-----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, Bc0Zvau64piL7pHH4UDjeXQ2ds3Wfo1t0MsGOveM7qMlnlczKxKkcpuSu8w6B9M6 4Fb2k6N/Py7OF1oFp4nXDA== /in/edgar/work/0000890566-00-001607/0000890566-00-001607.txt : 20001115 0000890566-00-001607.hdr.sgml : 20001115 ACCESSION NUMBER: 0000890566-00-001607 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TETRA TECHNOLOGIES INC CENTRAL INDEX KEY: 0000844965 STANDARD INDUSTRIAL CLASSIFICATION: [2810 ] IRS NUMBER: 742148293 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13455 FILM NUMBER: 766245 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-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2000 Commission file number 0-18335 TETRA TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 74-2148293 (State of incorporation) (I.R.S. Employer Identification No.) 25025 I-45 NORTH, THE WOODLANDS, TEXAS 77380 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (281)367-1983 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 |_| . As of September 30, 2000 there were 13,620,099 shares of the Company's common stock, $.01 par value per share, issued and outstanding. ITEM 1. FINANCIAL STATEMENTS TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------- --------------------- ($ THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999 2000 1999 --------- --------- --------- --------- REVENUES: PRODUCT SALES ........................ $ 36,388 $ 34,804 $ 116,047 $ 105,715 SERVICES ............................. 26,384 17,867 75,608 55,259 --------- --------- --------- --------- TOTAL REVENUES ................... 62,772 52,671 191,655 160,974 COST OF REVENUES: COST OF PRODUCT SALES ................ 28,259 28,075 94,504 86,017 COST OF SERVICES ..................... 19,883 12,909 54,727 39,014 --------- --------- --------- --------- TOTAL COST OF REVENUES ........... 48,142 40,984 149,231 125,031 --------- --------- --------- --------- GROSS PROFIT ..................... 14,630 11,687 42,424 35,943 GENERAL AND ADMINISTRATIVE EXPENSE ....... 10,186 9,751 30,759 30,426 SPECIAL CHARGE ........................... -- -- -- 4,745 --------- --------- --------- --------- OPERATING INCOME .............. 4,444 1,936 11,665 772 GAIN ON SALE OF ADMINISTRATION BUILDING .. -- -- -- 6,731 GAIN ON SALE OF BUSINESS ................. -- -- -- 28,829 INTEREST EXPENSE, NET .................... 1,480 1,491 4,631 5,862 OTHER INCOME (EXPENSE) ................... 258 (60) 37 43 --------- --------- --------- --------- INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 3,222 385 7,071 30,513 PROVISION FOR INCOME TAXES ............... 1,224 152 2,669 11,683 --------- --------- --------- --------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE .................... 1,998 233 4,402 18,830 CUMULATIVE EFFECT OF ACCOUNTING CHANGE (NET OF INCOME TAX EFFECT) ......... -- -- -- (5,782) --------- --------- --------- --------- NET INCOME .......... $ 1,998 $ 233 $ 4,402 $ 13,048 ========= ========= ========= ========= NET INCOME PER SHARE BEFORE CUMULATIVE EFFECT OF ACOUNTING CHANGE ............ $ 0.15 $ 0.02 $ 0.32 $ 1.39 CUMULATIVE EFFECT OF ACCOUNTING CHANGE .. -- -- -- ($ 0.43) --------- --------- --------- --------- NET INCOME PER SHARE ..................... $ 0.15 $ 0.02 $ 0.32 $ 0.96 ========= ========= ========= ========= AVERAGE SHARES ........................... 13,620 13,524 13,582 13,523 ========= ========= ========= ========= NET INCOME PER DILUTED SHARE BEFORE CUMULATIVE EFFECT ACCOUNTING CHANGE ... $ 0.14 $ 0.02 $ 0.31 $ 1.39 CUMULATIVE EFFECT OF ACCOUNTING CHANGE .. -- -- -- ($ 0.43) --------- --------- --------- --------- NET INCOME PER DILUTED SHARE ............. $ 0.14 $ 0.02 $ 0.31 $ 0.96 ========= ========= ========= ========= AVERAGE DILUTED SHARES ................... 14,260 13,612 14,064 13,580 ========= ========= ========= =========
See Notes to Consolidated Financial Statements 1 TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, ($ THOUSANDS) 2000 1999 ------------ ----------- (Unaudited) ASSETS CURRENT ASSETS: CASH AND CASH EQUIVALENTS ............................... $ 3,901 $ 4,184 RESTRICTED CASH ......................................... -- 2,000 TRADE ACCOUNTS RECEIVABLE, NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $1,687 IN 2000 AND $1,868 IN 1999 ........ 69,322 50,220 INVENTORIES ............................................. 48,643 57,020 DEFERRED TAX ASSETS ..................................... 4,483 4,483 PREPAID EXPENSES AND OTHER CURRENT ASSETS ............... 4,375 3,701 --------- --------- TOTAL CURRENT ASSETS ............................... 130,724 121,608 PROPERTY, PLANT AND EQUIPMENT: LAND AND BUILDING ....................................... 13,142 12,646 MACHINERY AND EQUIPMENT ................................. 120,932 112,026 AUTOMOBILES AND TRUCKS .................................. 8,055 9,261 CHEMICAL PLANTS ......................................... 51,845 52,195 CONSTRUCTION IN PROGRESS ................................ 8,374 7,538 --------- --------- 202,348 193,666 LESS ACCUMULATED DEPRECIATION AND AMORTIZATION .......... (73,112) (63,555) --------- --------- NET PROPERTY, PLANT, AND EQUIPMENT ................. 129,236 130,111 OTHER ASSETS: COST IN EXCESS OF NET ASSETS ACQUIRED, NET OF ACCUMULATED AMORTIZATION OF $3,882 IN 2000 AND $3,210 IN 1999 ... 32,638 33,328 OTHER, NET OF ACCUMULATED AMORTIZATION OF $3,662 IN 2000 AND $3,309 IN 1999 ................................... 5,432 5,589 --------- --------- TOTAL OTHER ASSETS ................................. 38,070 38,917 --------- --------- $ 298,030 $ 290,636 ========= =========
See Notes to Consolidated Financial Statements 2 TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, ($ THOUSANDS) 2000 1999 --------- --------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: TRADE ACCOUNTS PAYABLE ................................... $ 32,070 $ 25,939 ACCRUED EXPENSES ......................................... 17,087 17,729 UNEARNED REVENUE ......................................... 1,685 1,002 CURRENT PORTIONS OF ALL LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS ...................................... 7,656 2,232 --------- --------- TOTAL CURRENT LIABILITIES ........................... 58,498 46,902 LONG-TERM DEBT, LESS CURRENT PORTION .......................... 64,857 74,000 CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION ............... 497 1,026 DEFERRED INCOME TAXES ......................................... 18,756 18,792 OTHER LIABILITIES ............................................. 1,364 495 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: COMMON STOCK, PAR VALUE $.01 PER SHARE 40,000,000 SHARES AUTHORIZED, WITH 13,620,099 SHARES ISSUED AND OUTSTANDING IN 2000 AND 13,529,201 SHARES ISSUED AND OUTSTANDING IN 1999 ......................... 137 136 ADDITIONAL PAID-IN CAPITAL ............................... 78,864 77,988 TREASURY STOCK, AT COST, 94,000 SHARES IN 2000 AND IN 1999 (1,107) (1,107) ACCUMULATED OTHER COMPREHENSIVE INCOME ................... (997) (355) RETAINED EARNINGS ........................................ 77,161 72,759 --------- --------- TOTAL STOCKHOLDERS' EQUITY .......................... 154,058 149,421 --------- --------- $ 298,030 $ 290,636 ========= =========
See Notes to Consolidated Financial Statements 3
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED SEPTEMBER 30, ------------------------------ ($ THOUSANDS) 2000 1999 -------- -------- OPERATING ACTIVITIES: NET INCOME .................................................... $ 4,402 $ 13,048 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES : DEPRECIATION AND AMORTIZATION ............................. 12,626 12,511 PROVISION FOR DEFERRED INCOME TAXES ....................... (36) (261) PROVISION FOR DOUBTFUL ACCOUNTS ........................... 509 668 AMORTIZATION OF GAIN ON LEASEBACK ........................ (124) -- GAIN ON SALE OF PROPERTY, PLANT AND EQUIPMENT ............ (23) (38) SPECIAL CHARGES ........................................... -- 4,745 GAIN ON THE SALE OF BUSINESS .............................. -- (28,829) GAIN ON THE SALE OF THE ADMINISTRATION BUILDING ........... -- (6,731) CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX ........ -- 5,782 CHANGES IN OPERATING ASSETS AND LIABILITIES, NET OF ASSETS ACQUIRED: TRADE ACCOUNTS RECEIVABLE ............................... (19,611) 1,248 COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON INCOMPLETE CONTRACTS ................. -- (986) INVENTORIES ............................................ 8,377 (880) PREPAID EXPENSES AND OTHER CURRENT ASSETS .............. 1,326 (1,151) TRADE ACCOUNTS PAYABLE AND ACCRUED EXPENSES ............ 6,172 7,029 BILLINGS IN EXCESS OF COSTS AND ESTIMATED EARNINGS ON INCOMPLETE CONTRACTS .................... -- (519) OTHER .................................................. -- (66) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES ................. 13,618 5,570 -------- -------- INVESTING ACTIVITIES: PURCHASES OF PROPERTY, PLANT AND EQUIPMENT ................... (11,579) (9,259) BUSINESS COMBINATIONS, NET OF CASH ACQUIRED .................. -- (11,658) PROCEEDS FROM SALE OF BUSINESS ............................... -- 38,825 DECREASE (INCREASE) IN OTHER ASSETS .......................... (860) (1,833) PROCEEDS FROM SALE OF PROPERTY, PLANT AND EQUIPMENT .......... 342 10,051 -------- -------- NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES .......... (12,097) 26,126 -------- -------- FINANCING ACTIVITIES: NET REPAYMENTS AND BORROWINGS FROM SHORT-TERM CREDIT LINES ... -- -- PROCEEDS FROM LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS .......................................... 16,094 21,011 PROCEEDS FROM LEASEBACK SALE ................................. 1,074 -- PRINCIPAL PAYMENTS ON LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS .......................................... (19,848) (50,745) PROCEEDS FROM SALE OF COMMON STOCK AND EXERCISED STOCK OPTIONS 876 86 -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES ................. (1,804) (29,648) -------- -------- DECREASE IN CASH AND CASH EQUIVALENTS .......................... (283) 2,048 CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD ................. 4,184 2,803 -------- -------- CASH & CASH EQUIVALENTS AT END OF PERIOD ....................... $ 3,901 $ 4,851 ======== ========
See Notes to Consolidated Financial Statements 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, the information furnished reflects all normal recurring adjustments, which are, in the opinion of management, necessary to a fair statement of the results for the interim periods. The accompanying financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 1999. For the purposes of the statements of cash flows, the Company considers all highly liquid cash investments with a maturity of three months or less to be cash equivalents. Interest paid on debt during the nine months ended September 30, 2000 and 1999 was $5,594,109 and $6,988,000, respectively. Income tax payments made during the nine months ended September 30, 2000 and 1999 were $1,082,000 and $2,097,600, respectively. In April 1998, the American Institute of Certified Public Accountants 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. 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 the adoption of the new Statement will have a significant effect on earnings or the financial position of the Company. NOTE B - COMMITMENTS AND CONTINGENCIES The Company, its subsidiaries and other related companies 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 Company. NOTE C - 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 and the sale of its corporate headquarters building. The excess of purchase price over the fair value of assets acquired was approximately $8.3 million During the first quarter of 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. During the second quarter of 1999, the Company sold its Process Technologies business for a $28.8 million gain. 5 NOTE D - NET INCOME PER SHARE The following is a reconciliation of the weighted average number of common shares outstanding with the number of shares used in the computations of net income per common and common equivalent share:
THREE MONTH ENDED NINE MONTH ENDED SEPTEMBER 30 SEPTEMBER 30 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Number of weighted average common shares outstanding ...... 13,620,099 13,524,201 13,581,735 13,522,635 Assumed exercise of stock options 640,261 88,291 482,601 57,562 ---------- ---------- ---------- ---------- Average diluted shares outstanding 14,260,360 13,612,492 14,064,336 13,580,197 ========== ========== ========== ==========
In applying the treasury stock method to determine the dilutive effect of the stock options outstanding during the third quarter of 2000, the average market price of $14.06 was used. NOTE E - COMPREHENSIVE INCOME (LOSS) Comprehensive income for the three months ended September 30, 2000 and 1999 is as follows: THREE MONTH ENDED NINE MONTH ENDED SEPTEMBER 30 SEPTEMBER 30 2000 1999 2000 1999 -------- -------- -------- -------- Net Income ............... $ 1,998 $ 233 $ 4,402 $ 13,048 Translation Adjustment ... (268) 149 (642) (93) -------- -------- -------- -------- Comprehensive Income $ 1,730 $ 382 $ 3,760 $ 12,955 ======== ======== ======== ======== NOTE F - INDUSTRY SEGMENTS 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 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 primarily of a commodity products based operations, which significantly supports the energy service markets. The Company continues to manage 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 feedstock. The Company evaluates performance and allocates resources based on profit or loss from operations, excluding special charges and before income taxes. 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 and elimination of intersegmented revenues. 6 In 1999, the management reporting responsibilities for TETRA Process Services were transferred from the Chemicals Division to the Oil & Gas Services Division. The amounts in the table below have been restated to reflect this transfer. Summarized financial information concerning the business segments is as follows:
OIL & GAS SERVICES CHEMICALS OTHER CONSOLIDATED --------- --------- -------- ------------ THREE MONTHS ENDED SEPTEMBER 30, 2000 Revenues from external customers ........ $ 44,131 $ 18,641 $ -- $ 62,772 Intersegmented revenues ................. 3 4,631 (4,634) -- -------- -------- -------- -------- Total Revenues .................... 44,134 23,272 (4,634) 62,772 Income Before Taxes ..................... 5,274 1,323 (3,375) 3,222 Total Assets ............................ $168,335 $124,788 $ 4,907 $298,030 THREE MONTHS ENDED SEPTEMBER 30, 1999 Revenues from external customers ........ $ 32,980 $ 19,691 $ -- $ 52,671 Intersegmented revenues ................. 28 2,572 (2,600) -- -------- -------- -------- -------- Total Revenues .................... 33,008 22,263 (2,600) 52,671 Income Before Taxes and cumulative effect of accounting change ............... 3,320 295 (8,230) 385 Total Assets ............................ $153,009 $135,787 $ 8,824 $297,620 NINE MONTHS ENDED SEPTEMBER 30, 2000 Revenues from external customers ........ $128,638 $ 63,017 $ -- $191,655 Intersegmented revenues ................. 33 14,151 (14,184) -- -------- -------- -------- -------- Total Revenues .................... 128,671 77,168 (14,184) 191,655 Income Before Taxes ..................... 14,404 3,508 (10,841) 7,071 Total Assets ............................ $168,335 $124,788 $ 4,907 $298,030 NINE MONTHS ENDED SEPTEMBER 30, 1999 Revenues from external customers ........ $ 96,579 $ 64,395 $ -- $160,974 Intersegmented revenues ................. 176 8,683 (8,859) -- -------- -------- -------- -------- Total Revenues .................... 96,755 73,078 (8,859) 160,974 Income Before Taxes and cumulative effect of accounting change ............... 8,053 2,825 19,635(1) 30,513 Total Assets ............................ $153,009 $135,787 $ 8,824 $297,620
(1) Includes gain in the sale of TETRA Process Technologies of $28,829 and corporate headquarters building of $6,731, special charge of $4,745 and excludes the cumulative effect of accounting of $5,782, net of taxes. Substantially all of the special charge relates to the Chemicals Division. 7 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 1999. Total revenues for the quarter ended September 30, 2000 were $62.8 million compared to $52.7 million in the prior period, an increase of $10.1 million or 19.2%. Revenues from the Oil & Gas Services Division were $44.1 million, up approximately $11.1 million or 34% from the 1999 level of $33.0 million. Despite poor weather conditions in the Gulf of Mexico during September, both the offshore fluids and plug and abandonment businesses generated improved quarter-to-quarter revenues. The well abandonment/decommission operations continue to benefit from much improved equipment utilization rates; while the domestic clear brines fluid business has improved with the increase in working rigs in the Gulf. The division's Production Testing, Process Services and International operations have all also benefited from the improving energy environment. Chemicals Division revenues for the third quarter were $23.3 million, including intercompany, up $1.0 million or 4% over the third quarter 1999 total of $22.3 million. The chlorides business continues it's upward trend on the strength of much improved liquid calcium chloride volumes and pricing, particularly in the energy markets. The bromides business also improved due to increases in zinc bromine sales into oilfield markets. Gross profits were $14.6 million in 2000 compared to $11.7 million in 1999, an increase of $2.9 million or 25%. Gross profits as a percentage of revenues were 23% in 2000 versus 22% in 1999. Gross profits in the Oil & Gas Services Division increased along with the profit percentage. Increased activity in the CBF business, improved international margin percentages and improved utilization of production testing equipment all contributed to stronger profit percentages. The Chemicals Division gross profits and profits percentage increased quarter-to-quarter primarily on the strength of improved calcium chloride and bromides activity. General and administrative expenses were $10.2 million, up slightly from $9.8 million in the prior year due to the expanding oil and gas activity, and acquisitions made earlier in 2000. Operating income for the period ended September 30, 2000 was $4.4 million compared to $1.9 million in 1999. The increase in earnings quarter-to-quarter reflects improved oil and gas profitability and increased calcium chloride and bromides activity. Net income was $2.0 million in 2000 and $.2 million in 1999. Net income per diluted share was $0.14 in 2000 based on 14,260,000 average diluted shares outstanding and $0.02 in 1999 based on 13,612,000 average diluted shares outstanding. NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 1999. Total revenues for the period ended September 30, 2000 were $191.7 million compared to $161.0 million in the prior period, an increase of $30.7 million or 19%. Oil & Gas Services revenues contributed significantly to this growth increasing from $96.8 million in the prior year to $128.7 million in 2000, a $31.9 million or 33% growth. Major revenue improvements came in the well abandonment/decommissioning, production testing and process services business. Equipment utilization in the well abandonment/decommission group has improved steadily throughout the year resulting in substantial jumps in revenues and margins period-to-period. Chemicals Division revenues for the period were $77.2 million, including intercompany, up $4.1 million or 6% over the 1999 total of $73.1 million. Included in the 1999 revenues is approximately $4.2 million from the Process Technologies business, which was sold during the second quarter of 1999. The Chemicals Division revenues increased in every major product line. The chlorides business was up on the strength of much improved liquid and dry calcium chloride volumes. The micronutrients business increased as a result of significantly improved zinc sulfate fertilizer sales, while the bromides business improved due to significant increases in zinc bromide sales into oilfield markets. 8 Gross profits for the period ended September 30, 2000 were $42.4 million compared to $35.9 million in the prior year, an increase of $6.5 million or 18%. Gross profit, as a percentage of revenues were comparable to prior year at 22%. Gross profits in the Oil & Gas Services Division increased 44% period-to-period. The most significant gains came in the well abandonment/decommissioning and production testing business as increased activity resulted in significant improvements in equipment utilization. The process services group also showed substantial margin improvements over prior years. Despite improved activity, the CBF margins remain down due to continued depressed market pricing. Excluding the profits from Process Technologies, the Chemicals Division gross profits were flat, period-to-period. The micronutrients business gross profits were down due to pricing pressures in the feed markets and higher production costs caused by reduced production rates at the Cheyenne, Wyoming plant. This also resulted in reduced profit percentages for this group. Margin improvements in the chlorides and bromides business helped to offset some of the micronutrients shortfall. General and administrative expenses were $30.8 million in 2000 compared to $30.4 million in 1999. The Company recorded a special charge in the quarter ended March 31, 1999 of $4.7 million related to the following: 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 in 2002. 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, which 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 needed 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 of 1999. The abandoned assets of both plant facilities were written off during the first quarter of 1999. Finally, the Company recognized the impairment of certain micronutrients' assets totaling approximately $1.1 million. These assets were deemed impaired with the acquisitions of the WyZinCo Company and the CoZinCo assets and were written off during the first quarter of 1999. During the fourth quarter of 1999, the Company implemented a strategic restructuring program to refocus its effort in the energy services business. Under this program, the Company will concentrate its efforts on developing its oil and gas services business and will sell or consolidate non-core operations. To achieve this strategy, the Company is actively pursuing the disposition of its micronutrients business, as well as several smaller 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 primarily 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. The following table details the activity in the restructuring during the nine months ended September 30, 2000. 9 12/31/99 09/30/00 LIABILITY CASH PAYMENTS LIABILITY BALANCE 1ST QTR 2ND QTR 3RD QTR BALANCE --------- ------------------------ ------- Involuntary termination costs $1,170 $ 280 $ 271 $ 216 $ 403 Contractual costs ........... 760 -- -- -- 760 Exit costs .................. 390 -- -- 111 279 ------ ------ ------ ------ ------ $2,320 $ 280 $ 271 $ 327 $1,442 ====== ====== ====== ====== ====== 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 chemical product lines when the Company decided to exit these businesses. The Company currently has a sublease agreement, that expired in July 2000, which it is in the process of renegotiating. The remaining exit costs are additional liabilities realized by exiting certain portions of the specialty chemicals business. Of the total restructuring charge at December 31, 1999, approximately $1.7 million is associated with the Chemicals Division, $0.1 million with the Oil & Gas Services Division and $0.5 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. Operating income for the period ended September 30, 2000 was $11.7 million compared to $0.8 million in 1999. The increase in earnings period-to-period reflects improved profitability in Oil & Gas Services, calcium chloride and bromides, netted by a loss of earnings due to the sale of TETRA Process Technologies business in 1999 and a first quarter 1999 special charge of $4.7 million. Interest expense decreased during the period compared to the prior year, due to decreased long-term debt over the past twelve months. In March 1999, the Company sold its corporate headquarters building realizing a gain of approximately $6.7 million. The Company subsequently signed a ten-year lease agreement for space within the building. During the second quarter of 1999, the Company sold its Process Technologies business for a $28.8 million gain. Net income before cumulative effect of accounting change was $4.4 million in 2000 and $18.8 million in 1999. Net income per diluted share before the cumulative effect of accounting change was $0.31 in 2000 based on 14,064,000 average diluted shares outstanding and $1.39 in 1999 based on 13,580,000 average diluted shares outstanding. In April 1998, the American Institute of Certified Public Accountants issued STATEMENT OF POSITION 98-5, REPORTING THE COSTS OF START-UP ACTIVITIES, which requires that costs associated with 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 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 charge 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. After the cumulative effect adjustments, the Company reported a net income of $13.0 million or $0.96 per diluted share in 1999. LIQUIDITY AND CAPITAL RESOURCES The Company's investment in working capital, excluding cash, cash equivalents and restricted cash decreased to $68.3 million at September 30, 2000 from $68.5 million at December 31, 1999. Accounts receivables increased approximately $19.6 million, primarily in the Oil & Gas Services Division with the increased activity in well abandonment/decommissioning, production testing and CBF business. Inventories were down $8.4 million, mainly in the bromides, chlorides and micronutrients operations resulting from increased activity. Finally, accounts payables and accrued expenses increased in the gulf coast and well abandonment/decommissioning groups in support of increased activity and inventory levels. 10 To fund its capital and working capital requirements, the Company uses cash flow as well as its general purpose, prime rate/LIBOR-based line-of-credit with a syndicate of banks led by Bank of America. As of September 30, 2000, the Company has $2.2 million in letters of credit and $72.0 million in long-term debt outstanding. The line-of-credit matures in 2002. The Company's credit facility is subject to typical 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 has amended its existing credit facility to include an asset-based component of up to $50 million and a term component of up to $50 million secured with property and equipment. The Company believes this new credit facility will meet all its capital and working capital requirements. Major investing activities include an asset exchange with Key Energy Services, Inc. TETRA exchanged its South Texas trucking assets and certain rental tank assets for production testing, slickline, liquid mud and pipe testing assets in South Texas. This exchange will allow the Company to expand production testing domestic and international business. Capital expenditures during the nine months ended September 30, 2000 totaled approximately $11.6 million. Significant components include purchase of additional Process Services equipment, oil and gas production testing and well abandonment/decommission equipment and production equipment for the Company's Damp Rid(R) consumer products business. 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 remediation of 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. CAUTIONARY STATEMENT FOR PURPOSES OF FORWARD LOOKING STATEMENTS Certain statements contained herein and elsewhere may be deemed to be forward-looking within the meaning of The Private Securities Litigation Reform Act of 1995 and are subject to the "safe harbor" provisions of that act, 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 operations. Such statements involve risks and uncertainties. Actual results could differ materially from the expectations expressed in such forward-looking statements. Some of the risk factors that 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 such forward-looking statements are set forth in the section titled "Certain Business Risks" contained in the Company's report on Form 10-K for the year ended December 31, 1999. 11 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company, its subsidiaries and other related companies 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 Company. ITEM 6. EXHIBITS (a) Exhibits A statement of computation of per share earnings is included in Note D of the Notes to Consolidated Financial Statements included in this report and is incorporated by reference into Part II of this report. (b) Reports on Form 8-K: None 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TETRA TECHNOLOGIES, INC. Date: November 15, 2000 By: [Geoffrey M. Hertel] ---------------------- Geoffrey M. Hertel Chief Operating Officer Chief Financial Officer (Principal Financial Officer) Date: November 15, 2000 By: [Bruce A. Cobb] ---------------- Bruce A. Cobb Corporate Controller (Treasurer) 13 EX-27 2 0002.txt
5 1,000 9-MOS DEC-31-2000 SEP-30-2000 3,901 0 71,009 1,687 48,643 130,724 202,348 73,112 298,030 58,498 65,354 0 0 137 153,921 298,030 116,047 191,655 94,504 149,231 30,759 0 4,631 7,071 2,669 4,402 0 0 0 4,402 .32 .31
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