. The acquisition, which included a zinc sulfate plant in Cheyenne, Wyoming and certain assets of a second zinc sulfate plant located in Salida, Colorado, significantly expanded the Company's micronutrients business. The purchase was partially funded by drawing from the Company's credit facility. The Company also used a portion of the cash generated from the sale of its corporate headquarters building to fund the acquisition. The sale was completed in March 1999. The building was sold for approximately $9.7 million, with a subsequent ten-year lease for space in the building executed by the Company with the new owner. The Company also used a portion of the proceeds to pay down a portion of its long-term debt. Capital expenditures during the twelve months ended December 31, 1999 totaled approximately $13.2 million. Significant components include inland waters P&A equipment, production testing equipment, well service equipment - 19 - and process service equipment for the Oil & Gas Services Division. The Chemicals Division's expenditures included the completion of construction of a new manganous oxide plant in Tampico, Mexico, completion of construction of a new liquid calcium chloride facility in West Virginia and expansion of the West Memphis plant. The Company believes that its existing funds, cash generated by operations, funds available under its recently negotiated bank line-of-credit, as well as other traditional financing arrangements, such as secured credit facilities, leases with institutional leasing companies and vendor financing, will be sufficient to meet its current and anticipated operations and its anticipated capital expenditures through 2000 and thereafter. YEAR 2000 In prior years, the Company discussed the nature and progress of its plans to become Year 2000 ready. In late 1999, the Company completed its remediation and testing of systems. The Company experienced no significant disruptions in information technology or any other systems. The Company is not aware of any material problems resulting from Year 2000 issues, either with its products, its internal systems, or the products and services of third parties. The Company expensed approximately $250,000 during 1999 in connection with remediating its systems. The Company will continue to monitor its mission critical computer applications and those of its suppliers and vendors throughout the year to ensure that any latent Year 2000 matters that may arise are addressed promptly. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company is subject to market risk exposure related to changes in interest rates on the floating rate portion of its credit facility. These instruments carry interest at an agreed-upon percentage rate spread above LIBOR. At December 31, 1999, the Company had $74 million outstanding under its credit facility, of which $40 million was subject to an interest rate swap and $34 million subject to a floating rate based on LIBOR plus 2.25%. The interest rate swap agreements provide the Company with a 6.4% fixed interest rate which mitigates a portion of the Company's risk against changes in interest rates. Based on this balance, an immediate change of one percent in the interest rate would cause a change in interest expense of approximately $340,000 on an annual basis. The Company has no financial instruments subject to foreign currency fluctuation or commodity price risks. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements of the Company and its subsidiaries required to be included in this Item 8 are set forth in Item 14 of this Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There is no disclosure required by Item 304 of Regulation S-K in this report. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information required by this Item as to the directors and executive officers of the Company is hereby incorporated by reference from the information appearing under the captions "Election of Directors -- Executive Officers" and "Section 16(a) Beneficial ownership Reporting Compliance."in the Company's definitive proxy statement which involves the election of directors and is to be filed with the Securities and Exchange Commission ("Commission") pursuant to the Securities Exchange Act of 1934 within 120 days of the end to the Company's fiscal year on December 31, 1999. ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item as to the management of the Company is hereby incorporated by reference from the information appearing under the captions "Election of Directors -- Director Compensation" and " -- Compensation of Executive Officers" in the Company's definitive proxy statement which involves the election of directors and is to be filed with the Commission pursuant to the Securities Exchange Act of 1934 within 120 days of the end of the Company's fiscal year on December 31, 1999. Notwithstanding the foregoing, in accordance with the instructions to Item 402 of Regulation S-K, the information contained in the Company's proxy statement under the sub- - 20 - heading "Report of the Compensation Committee of the Board of Directors" and "Performance Graph" shall not be deemed to be filed as part of or incorporated by reference into this Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this Item as to the ownership by management and others of securities of the Company is hereby incorporated by reference from the information appearing under the caption "Security Ownership of Certain Beneficial Owners and Management" in the Company's definitive proxy statement which involves the election of directors and is to be filed with the Commission pursuant to the Securities Exchange Act of 1934 within 120 days of the end of the Company's fiscal year on December 31, 1999. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item as to certain business relationships and transactions with management and other related parties of the company is hereby incorporated by reference to such information appearing under the captions "Certain Transactions" and "Compensation Committee Interlocks and Insider Participation" in the Company's definitive proxy statement which involves the election of directors and is to be filed with the Commission pursuant to the Securities Exchange Act of 1934 within 120 days of the end of the Company's fiscal year on December 31, 1999. - 21 - PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) List of documents filed as part of this Report 1. Financial Statements of the Company PAGE Report of Independent Auditors F-1 Consolidated Balance Sheets at December 31, 1999 and 1998 F-2 Consolidated Statements of Operations for the years F-4 ended December 31, 1999, 1998, and 1997 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 1998, and 1997 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998, and 1997 F-6 Notes to Consolidated Financial Statements F-8 2. Financial Statement Schedule SCHEDULE DESCRIPTION PAGE II Valuation and Qualifying Accounts S-1 All other schedules are omitted as they are not required, or are not applicable, or the required information is included in the financial statements or notes thereto. 3. List of Exhibits 3.1 Restated Certificate of Incorporation (filed as an exhibit to the Company's Registration Statement on Form S-1 (33-33586) and incorporated herein by reference). 3.2 Bylaws, as amended (filed as an exhibit to the Company's Registration Statement on Form S-1 (33-33586) and incorporated herein by reference). 10.1 TETRA Technologies, Inc. 1990 Stock Option Plan (filed as an exhibit to the Company's Registration Statement on Form S-1 (33-33586) and incorporated herein by reference). 10.2 TETRA Technologies, Inc. 401(K) Retirement Plan (effective November 1, 1990) (filed as an exhibit to the Company's Registration Statement on Form S-1 (33-39154) and incorporated herein by reference). 10.3 Long-term Supply Agreement with Bromine Compounds Ltd. (filed as an exhibit to the Company's Form 10-K for the year ended December 31, 1996 and incorporated herein by reference; certain portions of this exhibit have been omitted pursuant to a confidential treatment request filed with the Securities and Exchange Commission). 10.4 Agreement dated November 28, 1994 between Olin Corporation and TETRA-Chlor, Inc. Certain portions of this exhibit have been omitted pursuant to a confidential treatment request filed with the Securities and exchange Commission (filed as an exhibit to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). - 22 - 10.5 Employment Agreement dated April 1, 1996 with Allen T. McInnes (filed as an exhibit to the Company's Form 10-Q for the three months ended June 30, 1996 and incorporated herein by reference). 10.6 Credit Agreement, dated April 10, 1997, with Nationsbank of Texas, N.A. (filed as an exhibit to the Company's Form 10-Q for the three months ended June 30, 1997 and incorporated herein by reference). 10.7 Sales Agreement with Albemarle Corporation. Certain portions of this exhibit have been omitted pursuant to a confidential treatment request filed with the Securities and Exchange Commission (filed as an exhibit to the Company's Form 10-Q for the three months ended June 30, 1997 and incorporated herein by reference). 10.8 Amendment to Nonqualified Stock Option Agreement effective December 11, 1998 with Allen T. McInnes. 10.9 Employment Agreement effective February 1, 2000 with Allen T. McInnes. 21 Subsidiaries of the Company. 23 Consent of Ernst & Young, LLP 27.1 Financial Data Schedule (b) Form 8-K dated July 12, 1999 disclosing the disposition of TETRA Process Technologies and related pro forma financial information. - 23 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, TETRA Technologies, Inc. has duly caused this report to be signed in its behalf by the undersigned, thereunto duly authorized. TETRA TECHNOLOGIES, INC. Date: March 26, 2000 BY: /s/ GEOFFREY M. HERTEL --------------------------------------- Geoffrey M. Hertel, Chief Operating Officer and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /s/ J. TAFT SYMONDS Chairman of March 26, 2000 - -------------------------- the Board of Directors J. Taft Symonds /s/ GEOFFREY M. HERTEL Geoffrey M. Hertel March 26, 2000 - -------------------------- Chief Operating Officer and Geoffrey M. Hertel Chief Financial Officer and Director (Principal Operating Officer) (Principal Financial Officer) /s/ BRUCE A. COBB Bruce A. Cobb March 26, 2000 - -------------------------- Corporate Controller Bruce A. Cobb (Principal Accounting Officer) /s/ HOYT AMMIDON, JR. Director March 26, 2000 - -------------------------- Hoyt Ammidon, Jr. /s/ PAUL D. COOMBS Director March 26, 2000 - -------------------------- Paul D. Coombs /s/ RALPH S. CUNNINGHAM Director March 26, 2000 - -------------------------- Ralph S. Cunningham /s/ TOM H. DELIMITROS Director March 26, 2000 - -------------------------- Tom H. Delimitros /s/ ALLEN T. MCINNES Director March 26, 2000 - -------------------------- Allen T. McInnes /s/ KENNETH P. MITCHELL Director March 26, 2000 - -------------------------- Kenneth P. Mitchell - 24 - REPORT OF INDEPENDENT AUDITORS Board of Directors and Stockholders TETRA Technologies, Inc. We have audited the accompanying consolidated balance sheets of TETRA Technologies, Inc. and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of TETRA Technologies, Inc. and subsidiaries at December 31, 1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As discussed in Note B to the financial statements, in 1999 the Company changed its method of accounting for start-up costs. ERNST & YOUNG LLP Houston, Texas March 28, 2000 F-1 TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
DECEMBER 31, ----------------------- 1999 1998 --------- --------- ASSETS Current Assets: Cash and cash equivalents ............................... $ 4,184 $ 2,803 Restricted cash ......................................... 2,000 -- Trade accounts receivable, net of allowance for doubtful accounts of $1,868 in 1999 and $853 in 1998 ........... 50,220 56,167 Costs and estimated earnings in excess of billings on incomplete contracts .................. -- 5,641 Inventories ............................................. 57,020 58,478 Deferred tax assets ..................................... 4,483 4,099 Prepaid expenses and other current assets ............... 3,701 3,731 --------- --------- Total Current Assets ................................ 121,608 130,919 Property, Plant and Equipment: Land and building ....................................... 12,646 16,761 Machinery and equipment ................................. 112,026 109,116 Automobiles and trucks .................................. 9,261 8,485 Chemical plants ......................................... 52,195 48,040 Construction in progress ................................ 7,538 23,201 --------- --------- 193,666 205,603 Less accumulated depreciation and amortization .......... (63,555) (60,007) --------- --------- Net Property, Plant and Equipment ..................... 130,111 145,596 Other Assets: Cost in excess of net assets acquired, net of accumulated amortization of $3,210 in 1999 and $2,510 in 1998 ..... 33,328 26,190 Other, net of accumulated amortization of $3,309 in 1999 and $3,680 in 1998 .................. 5,589 8,303 --------- --------- Total Other Assets .................................. 38,917 34,493 --------- --------- $ 290,636 $ 311,008 ========= =========
F-2 TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
DECEMBER 31, ----------------------- 1999 1998 --------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Trade accounts payable ................................. $ 25,939 $ 29,322 Accrued expenses ....................................... 17,729 11,335 Billings in excess of costs and estimated earnings on incomplete contracts .................... -- 956 Unearned revenue ....................................... 1,002 -- Current portion of all long-term debt and capital lease obligations ........................... 2,232 1,007 --------- --------- Total Current Liabilities ........................ 46,902 42,620 Long-term debt, less current portion ...................... 74,000 109,000 Capital lease obligations, less current portion ........... 1,026 1,307 Deferred income taxes ..................................... 18,792 17,759 Other liabilities ......................................... 495 1,000 Commitments and contingencies Stockholders' Equity: Common stock, par value $.01 per share: 40,000,000 shares authorized, with 13,529,201 shares issued and outstanding in 1999 and 13,514,340 shares issued and outstanding in 1998 ................ 136 136 Additional paid-in capital ............................. 77,988 77,923 Accumulated other comprehensive income ................. (355) (96) Treasury Stock, at cost, 94,000 shares in 1999 and 1998 (1,107) (1,168) Retained earnings ...................................... 72,759 62,527 --------- --------- Total Stockholders' Equity ......................... 149,421 139,322 --------- --------- $ 290,636 $ 311,008 ========= =========
See Notes to Consolidated Financial Statements F-3 TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, ------------------------------------- 1999 1998 1997 --------- --------- --------- Revenues: Product sales ............................... $ 140,349 $ 147,400 $ 147,927 Services .................................... 74,952 91,068 71,486 --------- --------- --------- Total Revenues ............................ 215,301 238,468 219,413 Cost of Revenues: Cost of product sales ....................... 116,302 111,646 107,379 Cost of services ............................ 53,062 66,387 49,052 --------- --------- --------- Total cost of revenues .................... 169,364 178,033 156,431 --------- --------- --------- Gross Profit ............................ 45,937 60,435 62,982 General and administrative ..................... 41,894 39,055 37,945 Special charge ................................. 4,745 -- -- Restructuring charge ........................... 2,320 -- -- --------- --------- --------- Operating Income ........................ (3,022) 21,380 25,037 Gain of sale of administration building ........ 6,731 -- -- Gain on sale of business ....................... 29,629 -- -- Interest expense ............................... (7,756) (6,458) (3,305) Interest income ................................ 388 172 305 Other income (expense), net .................... (81) (478) 1,065 --------- --------- --------- Income before income taxes and Cumulative effect of accounting change ...... 25,889 14,616 23,102 Provision for income taxes ..................... 9,875 5,718 9,166 --------- --------- --------- Income before cumulative effect of accounting change ........................... 16,014 8,898 13,936 Cumulative effect of accounting change, net of income tax effect ................... (5,782) -- -- --------- --------- --------- Net Income .............................. $ 10,232 $ 8,898 $ 13,936 ========= ========= ========= Net income per share before cumulative effect of accounting change ................ $ 1.18 $ 0.66 $ 1.05 Cumulative effect per share of accounting change ($0.43) -- -- --------- --------- --------- Net Income per share ........................... $ 0.75 $ 0.66 $ 1.05 ========= ========= ========= Average shares ................................. 13,524 13,561 13,297 ========= ========= ========= Net income per diluted share before cumulative effect accounting change ................... $ 1.18 $ 0.64 $ 0.98 Cumulative effect per share of accounting change ($ 0.43) -- -- --------- --------- --------- Net Income per diluted share ................... $ 0.75 $ 0.64 $ 0.98 ========= ========= ========= Average diluted shares ......................... 13,576 13,994 14,189 ========= ========= =========
See Notes to Consolidated Financial Statements F-4 TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
ACCUMULATED ADDITIONAL OTHER TOTAL COMMON PAID-IN TREASURY RETAINED COMPREHENSIVE STOCKHOLDERS' STOCK CAPITAL STOCK EARNINGS INCOME EQUITY --------- --------- --------- --------- ------------- ------------ Balance at December 31, 1996 ..................... $ 131 $ 67,811 $ -- $ 39,693 $ 387 $ 108,022 Net Income for 1997 .............................. 13,936 13,936 Translation adjustment ........................... (473) (473) -------- Comprehensive Income ........................... 13,463 Exercise of common stock options ................. 3 2,457 2,460 Tax benefit upon exercise of certain non-qualified and incentive stock options ................. 1,636 1,636 Common stock issued for acquisitions ............. 1 3,998 3,999 --------- --------- --------- --------- --------- --------- Balance at December 31, 1997 ..................... 135 75,902 -- 53,629 (86) 129,580 Net Income for 1998 .............................. 8,898 8,898 Translation adjustment ........................... (10) (10) -------- Comprehensive Income ........................... 8,888 Exercise of common stock options ................. 1 1,408 1,409 Purchase of Treasury Stock ....................... (1,168) (1,168) Tax benefit upon exercise of certain non-qualified and incentive stock options ................ 613 613 --------- --------- --------- --------- --------- --------- Balance at December 31, 1998 ..................... 136 77,923 (1,168) 62,527 (96) 139,322 Net Income for 1999 .............................. 10,232 10,232 Translation adjustment ........................... (259) (259) -------- Comprehensive Income ........................... 9,973 Exercise of common stock options ................. 65 65 Issuance of Treasury Stock ....................... 61 61 --------- --------- --------- --------- --------- --------- Balance at December 31, 1999 ..................... $ 136 $ 77,988 $ (1,107) $ 72,759 $ (355) $149,421 ========= ========= ========= ========= ========= ========
See Notes to Consolidated Financial Statements F-5 TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ---------------------------------- 1999 1998 1997 -------- -------- -------- Operating Activities: Net income ............................................ $ 10,232 $ 8,898 $ 13,936 Adjustments to reconcile net income to net cash provided: Depreciation and amortization ....................... 16,757 16,223 11,575 Provision for deferred income taxes ................. 4,161 2,472 3,236 Provision for doubtful accounts ..................... 1,436 200 253 Gain on sale of property, plant and equipment ..................................... (17) (38) (280) Restructuring Charge ................................ 2,320 -- -- Special charges ..................................... 4,745 -- 3,000 Gain on sale of business ............................ (29,629) -- -- Gain of sale of administration building ............. (6,731) -- -- Cumulative effect of accounting change, net of tax ........................................ 5,782 -- -- Changes in operating assets and liabilities, net of effects from acquisition of subsidiaries: Trade accounts receivable ........................ 2,169 526 (10,750) Costs and estimated earnings in excess of billings on incomplete contracts ........................ (986) (1,620) (2,611) Inventories ...................................... 2,350 (19,464) (15,155) Prepaid expenses and other current assets ........ (190) (953) 3,500 Trade accounts payable and accrued expenses ...... 1,036 1,569 8,003 Billings in excess of costs and estimated earnings on incomplete contracts ........................ (519) 712 (323) Unearned income .................................. 1,002 -- -- Other ............................................ (190) (17) (2,114) -------- -------- -------- Net cash provided by operating activities ........ 13,728 10,607 5,270 -------- -------- -------- Investing Activities: Purchases of property, plant and equipment ............ (13,229) (43,239) (47,360) Business combinations, net of cash acquired ........... (11,658) (2,135) (8,107) Proceeds from the sale of Process Technologies ........ 38,825 -- -- Proceeds from sale of property, plant and equipment ... 10,688 3,617 662 Change in Restricted Cash ............................. (2,000) -- -- Change in other assets ................................ (1,044) (607) 15 -------- -------- -------- Net cash provided (used) by investing activities ... $ 21,582 $(42,364) $(54,790) -------- -------- --------
See Notes to Consolidated Financial Statements F-6 TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ---------------------------------- 1999 1998 1997 -------- -------- -------- Financing Activities: Proceeds from long-term debt and capital lease obligations .............................. $ 25,615 $ 41,974 $ 55,495 Payments on long-term debt and capital lease obligations ...................... (59,670) (10,494) (6,223) Proceeds from exercised stock options ............ 65 1,409 2,460 Repurchase of common stock ....................... 61 (1,168) -- Net repayment and borrowings under short-term credit lines ................................... -- -- (2,202) -------- -------- -------- Net cash provided (used) by financing activities (33,929) 31,721 49,530 -------- -------- -------- Increase (Decrease) in cash ...................... 1,381 (36) 10 Cash and cash equivalents at beginning of period .... 2,803 2,839 2,829 -------- -------- -------- Cash and cash equivalents at end of period .......... $ 4,184 $ 2,803 $ 2,839 ======== ======== ======== Supplemental Cash Flow Information: Capital lease obligations incurred .............. $ 1,179 $ 975 $ 1,894 Capital lease obligations terminated ............ 1,465 1,109 798 Interest paid ................................... 8,358 7,286 3,366 Taxes paid ...................................... 2,600 2,727 2,783
See Notes to Consolidated Financial Statements F-7 TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 NOTE A -- ORGANIZATION AND OPERATIONS OF THE COMPANY TETRA Technologies, Inc. was incorporated in Delaware in 1981. All references to the Company or TETRA include TETRA Technologies, Inc. and its subsidiaries. TETRA is an energy services company with an integrated chemicals operation that supplies feedstocks to energy markets, as well as other markets. The Company's Oil & Gas Services Division markets chemicals, including those produced by the Chemicals Division, to the oil and gas industry for use in well completion and workover operations in both domestic and international markets. They also provide complementary on-site fluid engineering, fluid management and handling services and filtration for completion and workover applications. The Oil & Gas Services Division also offers a specialty drilling fluids product line and oil and gas well abandonment and production testing services. The Division also provides services to process industries and oil and gas producers to reduce or eliminate refinery and petrochemical wastes. The Company's Chemicals Division manufactures and markets chemicals to the agriculture, mining, water treatment, industrial, cement, food processing, ice melt and energy markets. The Division also participates in the consumer products market, offering an array of desiccant products under the trademark DampRid(R). NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. INVENTORIES Inventories are stated at the lower of cost or market and consist primarily of finished goods. Cost is determined using the weighted average method. FINANCIAL INSTRUMENTS The fair value of the Company's financial instruments, which includes cash, accounts receivable, short-term borrowings and long-term debt, approximate their carrying amounts. Financial instruments that subject the Company to concentrations of credit risk consist principally of trade receivables. The Company's policy is to evaluate, prior to shipment, each customer's financial condition and determine the amount of open credit to be extended. The Company generally requires appropriate, additional collateral as security for credit amounts in excess of approved limits. The trade receivables include activity with oil and gas companies and other industrial companies. F-8 PROPERTY, PLANT AND EQUIPMENT Property, plant, and equipment are stated at the cost of assets acquired. Expenditures that increase the useful lives of assets are capitalized. The cost of repairs and maintenance are charged to operations as incurred. For financial reporting purposes, the Company provides for depreciation using the straight-line method over the estimated useful lives of assets which are as follows: Building 25 years Machinery and equipment 3 and 5 and 10 years Automobiles and trucks 4 years Chemical plants 15 years Certain production equipment is depreciated based on operating hours or units of production because depreciation occurs primarily through use rather than through elapsed time. For income tax purposes, the Company provides for depreciation using accelerated methods. Interest capitalized for the years ended December 31, 1999, 1998 and 1997 was $73,000, $1,346,000 and $505,600, respectively. ADVERTISING The Company expenses costs of advertising as incurred. Advertising expense for the years ended December 31, 1999, 1998 and 1997 were $3,059,000, $1,326,000 and $1,217,000, respectively. INTANGIBLE ASSETS Patents and licenses are stated on the basis of cost and are amortized over the estimated useful lives, generally ranging from 14 to 20 years. Goodwill is amortized on a straight-line basis over its estimated life of 20 - 40 years. On an annual basis, the Company estimates the future estimated discounted cash flows of the business to which goodwill related in order to determine that the carrying value of the goodwill had not been impaired. LONG-LIVED ASSETS Impairment losses are recognized when indicators of impairment are present and the estimated undiscounted cash flows are not sufficient to recover the assets carrying cost. Assets held for disposal are recorded at the lower of carrying value or estimated fair value less costs to sell. INCOME TAXES The Company computes income tax expense using the liability method. Under this method, deferred tax liabilities or assets are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using tax rates and laws that are in effect at year end. ENVIRONMENTAL LIABILITIES Environmental expenditures which result in additions to property and equipment are capitalized, while other environmental expenditures are expensed. Environmental remediation liabilities are recorded on an undiscounted basis when environmental assessments or cleanups are probable and the costs can be reasonably estimated. These costs are adjusted as further information develops or circumstances change. F-9 STOCK COMPENSATION The Company accounts for stock-based compensation using the intrinsic value method. Compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. Note K to the Consolidated Financial Statements contains a summary of the pro forma effects to reported net income and earnings per share as if the Company had elected to recognize the compensation cost based on the fair value of the options granted at grant date. INCOME PER COMMON SHARE Basic earnings per share excludes any dilutive effects of options. Diluted earnings per share includes the dilutive effect of stock options, which is computed using the treasury stock method during the periods such options were outstanding. A reconciliation of the common shares used in the computations of income per common and common equivalent shares is presented in Note L to the Consolidated Financial Statements. FOREIGN CURRENCY TRANSLATION The U.S. dollar is the designated functional currency for all of the Company's foreign operations, except for those in the United Kingdom and Norway, where the British Pound and the Norwegian Kroner are the functional currency. The cumulative translation effects of translating balance sheet accounts from the functional currency into the U.S. dollar at current exchange rates are included as a separate component of shareholders' equity. USE OF ESTIMATES Management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. RECLASSIFICATIONS Certain previously reported financial information has been reclassified to conform to the current year's presentation. REVENUE RECOGNITION Revenues are recognized when finished products are shipped to unaffiliated customers or services have been rendered with appropriate provisions for uncollectible accounts. DERIVATIVE FINANCIAL INSTRUMENTS The Company manages its exposure to variable interest rate financing arrangements by entering into interest rate contracts, which provide for the Company to pay a fixed rate of interest and receive a variable rate of interest over the term of the contracts. The differential to be paid or received as a result of the changes in the prevailing interest rates are accrued and recognized as an adjustment of interest expense related to the debt. The net amount receivable or payable under the interest rate contracts are included in other assets or liabilities. Gains or losses on termination of interest rate swap agreements are deferred as an adjustment to the carrying amount of the debt and amortized to interest expense over the remaining term of the original contract. START-UP COSTS In April 1998, the American Institute of Certified Public Accounts issued Statement of Position 98-5, REPORTING THE COSTS OF START-UP ACTIVITIES ("SOP 98-5"), which requires that costs related to start-up activities be expensed as incurred. Prior to 1999, the Company capitalized those costs incurred in connection with opening a new production facility. The Company adopted the provisions of the SOP 98-5 in its financial statements for the year ended December 31, 1999. The effect of adoption of SOP 98-5 was to record a charge for the cumulative effect of an accounting change of $5.8 million ($0.43 per share), net of taxes of $3.9 million, to expense costs that had been F-10 previously capitalized prior to 1999. Had SOP 98-5 been adopted as of January 1, 1998, the reported net income and earnings per share for 1998 would not have materially changed. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which is required to be adopted in years beginning after June 15, 2001. Because of the Company's minimal use of derivatives, management does not anticipate that the adoption of the new Statement will have a significant effect on earnings or the financial position of the Company. NOTE C -- RESTRUCTURING AND SPECIAL CHARGES During the fourth quarter of 1999, the Company implemented a strategic restructuring program to refocus its effort in the energy services business. This program will concentrate the Company's efforts on developing its oil and gas services business and will sell or consolidate non-core chemical operations. To achieve this strategy, the Company is actively pursuing the disposition of its micronutrients business, as well as several smaller chemicals-related operations. Additionally, the Company has implemented plans to exit certain product lines and businesses which are not core to its new strategic direction. The remaining chemicals business will consist of a commodity products based operations, which significantly supports the energy service markets. The Company has also embarked on an aggressive program to reorganize its overhead structure to reduce costs and improve operating efficiencies in support of the energy services operations. As a result of this change in strategy, the Company recorded a $2.3 million, pretax, restructuring charge in the fourth quarter of 1999, as detailed below: DECEMBER 31, 1999 ------------------------ (IN THOUSANDS) LIABILITY EXPENSE BALANCE -------- --------- Involuntary termination costs......... $ 1,170 $ 1,170 Contractual costs..................... 760 760 Exit costs............................ 390 390 -------- -------- $ 2,320 $ 2,320 ======= ======= Involuntary termination costs consist of severance costs associated with the termination of six management level employees associated with the Company's restructuring. Contractual costs include obligations triggered in two chemicals product lines when the Company decided to exit these businesses. The remaining exit costs are additional liabilities realized by exiting certain portions of the specialty chemicals business. Of the total restructuring charge, approximately $1.8 million is associated with the Chemicals Division, $0.1 million with the Oil & Gas Services Division and $0.6 million with corporate administrative activities. The majority of the costs are expected to be paid within the next 18 months and will be funded using cash flow from operations. These restructuring activities may result in additional expenses to be incurred in 2000, which the Company is unable to quantify at this time. In March 1999, the Company was verbally notified of the early termination of a significant liquid calcium chloride contract. The Company was subsequently notified in writing. Under the terms of the contract, the Company is required to terminate its operations at that location and vacate the facility within two years from the date of written notification. The Company is also required to remove all of its equipment and fixtures, at its own cost. As a result of the early termination of the contract, the Company recorded a first quarter impairment of these Chemicals Division assets of approximately $1.4 million. These assets are currently in service through the end of the contract. Also during the first quarter of 1999, the Company committed to certain actions that resulted in the impairment of other plant assets in the Company's Chemicals Division. As a result of increased production volumes achieved at the new calcium chloride dry plant in Lake Charles, Louisiana, the Company no longer needs the previously existing dry plant and has subsequently dismantled it, resulting in an impairment charge of approximately $1.8 million. In addition, the Company recently completed modifications on the West Memphis, Arkansas bromine plant. The assets related to the old zinc bromide production unit, which had a carrying value of approximately $0.4 million, were taken out of service F-11 in the first quarter. The abandoned assets of both plant facilities were written off during the first quarter. Finally, the Company recognized the impairment of certain micronutrients' assets totaling approximately $1.1 million. These assets were deemed impaired with the acquisition of the WyZinCo Company and the CoZinCo assets and were written off during the first quarter. NOTE D -- ACQUISITIONS AND DISPOSITIONS In January 1999, the Company acquired WyZinCo, Inc., CoZinCo Sales, Inc. and certain assets of CoZinCo, Inc. for approximately $11.7 million in cash and notes. The acquisition, which was accounted for under the purchase method of accounting, was funded primarily through the Company's credit facility. The excess of purchase price over the fair value of assets acquired was approximately $8.3 million. In March 1999, the Company sold its corporate headquarters building realizing a pretax gain of approximately $6.7 million. The Company subsequently signed a ten-year lease agreement for space within the building. In July 1999, the Company sold its Process Technologies business for $38.8 million. Of these proceeds, $2.0 million was escrowed and could be used to satisfy certain claims asserted by the buyer within the first year after the sale. The escrowed amounts are classified as restricted cash in the accompanying financial statements. The Company does not anticipate any such claims. The sale, which was effective May 1, generated a pretax gain of $29.6 million. The proceeds were used to reduce long-term bank debt. TETRA Process Technologies ("TPT") is in the waste and potable water treatment business and was operated as part of the Chemicals Division. It had sales of $4.1 million in 1999, $15.6 million in 1998 and $11.4 million in 1997. During the third quarter of 1998, the Company acquired from Cargill, Inc. the assets of its calcium chloride facility located near Amboy, California. The business, which utilizes solar evaporation and other techniques to produce three grades of calcium chloride from underground brine reserves, will be integrated into the Chemicals Division. The Company paid approximately $2.1 million cash for the assets of the facility. The excess purchase price over the fair market value of the assets acquired was approximately $2.0 million. All acquisitions by the Company have been accounted for as purchases, with operations of the companies and businesses acquired included in the accompanying consolidated financial statements from their respective dates of acquisition. The purchase price has been allocated to the acquired assets and liabilities based on a preliminary determination of their respective fair values. The excess of the purchase price over the fair value of the net assets acquired is included in goodwill and amortized over periods which do not exceed forty years. Pro forma information for these acquisitions has not been presented as such amounts are not material. NOTE E -- LONG-TERM DEBT AND OTHER BORROWINGS Long-term debt consists of the following: DECEMBER 31, ------------ ------- (IN THOUSANDS) 1999 1998 --------- --------- General purpose unsecured, revolving line-of-credit for $120 million with interest at LIBOR plus .75 - 2.75%. Borrowings as of 12/31/99 accrued interest at LIBOR plus 2.25%. ............... $ 74,000 $ 109,000 Other ................................................. 1,230 -- --------- --------- 75,230 109,000 Less current portion................................... (1,230) -- --------- ---------- Total long-term debt................................ $ 74,000 $ 109,000 ======== ========= F-12 Scheduled maturities for the next five years and thereafter as of December 31, 1999 are as follows (in thousands): 2000................................$ 1,230 2001................................ -- 2002................................ 74,000 --------- $ 75,230 ========= As of December 31, 1999, the Company has $1.6 million in letters of credit and $75.2 million in long-term debt outstanding against a $120 million line-of-credit, leaving a net availability of $43.2 million. Beginning March 31, 2000, the maximum borrowing amount of this line will decrease $5 million per quarter until its maturity date of March 10, 2002. TETRA's credit facility, which is unsecured, is subject to common financial ratio covenants. These include, among others, a debt to EBITDA ratio, a fixed charge coverage ratio, a net worth minimum and dollar limits on the total amount of capital expenditures and acquisitions the Company may undertake in any given year. The Company pays a commitment fee on unused portions of the line and a LIBOR-based interest rate which decreases as the financial ratios increase. The Company is not required to maintain compensating balances. The covenants also included certain restrictions on the Company for the sale of assets. The Company obtained an amendment to the covenants authorizing the sale of its corporate headquarters building and the assets of TETRA Process Technologies. As of December 31, 1999, the Company was in violation of certain financial covenants of its credit agreement but has received a waiver agreement from the banks. The Company has a binding commitment from the banks to amend its current credit facility. This amended credit line will include an asset-based component of up to $50 million and a $50 million term component secured with property and equipment. The Company believes this new credit facility will meet all its capital and working capital requirements. The new financial covenants, which are effective December 31, 1999, are consistent with its 2000 business plan. In September 1997, the Company entered into two interest rate swap agreements, each with a nominal amount of $20,000,000, which are effective January 2, 1998 and expire on January 2, 2003. The interest rate swap agreements provide for the Company to pay interest at a fixed rate of approximately 6.4% (annual rate) every three months, beginning April 2, 1998 and requires the issuer to pay the Company on a floating rate based on LIBOR. The swap transactions can be canceled by the Company through payment of a cancellation fee, which is based upon prevailing market conditions and remaining life of the agreement. The estimated fair value of the swap transactions at December 31, 1999 was higher than the carrying value by $0.2 million. NOTE F -- LEASES The Company leases automobiles and trucks, transportation equipment, office space, and machinery and equipment. The automobile and truck leases, which are for three and five years and expire at various dates through 2003, are classified as capital leases. The machinery and equipment leases, which vary from three to five year terms and expire at various dates through 2010, are also classified as capital leases. The office leases, which vary from one to ten year terms expiring at various dates through 2001 and are renewable for three and five year periods at similar terms, are classified as operating leases. Transportation equipment leases expire at various dates through 2002 and are classified as operating leases. The automobile and truck leases, office leases, and machinery and equipment leases require the Company to pay all maintenance and insurance costs. F-13 Property, plant, and equipment includes the following amounts for leases that have been capitalized: DECEMBER 31, ------------------------- (IN THOUSANDS) 1999 1998 ------- ------- Automobiles and trucks ..................... $ 4,419 $ 3,658 Less accumulated amortization .............. (2,073) (1,424) ------- ------- $ 2,346 2,234 ======= ======= Machinery and equipment .................... 108 260 Less accumulated amortization .............. (30) (133) ------- ------- $ 78 $ 127 ======= ======= Amortization of these assets is computed using the straight-line method over the terms of the leases and is included in depreciation and amortization expense. Future minimum lease payments by year and in the aggregate, under capital leases and noncancellable operating leases with terms of one year or more consist of the following at December 31, 1999: CAPITAL OPERATING LEASES LEASES ------- --------- (IN THOUSANDS) 2000 ......................................... $ 1,109 $ 3,679 2001 ......................................... 631 3,013 2002 ......................................... 432 2,274 2003 ......................................... 70 1,742 2004 ......................................... 2 1,279 ------- ------- Total minimum lease payments ................. 2,244 $11,987 ======= Amount representing interest ................. (216) ------- Present value of net minimum lease payments .. 2,028 Less current portion ......................... (1,002) ------- Total long-term portion ................. $ 1,026 ======= Rental expense for all operating leases was $5,410,000, $4,335,000 and $3,598,000 in 1999, 1998 and 1997, respectively. F-14 NOTE G -- INCOME TAXES The income tax provision for years ended December 31, 1999, 1998 and 1997 consisted of the following: YEAR ENDED DECEMBER 31, -------------------------------------- (IN THOUSANDS) 1999 1998 1997 ------- ------- ------- CURRENT Federal ........................ $ 3,902 $ 920 $ 2,860 State .......................... 254 100 402 Foreign ........................ 1,558 2,226 2,668 ------- ------- ------- 5,714 3,246 5,930 DEFERRED Federal ........................ 5,786 2,420 3,090 State .......................... 392 52 146 Foreign ........................ (2,017) -- -- ------- ------- ------- 4,161 2,472 3,236 Total tax provision ............ $ 9,875 $ 5,718 $ 9,166 ======= ======= ======= A reconciliation of the provision for income taxes computed by applying the federal statutory rate for the years ended December 31, 1999, 1998 and 1997 to income before income taxes and the reported income taxes is as follows: 1999 1998 1997 ------- ------- ------- (IN THOUSANDS) Income tax provision computed at statutory federal income tax rates .................. $ 9,061 $ 4,970 $ 8,086 State income taxes (net of federal benefit) . 420 66 261 Permanent differences ....................... 630 391 359 Impact of International Operations .......... (694) 320 386 Other ....................................... 458 (29) 74 ------- ------- ------- Total tax provision ......................... $ 9,875 $ 5,718 $ 9,166 ======= ======= ======= Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 1999 and 1998 are as follows: Deferred Tax Assets: 1999 1998 ------- ------- (IN THOUSANDS) Tax inventory over book ...................... $ 842 $ 1,638 Allowance for doubtful accounts .............. 468 315 Accruals ..................................... 1,333 1,094 Net operating and capital loss carryforward ............................... 121 960 Tax credit carryforward ...................... 2,604 1,044 Foreign Tax credit carryforward .............. 753 550 Restructuring charge ......................... 858 -- All other, net ............................... 636 624 ------- ------- Total deferred tax assets ................ 7,615 6,225 Valuation reserve ............................ (227) (227) ------- ------- Net deferred tax assets .................. $ 7,388 $ 5,998 ======= ======= F-15 Deferred Tax Liabilities: 1999 1998 ------- ------- (IN THOUSANDS) Tax over book depreciation ..................... $18,883 $16,670 Goodwill amortization .......................... 1,688 1,516 Accounts receivable mark-to-market ............. 511 839 All other ...................................... 615 633 ------- ------- Total deferred tax liability ................... 21,697 19,658 ------- ------- Net deferred tax liability...................... $14,309 $13,660 ======= ======= The Company has net operating loss carryforward of $120,000 for U.S. federal income tax purposes which, if not utilized, will begin to expire in 2010. The Company also has alternative minimum tax credit carryforwards of approximately $250,000, which may be carried forward indefinitely and an asset tax carryforward associated with its Mexican subsidiary of approximately $2.1 million, a portion of which expires annually over the next ten years. The Company has recorded a valuation allowance of $227,000 at December 31, 1999 and 1998 for deferred tax assets, which are not considered realizable. NOTE H -- ACCRUED LIABILITIES Accrued liabilities are detailed as follows: YEAR ENDED DECEMBER 31, ----------------------- 1999 1998 ------- ------- (IN THOUSANDS) Compensation and employee benefits ............... $ 3,798 $ 3,297 Interest expense payable ......................... 605 1,134 Plant operating costs ............................ 246 481 Professional fees ................................ 636 289 Restructuring charges ............................ 2,320 -- Taxes payable .................................... 5,050 870 Transportation and distribution costs ............ 788 867 Other accrued liabilities ........................ 4,286 4,398 ------- ------- $17,729 $11,336 ======= ======= NOTE I -- COMMITMENTS AND CONTINGENCIES The Company and its subsidiaries 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 the Company cannot be predicted with certainty, management does not expect these matters to have a material adverse impact on the financial statements. NOTE J -- CAPITAL STOCK The Company's Restated Certificate of Incorporation authorizes the Company to issue 40,000,000 shares of common stock, par value $.01 per share, and 5,000,000 shares of preferred stock, no par value. The voting, dividend and liquidation rights of the holders of common stock are subject to the rights of the holders of preferred stock. The holders of common stock are entitled to one vote for each share held. There is no cumulative voting. Dividends may be declared and paid on common stock as determined by the Board of Directors, subject to any preferential dividend rights of any then outstanding preferred stock. F-16 The Board of Directors of the Company is empowered, without approval of the stockholders, to cause shares of preferred stock to be issued in one or more series and to establish the number of shares to be included in each such series and the rights, powers, preferences and limitations of each series. Because the Board of Directors has the power to establish the preferences and rights of each series, it may afford the holders of any series of preferred stock preferences, powers and rights, voting or otherwise, senior to the rights of holders of common stock. The issuance of the preferred stock could have the effect of delaying or preventing a change in control of the Company. The Board of Directors has no present plans to issue any of the preferred stock. Upon dissolution or liquidation of the Company, whether voluntary or involuntary, holders of common stock will be entitled to receive all assets of the Company available for distribution to its stockholders, subject to any preferential rights of any then outstanding preferred stock. NOTE K -- STOCK OPTION PLANS The Company has various stock option plans which provide for the granting of options for the purchase of the Company's common stock and other performance-based awards to officers, key employees, non employees and directors of the Company. Incentive stock options generally vest over a five year period and are exercisable for periods up to ten years. The TETRA Technologies, Inc. 1990 Stock Option Plan (the "1990 Plan") was initially adopted in 1985 and subsequently amended to change the name and the number and type of options that could be granted. In 1997 and 1998, the Company granted performance stock options under the 1990 Plan to certain executive officers. These options have an exercise price of $25.00 per share and vest in full in no less than five years, subject to earlier vesting as follows: fifty percent of each such option vests immediately if the market value per share is equal to or greater than $37.50 for a period of at least 20 consecutive trading days; and the remaining fifty percent vests immediately if the market value per share is equal to or greater than $50.00 for a period of at least 20 consecutive trading days. These options are immediately exercisable upon vesting; provided, however, that no more than 100,000 shares of Common Stock may be exercised by any individual after vesting in any 90 day period, except in the event of death, incapacity or termination of employment of the holder or the occurrence of a Corporation Change. Such options must be exercised within three years of vesting or they expire. At December 31, 1999, 950,000 shares of common stock have been reserved for grants, of which 350,000 were available for future grants. In 1993, the Company adopted the TETRA Technologies, Inc. Director Stock Option Plan (the "Director's Plan"). The purpose of the Directors' Plan is to enable the Company to attract and retain qualified individuals who are not employees of the Company to serve as directors. In 1996, the Directors' Plan was amended to increase the number of shares issuable under automatic grants thereunder. In 1998, the Company adopted the TETRA Technologies, Inc. 1998 Director Stock Option Plan (the "1998 Directors' Plan"). The purpose of the 1998 Directors' Plan is to enable the Company to attract and retain qualified individuals to serve as directors of the Company and to align their interests more closely with the Company's interests. The 1998 Directors' Plan is funded with treasury stock of the Company. The Company also has a plan designed to award incentive stock options to non-executive employees and consultants who are key to the performance of the Company. At December 31, 1999, 500,000 shares of common stock have been reserved for grants, of which 417,730 were available for future grants. Effective December 11, 1998, the Company's Board of Directors approved a stock option exchange program whereby all outstanding 1996 options, other than directors options, could be exchanged for 70% of as many shares, and all 1997 and 1998 options and all directors options could be exchanged for 50% of as many shares. The exercise price of the new options received was $10.188 per share. The new options issued are vested to the same extent as the old options, on a prorata basis, and the vesting period will continue unchanged. The term of the new options is ten years from December 11, 1998. The exchange program was offered to substantially all employee option holders and directors who received grants in 1996, 1997 and 1998, other than the performance-based options made to executive officers. This program reduced the number of options outstanding by approximately 516,000. F-17 The following is a summary of stock option activity for the years ended December 31, 1997, 1998 and 1999: SHARES WEIGHTED AVERAGE UNDER OPTION OPTION PRICE (000'S) PER SHARE ------------ ---------------- Outstanding at December 31, 1996 .............. 2,121 12.97 Options granted ............................. 732 24.36 Options canceled ............................ (26) 14.25 Options exercised ........................... (272) 9.42 ------ Outstanding at December 31, 1997 .............. 2,555 16.60 Options granted ............................. 1,415 14.76 Options canceled ............................ (1,459) 19.13 Options exercised ........................... (134) 10.71 ------ Outstanding at December 31, 1998 .............. 2,377 $14.28 Options granted ............................. 144 10.02 Options canceled ............................ (283) 14.55 Options exercised ........................... (13) 7.59 ------ Outstanding at December 31, 1999 .............. 2,225 13.96 ====== (In thousands, except per share amounts)
1999 1998 1997 ---- ---- ---- 1990 TETRA TECHNOLOGIES, INC. EMPLOYEE PLAN (AS AMENDED) - -------------------------------------------------------- Maximum number of shares authorized for issuance 3,950 3,950 3,950 Shares reserved for future grants .............. 1,030 824 867 Shares exercisable at year end ................. 948 848 803 Weighted average exercise price of shares exercisable at year end ...................... $9.58 $9.69 $11.05 DIRECTOR STOCK OPTION PLANS - --------------------------- Maximum number of shares authorized for issuance 175 175 100 Shares reserved for future grants .............. 86 101 26 Shares exercisable at year end ................. 57 47 68 Weighted average exercise price of shares exercisable at year end ...................... $10.10 $9.93 $16.72 ALL OTHER PLANS - --------------- Maximum number of shares authorized for issuance 785 785 785 Shares reserved for future grants .............. 418 467 465 Shares exercisable at year end ................. 269 209 198 Weighted average exercise price of shares exercisable at year end ...................... $10.35 $10.27 $16.92
F-18 OPTIONS OUTSTANDING OPTIONS EXERCISABLE -------------------------------------- ---------------------- WEIGHTED AVERAGE WEIGHTED RANGE OF REMAINING AVERAGE WEIGHTED AVERAGE EXERCISE PRICE SHARES CONTRACTED LIFE EXERCISE PRICE SHARES EXERCISE PRICE - ---------------- ------ --------------- -------------- ------ ---------------- $5.88 to $9.80 560 4.7 $ 8.01 514 $ 7.97 $10.19 to $16.75 1,041 8.3 10.59 739 10.62 $21.06 to $25.00 624 7.8 24.92 21 23.82 ----- ----- 2,225 7.3 $ 13.96 1,274 $ 9.76 ===== ===== Assuming that TETRA had accounted for its stock-based compensation using the alternative fair value method of accounting under FAS No. 123 and amortized the fair value to expense over the options vesting period, net income and earnings per share would have been as follows (in thousands except per share amounts):
YEAR ENDED DECEMBER 31, ------------------------------------ (IN THOUSANDS) 1999 1998 1997 --------- --------- ---------- Net Income - as reported ................. $ 10,232 $ 8,898 $ 13,936 ========= ========= ========== Net Income - pro forma ................... 8,144 7,369 12,272 ========= ========= ========== Net Income per share - as reported ....... 0.75 0.66 1.05 ========= ========= ========== Net Income per share - pro forma ......... 0.60 0.54 0.92 ========= ========= ========== Net Income per diluted share - as reported 0.75 0.64 0.98 ========= ========= ========== Net Income per diluted share - pro forma . $ 0.60 $ 0.53 $ 0.86 ========= ========= ==========
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions; expected stock price volatility 43.3%, expected life of options 5.0 to 6.0 years, risk-free interest rate 6.00% and no expected dividend yield. The weighted average fair value of options granted during 1999, 1998 and 1997 was $3.69, $6.62 and $12.95 per share, respectively. The pro forma effect on net income for 1998 is not representative of the pro forma effect on net income in future years because of the potential of accelerated vesting of certain options and it does not take into consideration pro forma compensation expense related to grants made prior to 1995. NOTE L -- 401(K) PLAN The Company has a 401(k) profit sharing and savings plan (the "Plan") that covers substantially all employees and entitles them to contribute up to 22% of their annual compensation, subject to maximum limitations imposed by the Internal Revenue Code. The Company matches 50% of each employee's contribution up to 6% of annual compensation, subject to certain limitations as outlined in the Plan. In addition, the Company make discretionary contributions which are allocable to participants in accordance with the Plan. F-19 NOTE M -- INCOME PER SHARE The following is a reconciliation of the common shares outstanding with the number of shares used in the computations of income per common and common equivalent share:
YEAR ENDED DECEMBER 31, -------------------------- (IN THOUSANDS) 1999 1998 1997 ------ ------ ------ Number of weighted average common shares outstanding 13,524 13,561 13,297 Assumed exercise of stock options .................. 52 433 892 ------ ------ ------ Average diluted shares outstanding ................. 13,576 13,994 14,189 ====== ====== ======
NOTE N -- INDUSTRY SEGMENTS AND GEOGRAPHIC INFORMATION In 1999, the Company managed its business in two segments: Oil & Gas Services and Chemicals. The Oil & Gas Services segment provides a broad range of products and services to its customers in the energy industry. The Chemicals segment manufactures and markets a variety of commercial products which are produced from low cost feedstocks. During the fourth quarter of 1999, the Company implemented a strategic restructuring program to refocus its effort in the energy services business. This program will concentrate the Company's efforts on developing its oil and gas services business and will sell or consolidate non-core chemical operations. To achieve this strategy, the Company is actively pursuing the disposition of its micronutrients business, as well as several smaller chemicals-related operations. Additionally, the Company has implemented plans to exit certain product lines and businesses which are not core to its new strategic direction. The remaining chemicals business will consist of a commodity products based operations which significantly supports the energy service markets. The Company evaluates performance and allocates resources based on profit or loss from operations before income taxes and non-recurring charges. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Transfers between segments, as well as geographic areas, are priced at the estimated fair value of the products or services as negotiated between the two operating units. Other includes corporate expenses, nonrecurring charges and elimination of intersegment revenues. F-20 Summarized financial information concerning the business segments follows:
OIL & GAS (IN THOUSANDS) SERVICES CHEMICALS DIVISION DIVISION OTHER CONSOLIDATED -------- -------- -------- ------------ 1999 SEGMENT DETAIL Revenues from external customers: Products ............................. $ 60,542 $ 79,807 $ -- $140,349 Services and Rentals ................. 59,813 15,139 -- 74,952 Intersegmented revenues ................. 196 13,206 (13,402) -- -------- -------- -------- -------- Total revenues ....................... 120,551 108,152 (13,402) 215,301 -------- -------- -------- -------- Depreciation and amortization ........... 7,799 8,270 688 16,757 Interest Expense ........................ 9 45 7,702 7,756 Income before income taxes and cumulative effect of accounting change 7,179 4,265 14,445(1) 25,889 Total Assets ............................ 131,262 151,073 8,301 290,636 Capital Expenditures .................... $ 4,269 $ 8,650 $ 310 $ 13,229 (1) Includes gain on the sale of administrative building of $6,731, gain on the sale of the TPT business of $29,629, special charges of $4,745 and a restructuring charge of $2,320, of which $1,660 is associated with the Chemicals Division, $75 with the Oil & Gas Services Division and $585 with corporate administration. 1998 SEGMENT DETAIL Revenues from external customers: Products ............................ $ 85,542 $ 61,858 $ -- $ 147,400 Services and Rentals ................ 62,866 28,202 -- 91,068 Intersegmented revenues ................ 616 16,635 (17,251) -- --------- --------- --------- --------- Total revenues....................... 149,024 106,695 (17,251) 238,468 ========= ========= ========= ========= Depreciation and amortization .......... 7,404 7,458 1,361 16,223 Interest Expense ....................... 11 213 6,234 6,458 Income before Taxes .................... 19,397 8,234 (13,015) 14,616 Total Assets ........................... 141,334 162,647 7,027 311,008 Capital Expenditures ................... $ 21,086 $ 22,978 $ 1,310 $ 45,374
F-21
OIL & GAS (IN THOUSANDS) SERVICES CHEMICALS DIVISION DIVISION OTHER CONSOLIDATED -------- -------- -------- ------------ 1997 SEGMENT DETAIL Revenues from external customers: Products ..................... $ 92,704 $ 55,223 $ -- $147,927 Services and Rentals ......... 55,094 16,392 -- 71,486 Intersegmented revenues ......... -- 15,356 (15,356) -- -------- -------- -------- -------- Total revenues ............... 147,798 86,971 (15,356) 219,413 ======== ======== ======== ======== Depreciation and amortization ... 5,072 5,733 770 11,575 Interest Expense ................ 60 1,046 2,199 3,305 Income before Taxes ............. 30,098 3,322 (10,318) 23,102 Total Assets .................... 123,371 133,056 7,365 263,792 Capital Expenditures ............ $ 36,227 $ 18,169 $ 1,071 $ 55,467
Summarized financial information concerning the geographic areas in which the Company operated at December 31, 1999, 1998 and 1997 are presented below: 1999 1998 1997 --------- --------- --------- Revenues from external customers: U.S ........................... $ 168,192 $ 189,853 $ 176,125 Europe and Africa ............. 21,011 24,112 21,409 Other ......................... 26,098 24,503 21,879 --------- --------- --------- Total .................. 215,301 238,468 219,413 Transfer between geographic areas: U.S ........................... 596 1,252 5,301 Europe and Africa ............. -- -- 972 Other ......................... -- -- -- Eliminations .................. (596) (1,252) (6,273) --------- --------- --------- Total Revenues ................... 215,301 238,468 219,413 ========= ========= ========= Identifiable Assets: U.S ........................... 249,154 264,811 221,113 Europe and Africa ............. 18,779 22,797 24,941 Other ......................... 42,726 42,875 36,709 Eliminations .................. (20,023) (19,475) (18,971) --------- --------- --------- Total ............................ $ 290,636 $ 311,008 $ 263,792 ========= ========= ========= In 1999 and 1998, no customer accounted for more than 10% of consolidated revenues. In 1997, one customer accounted for more than 10% of consolidated revenues with revenues of $22 million. F-22 NOTE O -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial data for 1999 and 1998 are as follows (in thousands, except per share data):
THREE MONTHS ENDED 1999 -------------------------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ---------- ---------- ------------ ----------- Total Revenue ........................... $ 57,997 $ 50,306 $ 52,671 $ 54,327 Gross Profit ............................ 14,144 10,112 11,687 9,994 Income (loss) before cumulative effect of accounting change .................... 2,103(1) 16,494(2) 233 (2,816)(3) Cumulative effect of accounting change (Net of income tax effect) ........... (5,782) -- -- -- ---------- ---------- ---------- ---------- Net Income (loss)........................ (3,679) 16,494 233 (2,816) ========== ========== ========== ========== Net Income per share before cumulative effect of accounting change .......... $ 0.16 $ 1.22 $ 0.02 ($ 0.21) Cumulative effect of accounting change .. ($ 0.43) -- -- -- ---------- ---------- ---------- ---------- Net Income per share..................... ($0.2) $ 1.22 $ 0.02 ($ 0.21) ========== ========== ========== ========== Net Income per diluted share before cumulative effect accounting change .. $ 0.16 $ 1.22 $ 0.02 ($ 0.21) Cumulative effect of accounting change .. ($ 0.43) -- -- -- ---------- ---------- ---------- ---------- Net Income per diluted share ............ ($ 0.27) $ 1.22 $ 0.02 ($ 0.21) ========== ========== ========== ==========
(1) Includes a special charge of $4.745 and gain on sale of administration building of $6,731. (2) Includes gain on sale of business of $29,629. (3) Includes restructuring charges of $2,320.
THREE MONTHS ENDED 1998 ----------------------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 --------- ------- ------------ ----------- Total Revenue ............................... $67,336 $63,787 $52,314 $55,031 Gross Profit ................................ 18,246 16,917 12,719 12,553 Net Income .................................. 3,937 3,714 391 856 Net earnings per share ...................... $ 0.29 $ 0.27 $ 0.03 $ 0.06 Net earnings per diluted share .............. $ 0.28 $ 0.26 $ 0.03 $ 0.06
F-23 NOTE P - SHAREHOLDERS RIGHTS PLAN On October 27, 1998, the Board of Directors adopted a stockholder rights plan (the "Rights Plan") designed to assure that all of the Company's shareholders receive fair and equal treatment in the event of any proposed takeover of the Company. The Rights Plan helps to guard against partial tender offers, open market accumulations and other abusive tactics to gain control of the Company without paying an adequate and fair price in any takeover attempt. The Rights are not presently exercisable and are not represented by separate certificates. The Company is currently not aware of any effort of any kind to acquire control of the Company. Terms of the Rights Plan provide for a dividend distribution of one Preferred Stock Purchase Right for each outstanding share of Common Stock to holders of record at the close of business on November 6, 1998. The Rights Plan would be triggered if an acquiring party accumulates or initiates a tender offer to purchase 20% or more of the Company's Common Stock and would entitle holders of the Rights to purchase either the Company's stock or shares in an acquiring entity at half of market value. Each Right entitles the holder thereof to purchase 1/100 of a share of Series One Junior Participating Preferred Stock for $50.00 per share, subject to adjustment. The Company would generally be entitled to redeem the Rights at $.01 per Right at any time until the tenth day following the time the Rights become exercisable. The Rights will expire on November 6, 2008. For a more detailed description of the Rights Plan, refer to the Company's Form 8-K filed with the Securities and Exchange Commission on October 28, 1998. NOTE Q -- ACCOUNTING FOR PROCESS TECHNOLOGY CONTRACTS The Company did not have any percentage of completion contracts at December 31, 1999. The following summarizes percentage of completion of Process Technology contracts in progress at December 31, 1998. (IN THOUSANDS) 1998 -------- Costs and estimated earnings incurred on contracts in progress................. $ 21,012 Less applicable billings................... (16,327) -------- $ 4,685 ======== These amounts are included in the accompanying consolidated balance sheets as follows: (IN THOUSANDS) 1998 ------- Costs and estimated earnings in excess of billings on incomplete contracts........ $ 5,641 Billings in excess of costs and estimated earnings on incomplete contracts....... (95) ------- $ 4,685 ======= Receivables under contractual retainage provisions aggregated approximately $796,120 at December 31, 1998. F-24 TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
ADDITIONS ------------------------- CHARGED BALANCE AT CHARGED TO OTHER BALANCE AT BEGINNING TO COSTS ACCOUNTS- DEDUCTIONS END OF PERIOD AND EXPENSES DESCRIBE DESCRIBE OF PERIOD ---------- ------------ --------- ---------- ---------- Year Ended December 31, 1997: Allowance for doubtful accounts .......... 1,266 253 74(3) (570)(1) 1,023 ====== ====== ===== ===== ====== Inventory reserves ....................... $ 303 $ 697 $(297)(2) -- $ 703 ====== ====== ===== ===== ====== Year Ended December 31, 1998 Allowance for doubtful accounts ......... 1,023 200 -- (370)(1) 853 ====== ====== ===== ===== ====== Inventory Reserves ...................... $ 703 $ 255 $(745)(2) -- $ 213 ====== ====== ===== ===== ====== Year Ended December 31, 1999 Allowance for doubtful accounts ......... $ 853 $1,436 (95)(4) (326)(1) 1,868 ====== ====== ===== ===== ====== Inventory Reserves ...................... $ 213 $ 491 $(283) $ -- $ 421 ====== ====== ===== ===== ======
- ----------- (1) Uncollectible accounts written off, net of recoveries. (2) Write off against inventory (3) Acquisitions (4) Sale of business S-1 EX-10.8 2 EXHIBIT 10.8 AMENDMENT TO NONQUALIFIED STOCK OPTION AGREEMENT This Amendment to Nonqualified Stock Option Agreement, dated effective December 11, 1998, is by and between TETRA Technologies, Inc., a Delaware corporation ("Company"), and Allen T. McInnes ("Optionee"). Company and Optionee are parties to that certain Nonqualified Stock Option Agreement, dated April 1, 1996 with respect to 284,977 shares of Company Stock ("Option Agreement"). For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged for all purposes, Company and Optionee hereby amend the Option Agreement as follows: 1. Section 1 of the Option Agreement is hereby amended to change the number of shares of Company Stock from "284,977" to "199,484". 2. Section 2 of the Option Agreement is hereby amended to change the purchase price per share from "$16.875" to "$10.1875". Except as amended as set forth above, the Option Agreement remains in full force and effect in accordance with its terms. TETRA Technologies, Inc. Optionee /s/ TOM H. DELIMITROS /s/ ALLEN T. MCINNES ----------------------------- --------------------------------- Tom H. Delimitros Allen T. McInnes Chairman, Management and President and Chief Compensation Committee of the Executive Officer Board of Directors EX-10.9 3 EXHIBIT 10.9 EMPLOYMENT AGREEMENT THIS AGREEMENT made and entered into effective on the 1st day of February, 2000 (the "Effective Date"), by and between TETRA Technologies, Inc., a Delaware corporation with its principal office at 25025 I-45 North, 6th Floor, The Woodlands, Texas (the "Company"), and Allen T. McInnes (the "Executive"). W I T N E S S E T H: ------------------- WHEREAS, the Company wishes to secure the services of Executive subject to the contractual terms and conditions set forth herein and Executive is willing to enter into this Agreement upon the terms and conditions set forth herein; and WHEREAS, the Company and the Executive mutually desire that this Agreement supercede the Employment Agreement, dated April 1, 1996, between them (the "Previous Employment Agreement"): NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein, the parties hereto agree as follows: 1. EMPLOYMENT. During Executive's Term of Employment (as hereinafter defined), the Company shall employ Executive, and Executive shall serve, in such capacity(ies) as may be determined from time to time by the Board of Directors of the Company. 2. TERM OF EMPLOYMENT. Executive's "Term of Employment" as used herein, shall be from the Effective Date through December 31, 2001 unless earlier terminated pursuant to the provisions of this Agreement. 3. COMPENSATION. The Company shall pay or cause to be paid to Executive during his Term of Employment $24,000 per month, which includes $20,833.33 per month as compensation for services rendered in the past and $3,166.67 per month as compensation for services under this Agreement (collectively, the "Base Salary"), payable in accordance with the Company's normal payroll practices. 4. DUTIES AND RESPONSIBILITIES OF EXECUTIVE. During the Term of Employment, Executive shall devote his services full time to the business of the Company and perform the duties and responsibilities assigned to him by the Board of Directors from time to time in writing to the best of his ability and with reasonable diligence. Executive will not participate in any planning, operation or management of any activity competitive with the Company's interest and will not otherwise engage in any activity potentially in conflict with the interest of the Company except as authorized in writing by the Board; provided, however, that the Company hereby agrees that Executive may continue to serve in his capacity as Chairman of the Board of Directors of TGC Industries, Inc. PAGE 1 ("TGC") and of its subsidiary Tidelands Geophysical Company, Inc. ("Tidelands") indefinitely. This paragraph 4 shall not be construed as preventing Executive from engaging in reasonable volunteer services for charitable, educational or civic organizations provided that such activity is not competitive with the Company's interest, or from owning stock in public corporations. Executive affirms that he is not subject to any agreement, written or oral, with TGC, Tidelands or any other entity that would conflict with or otherwise interfere with Executive's ability to carry out his obligations under this Agreement. 5. TERMINATION OF EMPLOYMENT. a. TERMINATION BY THE COMPANY WITHOUT CAUSE. If Executive's services hereunder shall be terminated by the Company prior to any "Change of Control" for any reason other than "Cause" (as such terms are hereinafter defined), Executive shall be entitled to receive, and the Company shall be obligated to pay, his Base Salary as in effect on termination of employment for the remainder of the Term of Employment, as if there had been no termination. The Company shall have no other obligation to Executive following any termination by the Company without Cause, and Executive shall no longer participate in any benefit plans or programs sponsored by the Company except to the extent provided under the terms of such plans or programs. b. TERMINATION BY THE COMPANY FOR CAUSE OR SUBSTANTIAL CAUSE. (i) The Company may terminate Executive's employment for Cause or Substantial Cause. In such event, all payments of compensation under this Agreement shall cease forthwith and Executive shall thereafter be entitled to only that Base Salary then being paid to him that is earned through the date Executive is terminated for Cause or Substantial Cause. (ii) Termination shall be for "Cause" only if termination occurs prior to a "Change of Control" (as hereinafter defined) and is based on (i) a material act or acts of dishonesty on the part of Executive that adversely affects the Company, (ii) a material breach by Executive during the Term of Employment of the provisions of paragraphs 4, 8 or 9, or (iii) the continuing and material failure of Executive to fulfill his obligations under this Agreement. (iii) Termination shall be for "Substantial Cause" only if termination occurs on or after the date of a Change of Control and because (a) the Executive is convicted of a felony involving moral turpitude; (b) the Executive commits a willful serious act of fraud, misappropriation or embezzlement intending to enrich himself at the expense of the Company or any affiliated entity; or (c) the Executive, in carrying out his duties and responsibilities under this Agreement, is guilty of willful misconduct or gross neglect that results in material harm to the Company or any affiliated entity, unless such conduct was reasonably believed by the Executive in good faith to be in the best interests of the Company. In each case, the existence of Substantial Cause must be confirmed by written notice signed by a majority of the Board prior to any termination therefor. PAGE 2 c. TERMINATION SUBSEQUENT TO CHANGE OF CONTROL. (i) If a Change of Control of the Company shall occur and at any time on or after that date the Executive shall elect to terminate his employment hereunder for "Good Reason" (as hereinafter defined) or Executive's employment is terminated by the Company without Substantial Cause, then the Executive shall be entitled to receive, and the Company shall be obligated to pay, the Base Salary then being paid to him until the stated expiration date of the Term of Employment in effect at the date of termination. The Company shall have no other obligation to Executive following any termination on or after a Change of Control by the Executive for Good Reason or by the Company without Substantial Cause, and Executive shall no longer participate in any benefit plans or programs sponsored by the Company except to the extent provided under the terms of such plans or programs. (ii) A "Change of Control" shall be deemed to have occurred on the first day following April 1, 2000 upon which any person or group of persons or entity or group of entities acquires either (i) direct or indirect voting power sufficient to elect a majority of the directors of the Company or (ii) stock or assets of some or all of the Company's business or operating units or affiliates comprising 60% or more of the total assets of the Company and its affiliates on a consolidated basis (as shown on the Company's financial statements for the immediately preceding fiscal year). (iii) A termination of employment is for "Good Reason" if such termination of employment occurs on or after the date of a Change of Control and follows either (a) a significant diminution in the duties and responsibilities of the Executive immediately prior to the date of the Change of Control or the assignment to the Executive of any duties materially inconsistent with the Executive's duties immediately prior to the Change of Control or a substantial change in the Executive's reporting responsibilities as in effect immediately prior to the Change of Control, without the Executive's express written consent; or any removal of the Executive from or any failure to re-elect the Executive to any office of the Company held by the Executive immediately prior to the Change of Control, except in connection with promotions to higher office; (b) a reduction in the Executive's Base Salary from that in effect immediately prior to the Change of Control; (c) the failure of the Company substantially to provide and continue for the Executive the same or substantially comparable fringe benefits as provided immediately prior to the Change of Control; (d) the Company's requiring the Executive to be based anywhere other than in or within 50 miles of the Executive's principal place of PAGE 3 employment at the time of the Change of Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's prior business travel obligations or, in the event the Executive consents to relocation, the failure of the Company to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive relating to a change in the Executive's principal residence in connection with such relocation, and to indemnify the Executive against any loss realized in the sale of the Executive's principal residence in connection with any such change of residence; or (e) the failure of the Company to obtain the assumption of this Agreement by any successor as contemplated by Section 14 below. d. OTHER TERMINATION. If Executive's services hereunder shall be terminated during the Term of Employment due to death, disability, retirement or resignation other than for Good Reason after the date of a Change of Control, $3,166.67 per month of his Base Salary shall cease being owed hereunder as of the end of the month in which such event occurs (although the Company shall continue to pay $20,833.33 per month to Executive or his estate through December 31, 2001); and upon such termination Executive shall no longer participate in any benefit plans or programs sponsored by the Company except to the extent provided under the terms of such plans and programs. e. EFFECT OF TERMINATION. Notwithstanding any other provision of this Agreement to the contrary, Executive agrees that he will resign his position as a member of the Board upon his termination of employment for any reason. 6. REIMBURSEMENT OF EXPENSES. During Executive's Term of Employment, the Company shall pay or reimburse Executive for all reasonable travel, entertainment and other expenses paid or incurred by Executive in performing his obligations hereunder. In addition, the Company shall, during Executive's Term of Employment up to and including June 30, 2000, pay or reimburse Executive for all reasonable club dues in accordance with a reasonable and customary program established by the Board for such purpose. 7. OTHER BENEFITS. During the Term of Employment, Executive shall be entitled to participate and shall be included in any pension, profit-sharing, deferred compensation, or similar plan or program of the Company established by the Company, to the extent that he is eligible under the provisions of each such plan or program. Executive shall also be entitled to participate in any group insurance, hospitalization, medical, health and accident, life, dental, disability or similar plan or program established by the Company, to the extent that he is eligible under the provisions of each such plan or program. Executive shall be eligible for vacation and sick leave in accordance with standard Company policies. Executive agrees that the plans and programs described under this Section 7 do not include any bonus programs or stock option plans, such as the TETRA Technologies, Inc. 1990 Stock Option Plan, as amended. PAGE 4 8. COVENANT AGAINST COMPETITION a. RESTRICTIVE COVENANT. Executive agrees that during the Restricted Period (as hereinafter defined), he will not in any manner, directly or indirectly, invest in, own, engage in or be employed by or render services or advice to any business or enterprise engaging in the Competitive Activities (as hereinafter defined) within the United States or within one hundred miles of any international location where the Company or any of its affiliates is operating. Competitive Activities shall mean (i) researching, developing, manufacturing, providing or marketing products or services of a nature (as hereinafter defined for purposes of this Section 8) researched, developed, manufactured, provided or marketed by the Company or any affiliated entity; (ii) hiring, attempting to hire, or assisting any other person or entity in hiring or attempting to hire any person employed by the Company or any affiliated entity; or (iii) soliciting, in competition with the Company or any affiliated entity, the business of any customer of the Company or any affiliated entity on behalf of whom the Company or any affiliated entity provided products or services at any time during the Executive's Term of Employment hereunder. As used in this Section 8, a product or service shall be deemed to be "of a nature" researched, developed, manufactured, provided or marketed by the Company or any affiliated entity if it is of the same or similar nature as a product or service of the Company or any affiliated entity or is an adaptation, improvement or development thereof. The Restricted Period is the period beginning as of the date of this Agreement and ending three years after the end of the last month for which Executive shall have been scheduled to receive any compensation in the form of Base Salary under this Agreement; provided, however, that in the event of a Change of Control, the Restricted Period shall end after the last month for which Executive shall have been scheduled to receive any compensation in the form of Base Salary under this Agreement. Ownership of stock in public corporations shall not be in violation of this provision. b. COVENANT NOT TO SOLICIT. The Executive shall not, directly or indirectly, during the Restricted Period, (a) take any action to solicit or divert any business or customers (or potential customers) away from the Company or any of its affiliates, (b) induce customers, potential customers, suppliers, agents or other persons under contract or otherwise associated or doing business with the Company or its affiliates to terminate, reduce or alter any such association or business with or from the Company or its affiliates and/or (c) induce any person in the employment of the Company or its affiliates or any consultant to the Company or its affiliates to (i) terminate such employment, or consulting arrangement, (ii) accept employment, or enter into any consulting arrangement, with anyone other than the Company or its affiliates, and/or (iii) interfere with the customers, suppliers, or clients of the Company or its affiliates in any manner or the business of the Company or its affiliates in any manner. For purposes of this Section 8.B, a "potential customer" shall mean a person or entity that the Company or its affiliates, as of the date the Executive's employment terminates, is actively soliciting for or in respect of any current, actively pending or contemplated business. c. REASONABLENESS OF RESTRICTIONS. Executive acknowledges that he has carefully read and considered the provisions of paragraphs 8.A and 8.B and agrees that the restrictions set forth in such paragraphs including, but not limited to, the time period of restriction, the geographical PAGE 5 areas of restriction, and the scope of activity of restriction are fair and reasonable and are reasonably required for the protection of the interests of the Company, and that the Company has legitimate business interests deserving to be protected. Notwithstanding the foregoing, in the event that any of the provisions of paragraphs 8.A or 8.B shall be held to be invalid or unenforceable, the remaining provisions thereof, together with any modification thereof made by a court of competent jurisdiction, shall nevertheless continue to be valid and enforceable as though the invalid or unenforceable parts had not been included therein. Without limiting the foregoing, in the event that any provision of paragraph 8.A or 8.B relating to time period or area of restriction shall be declared by a court of competent jurisdiction to exceed the maximum time period or area such court deems reasonable and enforceable, said time period or area of restriction shall be deemed to become and thereafter be the maximum time period or area which such court deems reasonable and enforceable. 9. INFORMATION AND INVENTIONS. a. CONFIDENTIAL INFORMATION. Executive agrees that he will not, except as permitted by the Company in writing, in any manner, at any time during the Term of Employment or thereafter, directly or indirectly, whether to the detriment of the Company or the benefit of Executive or any third party or otherwise, disclose or use any confidential information except in the good faith performance of his duties under this Agreement. In addition, Executive agrees that he will not create any derivative work or other product based upon or resulting from any confidential information except in the good faith performance of his duties under this Agreement. Executive further agrees that during the Restricted Period, he will not undertake any owner, consultant or employment role competitive or in conflict with any interest of the Company wherein the complete unhampered fulfillment of the duties of that employment would inherently or inevitably cause him to reveal, to base judgments upon or to use any such Company confidential information or trade secrets. As used in this Agreement, the term "confidential information" means any and all information disclosed to Executive or known by or acquired by Executive as a consequence of or through his employment by an employer or which was acquired during his employment with an employer which is not known to the general public or in the industry in which the Company is engaged, about the Company's products, customers, processes, financial condition, computer programs, formulas, patents, techniques, improvements or know-how and services, and including, without limitation, information relating to research, development, inventions, manufacturing, merchandising and selling. Executive shall employ all necessary safeguards and precautions in order to ensure that unauthorized access to the Confidential Information is not afforded to any person, firm, corporation or entity. Upon any expiration or termination of this Agreement, upon Executive's termination of employment, or if the Board so requests at any time, Executive shall promptly return to the Company all Confidential Information in Executive's possession, whether in writing, on computer disks or other media, without retaining any copies, extracts or other reproductions thereof. b. INVENTIONS. Executive agrees to disclose promptly, completely and in writing to the Company and thereafter to assign and to bind his heirs, executors and administrators to assign to the Company or its designee, successor, assignee or legal representative, any and all inventions, processes, diagrams, methods, apparatuses or improvements (all of which are hereinafter collectively called "Inventions") whatsoever, discovered, conceived or developed, either individually or jointly PAGE 6 with others, during the course of Executive's employment with the Company (including all Inventions based wholly or in part upon ideas conceived during Executive's employment with the Company), or using the Company's time, data, facilities and/or materials, provided the subject matter is one within a field of interest of Company. Executive's obligations under this Section apply without regard to whether the idea for such Invention or solution to a problem occurs to Executive on the job, at home or elsewhere. Executive further agrees that such Inventions are the sole property of the Company, whether or not any patent application is ever filed therefor. Executive agrees that he will cooperate fully in assisting the Company in filing any patent, copyright or associated trademark application with regard to any such Invention, if the Company elects to file such application, including signing written assignments of the Executive's rights to such Inventions. 10. INJUNCTIVE RELIEF. Executive acknowledges and agrees that the Company will be irreparably harmed and will have no adequate remedy at law if Executive breaches or threatens to breach any of the provisions of paragraph 8 or paragraph 9 of this Agreement. Executive agrees that the Company shall be entitled to injunctive and other equitable relief to prevent any breach or threatened breach of paragraph 8 or paragraph 9. Executive agrees that the Company shall also be entitled to specific performance of each of the terms of such paragraphs in addition to any other legal or equitable remedies that the Company may have. Executive further agrees that, in any equity proceeding relating to the enforcement of the terms of paragraph 8 or paragraph 9, he shall waive and he agrees not to raise the defense that the Company has an adequate remedy at law. 11. NOTICES. All notices and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by registered or certified mail (return receipt requested and with postage prepaid thereon) or by facsimile transmission to the respective parties at the following addresses (or at such other address as either party shall have previously furnished to the other in accordance with the terms of this Section 11): if to the Company: TETRA Technologies, Inc. c/o Chairman of the Board of Directors 25025 I-45 North 6th Floor The Woodlands, Texas 77380 if to the Executive: Allen T. McInnes 1206 Nantucket Houston, Texas 77057 12. ASSISTANCE WITH LITIGATION. For a period of two years after the end of the last period for which Executive shall have received any compensation under this Agreement and for as long PAGE 7 thereafter as any litigation instituted within such period continues, Executive shall furnish such information and proper assistance as may be reasonably necessary in connection with any litigation in which the Company is then or may become involved. The Company agrees to reimburse Executive for all expenses reasonably incurred in furnishing such assistance. 13. INCOME TAX WITHHOLDING AND OTHER TAX CONSIDERATIONS. a. WITHHOLDING. The Company may withhold from any compensation or benefits payable under this Agreement all federal, state, city or other taxes that shall be required pursuant to any law or governmental regulation or ruling. b. CERTAIN OTHER PAYMENTS. If the Executive is liable for the payment of any excise tax (the "Basic Excise Tax") because of Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any successor or similar provision, with respect to any payments or benefits received or to be received from the Company or any successor to the Company, whether provided under this Agreement or otherwise, the Company shall pay the Executive an amount (the "Special Reimbursement") which, after payment by the Executive (or on the Executive's behalf) of any federal, state and local taxes, including, without limitation, any further excise tax under such Section 4999 of the Code, on, with respect to or resulting from the Special Reimbursement, equals the net amount of the Basic Excise Tax. 14. CONSOLIDATION, MERGER, OR SALE OF ASSETS. Nothing in this Agreement shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation which assumes this Agreement and all obligations and undertakings of the Company hereunder; provided, that no such action shall diminish Executive's rights. Upon such a consolidation, merger, or transfer of assets in assumption of the Company, the term the "Company" as used herein, shall mean such other corporation, respectively. 15. GENERAL PROVISIONS. a. ASSIGNABILITY; ATTACHMENT AND EFFECT. Neither this Agreement nor any right or interest hereunder shall be assignable by Executive, or his legal representatives without the prior written consent of the Company. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect such action shall be null, void and of no effect. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns. b. WAIVER, SEVERABILITY AND AMENDMENT OF AGREEMENT. This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be an estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver PAGE 8 unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. If, for any reason, any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held so invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If any provision of this Agreement shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all provisions of this Agreement, shall to the full extent consistent with law continue in full force and effect. Unless otherwise provided, if this Agreement or any portion thereof conflicts with any law or regulation governing the activities of the Company, the Agreement or appropriate portion thereof shall be deemed invalid and of no force or effect. c. SUBMISSION TO ARBITRATION. Any controversy or claim arising out of or relating to this contract or its alleged breach or any matters arising, either directly or indirectly, out of Executive's employment relationship with the Company shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA"), and any judgment on the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. The arbitrator shall be selected by mutual agreement of the parties, if possible. If the parties fail to reach agreement upon appointment of an arbitrator within 30 days following receipt by one party of the other party's notice of desire to arbitrate, the arbitrator shall be selected from a panel or panels of persons submitted by the AAA. The selection process shall be that which is set forth in the AAA Commercial Arbitration Rules then prevailing, except that, if the parties fail to select an arbitrator from one or more panels, AAA shall not have the power to make an appointment but shall continue to submit additional panels until an arbitrator has been selected. Demand for arbitration must be made within one year after the accrual of the claim on which the demand is based. If the claiming party fails to demand arbitration within one year, the claim shall be deemed to be waived and shall be barred from either arbitration or litigation. d. HEADINGS; GOVERNING LAW. The headings of paragraphs herein are included solely for convenience and reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. e. PREVIOUS EMPLOYMENT AGREEMENT. The Company and Executive hereby agree that the Previous Employment Agreement is superceded by this Agreement in its entirety, and that none of the provisions of article 5 of the Previous Employment Agreement regarding termination shall be given any effect. The Company and the Executive hereby represent to each other that they are not aware of any defaults under the Previous Employment Agreement. PAGE 9 IN WITNESS THEREOF, the Company has caused this Agreement to be executed by its officer thereunto duly authorized, and Executive has signed this Agreement, all as of the day first above written. TETRA Technologies, Inc. By: /s/ GEOFFREY M. HERTEL ------------------------------- Geoffrey M. Hertel, Chief Operating Officer /s/ ALLEN T. McINNES -------------------------------- Allen T. McInnes, Executive PAGE 10 EX-21 4 Exhibit 21 TETRA TECHNOLOGIES, INC. List of Subsidiaries or Other Related Entities TETRA International Incorporated TETRA de Mexico, S.A. de C.V. TETRA Technologies de Venezuela, S.A. TETRA Technologies do Brasil, Ltda. TETRA Technologies U.K. Limited TETRA Technologies de Mexico, S.A. de C.V. TETRA Technologies Nigeria Ltd. TETRA Applied Technologies, Inc. TETRA F.S.C. Limited TETRA Investment Holding Co., Inc. TETRA Micronutrients, Inc. American Microbial Technologies, Inc. Seajay Industries, Inc. TETRA Agricultural Products de Mexico, S.A. de C.V. TETRA Real Estate, LLC TETRA Real Estate, L.P. TETRA Services, Inc. TETRA Technologies Australia Pty Ltd TETRA Thermal, Inc. TETRA Process Services, L.C. TETRA U.K. Limited Damp Rid, Inc. Industrias Sulfamex, S.A. de C.V. KVAC, LLC EX-23 5 Exhibit 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 33-99810), Registration Statement on Form S-4 (No. 33-80881) and the Registration statements on Form S-8 (Nos. 33-40509, 33-41337, 33-35750, 33-76804, 33-76806, 333-04284 and 333-09889) of TETRA Technologies, Inc. of our report dated March 28, 2000, with respect to the consolidated financial statements and schedule of TETRA Technologies, Inc. and subsidiaries included in the Annual Report (Form 10-K) for the year ended December 31, 1999. Houston, Texas March 28, 2000 EX-27 6
5 THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 12-MOS DEC-31-1999 DEC-31-1999 4,184 0 52,088 1,868 57,020 121,608 193,666 63,555 290,636 46,902 75,026 0 0 136 149,285 290,636 140,349 215,301 116,302 169,364 48,959 0 7,756 25,889 9,875 16,014 0 0 (5,782) 10,232 0.75 0.75
-----END PRIVACY-ENHANCED MESSAGE-----