Exhibit 99.1
TETRA Technologies, Inc.
Introduction to the Unaudited Pro Forma Consolidated Financial Statements
On January 29, 2021, Tetra Technologies, Inc. (the “Company”) sold (i) 10,952,478 common units representing limited partner interests of CSI Compressco LP (the “Partnership”) and (ii) all of the outstanding membership interests in CSI Compressco GP LLC, the general partner of the Partnership, to Spartan Energy Partners LP (“Spartan”) (the “GP Sale”). In December 2020, the Company received cash proceeds of $14.2 million from the sale to Spartan of 15 large compressors that are subject to a lease agreement with the Partnership (the “Compressor sale”). The sale of common units, the GP Sale and Compressor sale are collectively referred to as the “CSI Compressco Transactions.” The Company will continue to own 5,237,970 common units of the Partnership.
The following unaudited pro forma consolidated financial statements are based on the Company’s historical consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2019 and the Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2020. The Company’s historic financial statements are adjusted to give effect to the CSI Compressco Transactions as if they had occurred at the beginning of each reporting period. The unaudited pro forma consolidated balance sheet as of September 30, 2020 gives effect to the CSI Compressco Transactions as if they had occurred on September 30, 2020.
The pro forma adjustments are based upon available information and certain assumptions that Company’s management believes are reasonable under the circumstances. The unaudited pro forma consolidated financial statements presented do not necessarily reflect the operating results or the financial position of the Company if the transactions occurred on the dates presented and is not intended to be indicative of future operating results or financial position.
The unaudited pro forma financial information, including notes thereto, should be read in conjunction with the historical financial statements of the Company included in our Annual Report on Form 10-K for the year ended December 31, 2019 and the Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2020.
TETRA Technologies, Inc. and Subsidiaries | |||||||||||||||
Unaudited Pro Forma Consolidated Statements of Operations | |||||||||||||||
Nine Months Ended September 30, 2020 | |||||||||||||||
(In Thousands, Except Per Share Amounts) | |||||||||||||||
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| Discontinued Operations |
| Pro Forma Adjustments |
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Revenues: |
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Product sales | $ 252,016 |
| $ (42,761) |
| $ - |
| $ 209,255 | ||||||||
Services | 315,968 |
| (222,965) |
| - |
| 93,003 | ||||||||
Total revenues | 567,984 |
| (265,726) |
| - |
| 302,258 | ||||||||
Cost of revenues: |
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Cost of product sales | 184,512 |
| (43,630) |
| - |
| 140,882 | ||||||||
Cost of services | 201,056 |
| (123,329) |
| - |
| 77,727 | ||||||||
Depreciation, amortization, and accretion | 88,906 |
| (59,972) |
| - |
| 28,934 | ||||||||
Impairments and other charges | 14,445 |
| (14,348) |
| - |
| 97 | ||||||||
Insurance recoveries | (643) |
| 517 |
| - |
| (126) | ||||||||
Total cost of revenues | 488,276 |
| (240,762) |
| - |
| 247,514 | ||||||||
Gross profit | 79,708 |
| (24,964) |
| - |
| 54,744 | ||||||||
General and administrative expense | 89,807 |
| (29,517) |
| - |
| 60,290 | ||||||||
Interest expense, net | 53,073 |
| (38,841) |
| (1,087) | (A) | 13,145 | ||||||||
Warrants fair value adjustment income | (327) |
| - |
| - |
| (327) | ||||||||
Other expense, net | 2,141 |
| (3,449) |
| 9,376 | (B) | 8,068 | ||||||||
Loss before taxes and discontinued operations | (64,986) |
| 46,843 |
| (8,289) |
| (26,432) | ||||||||
Provision for income taxes | 3,800 |
| (1,967) |
| (802) | (C) | 1,031 | ||||||||
Loss before discontinued operations | (68,786) |
| 48,810 |
| (7,487) |
| (27,463) | ||||||||
Discontinued operations: |
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Loss from discontinued operations, net of taxes | (155) |
| - |
| - |
| (155) | ||||||||
Net loss | (68,941) |
| 48,810 |
| (7,487) |
| (27,618) | ||||||||
Loss (income) attributable to noncontrolling interest | 32,833 |
| (32,957) |
| - |
| (124) | ||||||||
Net loss attributable to TETRA stockholders | $ (36,108) |
| $ 15,853 |
| $ (7,487) |
| $ (27,742) | ||||||||
Basic and diluted net loss per common share: |
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Loss before discontinued operations attributable to TETRA stockholders | $ (0.29) |
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| $ (0.22) | ||||||||
Loss from discontinued operations attributable to TETRA stockholders | ─ |
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| ─ | ||||||||
Net loss attributable to TETRA stockholders | $ (0.29) |
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| $ (0.22) | ||||||||
Average basic and diluted shares outstanding | 125,789 |
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| 125,789 | ||||||||
TETRA Technologies, Inc. and Subsidiaries | |||||||
Unaudited Pro Forma Consolidated Statements of Operations | |||||||
Year Ended December 31, 2019 | |||||||
(In Thousands, Except Per Share Amounts) | |||||||
| As Reported |
| Discontinued Operations |
| Pro Forma Adjustments |
| Pro Forma |
Revenues: |
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Product sales | $ 435,768 |
| $ (142,568) |
| $ - |
| $ 293,200 |
Services | 602,165 |
| (334,109) |
| - |
| 268,056 |
Total revenues | 1,037,933 |
| (476,677) |
| - |
| 561,256 |
Cost of revenues: |
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Cost of product sales | 335,325 |
| (128,734) |
| - |
| 206,591 |
Cost of services | 393,158 |
| (188,547) |
| - |
| 204,611 |
Depreciation, amortization, and accretion | 124,226 |
| (76,663) |
| - |
| 47,563 |
Impairments and other charges | 95,196 |
| (3,160) |
| - |
| 92,036 |
Insurance recoveries | (1,771) |
| 555 |
| - |
| (1,216) |
Total cost of revenues | 946,134 |
| (396,549) |
| - |
| 549,585 |
Gross profit | 91,799 |
| (80,128) |
| - |
| 11,671 |
General and administrative expense | 139,747 |
| (43,123) |
| - |
| 96,624 |
Goodwill impairment | 25,784 |
| - |
| - |
| 25,784 |
Interest expense, net | 73,230 |
| (51,974) |
| (1,600) | (D) | 19,656 |
Gain on Sale of Assets | (2,333) |
| - |
| - |
| (2,333) |
Warrants fair value adjustment income | (1,624) |
| - |
| - |
| (1,624) |
CCLP Series A Preferred Units fair value adjustment expense | 1,309 |
| (1,309) |
| - |
| - |
Other (income) expense, net | (191) |
| 556 |
| (2,252) | (B) | (1,887) |
Loss before taxes and discontinued operations | (144,123) |
| 15,722 |
| 3,852 |
| (124,549) |
Provision (benefit) for income taxes | 6,164 |
| (3,529) |
| 87 | (E) | 2,722 |
Loss before discontinued operations | (150,287) |
| 19,251 |
| 3,765 |
| (127,271) |
Discontinued operations: |
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Loss from discontinued operations, net of taxes | (10,213) |
| - |
| - |
| (10,213) |
Net loss | (160,500) |
| 19,251 |
| 3,765 |
| (137,484) |
Loss (income) attributable to noncontrolling interest | 13,087 |
| (13,538) |
| - |
| (451) |
Net loss attributable to TETRA stockholders | $ (147,413) |
| $ 5,713 |
| $ 3,765 |
| $ (137,935) |
Basic and diluted net loss per common share: |
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Loss before discontinued operations attributable to TETRA stockholders | $ (1.09) |
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| $ (1.02) |
Loss from discontinued operations attributable to TETRA stockholders | (0.08) |
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| (0.08) |
Net loss attributable to TETRA stockholders | $ (1.17) |
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| $ (1.10) |
Average basic and diluted shares outstanding | 125,600 |
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| 125,600 |
TETRA Technologies, Inc. and Subsidiaries | |||||||||||||||
Unaudited Pro Forma Consolidated Balance Sheet | |||||||||||||||
September 30, 2020 | |||||||||||||||
(In Thousands) | |||||||||||||||
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| Discontinued Operations |
| Pro Forma Adjustments |
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ASSETS |
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Current assets: |
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Cash and cash equivalents | $ 75,165 |
| $ (16,699) |
| $ 9,047 | (F) | $ 67,513 | ||||||||
Restricted cash | 59 |
| - |
| - |
| 59 | ||||||||
Trade accounts receivable, net of allowances | 108,222 |
| (56,521) |
| - |
| 51,701 | ||||||||
Inventories | 113,020 |
| (33,981) |
| - |
| 79,039 | ||||||||
Prepaid expenses and other current assets | 21,176 |
| (6,584) |
| - |
| 14,592 | ||||||||
Total current assets | 317,642 |
| (113,785) |
| 9,047 |
| 212,904 | ||||||||
Property, plant, and equipment: |
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Land and building | 39,534 |
| (13,259) |
| - |
| 26,275 | ||||||||
Machinery and equipment | 1,341,905 |
| (978,422) |
| - |
| 363,483 | ||||||||
Automobiles and trucks | 26,581 |
| (7,904) |
| - |
| 18,677 | ||||||||
Chemical plants | 60,195 |
| - |
| - |
| 60,195 | ||||||||
Construction in progress | 10,819 |
| (8,817) |
| - |
| 2,002 | ||||||||
Total property, plant, and equipment | 1,479,034 |
| (1,008,402) |
| - |
| 470,632 | ||||||||
Less accumulated depreciation | (804,466) |
| 435,902 |
| - |
| (368,564) | ||||||||
Net property, plant, and equipment | 674,568 |
| (572,500) |
| - |
| 102,068 | ||||||||
Other assets: |
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Patents, trademarks and other intangible assets, net of accumulated amortization | 68,350 |
| (25,797) |
| - |
| 42,553 | ||||||||
Deferred tax assets | 24 |
| (24) |
| - |
| - | ||||||||
Operating lease right-of-use assets | 78,867 |
| (34,680) |
| - |
| 44,187 | ||||||||
Other assets | 22,089 |
| (4,638) |
| 4,662 | (G) | 22,113 | ||||||||
Total other assets | 169,330 |
| (65,139) |
| 4,662 |
| 108,853 | ||||||||
Total assets | $ 1,161,540 |
| $ (751,424) |
| $ 13,709 |
| $ 423,825 | ||||||||
TETRA Technologies, Inc. and Subsidiaries | ||||||||
Unaudited Pro Forma Consolidated Balance Sheet | ||||||||
September 30, 2020 | ||||||||
(In Thousands) | ||||||||
LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable | $ 42,406 |
| $ (19,404) |
| $ - |
| $ 23,002 | |
Unearned income | 7,310 |
| (6,463) |
| - |
| 847 | |
Accrued liabilities | 80,500 |
| (44,750) |
| - |
| 35,750 | |
Current liabilities of discontinued operations | 1,852 |
| - |
| - |
| 1,852 | |
Total current liabilities | 132,068 |
| (70,617) |
| - |
| 61,451 | |
Long-term debt, net | 843,216 |
| (636,943) |
| (19,100) | (H) | 187,173 | |
Deferred income taxes | 3,421 |
| (1,620) |
| 331 | (I) | 2,132 | |
Asset retirement obligation | 12,973 |
| - |
| - |
| 12,973 | |
Warrants liability | 123 |
| - |
| - |
| 123 | |
Operating lease liabilities | 64,200 |
| (25,896) |
| - |
| 38,304 | |
Other liabilities | 10,364 |
| (17) |
| - |
| 10,347 | |
Total long-term liabilities | 934,297 |
| (664,476) |
| (18,769) |
| 251,052 | |
Equity: |
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TETRA stockholders' equity |
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Common stock | 1,289 |
| - |
| - |
| 1,289 | |
Additional paid-in capital | 471,146 |
| - |
| - |
| 471,146 | |
Treasury stock, at cost | (19,484) |
| - |
| - |
| (19,484) | |
Accumulated other comprehensive income loss | (54,634) |
| - |
| - |
| (54,634) | |
Retained deficit | (398,630) |
| 78,719 |
| 32,478 | (J) | (287,433) | |
Total TETRA stockholders' equity | (313) |
| 78,719 |
| 32,478 |
| 110,884 | |
Non-controlling interests | 95,488 |
| (95,050) |
| - |
| 438 | |
Total equity | 95,175 |
| (16,331) |
| 32,478 |
| 111,322 | |
Total liabilities and equity | $ 1,161,540 |
| $ (751,424) |
| $ 13,709 |
| $ 423,825 | |
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Pro Forma Adjustments
| (A) | Reflects the interest savings from the assumed repayment of the Senior Term loan by $19.1 million based on an average rate of 7.6% for the period. |
| (B) | Reflects the change in fair value of and distributions from the retained units of the Partnership. |
| (C) | Reflects the income tax effect of pro forma adjustments based on the effective tax rate of 9.7% after considering the impact of the proforma adjustments on existing valuation allowances. |
| (D) | Reflects the interest savings from the assumed repayment of the Senior Term loan by $19.1 million based on an average rate of 8.4% for the period. |
| (E) | Reflects the income tax effect of pro forma adjustments based on the effective tax rate of 2.3% after considering the impact of the proforma adjustments on existing valuation allowances. |
| (F) | Reflects the increase in cash from sale proceeds of $28.1 million, less $19.1 million of assumed proceeds used for debt repayment. |
| (G) | Reflects the fair value of the retained common units of the Partnership as of September 30, 2020. |
| (H) | Reflects the decrease in long-term debt from the assumed repayment of the Senior Term loan with the $19.1 million of cash proceeds. |
| (I) | Reflects the increase in deferred tax liabilities related to the retained units of the Partnership after considering the impact of pro forma adjustments on existing valuation allowances. |
| (J) | Reflects the impact to the Company’s retained earnings from pro forma adjustments described in notes (F), (G), (H) and (I) above. |