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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, 2000
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. |_|
The aggregate market value of the common stock of TETRA Technologies, Inc.
held by non-affiliates (based upon the March 15, 2001 closing sale price as
reported by the New York Stock Exchange) ($23.85 per share) was approximately
$331,831,823. 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 15, 2001 was 13,913,284 shares.
Part III information is incorporated by reference from the registrant's
proxy statement for its annual meeting of stockholders to be held May 24, 2001
to be filed with the Securities and Exchange Commission within 120 days of the
end of the registrant's fiscal year.
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TABLE OF CONTENTS
Part 1
Item 1. Business ......................................................... 1
Item 2. Properties ....................................................... 11
Item 3. Legal Proceedings ................................................ 12
Item 4. Submission of Matters to a Vote of Security Holders .............. 12
Part II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters .................................... 12
Item 6. Selected Financial Data .......................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ...................................... 14
Item 7A. Quantitative and Qualitative Disclosures About Markets Risks ..... 19
Item 8. Financial Statements and Supplementary Data ...................... 19
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ....................................... 19
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 ... 20
Item 13. Certain Relationships and Related Transactions ................... 20
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K .. 21
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 chemical products
to energy markets, as well as other markets. The Company is comprised of three
divisions - Fluids, Well Abandonment/Decommissioning and Testing & Services.
The Company's Fluids Division manufactures and markets clear brine fluids
to the oil and gas industry for use in well drilling, completion and workover
operations in both domestic and international markets. The division also markets
the fluids and dry calcium chloride manufactured at its production facilities to
a variety of markets outside the energy industry.
The Well Abandonment/Decommissioning Division provides a complete package
of services required for the abandonment of depleted oil and gas wells and the
decommissioning of platforms, pipelines and other associated equipment. The
division services the onshore, inland waters and offshore markets of the Gulf of
Mexico. The Division is also an oil and gas producer from wells acquired in
connection with its well abandonment and decommissioning business.
The Company's Testing & Services Division provides production testing
services to the Texas, Louisiana, offshore Gulf of Mexico and Latin American
markets. It also provides technology and services required for the separation
and recycling of oily residuals generated from petroleum refining and
exploration and production operations.
In the fourth quarter of 1999, the Company initiated a strategic
restructuring program designed to refocus its efforts in the energy services
business. The program concentrated the Company's efforts on developing its oil
and gas services business and selling or consolidating non-core chemical
operations. During 2000, the Company implemented this strategy and sold the
manganese sulfate portion of the micronutrient business and consolidated, shut
down or sold other non-core components of the chemicals related operations. The
micronutrients business, which includes manganese sulfate and zinc sulfate feed
and fertilizer products, is presented in the accompanying financial statements
as a discontinued operation. The Company has written down its investment in the
remaining zinc sulfate micronutrient assets and is actively pursuing their
disposition.
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, its phone number is 281/367-1983
and its web site is at www.tetratec.com.
- 1 -
Products and Services
Fluids Division
Liquid calcium chloride, sodium bromide, calcium bromide and
zinc bromide produced by the Fluids 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 Fluids Division and are also sold to other companies who service
customers in the oil and gas industry.
The 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. It also
provides these customers a broad range of associated services, including on-site
fluid filtration, handling and recycling, fluid engineering consultation, and
fluid management. The Division also repurchases used CBFs from operators and
recycles and reconditions these materials. The utilization of reconditioned
CBF's reduces the net cost of the CBFs to the Company's customer and minimizes
the need for disposal of contaminated fluids. The Company recycles and
reconditions the CBFs through filtration, blending and the use of proprietary
chemical processes, and then markets the recycled CBFs.
The 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, temperature and chemical composition
of the CBFs are modified by the Company to satisfy a customer's unique
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. Filtration also enables recovery of a
greater percentage of used CBFs for recycling.
The PayZone(R) Drill-In Fluids systems use clear brine fluids
as the basis for this line of specialized drilling fluid systems, some of which
are 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 patented ACT clean-up systems are
designed to quickly and uniformly clean up drill-in fluids filtercake from the
payzone to increase oil and gas production.
The chemicals manufacturing group of the Fluids Division has
seven active production facilities that manufacture dry calcium chloride and
liquid calcium chloride, sodium bromide, calcium bromide and zinc bromide for
distribution primarily into energy markets. Liquid and dry calcium chloride are
also sold into the water treatment, industrial, cement, food processing, ice
melt and consumer products markets.
This group operates four facilities that convert co-product
hydrochloric acid from nearby sources into 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 acid 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 markets in the western United States.
- 2 -
The chemicals manufacturing group manufactures and distributes
calcium bromide and zinc bromide from its West Memphis, Arkansas facility. The
production process uses a low-cost hydrobromic acid or bromine along with
various zinc sources to manufacture its products. This facility also uses
proprietary technologies to recondition and upgrade used CBFs repurchased from
the Company's customers. The Company has a facility at Dow's Ludington, Michigan
chemical plant that converts a crude bromine stream from Dow's calcium/magnesium
chemicals operation into purified bromine and liquid calcium bromide or liquid
sodium bromide. Liquid sodium bromide is also sold into the industrial water
treatment markets, where it is used as a biocide in recirculated cooling tower
waters.
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 by the Company in the vicinity 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 their
development.
Well Abandonment/Decommissioning Division
The Well Abandonment/Decommissioning Division provides a
complete package of services required for the abandonment of depleted oil and
gas wells and the decommissioning of platforms and other associated equipment
onshore and in inland waters in Texas and Louisiana and offshore in the Gulf of
Mexico. The Company 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 business
was expanded significantly in 1996 with two acquisitions that provided
penetration into the Texas onshore markets and the inland waters markets off
Texas and Louisiana. The Division added wireline services as well as oilfield
tubular sales and reconditioning services to its mix in 1997 through two
additional acquisitions.
The Division has eight service facilities which are located in
Houma and Lafayette, Louisiana and Alice, Bryan, Edinburg, Laredo, Midland and
Victoria, Texas. In providing its well abandonment and decommissioning services,
the Company operates onshore rigs, barge-mounted rigs, a jack-up rig, a platform
rig, a heavy lift barge and offshore rigless packages. The Division's integrated
package of services includes the full compliment of operations required to plug
wells, salvage tubulars and decommission well head equipment, pipelines and
platforms. Its wireline operations provide pressure transient testing, reservoir
evaluation, well performance evaluation, cased hole and memory production
logging, perforating, bridge plug and packing service and pipe recovery to major
oil companies operating in the Gulf of Mexico.
In the fourth quarter of 2000, the Company significantly
increased its capacity to service its markets through the acquisition of the
assets of Cross Offshore Corporation, Ocean Salvage Corporation and Cross Marine
LLC. This purchase approximately doubled the number of offshore rigless well
abandonment packages owned by the Company and increased the number of inland
packages as well. The Company also acquired the heavy lift barge, Southern
Hercules, with a 500 ton lift capacity (upgradable to 800 tons) which further
expands the Company's turnkey capabilities in decommissioning inland water and
offshore pipelines and platforms.
During 2000, the Company formed Maritech Resources, Inc. as a
new component of the Well Abandonment/Decommissioning Division to own, manage
and exploit producing oil and gas properties the Company acquired in conjunction
with its well abandonment business. Numerous oil and gas operators are offering
packages of federal leases of offshore Gulf of Mexico producing properties,
which include non-producing wells and wells with marginal or declining
production. Federal regulations generally require leasees to plug and abandon
wells and decommission the platforms, pipelines and other equipment located on
the lease within one year after the lease terminates. Frequently the costs of
abandonment and decommissioning exceed the value of the producing wells with
regard to a particular lease. This Division, through its Maritech Resources,
Inc. subsidiary, has been successful in acquiring offshore properties such as
these. Maritech operates the leases by producing from active wells and utilizing
the integrated services of this division to rework promising wells on the lease
and abandoning and decommissioning the wells and equipment according to an
optimized schedule. The Company believes that this division's strategy is being
perceived by operators of these properties as a cost effective method of
satisfying the abandonment and decommissioning obligation, which in turn
provides for increased demand for the division's services and equipment.
- 3 -
Testing & Services Division
The production testing group of the Testing & Services
Division provides flow-back pressure and volume testing of oil and gas wells,
predominantly in the Texas, Louisiana, offshore Gulf of Mexico, Mexico and
Venezuela markets. The Company believes this group to be the largest onshore
production testing company in the world. These services facilitate the
sophisticated evaluation techniques needed for reservoir management and
optimization of well work-over programs. In 2000, the Company acquired certain
assets of Southern Well Testing, Inc. and Key Energy Services, Inc., which
significantly increased its equipment capacity in production testing, slickline,
liquid mud facilities and pipe testing assets. The division's Production Testing
group maintains the largest fleet of high pressure production testing equipment
in the South Texas area, with operations in Victoria, Alice, Edinburg and
Laredo, Texas, as well as Reynosa, Mexico. The division also has operations in
Conroe and Palestine Texas, Lafayette Louisiana and Maturin, Venezuela.
Oily residuals are mixtures of hydrocarbons, water and solids.
The Process Services group of the Testing & Services Division applies a variety
of technologies to separate oily residuals into their components. The group
provides its oil recovery and residuals separation and recycling services to
approximately 17% of the petroleum refining capacity in the United States. This
group utilizes various liquid/solid separation technologies, including a
proprietary high temperature thermal desorption and recovery technology and
hydrocyclones, centrifuges and filter presses. Oil is recycled for productive
use, water is recycled or disposed and organic solids are recycled. Inorganic
solids are treated to become inert, nonhazardous materials. The Division
typically builds, owns and operates fixed systems that are located on its
customer's sites, providing these services under long-term contracts.
Through the Company's international fluids operations, this
Division has developed an exploration and production application for its
technology. Utilizing its existing technology, the division is able to remove
oily contaminants from liquid and solid residuals generated in offshore drilling
and production. The division acquired its first international contract in 2000
and subsequently constructed a processing facility in Kristiansund, Norway. The
division currently has a multi year contract to process residuals for four major
exploration/production operators working offshore Norway.
Sources of Raw Materials
The Fluids Division manufactures calcium chloride, sodium bromide,
calcium bromide and zinc bromide for distribution to its oil and gas customers.
The Division also purchases calcium bromide and zinc bromide from two domestic
and one foreign manufacturer, and it recycles calcium and zinc bromide CBFs
repurchased from its oil and gas customers.
Some of the Division's primary sources of raw materials 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
hydrochloric acid, but believes that there are numerous alternative sources of
supply as well. The Company produces calcium chloride at its Amboy, California
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 calcium bromide and zinc bromide at its West Memphis
facility, the Company uses hydrobromic acid, bromine and various sources of zinc
raw materials. The Company has one internal and several external sources of
bromine and several external sources of co-product hydrobromic acid. The Company
uses a proprietary process that permits the use of cost advantaged raw
materials, while maintaining high product quality. There are numerous sources of
zinc that the Company can use in the production of zinc bromide. The Company has
an agreement with the Dow Chemical Company to purchase crude bromine to feed its
bromine derivatives plant in
- 4 -
Ludington, Michigan. This plant produces purified bromine for use at the West
Memphis facility as well as liquid calcium bromide and sodium bromide for
resale.
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 in the vicinity of
this plant. 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 bromine and sodium and calcium bromide from the new Ludington
plant and zinc bromide from the West Memphis, Arkansas facility, affords the
Company additional flexibility, beyond the development of the Magnolia plant,
for the secure supply of its required bromine derivatives.
Market Overview and Competition
Fluids Division
The Fluids 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 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. and OSCA, Inc. 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. Major customers of
the Oil & Gas Services Division include Shell Oil, Texaco, Amerada Hess, BP
Amoco, El Paso, Kerr McGee Corp., Apache, Anadarko, Newfield Exploration and
Conoco USA.
Non-energy markets for the Company's liquid and dry calcium chloride
products include 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. The Company's major competitors in
the dry calcium chloride market include Dow Chemical Company and General
Chemical Company. Sodium bromide is sold into the industrial water treatment
markets as a biocide under the BioRid(TM) trade name.
Well Abandonment/Decommissioning Division
The well abandonment/decommissioning market is predominately driven
by government regulations that dictate when a well must be plugged. Current
regulations generally require onshore wells to be plugged within twelve months
after the well ceases production and offshore wells to be plugged within one
year after the entire lease ceases production. As a result of various exceptions
generally offered to exploration and production companies in the past, the
number of wells requiring plugging has grown steadily. The Company believes
there to be a substantial number of wells offshore in the Gulf of Mexico and in
the inland waters, and onshore Texas and Louisiana that require well abandonment
and decommissioning work. These markets are very competitive. Critical factors
required to participate in these markets include: the proper equipment to meet
diverse market conditions; qualified, experienced personnel; technical expertise
to address varying downhole conditions; the financial strength to insure all
abandonment and decommissioning obligations are satisfied, and a comprehensive
safety and environmental program. The Company believes its integrated service
package satisfies these market requirements, allowing it to successfully
compete.
- 5 -
The Division 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, Apache Anadarko,
Newfield Exploration, El Paso, the Louisiana Conservation Commission and the
Railroad Commission of the State of Texas. These services are performed in the
upper and lower Gulf Coast regions of Texas, South Texas, West Texas, East
Texas, Louisiana, Gulf Coast inland waterways and the Gulf of Mexico. The
Company's principal competitors in this business include Superior Energy
Services, Inc., Cal Dive International, Inc., Horizon Offshore and Global
Industries. This market is highly competitive and competition is based primarily
on service, equipment availability and price. The Division believes its focus on
core competency in well abandonment and decommissioning operations has allowed
it to better provide the complete portfolio of equipment, experience and
administration required to manage its customer's needs.
Testing & Services Division
The Division's production testing group provides its services
primarily to the natural gas segment of energy markets. Using typical completion
techniques, sand and other abrasive materials will normally accompany the
initial production of natural gas, usually under very high pressures. The
Company provides the equipment and qualified personnel to remove these
impediments to production and to pressure test wells and wellhead equipment. The
Division's slickline equipment is used to provide various downhole pressure,
temperature and flow rate measurements which are critical in the reservoir
analysis.
The market is highly competitive and competition is based on
availability of equipment and qualified personnel, as well as price.
Additionally, as a result of the high pressure environment in which theses
services are performed, the safety program of the Company can also be a
significant factor. The Company believes its equipment maintenance program and
operating procedures give it a competitive advantage in the marketplace. Market
competition is dominated by numerous small, individually owned operators. Major
competitors include Fesco and Parchman. The Company's customers include Conoco,
Shell, El Paso Energy, Enron, Chevron, Devon, Newfield, other large independent
gas producers, PEMEX (the national oil company of Mexico) and PDVSA (the
national oil Company of Venezuela).
The Division's Process Services group currently provides oily
residuals processing to approximately 25% of the largest U.S. refineries, which
are concentrated in Texas and Louisiana. Although U.S. refineries have
alternative technologies and disposal systems available to them, the Company
feels its competitive edge lies in its ability to apply its various liquid/solid
separation technologies to provide the most efficient processing alternative at
competitive prices. The group currently has major processing facilities at the
following refineries: Exxon /Mobil - Beaumont and Baytown, Texas, and Baton
Rouge, Louisiana; Premcor and Motiva - Port Arthur, Texas; Phillips - Borger,
Texas; Lyondell-Citgo - Houston, Texas and Citgo - Lake Charles, Louisiana.
Major competitors in this market include Scaltech, Midwestern Centrifuge Systems
and Phillips Services. The Company believes that new refinery regulations
permitting the processing of oily residuals from other refineries will provide
the group with expanded market opportunities in the U.S. The group recently
signed a contract with Hovensa to install and operate a processing facility in
St. Croix, U.S. Virgin Islands.
The group entered the international energy market in 2000 by
applying its technology to process oily residuals generated from offshore
exploration and production in the Norwegian sector of the North Sea. The
Division has a contract with Renovasson Nord A/S (RN) to process drilling fluids
and drill cuttings at the group's central processing facility in Kristiansund,
Norway. RN has contracts with major exploration and production operators working
offshore Norway to process their oily residuals. Using its technologies, the
group believes it is able to provide more cost effective alternatives to the
customer's waste disposal needs. Major competitors in this market include
Soilcare, Slovagen Industries and Franzefoss Gjennvinning. Environmental
regulations are a major marketplace driver in this business. Markets such as the
North Sea, which have stringent zero discharge regulations, afford the greatest
growth opportunities for the Company. The group has also targeted opportunities
in several Mideast and South American markets that it is starting to develop.
- 6 -
Other Business Matters
Marketing and Distribution
The Fluids Division markets its domestic products and services through its
distribution facilities located principally in the Gulf Coast region of the
United States 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, Brazil, Western Africa
and the Far East.
The non oilfield liquid and dry calcium chloride products are marketed
through the Division's sales offices and sales agents in California, Colorado,
Connecticut, Florida, Georgia, 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 markets, the Division has
over two dozen distribution facilities strategically located to provide
efficient, low-cost product availability.
Backlog
The Company generally provides its products and services within seven days
of receipt of an order. Consequently, the level of backlog is not indicative of
the Company's sales activity. On December 31, 2000, the Company had an estimated
backlog of work of $51.5 million, of which approximately $18.9 million is
expected to be billed during 2001. On December 31, 1999, the Company had an
estimated backlog of $44.6 million.
Employees
As of December 31, 2000, the Company had 1,362 employees. None of the
Company's U.S. employees are presently covered by a collective bargaining
agreement, other than the employees of the Company's Lake Charles, Louisiana
calcium chloride production facility who are represented by the Paper, Allied
Industrial, Chemical and Energy Workers International union. 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, 2000, the
Company owned or licensed 21 issued U.S. patents, had four patents pending in
the U.S., had one issued foreign patent and eight 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 2018. 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.
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Safety, Health and Environmental Affairs Regulations
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 (CERCLA), the Superfund Amendments and Reauthorization Act of 1986
(SARA), the Federal Insecticide, Fungicide, and Rodenticide Act of 1947 (FIFRA),
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 those
foreign countries in which it 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 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 levels of
oil and gas well drilling, completion, workover and abandonment activity, both
in the United States and internationally. Such activity levels are affected both
by short-term and long-term trends in oil and gas prices, among other factors.
In recent years, oil and gas prices and, therefore, the levels of well drilling,
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. Also, a prolonged slow down of the U.S.
and/or world economy may contribute to an eventual downward trend in the demand
and correspondingly the price of oil and natural gas. Any prolonged reduction in
oil and gas prices may depress the levels of well drilling, 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.
- 8 -
Much of the Company's growth strategy depends upon its ability to
sell its products in geographic 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.
Competition
The Company encounters and expects to continue to encounter intense
competition in the sale of its products and services. The Company competes with
numerous companies in its oil and gas and chemical 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 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 and 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. 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 and 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, refinery
waste treatment operations and for its oil and gas production properties. The
Company could be materially and 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 and adversely
affect the demand for the types of systems offered by the Company's Process
Service and Well Abandonment/Decommissioning operations and, therefore,
materially and adversely affect the Company's business.
- 9 -
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.
Weather Related Factors
Demand for the Company's products and services are subject to
seasonal fluctuation due in part to weather conditions, which cannot be
predicted. 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 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 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.
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 future
press releases and filings and reports with the Securities and Exchange
Commission for further information on 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.
- 10 -
Item 2. Properties.
The following table sets forth certain information concerning facilities
leased or owned by the Company as of December 31, 2000. The Company believes its
facilities are adequate for its present needs.
Description Location Approximate Square Footage(1)
----------- -------- -----------------------------
Fluid, Well Abandonment and Testing Distribution
facilities.......................................... Texas - twelve locations 1,262,700
Louisiana - six locations 732,200
Venezuela 110,000
Mexico - various locations 95,000
United Kingdom - various locations 92,000
Brazil 30,000
Ivory Coast 30,000
Nigeria 28,000
Norway - various locations 25,000
Angola 20,000
Cameron 15,000
Fluids chemical plant production facilities......... Amboy, California 59 square miles(2)
Lake Charles, Louisiana 751,500
West Memphis, Arkansas 697,800
Magnolia, Arkansas 120,000
Parkersburg, West Virginia 106,300
Norco, Louisiana 85,200
Orlando, Florida 35,800
Wichita, Kansas 19,500
Ludington, Michigan 10,000
Process Services facilities......................... Texas - six locations 81,125
Louisiana - two locations 31,260
Norway 25,000
Delaware 20,000
The Woodlands, Texas 16,000
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.
- 11 -
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, 2000.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
Price Range of Common Stock
The Common Stock is traded on the New York Stock Exchange under the symbol
"TTI". As of March 26, 2001 there were approximately 2,309 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 quarter in the two years ended
December 31, 2000, 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
---- ---
2000
First Quarter ................... $13.44 $ 7.00
Second Quarter .................. 14.94 11.25
Third Quarter ................... 16.94 12.56
Fourth Quarter .................. 16.50 12.56
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
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. The Company declared a
dividend of one Preferred Stock Purchase Right per share of Common Stock to
holders of record at the close of business on Novembers 6, 1998. See Note Q to
the financial statements attached hereto.
- 12 -
Item 6. Selected Financial Data.
Year Ended December 31,
----------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Income Statement Data
Revenues $224,505 $178,062 $211,728 $196,999 $138,866
Gross Profit 53,693 38,966 56,110 59,702 43,274
Operating Income (Loss) 16,124 (5,289)(1) 20,661 27,613(2) 18,679
Interest Expense (4,187) (5,238) (5,257) (1,288) (655)
Interest Income 441 371 148 273 192
Other Income (Expense) net 31 65 (239) 1,009 823
Net Income, before discontinued operations
and cumulative effect of accounting change 7,737 14,329(3) 9,322 16,654 12,196
Net Income per share, before discontinued
operations and cumulative effect of
accounting change $ 0.57 $ 1.06 $ 0.69 $ 1.25 $ 0.95
Average Shares 13,616 13,524 13,561 13,297 12,873
Net Income per diluted share, before
discontinued operations and cumulative
effect of accounting change $ 0.57 $ 1.06 $ 0.67 $ 1.17 $ 0.90
Average Diluted Shares 13,616 13,576 13,994 14,189 13,545
(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 administration building of $6,731 and gain on
sale of business of $29,629.
Year Ended December 31,
----------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Balance Sheet Data
Working capital $ 65,559 $ 60,311 $ 75,894 $ 59,905 $ 36,475
Total assets 278,940 284,510 305,285 255,986 168,074
Long-term liabilities 82,661 92,806 126,447 89,724 31,360
Stockholder's equity 143,754 149,421 139,322 129,580 108,022
The above selected financial data has been restated to reflect the discontinued
operations of TETRA Micronutrients, Inc.
- 13 -
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
-------------------------------- ---------------
2000 1999
vs vs
2000 1999 1998 1999 1998
---- ---- ---- ---- ----
Revenues ...................................... 100.0% 100.0% 100.0% 26.1% (15.9)%
Cost of Revenues .............................. 76.1 78.1 73.5 22.8 (10.6)
Gross profit .................................. 23.9 21.9 26.5 37.8 (30.6)
General & administrative expenses ............. 16.7 20.9 16.7 1.0 4.9
Special and restructuring charges ............. -- 4.0 -- (100.0) 100.0
Operating income .............................. 7.2 (3.0) 9.8 404.9 (125.6)
Gain of sale of building and TPT business ..... -- 20.4 -- (100.0) 100.0
Interest expense .............................. 1.9 2.9 2.5 (20.1) --
Interest income ............................... 0.2 0.2 0.1 18.9 150.7
Other income (expense), net ................... -- -- (0.1) (52.3) 127.2
Income before income taxes, discontinued
operations and cumulative effect of
accounting change ........................... 5.5 14.8 7.2 (52.8) 71.5
Income before discontinued operations and
cumulative effect of accounting change ..... 3.4 8.0 4.4 (46.0) 53.7
Discontinued operations, net of tax ........... (6.4) 0.9 (0.2) (958.1) 497.4
Cumulative effect of accounting change,
net of tax ............................... -- 3.2 -- 100.0 (100.0)
Net income .................................... (3.0) 5.7 4.2 (165.7) 15.0
2000 Compared to 1999
Revenues for the year ended December 31, 2000 were $224.5 million compared
to $178.1 million in 1999, an increase of $46.4 million or 26%. Improved
revenues reflected the overall improvement in the energy industry, particularly
the Gulf of Mexico markets. Fluid Division revenues improved 8% to $118.9
million. Well Abandonment/ Decommissioning revenues increased 67% to $60.4
million due to significantly improved equipment utilization rates and revenues
generated from natural gas producing properties. Testing & Services Division
revenues increased 55% to $46.4 million due to increased production testing
activity in South Texas and Mexico and the addition of process services
operations in Norway.
Gross profits for the year were $53.7 million compared to $39 million in
1999, an increase of $14.7 million or 38%. Gross profit percentage increased
from 22% to 24%. Gross profits in both the Well Abandonment/Decommissioning and
Testing & Services Divisions improved significantly as a result of substantial
improvements in equipment utilization. Gross profit from natural gas producing
properties also contributed to the year over year improvement.
General and administrative expenses were $37.6 million in 2000 compared to
$37.2 million in 1999. G&A expense as a percentage of revenues decreased from
20.9% in 1999 to 16.7% in 2000. In March 1999, the Company recorded a $4.7
million special charge relating to the impairment of various plant assets
predominantly in the Fluids Division.
- 14 -
During the fourth quarter of 1999, the Company initiated a strategic
restructuring program to refocus its efforts in the energy services business.
This program concentrated the Company's efforts on developing its oil and gas
services business and selling or consolidating non-core chemical operations. To
achieve this strategy, the Company started to actively pursue 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. The following table details the activity in the restructuring during the
twelve months ended December 31, 2000.
12/31/99 12/31/00
Liability Cash Liability
Balance Payments Balance
--------- -------- --------
Involuntary termination costs ...... $1,170 $ 877 $ 293
Contractual costs .................. 760 -- 760
Exit costs ......................... 390 273 117
------ ------ ------
$2,320 $1,150 $1,170
====== ====== ======
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 at December
31, 2000, approximately $0.9 million is associated with the Fluids Division, and
$0.3 million with corporate administrative activities. The majority of these
costs are expected to be paid within the next 12 months and will be funded using
cash flow from operations.
Operating income for the year was $16.1 million compared to a loss of $5.3
million in 1999, an improvement of $21.4 million. The increase in earnings
year-to-year reflects improved profitability in all three divisions, net of the
$4.7 million special charge and $2.3 million restructuring charge, both in 1999.
Interest expense decreased during the period compared to the prior year,
due to decreased long-term debt over the past twelve months. Proceeds from the
sales of a portion of the micronutrient business in 2000 and the Process
Technologies business in 1999 were used to reduce long-term debt.
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 $29.6
million gain.
Income before discontinued operations and the cumulative effect of
accounting change was $7.7 million in 2000 and $14.3 million in 1999. Net income
per diluted share before discontinued operations and the cumulative effect of
accounting change was $0.57 in 2000 based on 13,616,000 average diluted shares
outstanding and $1.06 in 1999 based on 13,576,000 average diluted shares
outstanding.
In conjunction with the Company's strategic restructuring program, the
Company developed a plan in October 2000 to exit its micronutrients business,
which produces zinc and manganese products for the agricultural markets. The
plan provided for the sale of the stock of TETRA's wholly owned Mexican
subsidiary, Industrias Sulfamex, S.A. de C.V., a producer and distributor of
manganese sulfate, and all the manganese inventory held by the Company's U.S.
operations. It also provided for the sale of all inventories and the sale or
shutdown of the plant and equipment associated with its zinc sulfate business.
In December 2000, the Company sold all of its U.S. and foreign manganese sulfate
assets for $15.4 million in cash and wrote down its investment in the remaining
zinc sulfate micronutrients assets to their estimated net realizable value.
- 15 -
The Company has accounted for the micronutrients business as a
discontinued operation and has restated prior period financial statements
accordingly. The estimated loss on the disposal of the discontinued operations
of $14.5 million (net of income tax benefit of $5.4 million) represents the
estimated loss on the disposal of the assets of the micronutrients business and
a provision of $0.2 million for anticipated losses during the disposition period
from October 1, 2000 to September 30, 2001. Revenues from discontinued
operations were $30.6 million in 2000 compared to $37.2 million in 1999. Net
income from discontinued operations was $0.01 million in 2000 and $1.7 million
in 1999.
In April 1998, the American Institute of Certified Public Accounts issued
Statement of Position 98-5, Reporting the Costs of Start-up Activities (ASOP
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 loss for the year was $6.7 million compared to income of $10.2 million
in the prior year. Net loss per diluted share was $0.49 in 2000 on 13,616,000
average diluted shares outstanding and net income of $0.75 in 1999 on 13,576,000
average diluted shares outstanding.
1999 Compared to 1998
Total revenues for the year ended December 31, 1999 were $178.1 million
compared to $211.7 million in 1998, a decrease of $33.6 million or 15.9%.
Revenues from the Fluids Division were $109.6 million, down $17.9 million or
14%, from the 1998 level of $127.5 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 Well
Abandonment/ Decommissioning Division revenues declined at a slower rate,
approximately 8% based on market penetration in 1999 for inland waters services.
During the year, the Company sold its Process Technologies business (TPT), which
generated revenues of $4.1 million in 1999 and $15.6 million in 1998.
Gross profits for the year were $39 million, down $17.1 million or 30%
from $56.1 million in 1998. Gross profits in the Fluids Division were down
significantly as volumes declined and pricing pressures were realized from the
general industry slow down. Gross profits for the calcium chloride products were
down slightly due to the planned shut down of the Lake Charles dry plant to
reduce inventory levels. The Division's gross profits percentages also suffered
significantly from these business conditions.
General and Administrative expenses were $37.2 million in 1999 compared to
$35.4 in 1998, an increase of $1.8 million. This increase is attributable to
costs obtained through acquisitions and increased advertising costs.
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
Fluids 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
Fluids 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.
- 16 -
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 $1.1 million is associated with the Fluids Division, $0.6 million
with corporate administrative activities and $0.6 million with operations that
were discontinued during the year. 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.
Operating income for the year ended December 31, 1999 was a loss of $5.3
million compared to $20.7 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.
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. It had sales of $4.1 million in 1999, $15.6
million in 1998 and $11.4 million in 1997.
Interest expense in 1999 was $5.2 million, comparable to the prior year.
Proceeds from the TPT and building sales were used to reduce long-term debt.
Income before discontinued operations and the cumulative effect of
accounting change was $14.3 million in 1999 compared to $9.3 million in 1998, an
increase of $5.0 million. Net income per diluted share before discontinued
operations and the cumulative effect of accounting change was $1.06 in 1999 on
13,576,000 average diluted shares outstanding and $0.67 in 1998 on 13,994,000
average diluted shares outstanding.
In the fourth quarter of 2000, the Company approved a plan to exit the
micronutrients business. This business has been reported as a discontinued
operation in the accompanying financial statement with the prior years restated.
In the year 1999, income from discontinued operations was reported as $1.7
million, net of a $2.1 million tax benefit. In 1998 a loss of $0.4 million net
of a $0.3 million tax benefit from discontinued operations was reported . The
increase in 1999 is attributable to improved commodity prices in the
agricultural markets.
- 17 -
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.
Liquidity and Capital Resources
The Company's investment in working capital, excluding cash, cash
equivalents and restricted cash , was $59.0 million at December 31, 2000
compared to $54.2 million at December 31, 1999, an increase of $4.8 million.
Accounts receivables increased approximately $18.5 million, due to the increased
activity in the well abandonment/decommissioning, production testing and CBF
businesses. Inventories were down $10.4 million, mainly in the bromides and
chlorides operations resulting from increased sales demand. Deferred tax assets
increased primarily from the tax benefits of the discontinued operations losses.
Accounts payables and accrued expenses increased in the gulf coast and well
abandonment/decommissioning groups in support of increased activity. Current
portion of long term debt increased $4.7 million due to the required
amortization of the term portion of the credit facility.
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, 2000, the Company had $2.6 million in letters of credit and $56.7 million in
long-term debt outstanding. The line-of-credit matures in 2002. The Company's
credit facility 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. During the year, the
Company 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 in 2000 included 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 its production testing domestic and international business.
During the fourth quarter of 2000, the Company significantly expanded its
Well Abandonment/Decommissioning capacity through the acquisition of the assets
of Cross Offshore Corporation, Ocean Salvage Corporation and Cross Marine LLC.
The Company paid approximately $6.2 million in cash plus additional future
consideration based upon future net earnings. The assets purchased will
complement the Company's current well abandonment, platform decommissioning and
heavy lift operations in the Gulf Coast inland waters and offshore markets. This
transaction approximately doubles the offshore rigless well abandonment packages
and increases the number of inland water well abandonment packages the Company
can provide. It also gives the Company heavy lift capability with the
acquisition of the Southern Hercules, a 500 ton capacity heavy lift barge.
Capital expenditures during the twelve months ended December 31, 2000
totaled approximately $16.0 million. Significant components include purchase of
additional Process Services equipment, oil and gas production testing and well
abandonment/decommissioning equipment. The Company also acquired over $7 million
of oil and gas properties in exchange for assuming certain well abandonment and
decommissioning liabilities associated with the properties.
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 2001 and thereafter.
- 18 -
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, 2000, the Company had $56.7 million outstanding under its credit
facility, of which $40 million was subject to an interest rate swap and $16.7
million subject to a floating rate based on LIBOR plus 2.0%. 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 $167,000 on an annual
basis. The Company has no financial instruments subject to foreign currency
fluctuation or commodity price risks.
FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," requires companies to record derivatives on the balance sheet as
assets and liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedge accounting. The
Company has adopted this accounting standard as required on January 1, 2001. The
impact of the adoption was not material.
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.
- 19 -
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 of the Company's
fiscal year on December 31, 2000.
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, 2000. 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-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, 2000.
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, 2000.
- 20 -
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(1) 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, 2000 and 1999 F-2
Consolidated Statements of Operations for the years F-4
ended December 31, 2000, 1999, and 1998
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 2000, 1999, and 1998 F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 2000, 1999, and 1998 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.
- 21 -
3. List of Exhibits
3.1(i) 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).
3.1(ii) Certificate of Designation of Series One Junior
Participating Preferred Stock of the Company dated October
27, 1998 (filed as an exhibit to the Company's Registration
Statement on Form 8-A filed on October 27, 1998 (the "1998
Form 8-A") 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).
4.1 Rights Agreement dated as of October 26, 1998 between the
Company and Computershare Investor Services LLC (as
successor in interest to Harris Trust & Savings Bank), as
Rights Agent (filed as an exhibit to the 1998 Form 8-A and
included herein reference).
10.1 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).
10.2 Agreement dated November 28, 1994 between Olin Corporation
and TETRA-Chlor, Inc. (filed as an exhibit to the Company's
Form 10-K for the year ended December 31, 1994 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).
10.3 Sales Agreement with Albemarle Corporation (filed as an
exhibit to the Company's Form 10-Q for the three months
ended June 30, 1997 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 Amendment to Nonqualified Stock Option Agreement effective
December 11, 1998 with Allen T. McInnes (filed as an
exhibit to the Company's Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).
10.5 Employment Agreement effective February 1, 2000 with Allen
T. McInnes (filed as an exhibit to the Company's Form 10-K
for the year ended December 31, 1999 and incorporated
herein by reference).
10.6 First Amended and Restated Credit Agreement dated as of May
12, 2000 with Bank of America, N.A. (filed as an exhibit to
the Company's Form 10-Q for the three months ended June 30,
2000 and incorporated herein by reference).
10.7* Nonqualified Stock option Agreement dated April 1, 1996
with Allen T. McInnes
10.8* 1990 Stock Option Plan, as amended through January 5, 2001.
10.9* Director Stock Option Plan
10.10* 1998 Director Stock Option Plan
21* Subsidiaries of the Company
23* Consent of Ernst & Young, LLP
- ----------
* Filed with this report
(b) Form 8-K: None.
- 22 -
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 23, 2001 By: /s/Geoffrey M. Hertel
--------------------------------
Geoffrey M. Hertel, President
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 23, 2001
J. Taft Symonds the Board of Directors
/s/ Geoffrey M. Hertel Geoffrey M. Hertel March 23, 2001
- ------------------------- President and Director
Geoffrey M. Hertel (Principal Operating Officer)
(Principal Financial Officer)
/s/ Bruce A. Cobb Bruce A. Cobb March 23, 2001
- ------------------------- Vice President, Finance
Bruce A. Cobb (Principal Accounting Officer)
/s/ Hoyt Ammidon, Jr. Director March 23, 2001
- -------------------------
Hoyt Ammidon, Jr.
/s/ Paul D. Coombs Director March 23, 2001
- -------------------------
Paul D. Coombs
/s/ Ralph S. Cunningham Director March 23, 2001
- -------------------------
Ralph S. Cunningham
/s/ Tom H. Delimitros Director March 23, 2001
- -------------------------
Tom H. Delimitros
/s/ Allen T. McInnes Director March 23, 2001
- -------------------------
Allen T. McInnes
/s/ Kenneth P. Mitchell Director March 23, 2001
- -------------------------
Kenneth P. Mitchell
- 23 -
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, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2000. 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, 2000 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, 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.
ERNST & YOUNG LLP
Houston, Texas
February 21, 2001
F-1
TETRA Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands)
December 31,
------------------------
2000 1999
--------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 6,594 $ 4,088
Restricted cash -- 2,000
Trade accounts receivable, net of allowances for doubtful
accounts of $930 in 2000 and $1,760 in 1999 63,997 45,871
Inventories 34,141 44,825
Deferred tax assets 9,828 2,356
Prepaid expenses and other current assets 3,524 3,454
--------- ---------
Total current assets 118,084 102,594
Property, Plants and Equipment:
Land and Building 9,924 9,355
Machinery and equipment 120,029 103,188
Automobiles and trucks 7,924 9,141
Chemical plants 36,223 36,675
O&G Producing Assets 7,475 --
Construction in progress 10,410 7,048
--------- ---------
191,985 165,407
Less accumulated depreciation and depletion (66,480) (54,934)
--------- ---------
Net property, plant and equipment 125,505 110,473
Other Assets:
Cost in excess of net assets acquired, net of accumulated
amortization of $2,967 in 2000 and $2,425 in 1999 20,189 20,685
Other, net of accumulated amortization of $3,762 in 2000
and $3,290 in 1999 5,406 5,473
Net Assets of Discontinued Operations 9,756 45,285
--------- ---------
Total other assets 35,351 71,443
--------- ---------
$ 278,940 $ 284,510
========= =========
See Notes to Consolidated Financial Statements
F-2
TETRA Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
December 31,
------------------------
2000 1999
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 28,082 $ 23,488
Accrued Expenses 17,488 16,563
Current portions of all long-term debt and capital lease
obligations 6,955 2,232
--------- ---------
Total Current Liabilities 52,525 42,283
Long-Term debt, less current portion 50,166 74,000
Capital Lease Obligations, less current portion 444 1,026
Deferred Income Taxes 20,966 16,283
Decommissioning liabilities 9,165 --
Other liabilities 1,920 1,497
Commitments and Contingencies
Stockholders' Equity:
Common stock, par value $0.01 per share
40,000,000 shares authorized, with 13,719,607 shares issued and
outstanding in 2000 and 13,529,201 shares issued and
outstanding in 1999 138 136
Additional paid-in capital 79,587 77,988
Treasury stock, at cost, 94,000 shares in 2000 and in 1999 (1,107) (1,107)
Accumulated other comprehensive income (901) (355)
Retained earnings 66,037 72,759
Total Stockholders' Equity 143,754 149,421
--------- ---------
$ 278,940 $ 284,510
========= =========
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,
---------------------------------------
2000 1999 1998
--------- --------- ---------
Revenues:
Product Sales $ 120,321 $ 103,790 $ 121,663
Services 104,184 74,272 90,065
--------- --------- ---------
Total Revenues 224,505 178,062 211,728
Cost of Revenues:
Cost of Product Sales 95,216 86,211 89,426
Cost of Services 75,596 52,885 66,192
--------- --------- ---------
Total Cost of Revenues 170,812 139,096 155,618
--------- --------- ---------
Gross Profit 53,693 38,966 56,110
General and Administrative Expense 37,569 37,190 35,449
Special Charge -- 4,745 --
Restructuring Charge -- 2,320 --
--------- --------- ---------
Operating Income 16,124 (5,289) 20,661
Gain on sale of administration building -- 6,731 --
Gain on sale of business -- 29,629 --
Interest expense (4,187) (5,238) (5,257)
Interest income 441 371 148
Other income (expense) 31 65 (239)
--------- --------- ---------
Income before taxes, discontinued operations and cumulative effect
of accounting change 12,409 26,269 15,313
Provision for income taxes 4,672 11,940 5,991
--------- --------- ---------
Income before discontinued operations and cumulative effect
of accounting change 7,737 14,329 9,322
Discontinued Operations:
Income (loss) from discontinued operations, net of tax benefits of
$7, $2,066 and $272 in 2000, 1999 and 1998, respectively 10 1,685 (424)
Estimated loss on disposal of discontinued operations, net of
tax benefits of $5,374 (14,469) -- --
--------- --------- ---------
(Loss) income from discontinued operations (14,459) 1,685 (424)
--------- --------- ---------
(Loss) income before cumulative effect of accounting change (6,722) 16,014 8,898
Cumulative effect of accounting change, net of tax benefit of $3,855 -- (5,782) --
--------- --------- ---------
Net (loss) income ($6,722) $ 10,232 $ 8,898
========= ========= =========
Net income per share before discontinued operations and cumulative
effect of accounting change $ 0.57 $ 1.06 $ 0.69
Income (loss) per share from discontinued operations -- $ 0.12 ($0.03)
Estimated loss per share on disposal of discontinued operations ($1.06) -- --
Cumulative effect per share of accounting change -- ($0.43) --
--------- --------- ---------
Net (loss) income per share ($0.49) $ 0.76 $ 0.66
========= ========= =========
Average Shares 13,616 13,524 13,561
========= ========= =========
Net income per diluted share before discontinued operations and
cumulative effect of accounting change $ 0.57 $ 1.06 $ 0.67
Income (loss) per share from discontinued operations -- $ 0.12 ($0.03)
Estimated loss per share on disposal of discontinued operations ($1.06) -- --
Cumulative effect per share of accounting change -- ($0.43) --
--------- --------- ---------
Net (loss) income per diluted share ($0.49) $ 0.75 $ 0.64
========= ========= =========
Average diluted shares 13,616 13,576 13,994
========= ========= =========
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, 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
Net Income for 2000 (6,722) (6,722)
Translation adjustment (546) (546)
Comprehensive Income ---------
(7,268)
Exercise of common stock options 2 1,599 1,601
--------- --------- --------- --------- --------- ---------
Balance at December 31, 2000 $ 138 $ 79,587 ($ 1,107) $ 66,037 ($901) $ 143,754
========= ========= ========= ========= ========= =========
See Notes to Consolidated Financial Statements
F-5
TETRA Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
Year Ended December 31,
--------------------------------
2000 1999 1998
-------- -------- --------
Operating Activities:
Net Income ($6,722) $ 10,232 $ 8,898
Adjustments to reconcile net income to net cash provided by
operating activities :
Depreciation and amortization 15,265 14,205 14,195
Provision for deferred income taxes 1,679 6,312 2,846
Provision for doubtful accounts 655 1,366 163
Amortization of gain on leaseback (202) -- --
Loss from the disposal of discontinued operation, net of tax 14,469 -- --
Gain on sale of property, plant and equipment (29) (9) (113)
Restructuring Charge -- 2,320 --
Special charges -- 4,745 --
Gain on the sale of business -- (29,629) --
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 (18,514) 748 785
Costs and estimated earnings in excess of
billings on incomplete contracts -- (986) (1,620)
Inventories 10,473 2,895 (16,863)
Prepaid expenses and other current assets (344) (271) 492
Trade accounts payable and accrued expenses 3,686 1,695 3,170
Discontinued operations - noncash charges
and working capital changes 2,231 (1,309) (2,111)
Other -- 483 700
-------- -------- --------
Net cash provided by operating activities 22,647 11,848 10,542
-------- -------- --------
Investing Activities:
Purchases of property, plant and equipment (15,992) (12,407) (35,388)
Business combinations, net of cash acquired (6,587) -- (2,135)
Proceeds from sale of business 15,414 38,825 --
Change in Restricted Cash 2,000 (2,000) --
Decrease (increase) in other assets 1,261 (723) (339)
Investing activities of discontinued operations (222) (10,836) (7,851)
Proceeds from sale of property, plants and equipment 511 10,662 3,478
-------- -------- --------
Net cash (used) provided by investing activities (3,615) 23,521 (42,235)
-------- -------- --------
See Notes to Consolidated Financial Statements
F-6
TETRA Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
Year Ended December 31,
--------------------------------
2000 1999 1998
-------- -------- --------
Financing Activities:
Proceeds from long-term debt and capital lease obligations $ 39,233 $ 25,615 $ 41,974
Proceeds from leaseback sale 1,074 -- --
Principal payments on long-term debt and capital lease obligations (58,432) (59,670) (10,494)
Repurchase of common stock -- 61 (1,168)
Proceeds from sale of common stock and exercised stock options 1,599 65 1,409
-------- -------- --------
Net cash provided by financing activities (16,526) (33,929) 31,721
-------- -------- --------
Decrease in cash and cash equivalents
2,506 1,440 28
Cash & Cash Equivalents at Beginning of Period 4,088 2,648 2,620
-------- -------- --------
Cash & Cash Equivalents at End of Period $ 6,594 $ 4,088 $ 2,648
======== ======== ========
Supplemental Cash Flow Information:
Capital lease obligations incurred $ 233 $ 1,179 $ 975
Capital lease obligations terminated 1,397 1,465 1,109
Interest paid 7,163 8,358 7,286
Taxes paid 1,389 2,600 2,727
See Notes to Consolidated Financial Statements
F-7
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
NOTE A -- ORGANIZATION AND OPERATIONS OF THE COMPANY
TETRA Technologies, Inc. ("TETRA" or "the Company") is an energy services
company with an integrated chemicals operation that supplies chemical products
to energy markets, as well as other markets. The Company is comprised of three
divisions - Fluids, Well Abandonment/Decommissioning and Testing & Services.
The Company's Fluids Division manufactures and markets clear brine fluids
to the oil and gas industry for use in well drilling, completion and workover
operations in both domestic and international markets. The division also markets
the fluids and dry calcium chloride manufactured at its production facilities to
a variety of markets outside the energy industry.
The Well Abandonment/Decommissioning Division provides a complete package
of services required for the abandonment of depleted oil and gas wells, and the
decommissioning of platforms, pipelines and other associated equipment. The
division services the onshore, inland waters and offshore of the Gulf of Mexico.
The Division is also an oil and gas producer from wells acquired in connection
with its well abandonment and decommissioning business.
The Company's Testing & Services Division provides production testing
services to the Texas, Louisiana, offshore Gulf of Mexico and Latin American
markets. It also provides the technology and services required for separation
and recycling of oily residuals generated from petroleum refining and
exploration and production 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, its phone number is 281/367-1983,
and its website is at www.tetratec.com.
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.
F-8
Financial Instruments
The fair value of the Company's financial instruments, which includes
cash, accounts receivable, short-term borrowings and long-term debt,
approximates their carrying amounts. Financial instruments that subject the
Company to concentrations of credit risk consist principally of trade
receivables with companies in the energy industry. 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.
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. Depreciation expense for the years ended December 31,
2000, 1999 and 1998 was $13.5 million, $13.1 million and $12.9 million,
respectively.
For income tax purposes, the Company provides for depreciation using
accelerated methods. Interest capitalized for the years ended December 31, 2000,
1999 and 1998 was $0.3 million, $0.07 million and $1.3 million, respectively.
All of the Company's interests in oil and gas properties are located
offshore in the Gulf of Mexico. The Company follows the full cost method of
accounting for its investment in natural gas and oil properties. Under the full
cost method, all the costs associated with acquiring, developing and producing
the Companies oil and gas properties are capitalized. Maritech's offshore
property acquisitions are recorded at the value exchanged at closing together
with an estimate of its proportionate share of the decommissioning liability
assumed in the purchase, based upon its working interest ownership percentage.
In estimating the decommissioning liabilities associated with these offshore
property acquisitions, the Company performs detailed estimating procedures,
analysis and engineering studies. All capitalized costs are amortized on a
unit-of-production basis based on the estimated remaining oil and gas reserves.
For the year ended December 31, 2000, oil and gas producing assets were
amortized at a rate of $1.60 per MCF. Properties are periodically assessed for
impairment in value, with any impairment charged to expense.
Decommissioning Liability
The decommissioning liability recorded by the Company includes costs to
dismantle, relocate and dispose of the Company's offshore production platforms,
gathering systems, wells and related equipment. These costs are amortized on a
unit of production basis upon the depletion of the oil and gas producing assets.
Advertising
The Company expenses costs of advertising as incurred. Advertising expense
for the years ended December 31, 2000, 1999 and 1998 were $3.0 million, $3.1
million and $1.3 million, respectively.
F-9
Intangible Assets
Patents and licenses are stated on the basis of cost and are amortized on
a straight-line basis 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 relates 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.
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 L 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 the 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 N to the
Consolidated Financial Statements.
F-10
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. The Company recognizes oil and gas revenue from its
interests in producing wells as oil and natural gas is produced and sold from
those wells. Oil and natural gas sold is not significantly different from the
Company's share of production.
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 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 1999, the Financial Accounting Standards Board issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133," which is effective for fiscal
years beginning after June 15, 2000, with earlier adoption encouraged. FASB
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," requires companies to record derivatives on the balance sheet as
assets and liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedge accounting. The
Company has adopted this accounting standard as required on January 1, 2001. The
impact of the adoption was not material.
F-11
NOTE C -- DISCONTINUED OPERATIONS
During the fourth quarter of 1999, the Company announced its strategic
restructuring program to refocus its efforts in the energy services business. In
conjunction with this program, the Company developed a plan in October 2000 to
exit its micronutrient business which produces zinc and manganese products for
the agricultural markets. The plan provided for the sale of the stock of TETRA's
wholly owned Mexican subsidiary, Industrias Sulfamex, S.A. de C.V., a producer
and distributor of manganese sulfate, and all the manganese inventory held by
the Company's U.S. operations. It also provided for the sale of all inventories,
plant and equipment associated with its U.S. zinc sulfate business. In December
2000, the Company sold all of its U.S. and foreign manganese sulfate assets for
$15.4 million in cash.
The Company has accounted for the micronutrients business as a
discontinued operation and has restated prior period financial statements
accordingly. The estimated loss on the disposal of the discontinued operations
of $14.5 million (net of income tax benefit of $5.4 million) represents the
estimated loss on the disposal of the assets of the micronutrients business and
a provision of $0.2 million for expected losses during the disposition period
from October 1, 2000 to September 30, 2001.
Summary operating results of discontinued operations are as follows:
2000 1999 1998
------- ------- -------
In Thousands
Revenues ................. $30,553 $37,239 $26,740
Income (loss) before taxes 17 (381) (696)
Provision for Taxes ...... 7 (2,066) (272)
Net income (loss) from
Discontinued Operations $ 10 $ 1,685 ($424)
Assets and liabilities of the micronutrient business to be disposed of consist
of the following at December 31:
2000 1999
------- -------
In Thousands
Accounts Receivable ......... $ 5,437 $ 4,350
Inventory ................... 4,462 12,195
Property, Plant and Equipment 1,874 19,639
Other Assets ................ 41 15,227
------- -------
Total Assets ............. 11,814 51,411
Current Liabilities ......... 2,058 3,617
Other Liabilities ........... -- 2,509
------- -------
Net Assets ............... $ 9,756 $45,285
======= =======
The net assets to be disposed are carried at their expected net realizable
values and have been separately classified in the accompanying balance sheet at
December 31, 2000. The 1999 balance sheet has been restated to conform with the
current year's presentation.
During the period from January 1, 2000 to the measurement date and for the
years ended December 31, 1999 and 1998, the loss from discontinued operations,
net of taxes, included an allocation of interest expense of $1.4 million, $2.0
million and $0.9 million, respectively. For the period from the measurement date
through the expected divestiture date, the loss from discontinued operations
included an allocation of interest expense of $1.2 million. Interest expense
allocated to the discontinued operations was based upon borrowings directly
attributed to those operations.
F-12
NOTE D - RESTRUCTURING AND SPECIAL CHARGES
During the fourth quarter of 1999, the Company initiated a strategic
restructuring program to refocus its effort in the energy services business.
This program concentrated the Company's efforts on developing its oil and gas
services business and selling or consolidating non-core chemical operations. To
achieve this strategy, the Company started to actively pursue the disposition of
its micronutrients business, as well as several smaller chemicals-related
operations. Additionally, the Company implemented plans to exit certain product
lines and businesses which were 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
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 during the twelve months ended December 31,
2000.
December 31, 1999 December 31, 2000
----------------- -----------------
(In Thousands) (In Thousands)
Liability Cash Liability
Expense Balance Payments Balance
------- ------- -------- -------
Involuntary termination costs $1,170 $1,170 $ 877 $ 293
Contractual costs ........... 760 760 -- 760
Exit costs .................. 390 390 273 117
------ ------ ------ ------
$2,320 $2,320 $1,150 $1,170
====== ====== ====== ======
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 $0.9 million is associated with the Fluids Division and $0.3
million with corporate administrative activities. The majority of the costs are
expected to be paid within the next 12 months and will be funded using cash flow
from operations.
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 Fluids 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
Fluids 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. 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.
F-13
NOTE E -- ACQUISITIONS AND DISPOSITIONS
In April 2000, the Company completed an asset exchange of its trucking
operations for certain assets of Key Energy Services. The Company accounted for
the exchange of interest as a non-monetary transaction whereby the basis in the
exchanged assets became the new basis in the assets received. No gain or loss
was recognized as a result of the exchange.
During the fourth quarter of 2000, the Company significantly expanded its
Well Abandonment/ Decommissioning capacity through the acquisition of the assets
of Cross Offshore Corporation, Ocean Salvage Corporation and Cross Marine LLC.
The Company paid approximately $6.2 million in cash plus additional future
consideration contingent upon future net earnings. The assets purchased will
complement the Company's current well abandonment, platform decommissioning and
heavy lift operations in the Gulf Coast inland waters and offshore markets. This
transaction approximately doubles the offshore rigless well abandonment packages
and increases the number of inland water well abandonment packages the Company
can provide. It also gives the Company heavy lift capabilities with the
acquisition of the Southern Hercules, a 500 ton capacity heavy lift barge.
In two separate transactions closing during the fourth quarter of 2000,
the Company acquired oil and gas producing properties in exchange for the
assumption of the decommissioning liability. The effective date of the initial
transaction was June 1, 2000. Oil and gas producing assets were recorded at the
future estimated decommissioning costs less cash received of $1.3 million.
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 received the full amount in 2000. The sale,
which was effective May 1, 1999 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.
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.
F-14
NOTE F -- LONG-TERM DEBT AND OTHER BORROWINGS
Long-term debt consists of the following:
December 31,
------------
(In Thousands)
2000 1999
---- ----
General purpose revolving line-of-credit
for $100 million with interest at LIBOR
plus .75 - 2.75%. Borrowings as of 12/31/00
accrued interest at LIBOR plus 2.00% ........... $ 56,700 $ 74,000
Other .............................................. -- 1,230
-------- --------
56,700 75,230
Less current portion ............................... (6,534) (1,230)
-------- --------
Total long-term debt ............................ $ 50,166 $ 74,000
======== ========
Scheduled maturities for the next five years and thereafter as of December
31, 2000 are as follows (in thousands):
2001 .................................. $ 6,534
2002 .................................. 50,166
-------
$56,700
=======
As of December 31, 2000, the Company has $2.6 million in letters of credit
and $56.7 million in long-term debt outstanding against a $100 million line of
credit, leaving a net availability of $40.7 million. In May 2000, the Company
amended its $120 million line of credit to be a $100 million line of credit
secured by an asset-based component of $50 million and a $50 million term
component secured by property and equipment. This agreement matures on March 31,
2002. TETRA's credit facility 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 believes
this new credit facility will meet all its capital and working capital
requirements.
In September 1997, the Company entered into two interest rate swap
agreements, each with a nominal amount of $20 million, 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,
2000 was lower than the carrying value by $0.5 million.
F-15
NOTE G -- 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.
Property, plant, and equipment includes the following amounts for leases
that have been capitalized:
December 31,
------------
(In Thousands)
2000 1999
---- ----
Automobiles and trucks ............... $ 3,736 $ 4,419
Less accumulated amortization ........ (2,756) (2,073)
------- -------
980 2,346
======= =======
Machinery and equipment .............. 108 108
Less accumulated amortization ........ (43) (30)
------- -------
$ 65 $ 78
======= =======
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, 2000:
Capital Operating
Leases Leases
------ ------
(In Thousands)
2001 ...................................... $ 524 $ 4,332
2002 ...................................... 353 3,887
2003 ...................................... 157 3,268
2004 ...................................... 124 2,180
2005 ...................................... 3 1,625
------- -------
Total minimum lease payments .............. 1,161 $15,292
=======
Amount representing interest .............. (296)
-------
Present value of net minimum lease payments 865
Less current portion ...................... (421)
-------
Total long-term portion .............. $ 444
=======
Rental expense for all operating leases was $6.5 million, $5.4 million and
$4.2 million in 2000, 1999 and 1998, respectively.
F-16
NOTE H -- INCOME TAXES
The income tax provision attributable to continuing operations for years
ended December 31, 2000, 1999 and 1998 consisted of the following:
Year Ended December 31,
-----------------------
(In Thousands)
2000 1999 1998
---- ---- ----
Current
Federal ................................. $ 1,261 $ 3,967 $1,052
State ................................... 117 261 106
Foreign ................................. 1,615 1,400 1,986
------- ------- ------
2,993 5,628 3,144
Deferred
Federal ................................. 1,528 5,909 2,791
State ................................... 151 403 56
Foreign ................................. -- -- --
------- ------- ------
1,679 6,312 2,847
Total tax provision ..................... $ 4,672 $11,940 $5,991
======= ======= ======
A reconciliation of the provision for income taxes attributable to
continuing operations computed by applying the federal statutory rate for the
years ended December 31, 2000, 1999 and 1998 to income before income taxes and
the reported income taxes is as follows:
2000 1999 1998
---- ---- ----
(In Thousands)
Income tax provision computed at statutory
federal income tax rates ................ $ 4,219 $ 9,194 $5,206
State income taxes (net of federal benefit) 177 432 72
Nondeductible expenses ..................... 372 612 358
Impact of international operations ......... 304 1,290 260
Other ...................................... (400) 412 94
------- ------- ------
Total tax provision ........................ $ 4,672 $11,940 $5,990
======= ======= ======
Income before taxes, discontinued operations and cumulative effect of
accounting change includes the following components:
2000 1999 1998
---- ---- ----
(In Thousands)
Domestic .......................... $11,022 $24,983 $13,879
International ..................... 1,387 1,286 1,434
------- ------- -------
Total ................ $12,409 $26,269 $15,313
======= ======= =======
F-17
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, 2000 and
1999 are as follows:
Deferred Tax Assets: 2000 1999
---- ----
(In Thousands)
Tax inventory over book ................... $ 899 $ 842
Allowance for doubtful accounts ........... 383 468
Accruals .................................. 5,016 1,333
Net operating and capital loss carryforward -- 121
Tax credit carryforward ................... -- 477
Foreign Tax credit carryforward ........... 1,131 753
Restructuring charge ...................... 386 858
All other ................................. 730 636
------- -------
Total deferred tax assets ............. 8,545 5,488
Valuation reserve ......................... (227) (227)
------- -------
Net deferred tax assets ............... $ 8,318 $ 5,261
======= =======
Deferred Tax Liabilities: 2000 1999
---- ----
(In Thousands)
Tax over book depreciation ................ $17,129 $16,374
Goodwill amortization ..................... 1,979 1,688
Accounts receivable mark-to-market ........ 248 511
All other ................................. 100 615
------- -------
Total deferred tax liability .............. 19,456 19,188
------- -------
Net deferred tax liability ................ $11,138 $13,927
======= =======
The Company has recorded a valuation allowance of $0.2 million at December
31, 2000 and 1999 for deferred tax assets, which are not considered realizable.
NOTE I -- ACCRUED LIABILITIES
Accrued liabilities are detailed as follows:
Year Ended December 31,
2000 1999
(In Thousands)
Compensation and employee benefits ............. $ 6,148 $ 3,354
Interest expense payable ....................... 163 530
Oil & Gas producing liabilities ................ 573 --
Professional fees .............................. 766 542
Restructuring charges .......................... 1,170 2,320
Taxes payable .................................. 4,203 5,016
Transportation and distribution costs .......... 701 681
Commissions, royalties and rebates ............. 743 560
Plant operating costs .......................... 631 512
Other accrued liabilities ...................... 2,390 3,048
------- -------
$17,488 $16,563
======= =======
F-18
NOTE J -- 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 K -- 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.
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 L -- 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 can vest over a period of up to five
years 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, 2000,
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.
F-19
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, 2000, 500,000 shares of common stock have been reserved
for grants, of which 316,874 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.
The following is a summary of stock option activity for the years ended
December 31, 1998, 1999 and 2000:
Shares Weighted Average
Under Option Option Price
(000's) Per Share
------- ---------
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
Options granted ....................................... 582 8.81
Options canceled ...................................... (189) 9.40
Options exercised ..................................... (191) 9.99
-----
Outstanding at December 31, 2000 .......................... 2,427 13.40
=====
(In thousands, except per share amounts)
2000 1999 1998
---- ---- ----
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 ..................... 740 1,030 824
Shares exercisable at year end ........................ 883 948 848
Weighted average exercise price of shares
exercisable at year end ........................... $10.20 $ 9.58 $ 9.69
Director Stock Option Plans
Maximum number of shares authorized for issuance ...... 175 175 175
Shares reserved for future grants ..................... 79 86 101
Shares exercisable at year end ........................ 64 57 47
Weighted average exercise price of shares
exercisable at year end ........................... $ 8.92 $10.10 $ 9.93
All Other Plans
Maximum number of shares authorized for issuance ...... 702 785 785
Shares reserved for future grants ..................... 317 418 467
Shares exercisable at year end ........................ 342 269 209
Weighted average exercise price of shares
exercisable at year end ........................... $10.09 $10.35 $10.27
F-20
Options Outstanding Options Exercisable
----------------------------------------------- ------------------------
Weighted Average Weighted Weighted
Range of Remaining Average Average
Exercise Price Shares Contracted Life Exercise Price Shares Exercise Price
-------------- ------ --------------- -------------- ------ --------------
$5.88 to $9.80 850 6.3 $ 7.81 462 $ 7.83
$10.19 to $16.75 921 7.9 10.65 758 10.56
$16.88 to $25.00 656 6.7 24.50 69 20.49
----- ------
2,427 7.0 $13.40 1,289 $10.11
===== ======
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)
2000 1999 1998
------- ------- ------
Net (Loss) Income - as reported ........................ ($6,722) $10,232 $8,898
Net (Loss) Income - pro forma .......................... (9,022) 8,144 7,369
Net (Loss) Income per share - as reported .............. (0.49) 0.75 0.66
Net (Loss) Income per share - pro forma ................ (0.66) 0.60 0.54
Net (Loss) Income per diluted share - as reported (0.49) 0.75 0.64
Net (Loss) Income per diluted share - pro forma ........ ($0.66) $ 0.60 $ 0.53
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 46%, expected life of options 5.0 to 6.0 years,
risk-free interest rate 5.25% and no expected dividend yield. The weighted
average fair value of options granted during 2000, 1999 and 1998 was $3.91,
$3.69 and $6.62 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 M -- 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 can make discretionary contributions which
are allocable to participants in accordance with the Plan.
F-21
NOTE N -- 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)
2000 1999 1988
------ ------ ------
Number of weighted average common shares outstanding ..... 13,616 13,524 13,561
Assumed exercise of stock options ........................ -- 52 433
------ ------ ------
Average diluted shares outstanding ....................... 13,616 13,576 13,994
====== ====== ======
NOTE O -- INDUSTRY SEGMENTS AND GEOGRAPHIC INFORMATION
In 1999, the Company managed its business in two segments: Oil & Gas
Services and Chemicals. In the fourth quarter of 1999, the Company initiated a
strategic restructuring program to refocus its efforts in the energy services
business. The program centered on concentrating the Company's efforts on
developing its oil and gas services business and selling or consolidating
non-core chemical operations. During 2000, the Company executed this strategy
and sold the manganese portion of the micronutrient business and consolidated,
shutdown or sold other non-core components of the chemicals related operations.
The micronutrients business, which includes the manganese and zinc sulfate feed
and fertilizing products, is presented in the accompanying financial statements
as a discontinued operation. The Company has written down its investment in the
remaining zinc sulfate micronutrient assets and is actively pursuing their
disposition. The Company now manages its operations through three divisions;
Fluids, Well Abandonment/Decommissioning and Testing & Services. The segment
information for the years ended December 31, 1999 and 1998 has been restated to
reflect the restructuring of the Company.
The Company's Fluids Division manufactures and markets clear brine fluids
to the oil and gas industry for use in well drillng, completion and workover
operations in both domestic and international markets. The division also markets
the liquid and dry calcium chloride manufactured at its production facilities to
a variety of markets outside the energy industry.
The Well Abandonment/Decommissioning Division provides a complete package
of services required for the abandonment of depleted oil and gas wells and
decommissioning of platforms, pipelines and other associated equipment. The
division services the onshore, inland waters and offshore markets of the Gulf of
Mexico. The Division is also an oil and gas producer from wells acquired in its
well abandonment and decommissioning business.
The Company's Testing & Services Division provides production testing
services to the Texas, Louisiana and Latin American markets. It also provides
the technology and services required for separation and recycling of oily
residuals generated from petroleum refining and offshore exploration and
production.
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 operating units. Other includes
corporate expenses, nonrecurring charges and elimination of intersegment
revenues.
F-22
Summarized financial information concerning the business segments from
continuing operations as follows:
Well
Abandon/ Testing
(In Thousands) Fluids Decomm. & Services Other Consolidated
-------------------------------------------------------------------
2000 Segment Detail
Revenues from external customers
Products $100,632 $ 11,740 $ 7,949 $ -- $120,321
Services and Rentals 17,066 48,672 38,446 104,184
Intersegmented Revenues 1,173 -- (1,173) --
-------------------------------------------------------------------
Total Revenues 118,871 60,412 46,395 (1,173) 224,505
===================================================================
Depreciation and Amortization 6,651 4,253 3,779 582 15,265
Interest Expense 8 4,179 4,187
Income (loss) before taxes and
discontinued operations 10,233 4,565 10,166 (12,555) 12,409
Total Assets 123,673 75,965 55,922 23,380(3) 278,940
Capital Expenditures 4,810 2,448 8,611 123 15,992
1999 Segment Detail
Revenues from external customers
Products $ 89,133 $ 4,753 $ 9,904 $ 103,790
Services and Rentals 18,730 31,452 19,962 4,128(2) 74,272
Intersegmented Revenues 1,729 (1,729) --
-------------------------------------------------------------------
Total Revenues 109,592 36,205 29,866 2,399 178,062
===================================================================
Depreciation and Amortization 7,088 3,093 3,261 763 14,205
Interest Expense 12 35 5,191 5,238
Income (loss) before taxes, discontinued
operations and cumulative effect of
accounting change 7,380 (626) 2,254 17,261(1) 26,269
Total Assets 129,878 57,700 42,792 54,140(3) 284,510
Capital Expenditures 4,428 1,576 5,993 410 12,407
1998 Segment Detail
Revenues from external customers
Products $104,904 $ 9,387 $ 7,372 -- $121,663
Services and Rentals 19,671 29,820 25,016 15,558(2) 90,065
Intersegmented Revenues 2,965 79 (3,044) --
-------------------------------------------------------------------
Total Revenues 127,540 39,207 32,467 12,514 211,728
===================================================================
Depreciation and Amortization 7,322 2,975 2,798 1,100 14,195
Interest Expense 8 3 213 5,033 5,257
Income (loss) before taxes and
discontinued ops 18,350 (1,720) 7,341 (8,658) 15,313
Total Assets 148,290 59,059 38,762 59,174(3) 305,285
Capital Expenditures 16,639 12,669 5,438 642 35,388
(1) Includes gain on the sale of administration 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.
(2) Revenues from the TETRA Process Technologies business, which was sold in
1999.
(3) Includes net assets of discontinued operations.
F-23
Summarized financial information concerning the geographic areas in which
the Company operated at December 31, 2000, 1999 and 1998 are presented below:
2000 1999 1998
---- ---- ----
Revenues from external customers:
U.S ............................... $ 190,709 $ 143,192 $ 172,530
Europe and Africa ................. 17,813 21,011 24,112
Other ............................. 15,983 13,859 15,086
--------- --------- ---------
Total ...................... 224,505 178,062 211,728
Transfer between geographic areas:
U.S ............................... 208 596 1,252
Europe and Africa ................. -- -- --
Other ............................. -- -- --
Eliminations ...................... (208) (596) (1,252)
--------- --------- ---------
Total Revenues .......................... 224,505 178,062 211,728
========= ========= =========
Identifiable Assets:
U.S ............................... 248,023 217,260 242,325
Europe and Africa ................. 17,436 18,779 22,797
Other ............................. 26,498 23,209 21,936
Eliminations ...................... (13,017)(1) (25,262)(1) (18,227)(1)
--------- --------- ---------
Total ................................... $ 278,940 $ 284,510 $ 305,285
========= ========= =========
(1) Includes net assets of discontinued operations.
In 2000, 1999 and 1998, no customer accounted for more than 10% of
consolidated revenues.
F-24
NOTE P - QUARTERLY FINANCIAL INFORMATION (Unaudited)
Summarized quarterly financial data from continuing operations for 2000 and 1999
are as follows:
Three Months Ended 2000
--------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Total Revenue $ 50,909 $ 56,117 $ 54,077 $ 63,402
Gross Profit 11,258 13,312 13,308 15,815
Net income before discontinued operations 661 1,639 2,092 3,345
Income (loss) from discontinued operations,
net of tax 25 79 (94) --
Estimated loss on disposal of discontinued
operations, net of tax -- -- -- (14,469)
---------------------------------------------------------------
Net Income (loss) 686 1,718 1,998 (11,124)
===============================================================
Net income per share before discontinued
operations $ 0.05 $ 0.12 $ 0.15 $ 0.24
Income (loss) per share from discontinued
operations -- $ 0.01 ($ 0.01) --
Estimated loss per share on disposal of
discontinued operations -- -- -- ($1.05)
---------------------------------------------------------------
Net income (loss) per share $ 0.05 $ 0.13 $ 0.14 ($0.81)
===============================================================
Net income per diluted share before discontinued
operations $ 0.05 $ 0.12 $ 0.15 $ 0.24
Income (loss) per share from discontinued ops -- $ 0.01 ($0.01) --
Estimated loss per share on disposal of
discontinued operations -- -- -- ($1.05)
---------------------------------------------------------------
Net income per diluted share $ 0.05 $ 0.13 $ 0.14 ($0.81)
===============================================================
Three Months Ended 1999
--------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Total Revenue $ 48,429 $ 40,139 $ 44,089 $ 45,405
Gross Profit 11,979 7,855 10,181 8,951
Net income before discontinued ops and
cumulative effect of accounting change, net of tax 1,909(1) 16,315(2) 412 (4,307)(3)
Income (loss) from discontinued operations,
net of tax 194 179 (180) 1,492
Cumulative effect of accounting change, net of tax (5,782) -- -- --
---------------------------------------------------------------
Net income (loss) (3,679) 16,494 232 (2,815)
===============================================================
Net income (loss) per share before discontinued
ops and cumulative effect of accounting change $ 0.14 $ 1.21 $ 0.03 ($0.32)
Income (loss) per share from discontinued ops $ 0.01 $ 0.01 ($0.01) $0.11
Cumulative effect of accounting change ($0.43) -- -- --
---------------------------------------------------------------
Net income per share ($0.28) $ 1.22 $ 0.02 ($0.21)
===============================================================
Net income (loss) per diluted share before
discontinued operations and cumulative effect of
accounting change $ 0.14 $ 1.21 $ 0.03 ($0.32)
Income (loss) per diluted share from discontinued
operations $ 0.01 $ 0.01 ($0.01) $ 0.11
Cumulative effect of accounting change ($0.43) -- -- --
---------------------------------------------------------------
Net income (loss) per diluted share ($0.28) $ 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
F-25
NOTE Q - 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 subsequent to 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.
F-26
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, 1998:
Allowance for doubtful accounts $1,004 $ 111 $ -- $ (305)(1) $ 810
====== ====== ========== ======= ======
Inventory Reserves $ 150 $ 255 $ (192)(2) $ -- $ 213
====== ====== ========== ======= ======
Year Ended December 31, 1999:
Allowance for doubtful accounts $ 810 $1,365 $ (95)(3) $ (320)(1) $1,760
====== ====== ========== ======= ======
Inventory Reserves $ 213 $ 460 $ (283) $ -- $ 390
====== ====== ========== ======= ======
Year Ended December 31, 2000:
Allowance for doubtful accounts $1,760 $ 655 $ -- $(1,487) $ 928
====== ====== ========== ======= ======
Inventory Reserves $ 390 $ -- $ (57) $ -- $ 333
====== ====== ========== ======= ======
(1) Uncollectible accounts written off, net of recoveries.
(2) Write off against inventory
(3) Sale of business
S-1