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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, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from January 1, 1996 to December 31, 1996
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: NONE
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share NASDAQ National Market System
(Title of class (Name of Exchange on Which Registered)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
The aggregate market value of the voting stock of TETRA Technologies,
Inc. held by non-affiliates (based upon the March 15, 1997 average high and low
trade prices of these shares as reported by the National Market System of the
National Association of Securities Dealers, Inc.) was approximately
$321,258,137.
Number of shares outstanding of each of the issuer's classes of common
stock, as of March 15, 1997: 13,112,577 shares.
Part III information is incorporated by reference from the proxy
statement for the annual meeting of stockholders to be held May 23, 1997.
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TABLE OF CONTENTS
<TABLE>
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PART 1
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . 10
Item 4a. Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . 16
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . 16
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . 16
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . 17
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . 18
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PART I
ITEM 1. BUSINESS.
GENERAL
TETRA Technologies, Inc. ("TETRA" or "the Company") is a
specialty inorganic chemical company selling products, services and process
technologies to a variety of markets, including oil and gas, agriculture and
environmental services. The Company's Specialty Chemicals Division
manufactures, recycles and markets certain specialty chemicals for various
industrial, agricultural and food industry uses. Among other things, the
division converts low-cost chemical by-product streams produced by other
chemical plants into high-quality commercial products, which are marketed by
the Company. The Division's Process Technologies Group provides engineered
systems and services that treat industrial and municipal wastewater and in some
cases, solid waste streams, to ensure compliance with environmental effluent
requirements, to achieve on-site waste minimization, and/or to recover reusable
constituents. These systems employ the Company's proprietary biological
filtration, metals removal and resource recovery technologies, some of which
are patented. The Division's Performance Chemicals Group develops
custom-tailored chemical treatment programs to meet specific customer needs,
and its Agriculture Group manufactures and distributes calcium chloride-based
agricultural products and zinc and manganese products for animal and plant
nutrition.
The Company's Oil & Gas Services Division markets chemicals
including those produced by the Specialty Chemicals Division to the oil and gas
industry for use in well completion and workover operations in both domestic
and international markets. They also provide complementary on-site fluid
engineering, fluid management and handling services and filtration for
completion and workover applications. The Oil & Gas Services Division also
offers a specialty drilling fluids product line and oil and gas well plugging
and production testing services.
TETRA Technologies, Inc. was incorporated in Delaware in 1981.
All references to the Company or TETRA include TETRA Technologies, Inc., its
subsidiaries, and their predecessors and subsidiaries.
PRODUCTS AND SERVICES
SPECIALTY CHEMICALS DIVISION. The principal operations of the
Specialty Chemicals Division are the manufacture, recovery and marketing of
useful chemical products from by-product streams produced by industrial
chemical manufacturing processes. The division's major facilities and
manufacturing operations are located in West Memphis, Arkansas; Lake Charles,
Louisiana; Wichita, Kansas; Parkersburg, West Virginia; Norco, Louisiana;
Magnolia, Arkansas; Fairbury, Nebraska; Tampico, Mexico and Orlando, Florida.
The major products produced by this division include calcium
chloride, zinc bromide, calcium bromide, zinc chloride, zinc ammonium chloride,
zinc sulfate and manganese sulfate. Liquid calcium chloride, zinc bromide and
calcium bromide 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.
In 1995, the Company's Lake Charles facility embarked on a major
expansion program to significantly increase its production capacity of liquid
and dry calcium chloride. The expanded liquid plant commenced production in
mid 1995 and the new dry production line began start-up operations in late
December with debottlenecking continuing through August 1996. In 1996, the new
dry facilities successfully produced a new 80% calcium pellet, which
complements the 97% product currently produced and was enthusiastically
accepted in the marketplace.
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As part of the Specialty Chemicals Division, the Process
Technologies Group provides three principal types of systems and services:
biological filtration, heavy metals removal and chemical separation systems.
Biological filtration systems and services include deepbed filtration systems
that capture insoluble organics, oils, greases, nutrients, inorganics, digested
solids and viruses suspended in industrial and municipal effluents. The
Company markets a proprietary process, Denite(R), which removes nitrogen and
suspended solids from wastewaters. The Company also provides specialized
systems and services for the removal of heavy metals from wastewaters generated
by a variety of industrial and mining operations. These systems incorporate
the Company's proprietary High Density Solids (HDS(TM)) process, which
concentrates metals solids into a dense product. In some cases, this material
can be recycled by the customer or by the Company's Specialty Chemicals
Division. Continuous Countercurrent Ion Exchange technology (CCIX(TM)) removes
and separates metals, acids, nutrients and other chemical constituents from
wastewater and potable water streams. This proprietary process produces a
highly concentrated stream of the constituent removed and is used not only for
the efficient removal of unwanted wastewater constituents but for the
production of desired products from solutions of low concentration.
The division's Performance Chemicals Group is a service-oriented
group that develops and monitors custom-tailored chemical treatment programs
to meet specific needs of its customers and then identifies, purchases and/or
blends a variety of polymers, resins and other chemicals, many of which the
Company has recycled, to meet these needs. In conducting its business, the
Performance Chemicals Group defines and locates opportunities for the Company's
process technology applications.
The division's Agriculture Group manufactures and distributes
calcium chloride-based agricultural products and zinc and manganese products
for animal and plant nutrition. The Company believes that calcium chloride is
one of the most efficient vehicles for delivering calcium to plants and, when
combined with nitrogen-based fertilizers, will dramatically increase the
efficiency of nitrogen fertilizers. These products are sold as liquid blends
under the name N-CAL(R). The Company's research has also discovered that
certain calcium chloride-based products will also eliminate sodium in the soil.
As a result, the Company has developed and introduced a soluble liquid calcium
blended product, ReNew(TM), that remediates severe sodium chloride contaminated
soils which occur naturally and as a result of spills of saltwater, as often
found at oil and gas well sites. This product displaces the harmful sodium
with a concentrated source of calcium, helping to restore vegetation and
improve soil structure for increased water infiltration and permeability. The
Company has also developed a related product, ACCEL(TM), that helps to
remediate soils contaminated with hydrocarbons. This proprietary blend
contains nutrients that promote and accelerate growth of microorganisms present
in the soil for a more efficient and economical bioremediation process.
The Agriculture Group expanded in late 1995 with the acquisition
of American MicroTrace Corporation ("AMT"). AMT manufactures and distributes
certain specialty chemicals, principally zinc sulfate and manganese sulfate
micronutrients. These products are widely used to provide trace minerals to
meet the nutritional needs of animals and plants. AMT acquires its zinc raw
material feedstocks from secondary sources and recycles them with sulfuric acid
to produce zinc sulfate. In 1996, this group continued to expand its macro
and micronutrient product line for animal and plant nutrition with the
acquisition of Industrias Sulfamex S.A. de C.V. ("Sulfamex"). This company,
which is located in Tampico, Mexico, manufactures manganese sulfate for
distribution predominately into U.S. markets.
The Specialty Chemicals Division entered into the consumer
products market late in 1996 with the acquisition of Wilchem Corporation, which
sells products under the trade name Vapor Products. Wilchem manufacturers
desiccants that reduce mold and mildew. The primary ingredient in these
products is dry calcium chloride. This acquisition has enabled the division to
vertically integrate its dry calcium chloride business and access the consumer
products markets. The division plans to utilize Wilchem's distribution
channels to market certain other products.
The division through its RETEC-TETRA joint venture with
Remediation Technologies utilizes various technologies, including a proprietary
thermal desorption technology to separate, collect and recycle volatile
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hydrocarbons and other hazardous constituents from EPA-listed refinery sludges.
This thermal process has been approved by the EPA as "Best Demonstrated
Available Technology". The joint venture entered the "Waste Derived Fuels"
market in 1993 with the acquisition of TRW's environmental services business,
which prepares oily refinery sludges for use as a fuel source to cement kiln
operators and for use in cokers.
OIL & GAS SERVICES DIVISION. The Oil & Gas Services Division
provides custom blended CBFs to most major oil and gas well operators, based on
the specific need of the customer and the proposed application of the product.
The division is currently supplying CBFs to oil and gas operators in both
international and domestic markets. In addition, the division also provides
these customers a broad range of complementary services, including on-site
fluid filtration, handling and recycling, fluid engineering consultation, and
fluid management assistance. The Company also repurchases used calcium bromide
and zinc bromide CBFs from operators and recycles these materials. Revenues
from repurchased CBFs reduce the net cost of the CBFs to the operators and the
cost and management investment involved in disposing of those fluids. The
Company recycles the CBFs through filtration, blending and the addition of
chemicals, and then markets the recycled CBFs.
The Oil & Gas Services Division's fluid engineering and
management employees use proprietary technology to determine proper blends for
a particular application to maximize the effectiveness and duration of the
CBFs. The specific volume, density, crystallization point and chemical
composition of the CBFs are modified by the Company to satisfy a customer's
requirements. The Company's filtration services involve the use of a variety
of techniques for the on-site removal of particulates from CBFs so that those
CBFs can be recirculated back into the well. The Company's filtration systems
reduce fluid loss, which allows operators to complete and workover wells in
environmentally sensitive areas with greater safety. This also enables
recovery of a greater percentage of used CBFs for recycling.
The economic viability of a well is determined through optimizing
oil and gas recovery from the producing zone (pay zone). The Oil & Gas
Services Division, through its PayZone(R) Drilling Fluids product line, has
become a leader in the use of clear brine fluids for the protection of the
sensitive pay zone during drilling, completing, underreaming, reentry and
workover operations.
The Oil & Gas Services Division's plugging and abandonment
business provides services onshore, in inland waters and offshore in Texas and
Louisiana for depleted oil and gas wells. The division first entered this
business in 1994 with its acquisition of Pacer-Atlas in an effort to expand the
quality services offered to its customers and to capitalize on existing
personnel, equipment and facilities along the Louisiana and Texas Gulf Coast.
The plugging business was significantly expanded in 1996 with the purchase of
the assets of Culberson Well Service in Texas and Inland Rigs in Louisiana.
Altogether this business operates 26 onshore rigs, 5 barge-mounted rigs, one
jack-up rig and one offshore platform rig and has operating hubs in Bryan,
Rosenberg and Victoria, Texas and Lafayette and Houma, Louisiana. The
division further expanded the onshore services it offers by acquiring the
assets of Production Test, Inc. ("PTI") in 1996. These operations provide
pressure and volume testing of oil and gas wells predominately in the South
Texas area. PTI provides sophisticated evaluation techniques needed for
reservoir management and optimizing well work-over programs.
SUPPLY OF RAW MATERIALS.
SPECIALTY CHEMICAL DIVISION. The primary sources of raw
materials for the Specialty Chemicals Division are certain chemical by-products
streams.
At the Norco, Louisiana; Wichita, Kansas; Lake Charles,
Louisiana; and Parkersburg, West Virginia calcium chloride production plants,
the principal source of raw material is by-product hydrochloric acid or weak
calcium chloride produced by other chemical companies. The Company has written
agreements with those chemical companies regarding the supply of these raw
materials, but believes that there are numerous alternative supplies.
Substantial quantities of limestone are also consumed when converting acids to
calcium chloride. The Company purchases limestone from several different
sources. In addition, the Company is reviewing a proprietary process that may
permit the use of less expensive and more widely available limestone while
maintaining end-use product quality.
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To produce zinc bromide, calcium bromide and zinc chloride at its
West Memphis facility, the Company consumes by-product hydrobromic acid and
various zinc byproducts and zinc oxide. Hydrobromic acid is obtained from
several major producers of brominated intermediate products. The chemical
process to manufacture zinc bromide requires the purification of the zinc
by-products into a high quality zinc feedstock. The zinc by-products are
obtained from a number of major steel companies and other sources. In
addition, the Company is able to extract zinc from zinc-bearing sludges with
proprietary technologies supplied by its Process Technologies Group.
The Company owns a calcium bromide manufacturing plant near
Magnolia, Arkansas, that was constructed in 1986 and has a capacity of 100
million pounds of calcium bromide per year. It also owns certain lease rights
and lease option rights covering approximately 33,000 gross acres of bromine
reserves. At December 31, 1996, TETRA had not yet commenced operations at the
plant. While this plant is designed to produce calcium bromide, it could be
reconfigured and expanded to produce elemental bromine or select bromine
compounds. The Company believes it has enough brine reserves to operate a
medium-size bromine facility for 25 to 30 years. Development of the brine
field, which could take up to three years, and its associated pipeline and the
reconfigured plant would require a substantial additional capital investment by
the Company.
In early 1997, the Company announced that it had entered into a
series of agreements with the Dow Chemical Company ("Dow") to purchase crude
bromine and build a bromine derivative plant at Dow's magnesium and calcium
chloride facility in Ludington, Michigan. The new Ludington plant will give
the Company the flexibility to produce bromine, sodium bromide and calcium
bromide. The Company's need for bromine or its derivatives has increased
steadily. Starting as a principal component to the completion fluids business,
the demand has increased with the use of sodium bromide in its PayZone(R)
Drilling Fluids and in its sales of biocides for the water treatment business.
OIL & GAS SERVICES DIVISION. The Oil & Gas Services Division
purchases calcium chloride, calcium bromide and zinc bromide from the Specialty
Chemicals Division for resale to its oil and gas customers. The Oil & Gas
Services Division recycles zinc and calcium bromide CBFs repurchased from its
oil and gas customers. The Company also has purchased CBFs from two domestic
and one foreign chemical manufacturer. During 1996, the division entered into
a long-term supply agreement with a foreign producer of calcium bromide. This
agreement, coupled with the products to be produced at the new Ludington plant
and its existing West Memphis, Arkansas plant, should afford the Company
additional flexibility in its development of the Magnolia plant, allowing it to
consider manufacturing other bromine derivatives at that facility.
MARKET OVERVIEW AND COMPETITION
Many of the major chemical companies devote limited resources to
the by-products produced by their own operations as a source of raw materials,
and instead rely on virgin feedstocks. With the increasingly stringent
environmental regulations, these companies have for a number of years sought
cost effective, environmentally safe methods of using and marketing of these
non-essential materials. As a result, a market has evolved for the design,
manufacture, recycling and sale of non-essential materials and by-products.
The Company believes that the demand for its by-product conversion and
recycling services, including its marketing network for end-use products, could
increase in the future as environmental regulations become more stringent.
The manufacture of calcium chloride from by-product acid is the
principal example of the Company's recycling operations. The Company's major
competitors of dry calcium chloride include General Chemical Company, a
Canadian company, and Dow Chemical Company, the only other U.S. producer of
significant quantities of dry calcium chloride. Management of the Company
believes that Dow is capable of producing approximately 800,000 tons of dry
calcium chloride annually through conventional manufacturing methods. A
substantial investment would be necessary for a new competitor to manufacture
this product by conventional methods in sufficient quantities and at costs
necessary to compete. With a smaller investment, the Company has been able to
produce and successfully market dry calcium chloride by using by-product acid,
thereby becoming a niche competitor in a market that is dominated by two larger
companies.
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Markets for the Company's liquid and dry calcium chloride include
sales to industrial, municipal, janitorial and consumer customers for snow and
ice removal, dust control, production of cement, road stabilization, oil and
gas operations, and certain agricultural and food industry activities. In food
processing, calcium chloride is used to preserve crispness in certain canned
and bottled fruits and vegetables and to tenderize meat by enhancing enzyme
activity.
The Company's agricultural operations produce liquid calcium
chloride and nitrogen products that are used in agricultural applications as
macronutrients to deliver calcium to crops, to reduce nitrogen volatilization,
to enhance nitrogen utilization and as a component of fertilizer that is
designed to improve crop yields and create healthier plants. While sales have
improved significantly, they remain minuscule in comparison to the nitrogen
fertilizer market, which is predominately a dry product market.
The Company's concept of using mineral acids, such as
hydrochloric, sulphuric and hydrobromic acid to produce calcium chloride, zinc
bromide, zinc chloride, zinc sulfate and calcium bromides, has been expanded to
other chemicals and metals. The Company is also recovering zinc from certain
byproducts for manufacturing into zinc chemicals, and is conducting pilot tests
on aluminum, nickel, copper and chrome recovery for resale as commercial
products.
The Oil & Gas Services Division sells and markets clear brine
fluids and related products and services to all major markets worldwide.
Current foreign areas of market presence include the North Sea, Mexico, South
America, West Africa, Asia Pacific, and the CIS. The Company has three
principal competitors in the sale of CBFs to the oil and gas industry: Baroid
Corporation, M.I. and OSCA, Inc., a subsidiary of Great Lakes Chemical
Corporation. This market is highly competitive and competition is based
primarily on service, availability and price. Although Baroid and OSCA both
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 both companies.
Because of the significant use of CBFs in deeper natural gas and offshore well
completions and workovers, a modest change in drilling in these areas could
have a material impact on the profitability of both the Specialty Chemicals and
Oil & Gas Services Divisions.
OTHER BUSINESS MATTERS
CUSTOMERS
The Specialty Chemicals Division sells its products and services
into retail distribution as well as end use markets. Major customers of the
Oil & Gas Services Division include Shell Oil Company, Texaco, Baker Hughes,
Amerada Hess, British Petroleum, Oryx Energy, Unocal, Elf Acquitane, Chevron
USA, Phillips Petroleum Company, Conoco USA, and Atlantic Richfield
Corporation.
MARKETING AND DISTRIBUTION
The Specialty Chemicals Division markets its products through
offices in Pennsylvania, Virginia, Texas, Florida, Connecticut, California,
Georgia, Wyoming and Mexico, as well as through a network of distributors
located throughout the Midwest, Northeast, Southeast and Southwest. To service
these distributors, the division has over two dozen distribution facilities
strategically located to provide efficient, low-cost product availability. The
recent growth of the Company has allowed it to optimize its transportation
costs through the acquisition or the long-term leasing of customized
transportation equipment.
The Oil & Gas Services Division markets its domestic products and
services through its sixteen distribution facilities located principally in the
United States' Gulf Coast region that are in close proximity to both product
supplies and customer concentrations. Since transportation costs can represent
a large percentage of the total delivered cost of chemical products,
particularly liquid chemicals, the division believes that its strategic
locations make it one of the lowest cost suppliers of liquid calcium chloride
and other CBFs in the southern United States.
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International markets that are served include the British and Norwegian sectors
of the North Sea, Colombia, Mexico, Venezuela, Western Africa and the Far East.
In 1995, the Company made a significant investment to upgrade its
transportation, manufacturing and inventory control management information
systems. New software was acquired and installed late in 1995 to provide
additional operating information to allow the Company to better manage
inventory levels and logistics, raw material supplies and plant operating
efficiencies.
The marketing efforts of the Process Technologies Group are
primarily conducted by senior technical and management professionals located in
Pittsburgh, Pennsylvania; Tampa, Florida; and The Woodlands, Texas. These
people maintain communications with appropriate corporate representatives,
consulting firms and specialty contractors as sources of potential business.
This group retains specialized municipal sales representatives and monitors and
responds to requests for proposals for competitive bids.
BACKLOG
The Company ships most of its products within seven days of
receipt of an order. Therefore, the level of backlog is not indicative of
corporate sales activity. On December 31, 1996, the Company had an estimated
backlog of work of $2.9 million, all of which is expected to be billed during
1997. On December 31, 1995, the Company had an estimated backlog of $4.3
million.
EMPLOYEES
As of December 31, 1996, the Company had 989 employees. The
Company believes that its relations with its employees are good. None of the
Company's employees are covered by a collective bargaining agreement.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company actively pursues a policy of seeking patent
protection both in the U.S. and abroad for appropriate technology. The Company
owns or licenses 28 U.S. patents or patent applications and many foreign
counterparts. These patents expire at various times through 2014. While the
Company believes that the protection of patents is important to its business,
the Company does not believe any one patent is essential to the success of the
Company.
TETRA has historically utilized patents and trade secrets to
improve its manufacturing processes or to increase the value of its product
line. Current growth is being fueled by a number of these items, including:
liquid N-CAL(R) fertilizer, new PayZone(R) products for oil and gas wells, and
a number of process technologies. Since an incubation process is generally
required to take an idea or patent to commerciality, all of these items have
been in development for years.
Some of the more recent additions to TETRA's portfolio of patents
and trade secrets could begin to contribute to profitability. In response to
the need to develop a dry agricultural product to compliment liquid N-CAL(R),
TETRA has developed a line of granulated agricultural products that are
expected to be commercially marketed in 1997. This is expected to allow the
Company to more rapidly penetrate the fertilizer and nutrient market. TETRA's
Improved Metal Recovery (IMR) technology allows for the more efficient removal
of impurities, particularly from concentrated brines. This is expected to
allow TETRA to utilize lower cost and lower grade limestone in the production
of calcium chloride.
In early 1995, TETRA acquired the license to utilize certain
patents for the use of calcium chloride for use in the pulp and papermaking
industry. The Company's Performance Chemical Group has developed
TETRA-Flux(TM), a zinc ammonium chloride additive used in metal finishing.
TETRA plans to expend significant capital and resources in the development of
proprietary technologies.
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The Company also relies on trade secrets, know-how and continuing
technological advancements to maintain its competitive position. 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, TETRA uses any legal means possible to protect its patents, trade
secrets and other proprietary information.
ENVIRONMENTAL REGULATION
Various environmental protection laws have been enacted and
amended during the past three decades in response to public concern over the
environment. The operations of the Company and its customers are subject to
these evolving environmental laws and corresponding the regulations, which are
enforced by the EPA and various other federal, state and local environmental,
safety and health agencies and authorities. Efforts to comply with the
requirements of these laws have contributed to the demand for the Company's
services, but have also increased the Company's risk of liability for
environmental problems. Although the Company's customers remain responsible by
law for compliance with environmental regulations, the Company must also comply
with the requirements of those environmental laws applicable to its operations,
which includes the Federal Water Pollutions Control Act of 1972 ("The Clean
Water Act"), the Resource Conservation and Recovery Act of 1976 ("RCRA"), the
Clean Air Act of 1977 ("The Clean Air Act"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("Superfund") and the
Superfund Amendments and Reauthorization of 1986 ("SARA").
There are a number of federal environmental regulatory programs
and most states and local authorities have enacted state and local laws
regulating activities affecting the environment, some of which impose stricter
standards than their federal counterparts. Also, health and safety standards
have been promulgated by the federal Occupational Safety and Health
Administration ("OSHA"), including regulations related to the handling of
hazardous materials and wastes. The Company and its customers and suppliers
are affected by these other regulatory programs.
The Company's own operations are currently subject to certain
environmental regulations. For example, at its Lake Charles, West Memphis,
Parkersburg and Fairbury plants, the Company holds permits regulating air
emissions and wastewater discharges from those plants or the disposal of
certain non-hazardous solid wastes. The Company does not currently hold any
RCRA permits. The Company is also subject to OSHA rules governing health and
safety, as well as certain federal and state community-right-to-know
regulations.
The Company believes that its chemical manufacturing plants and
other facilities are in general compliance with all applicable safety, health
and environmental laws. Since its inception, the Company has not had a history
of significant fines or claims in connection with safety, health or
environmental matters. However, risks of substantial costs and liabilities are
inherent in certain plant operations and certain products produced at the
Company's plants, as they are with other companies engaged in the chemical
business, and there can be no assurance that significant costs and liabilities
will not be incurred. Moreover, it is possible that other developments, such
as increasingly strict environmental, safety and health laws, and regulations
and enforcement policies thereunder, could result in substantial costs and
liabilities to the Company. Changes in environmental regulations could subject
the Company's handling, manufacture, use, reuse, or disposal of materials at
the plants to scrutiny. The Company cannot predict the extent to which its
operations may be affected by future enforcement policies as applied to
existing laws or by the enactment of new statutes and regulations.
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ITEM 2. PROPERTIES.
The following table sets forth certain information concerning the
Company's facilities as of December 31, 1996. The Company believes its
facilities are adequate for its present needs.
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Description Location Approximate Square Footage(1)
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Chemical plant facilities . . . . . . . . . . . Lake Charles, Louisiana(2) 603,600
Norco, Louisiana(2) 85,200
West Memphis, Arkansas 139,000
Magnolia, Arkansas 120,000
Lamesa, Texas 17,000
Wichita, Kansas 19,500
Parkersburg, West Virginia(2) 360
Fairbury, Nebraska 90,000
Orlando, Florida 35,800
Tampico, Mexico 353,800
Oil and gas distribution facilities . . . . . . Louisiana - eight locations 701,700
Texas - eight locations 486,600
United Kingdom - various locations 92,000
Nigeria 28,000
Mexico 30,000
Venezuela 16,000
Colombia 11,500
Norway - various locations 15,000
Laboratory . . . . . . . . . . . . . . . . . . The Woodlands, Texas 26,000
Headquarters . . . . . . . . . . . . . . . . . The Woodlands, Texas 109,000
Process technologies engineering
and sales office . . . . . . . . . . . . . . Pittsburgh, Pennsylvania 8,000
Tampa, Florida 3,000
Clinton, Tennessee 10,000
Process technologies facilities . . . . . . . . Washington, Pennsylvania(2) 2,600
</TABLE>
_____________
(1) Includes real property and buildings unless otherwise noted.
(2) The Company owns the buildings and improvements.
- 9 -
<PAGE> 11
ITEM 3. LEGAL PROCEEDINGS.
The Company, its subsidiaries and other related companies are
named defendants in several lawsuits and respondents in certain other
governmental proceedings arising in the ordinary course of business. While the
outcome of lawsuits or other proceedings against the Company cannot be
predicted with certainty, management does not expect these matters to have a
material adverse impact on the Company.
ITEM 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, 1996.
ITEM 4A. EXECUTIVE OFFICERS.
The current executive officers of the Company and their ages and
positions are listed below.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Allen T. McInnes . . . . . . . . . 59 President, Chief Executive Officer and Director
Thomas H. Wentzler . . . . . . . . 49 Executive Vice President - Specialty Chemicals and
Director
Geoffrey M. Hertel . . . . . . . . 51 Executive Vice President - Finance and
Administration, Chief Financial Officer
and Director
Paul D. Coombs . . . . . . . . . . 40 Executive Vice President - Oil & Gas Services and
Director
James R. Hale . . . . . . . . . . . 45 Treasurer and Assistant Secretary
</TABLE>
Allen T. McInnes has served as a director of the Company since
1993 and as President and Chief Executive Officer of the Company since April
1996. Mr. McInnes is also Chairman of the Board and Chief Executive Officer of
TGC Industries, which is involved in the geophysical business and the
agricultural products packaging business, and Chairman of the Board of
Tidelands Geophysical Company, Inc., which is a subsidiary of TGC Industries.
Mr. McInnes is a former Executive Vice President and director of Tenneco, Inc.,
where he had overall corporate-level responsibility for chemicals, minerals,
packaging, international development and real estate operations. He also
serves as a director of the American Graduate School for International
Management and several other educational and charitable institutions. Mr.
McInnes holds B.B.A., M.B.A. and Ph.D. degrees from the University of Texas.
Thomas H. Wentzler, a founder of the Company, was named
Executive Vice President in January 1994. Mr. Wentzler served as Senior Vice
President - Specialty Chemicals Recycling Division since 1990 and as a director
of the Company since the Company's inception. Mr. Wentzler has also served in
numerous other executive positions with the Company since 1981. From 1972 to
1981, Mr. Wentzler held various positions with Dow Chemical Company, including
the position of Manager of Market Development for clear brine fluids from 1979
to 1981. Mr. Wentzler received B.S. and M.S. degrees in mineral processing
from Pennsylvania State University and an M.B.A. from the University of
Michigan.
Geoffrey M. Hertel has been associated with the Board of
Directors since 1981 as either a full director or a non-voting director and
special consultant to the Board. Mr. Hertel joined the Company in March 1993
as Senior Vice President - Finance and Administration. In January 1994, he was
named Executive Vice President. Mr. Hertel has served as President of Fairway
Petroleum, Inc., an oil and gas company, and LAGGS, Inc., a natural gas
pipeline company, since 1980. From October 1991 to February 15, 1993, Mr.
Hertel was Chief Executive Officer of Mayday
- 10 -
<PAGE> 12
USA, Inc., an electronic tracking company. From 1972 to 1985, Mr. Hertel held
various positions with Rotan Mosle, Inc., an investment banking firm, most
recently as Senior Vice President - Corporate Finance. Mr. Hertel received
both his B.A. degree and his M.B.A. from Michigan State University.
Paul D. Coombs was named Executive Vice President in January
1994, and a director on June 28, 1994. Mr. Coombs served as Senior Vice
President - Oil and Gas Division from 1987 to 1994. From 1985 to 1987, Mr.
Coombs served as General Manager - Oil and Gas for the Company. Mr. Coombs has
served in numerous other positions for the Company since 1982.
James R. Hale has served as Treasurer of the Company since 1986
and served as Chief Financial Officer from 1986 until 1993. From 1976 to 1985,
Mr. Hale held various positions with First City Bancorporation of Texas, Inc.,
most recently as Vice President and Manager of Profit Planning. Mr. Hale
received a B.S. degree in economics and history from the University of the
South and an M.B.A. from Vanderbilt University. Mr. Hale is a certified public
accountant.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
PRICE RANGE OF COMMON STOCK
The Common Stock has traded on the National Market System of the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") since the Company's initial public offering on April 3, 1990. The
Company's trading symbol is "TTRA." As of March 12, 1997 there were
approximately 4,350 holders of record of the Common Stock. The following table
sets forth the high and low closing sale prices for the Common Stock on the
National Market System as reported by NASDAQ for 1996 and 1995.
Over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
1996
First Quarter . . . . . . . . . . . . . . . $ 17 3/4 $ 13 1/2
Second Quarter . . . . . . . . . . . . . . . 21 7/8 16 1/8
Third Quarter . . . . . . . . . . . . . . . 19 3/8 16 3/4
Fourth Quarter . . . . . . . . . . . . . . . 27 3/8 18 3/8
1995
First Quarter . . . . . . . . . . . . . . . $ 12 1/4 $ 10 1/4
Second Quarter . . . . . . . . . . . . . . . 14 11 3/4
Third Quarter . . . . . . . . . . . . . . . 15 1/2 11 1/2
Fourth Quarter . . . . . . . . . . . . . . . 17 3/8 11 3/8
</TABLE>
- 11 -
<PAGE> 13
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.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues . . . . . . . . . . . . . . . . . . . . $ 160,790 $ 113,468 $ 88,506 $ 62,846 $ 57,208
Gross profit . . . . . . . . . . . . . . . . . . 48,644 (1)37,655 (1)29,060 (1)18,403 (1)12,836
Operating income (loss) . . . . . . . . . . . . 20,781 13,430 7,962 (2)(1,092) (2)(7,298)
Interest expense . . . . . . . . . . . . . . . . (1,250) (159) (363) (558) (549)
Interest income . . . . . . . . . . . . . . . . 198 959 558 741 1,635
Undistributed earnings (loss) of joint ventures 522 (47) 580 2,031 438
Other income (expense) . . . . . . . . . . . . . 257 377 241 144 (442)
Net income (loss), net . . . . . . . . . . . . . 13,137 9,366 6,058 863 (3,899)
Net income (loss) per share . . . . . . . . . . $ 0.97 $ 0.72 $ 0.48 $ 0.07 $ (0.31)
Weighted average common and common
equivalent shares outstanding . . . . . . . . 13,545 13,069 12,693 12,609 12,451
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital . . . . . . . . . . . . . . $ 37,398 $ 30,088 $ 37,357 $ 36,076 $ 40,538
Total assets . . . . . . . . . . . . . . . . 178,506 129,921 102,522 89,187 88,211
Long-term liabilities . . . . . . . . . . . 31,756 9,364 6,472 6,986 8,131
Stockholders' equity . . . . . . . . . . . . 108,022 89,286 77,687 71,390 70,345
</TABLE>
_________________
(1) The Company reclassified certain costs previously classified as
general and administrative expenses to cost of goods as direct charges
effective June 30, 1995. The 1992 to 1994 periods have been restated
for comparability. Operating income, net income and per share results
were unaffected by this change.
(2) Includes writedown of treatment plant facilities of $4.1 million in
1992 and unusual charges of $2.3 million in 1993.
- 12 -
<PAGE> 14
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.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES PERIOD-TO-
YEARS ENDED DECEMBER 31, PERIOD CHANGE
------------------------------- ----------------
1996 1995
vs vs
1996 1995 1994 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 41.7% 28.2%
Cost of Revenues . . . . . . . . . . . . . 69.7 66.8 67.2 47.9 27.5
Gross profit . . . . . . . . . . . . . . . 30.3 33.2 32.8 29.2 29.6
General & administrative expenses . . . . . 17.3 21.3 23.8 15.0 14.8
Operating income . . . . . . . . . . . . . 13.0 11.9 9.0 54.7 68.7
Interest expense . . . . . . . . . . . . . 0.8 0.1 0.4 686.2 (56.2)
Interest income . . . . . . . . . . . . . . 0.1 0.8 0.6 (79.4) 71.9
Income in undistributed earnings
of joint ventures . . . . . . . . . . . . 0.3 -- 0.6 * *
Other income, net . . . . . . . . . . . . . 0.2 0.3 0.3 (31.8) 56.4
Income before income taxes . . . . . . . . 12.8 12.8 10.1 40.9 2.2
Net income . . . . . . . . . . . . . . . . 8.2 8.3 6.8 40.3 54.6
</TABLE>
* Comparison not meaningful
1996 COMPARED TO 1995
Revenues for the twelve months ended December 31, 1996 were
$160.8 million compared to $113.5 million in 1995, an increase of $47.3 million
or 41.7%. Both the Oil & Gas Services Division and the Specialty Chemicals
Division showed significant revenue growth over the prior year. In the Oil &
Gas Services Division, all three operating components (domestic, international
and plug and abandon) realized improved revenues. Domestic operations
continued to benefit from the sustained levels of high drilling activity in the
Gulf of Mexico throughout the year, while international revenues improved
principally in Europe and Africa through a combination of increased drilling
activity and market penetration. The Company believes it has minimal foreign
exchange exposure since the majority of its international operation activity is
denominated in U.S. dollars. The plug and abandonment operations were
complemented during 1996 with several acquisitions that increased the land rig
fleet, added an inland waters fleet operating in Louisiana and Texas, and added
a production testing operation. Revenues increased significantly as a result
of these operations.
In the Specialty Chemicals Division, revenues from liquid and dry
calcium chloride sales increased in 1996 as the Company continued to
aggressively develop new domestic and international markets. The division also
benefitted from increased sales of zinc sulfate and manganese sulfate derived
from acquisitions in late 1995 and early 1996. Finally, revenues from the
acquisition of Wilchem Corporation, which manufactures mold and mildew
preventative products for retail distribution, in the fourth quarter of 1996
also contributed slightly to the Division's revenue growth.
In the twelve months ended December 31, 1996, gross profits were
$48.6 million, up $10.9 million or 29.2% from $37.7 million in 1995. Gross
profits as a percentage of revenues was 30.3% in 1996 versus 33.2% in 1995, a
decline of 2.9 points. Gross profits increased significantly in both divisions
to keep pace with the revenue growth.
- 13 -
<PAGE> 15
However, higher than expected production costs associated with the start-up of
the Specialty Chemicals Division's expanded calcium chloride facility at Lake
Charles, Louisiana resulted in the gross profit percentage decline.
General and administrative expenses were $27.9 million in 1996
compared to $24.2 million in 1995, an increase of $3.7 million or 15.0%. A
significant portion of the increase is attributable to the new operations
purchased during the year. Additional costs associated with the expansion of
the Oil & Gas Services Division domestic and international operations also
contributed to these cost increases. General and administrative expenses as a
percentage of revenues continued to decrease from 21.3% in 1995 to 17.3% in
1996.
Operating income for the twelve months ended December 31, 1996
was $20.8 million compared to $13.4 million in 1995, an increase of $7.4
million or 54.7%. This increase is the combined result of a gross margin
increase of $15.7 million due to increased revenue volume and a $4.6 million
decrease due to lower gross margin rates, offset by a $3.7 million increase in
general and administrative expenses.
During the twelve months ended December 31, 1996, long-term debt
increased approximately $23 million as the Company utilized debt to execute its
internal and external growth strategy. This increase in debt and corresponding
decrease in cash available for investment resulted in an increase in interest
expense and a decrease in interest income in 1996 compared to 1995.
The effective tax rate for the income tax provision was 35.9% in
1996 compared to 35.7% in 1995. The effective rates differ from the statutory
rates due principally to the effects of research and development tax credits
and permanent differences in 1996 and 1995.
Net income after taxes for the twelve months ended December 31,
1996 was $13.1 million compared to $9.4 million in 1995, an increase of $3.7
million or 40.3%. Net income per share was $0.97 in 1996 based on 13,545,000
weighted average common and common equivalent shares outstanding compared to
$0.72 in 1995 based on 13,069,000 weighted average common and common equivalent
shares outstanding. Net income per share increased $0.25 or 34.7% in 1996.
1995 COMPARED TO 1994
Revenues for the twelve months ended December 31, 1995 were
$113.5 million, up $25.0 million or 28.2% over 1994 revenues of $88.5 million.
TETRA's Oil and Gas Division contributed significantly to this increase
benefitting from improvements in both domestic and international markets.
Domestic revenues improved substantially as drilling activity in the Gulf Coast
remained high. Revenues from foreign operations increased principally due to
market penetration in Africa and Latin America. Specialty Chemicals Division
revenues increased in 1995 as a result of higher sales of liquid calcium
chloride, zinc products and performance chemicals. In addition, revenues from
the acquisition of American MicroTrace in October of 1995 and the acquisitions
of Pacer-Atlas and Baker Hughes INTEQ/TETRA in 1994 contributed to this
improvement.
Gross profits for the twelve months ended December 31, 1995 were
$37.7 million compared to $29.1 million in the prior year, an increase of $8.6
million or 29.6%. Gross margin as a percentage of revenues improved from 32.8%
in 1994 to 33.2% in 1995. Improved pricing for liquid and dry calcium
chloride, combined with lower product costing achieved through enhanced
manufacturing processes and throughput, contributed to this margin improvement.
Additionally, improved margins from the waste treatment group of the Chemicals
Division also contributed to the enhanced profitability.
General and administrative expenses were $24.2 million in 1995 or
21.3% of revenue compared to $21.1 million or 23.8% of revenue in 1994. The
acquisition of American MicroTrace in 1995 and the acquisitions of Pacer-Atlas
and Baker Hughes INTEQ/TETRA in 1994 contributed to this increase.
Additionally, the Company incurred approximately $1.2 million in
non-recoverable legal costs in 1995 associated with the successful defense of a
civil legal action. General and administrative expenses as a percent of
revenues continued to decrease to 21.3% in 1995 compared to 23.8% in 1994.
Operating income for the twelve months ended December 31, 1995
was $13.4 million up $5.4 million or 67.5% from $8.0 million in 1994. This
increase is attributable to a gross margin improvement of $8.2 million
- 14 -
<PAGE> 16
relating to increased volume and $0.4 million from improved pricing offset by
increased general and administrative expenses of $3.2 million.
Interest expense in 1995 was down as a result of the
capitalization of interest costs associated with the Lake Charles plant
expansion.
The effective tax rate for the income tax provision was 35.7% in
1995 and 32.5% in 1994. The effective rates differ from the statutory rates
due to the effects of research and development tax credits recorded in 1995 and
1994.
Net income after taxes for the twelve months ended 1995 was $9.4
million compared to $6.1 million in 1994, an increase of $3.3 million or 54.1%.
Net income per share was $0.72 in 1995 based on 13,069,000 weighted average
common and common equivalent shares outstanding compared to earnings in 1994 of
$0.48 based on 12,693,000 weighted average common and common equivalent shares
outstanding.
LIQUIDITY AND CAPITAL RESOURCES
The Company's investment in working capital, excluding cash and
cash equivalents, increased $12 million in 1996 to $34.6 million. Increased
trade accounts receivable balances and inventory levels accounted for this
increase. The increase in accounts receivable amounting to $10.7 million
results from improved fourth quarter sales from international oil and gas
operations and from water treatment and metals concentration technologies. The
1996 acquisitions of Industrias Sulfamex, S.A. de C.V. ("Sulfamex") and Wilchem
Corporation ("Wilchem") into the Specialty Chemicals Division also contributed
to this increase. Inventories increased $8.1 million in 1996. Inventories of
dry calcium chloride increased as production levels from the expanded Lake
Charles, Louisiana facility increased at year end. Domestic Oil & Gas Division
inventories also increased in response to the increased drilling activity in
the Gulf of Mexico. Finally, agricultural product inventories increased in
association with the acquisition of Sulfamex in 1996. Acquisitions also
accounted for most the $4.3 million increase in accounts payable and accrued
expenses. Current portion of long-term debt increased in 1996 by $2.7 million.
Most of this increase relates to reclassifying at December 31, 1996, $2.4
million of debt acquired along with the purchase of American MicroTrace in
1994. In January 1997, the Company reduced its cost of capital by retiring the
long-term debt and working capital loans of its American MicroTrace subsidiary.
The $4.4 million payoff was funded from the Company's current revolving
line-of-credit.
The Company has announced its intention to augment internal
growth with acquisitions. The emphasis of these purchases has been and will
continue to be in areas where TETRA has technological leadership or existing
distribution channels such as acids, metals, agricultural products or oil and
gas services. To fund this acquisition program, the Company will use existing
cash and cash flow as well as its general purpose, unsecured, prime rate/LIBOR
line-of-credit with NationsBank and Texas Commerce Bank. As of December 31,
1996, the Company has $4 million in letters of credit and $23.4 million in
long-term debt outstanding against a $30 million line-of-credit. Subsequent to
year end, the terms of the line were extended to $60 million maturing in 1999,
leaving a net availability of $32.6 million. The Company is currently
negotiating to increase this line-of-credit to $120 million. In addition to
this expanded line, the Company has 4.8 million shares of TETRA common stock
available under a shelf registration statement to finance its acquisition
program.
Major investing activities during the twelve months ended
December 31, 1996 included the acquisition of several companies. In the Oil &
Gas Services Division, three operations were acquired. The assets of
Production Test, Inc. a well testing service company, and Culberson Well
Service, Inc., an oilfield service company, were purchased for $1.5 million and
$1.4 million, respectively. The Company also acquired the outstanding stock of
three affiliated companies operating under the name of Inland Rigs. The
acquired operations, which are predominantly involved in plugging wells in the
inland waters of Louisiana, were merged into the Division's plug and abandon
business. The Company issued 164,101 shares of common stock valued at $24.38
per share for the acquired companies. The Specialty Chemicals Division
completed two acquisitions in 1996. The stock of Industrias Sulfamex was
purchased for $8.1 million. Sulfamex is located in Tampico, Mexico and
manufactures manganese-based chemicals. The Company also acquired the stock of
Wilchem, a major marketer of mold and mildew preventative products, for $7.5
million. All of these cash acquisitions were funded by drawing against the
Company's line-of-credit. Other investing activities include a $1.1 million
additional investment in the Company's 50% owned RETEC-TETRA
- 15 -
<PAGE> 17
joint venture. Finally, the Company has continued to lease significant
additional bromine reserves in close proximity to its Magnolia, Arkansas plant.
Capital expenditures during the twelve months ended December 31,
1996 totaled approximately $12.1 million, a significant portion of which was
associated with the major expansion of the Lake Charles plant. The expanded
dry calcium chloride facility began start-up operations in late 1995 with
de-bottlenecking continuing during the first and second quarters of 1996. The
Company also acquired a 26,000 square foot building which will accommodate a
new technical center for both divisions. The new facility, which will also
provide for pilot plant activities, will be occupied in the first quarter of
1997. The Company's plant at Fairbury, Nebraska was also expanded to improve
the manufacturing process and provide enhanced mineral extraction from its raw
material sources. These improvements will provide better utilization of raw
materials and reduce by-products. Additional expenditures were incurred to
acquire oil and gas blending and filtration equipment, plug and abandon rig
equipment and speciality chemicals transportation and distribution equipment.
The Company believes that its existing funds, cash generated by
operation, funds available under its 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 1997 and thereafter.
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.
The information required by Item 304 of Regulation S-K is not
applicable to the Company.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information relating to the identification, business
experience and directorships of each director and nominee for director of the
Company required by Item 401 of Regulation S-K, and presented in the section
entitled "Election of Directors-Directors and Nominees for Director" of the
Company's Proxy Statement for the annual meeting of stockholders on May 23,
1997, is hereby incorporated by reference. See Item 4A for information
relating to the identification and business experience of the Company's
executive officers.
ITEM 11. EXECUTIVE COMPENSATION.
The information relating to the cash compensation of directors
and officers required by Item 402 of Regulation S-K and presented in the
sections entitled "Election of Directors-Director Compensation" and "Election
of Directors-Compensation of Executive Officers" of the Company's Proxy
Statement for the annual meeting of stockholders on May 23, 1997, is hereby
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information relating to security ownership required by Item
403 of Regulation S-K, which is presented in the sections entitled "Voting
Securities" and "Election of Directors-Directors and Nominees for Director" of
the Company's Proxy Statement for the annual meeting of stockholders on May 23,
1997, is hereby incorporated by reference.
- 16 -
<PAGE> 18
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 404 of Regulation S-K is not
applicable to the Company.
- 17 -
<PAGE> 19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements of the Company
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors F-1
Consolidated Balance Sheets at December 31, 1996 and 1995 F-2
Consolidated Statements of Operations for the years F-4
ended December 31, 1996, 1995, and 1994
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1995, and 1994 F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995, and 1994 F-6
Notes to Consolidated Financial Statements F-8
</TABLE>
(a) 2. Financial Statement Schedule*
<TABLE>
<CAPTION>
Schedule Description Page
-------- ----------- ----
<S> <C> <C>
VIII Valuation and Qualifying Accounts S-1
</TABLE>
* 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.
(a) 3. List of Exhibits
3.1 Restated Certificate of Incorporation (filed as an
exhibit to the Company's Registration Statement on
Form S-1 (33-33586) and incorporated herein by
reference).
3.2 Bylaws, as amended (filed as an exhibit to the
Company's Registration Statement on Form S-1
(33-33586) and incorporated herein by reference).
10.1 Asset Purchase Agreement dated as of May 13, 1988
between the Dow Chemical Company and TETRA-Chlor,
Inc (filed as an exhibit to the Company's
Registration Statement on Form S-1 (33-33586) and
incorporated herein by reference).
10.2 Asset Sale and Purchase Agreement dated as of
February 28, 1989 among TETRA-Chlor, Inc., TETRA
Technologies, Inc., Texas United Chemical
Corporation and Texas United Corporation (filed as
an exhibit to the Company's Registration Statement
on Form S-1 (33-33586) and incorporated herein by
reference).
10.3 Registration Rights Agreement dated May 4, 1989 by
and among TETRA Technologies, Inc. and certain
stockholders listed therein (filed as an exhibit to
the Company's Registration Statement on Form S-1
(33-33586) and incorporated herein by reference).
10.4 Loan Agreement dated August 30, 1990 between TETRA
Technologies, Inc. and NCNB Texas National Bank
(filed as an exhibit to the Company's Registration
Statement on Form S-1 (33- 39154) and incorporated
herein by reference).
- 18 -
<PAGE> 20
10.5 Promissory Note (Revolving Line-of-credit) dated
August 30, 1990 from TETRA Technologies, Inc. to
NCNB Texas National Bank (filed as an exhibit to
the Company's Registration Statement on Form S-1
(33-39154) and incorporated herein by reference).
10.6 Promissory Note (Installment) dated December 28,
1990 from TETRA Technologies, Inc. to NCNB Texas
National Bank (filed as an exhibit to the Company's
Registration Statement on Form S-1 (33-39154) and
incorporated herein by reference).
10.7 Loan and Security Agreement dated as of April 15,
1988 between TETRA Technologies, Inc. and Metlife
Capital Corporation (filed as an exhibit to the
Company's Registration Statement on Form S-1
(33-33586) and incorporated herein by reference).
10.8 Term Note dated April 15, 1988 from TETRA
Technologies, Inc. to Metlife Capital Corporation
(filed as an exhibit to the Company's Registration
Statement on Form S-1 (33-33586) and incorporated
herein by reference).
10.9* TETRA Technologies, Inc. 1990 Stock Option Plan
(filed as an exhibit to the Company's Registration
Statement on Form S-1 (33-33586) and incorporated
herein by reference).
10.10 TETRA Technologies, Inc. 401(K) Retirement Plan
(effective November 1, 1990) (filed as an exhibit
to the Company's Registration Statement on Form S-1
(33-39154) and incorporated herein by reference).
10.11 Sales Agreement dated June 25, 1987 between Shell
Chemical Company and TETRA Resources, Inc. (filed
as an exhibit to the Company's Registration
Statement on Form S-1 (33-33586) and incorporated
herein by reference).
10.12 Purchase Order No. N21553 dated October 1, 1989
from TETRA Chemicals to Kaskaskia Stone Company
(filed as an exhibit to the Company's Registration
Statement on Form S-1 (33-33586) and incorporated
herein by reference).
10.13 Purchase Order No. N21554 dated October 1, 1989
from TETRA Chemicals to Kaskaskia Stone Company
(filed as an exhibit to the Company's Registration
Statement on Form S-1 (33-33586) and incorporated
herein by reference).
10.14 Letter Agreement dated September 1, 1989 between
Synergy Fluids, a division of Ameribrom, Inc. and
TETRA Resources, Inc. (filed as an exhibit to the
Company's Registration Statement on Form S-1
(33-33586) and incorporated herein by reference).
10.15 Optional Supply Agreement dated February 15, 1989
between Ethyl Corporation and TETRA Technologies,
Inc. (filed as an exhibit to the Company's
Registration Statement on Form S-1 (33-33586) and
incorporated herein by reference).
10.16 Service Agreement dated July 18, 1990 between TETRA
Technologies, Inc. and Inland Steel Co. (filed as
an exhibit to the Company's Registration Statement
on Form S-1 (33-39154) and incorporated herein by
reference).
10.17 Milpark/TETRA Joint Venture Agreement dated May 24,
1991 (filed as an exhibit to the Company's Form
10-K for the year ended December 31, 1991 and
incorporated herein by reference).
10.18 Agreement Between TETRA Technologies, Inc. TETRA
(U.K.) Limited, Severn Trent plc and TETRA Europe
Limited effective October 1, 1991 (filed as an
exhibit to the Company's Form 10-K for the year
ended December 31, 1991 and incorporated herein by
reference).
10.19 Severn Trent Water License Agreement effective
February 5, 1992 Between TETRA Technologies, Inc.
and TETRA Europe Limited and Severn Trent Water
Limited (filed as an exhibit to the Company's Form
10-K for the year ended December 31, 1991 and
incorporated herein by reference).
10.20 TETRA Know-How Transfer Agreement effective October
1, 1991 Between TETRA Technologies, Inc. and TETRA
Europe Limited (filed as an exhibit to the
Company's Form 10-K for the year ended December 31,
1991 and incorporated herein by reference).
10.21 PhoStrip Know-How Transfer Agreement effective
October 1, 1991 Between TETRA Technologies, Inc.
and TETRA Europe Limited (filed as an exhibit to
the Company's Form 10-K for the year ended December
31, 1991 and incorporated herein by reference).
10.22 Amendments 1 and 2 to Loan Agreement dated August
30, 1990 between TETRA Technologies, Inc. and
NationsBank (formerly NCNB Texas National Bank)
(filed as an exhibit to the Company's Form 10-K for
the year ended December 31, 1992 and incorporated
herein by reference).
- 19 -
<PAGE> 21
10.23 Formation Agreement and Regulations of RETEC-TETRA,
Limited Liability Co., dated July 28, 1992 (filed
as an exhibit to the Company's Form 10-K for the
year ended December 31, 1992 and incorporated
herein by reference).
10.24 Agreement dated November 28, 1994 between Olin
Corporation and TETRA-Chlor, Inc. Certain portions
of this exhibit have been omitted pursuant to a
confidential treatment request filed with the
Securities and exchange Commission (filed as an
exhibit to the Company's Form 10-K for the year
ended December 31, 1994 and incorporated herein by
reference).
10.25 Employment Agreement dated April 1, 1996 with Allen
T. McInnes (filed as an exhibit to the Company's
Form 10-Q for the three months ended June 30, 1996
and incorporated herein by reference.)
10.26 Employment Agreement dated April 1, 1996 with
Michael L. Jeane (filed as an exhibit to the
Company's Form 10-Q for the three months ended June
30, 1996 and incorporated herein by reference.)
10.27 Long-term Supply Agreement with Bromine Compounds
Ltd. Certain portions of this exhibit have been
omitted pursuant to a confidential treatment
request filed with the Securities and Exchange
Commission.
21 Subsidiaries of the Company.
23 Consent of Ernst & Young, LLP
____________________
*Management contract or compensatory plan.
(b) Reports on Form 8-K: None
- 20 -
<PAGE> 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 22, 1997 BY: /s/Allen T. McInnes
----------------------------------------
Allen T. McInnes, 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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/J. Taft Symonds Chairman of March 22, 1997
- -------------------------------- the Board of Directors
J. Taft Symonds
/s/Allen T. McInnes Allen T. McInnes March 22, 1997
- -------------------------------- President and Director
Allen T. McInnes (Principal Executive Officer)
/s/Geoffrey M. Hertel Geoffrey M. Hertel March 22, 1997
- ------------------------------- Chief Financial Officer and Director
Geoffrey M. Hertel (Principal Financial Officer)
/s/Bruce A. Cobb Bruce A. Cobb March 22, 1997
- -------------------------------- Corporate Controller
Bruce A. Cobb (Principal Accounting Officer)
/s/Paul D. Coombs Director March 22, 1997
- ------------------------------
Paul D. Coombs
/s/Tom H. Delimitros Director March 22, 1997
- ------------------------------
Tom H. Delimitros
/s/Stephen T. Harcrow Director March 22, 1997
- ------------------------------
Stephen T. Harcrow
/s/Thomas H. Wentzler Director March 22, 1997
- -------------------------------
Thomas H. Wentzler
</TABLE>
-21-
<PAGE> 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, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. 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 generally accepted auditing
standards. 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, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. 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 19, 1997
F-1
<PAGE> 24
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents .................................. $ 2,829 $ 7,510
Trade accounts receivable, net of allowance for doubtful
accounts of $1,266 in 1996 and $1,568 in 1995 ........... 43,768 33,042
Costs and estimated earnings in excess
of billings on incomplete contracts ..................... 1,410 1,443
Inventories ................................................ 24,360 16,309
Deferred tax assets ........................................ 1,676 1,451
Prepaid expenses and other current assets .................. 2,083 1,604
--------- ---------
Total Current Assets ................................... 76,126 61,359
Property, Plant and Equipment:
Land and building .......................................... 8,428 7,890
Machinery and equipment .................................... 43,477 33,465
Automobiles and trucks ..................................... 5,276 4,099
Chemical plants ............................................ 45,014 31,370
Construction in progress ................................... 5,409 3,255
--------- ---------
107,604 80,079
Less accumulated depreciation and amortization ............. (35,436) (25,471)
--------- ---------
Net Property, Plant and Equipment ....................... 72,168 54,608
Other Assets:
Patents and licenses, net of accumulated amortization
of $750 in 1996 and $673 in 1995 ........................ 460 519
Investments in joint ventures .............................. 5,928 4,189
Cost in excess of net assets acquired, net of accumulated
amortization of $964 in 1996 and $552 in 1995 ........... 17,381 3,944
Other, net of accumulated amortization
of $1,218 in 1996 and $669 in 1995 ...................... 6,443 5,302
--------- ---------
Total Other Assets ..................................... 30,212 13,954
--------- ---------
$ 178,506 $ 129,921
========= =========
</TABLE>
F-2
<PAGE> 25
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings ................................................................................. $ 2,202 $ 2,262
Trade accounts payable ................................................................................ 22,618 18,554
Accrued expenses ...................................................................................... 9,085 8,811
Billings in excess of costs and estimated
earnings on incomplete contracts ................................................................... 567 44
Current portion of all long-term debt and
capital lease obligations .......................................................................... 4,256 1,600
-------- --------
Total Current Liabilities ....................................................................... 38,728 31,271
Long-term debt, less current portion ..................................................................... 23,853 3,377
Capital lease obligations, less current portion .......................................................... 835 502
Deferred income taxes .................................................................................... 6,687 4,977
Other liabilities ........................................................................................ 381 508
Commitments and contingencies
Stockholders' Equity:
Common stock, par value $.01 per share:
40,000,000 shares authorized, with 13,069,396
shares issued and outstanding in 1996 and
12,809,580 shares issued and outstanding in 1995 .................................................. 131 128
Additional paid-in capital ............................................................................ 67,811 62,691
Cumulative translation adjustment .................................................................... 387 (89)
Retained earnings ..................................................................................... 39,693 26,556
-------- --------
Total Stockholders' Equity ........................................................................ 108,022 89,286
-------- --------
$178,506 $129,921
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE> 26
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Product sales .................................... $ 125,932 $ 86,958 $ 68,581
Services ......................................... 34,858 26,510 19,925
--------- --------- ---------
Total Revenues ................................. 160,790 113,468 88,506
Cost of Revenues:
Cost of product sales ............................ 87,775 59,363 48,843
Cost of services ................................. 24,371 16,450 10,603
--------- --------- ---------
Total Cost of Revenues ......................... 112,146 75,813 59,446
--------- --------- ---------
Gross Profit ................................. 48,644 37,655 29,060
General and administrative .......................... 27,863 24,225 21,098
--------- --------- ---------
Operating Income ............................. 20,781 13,430 7,962
Interest expense .................................... (1,250) (159) (363)
Interest income ..................................... 198 959 558
Undistributed earnings (loss) of joint ventures ..... 522 (47) 580
Other income, net ................................... 257 377 241
--------- --------- ---------
Income before Income Taxes .......................... 20,508 14,560 8,978
Provision for income taxes .......................... 7,371 5,194 2,920
--------- --------- ---------
Net Income ................................... $ 13,137 $ 9,366 $ 6,058
========= ========= =========
Income per common and common
equivalent share ................................. $ 0.97 $ 0.72 $ 0.48
========= ========= =========
Weighted average common and common
equivalent shares outstanding .................... 13,545 13,069 12,693
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE> 27
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED CUMULATIVE TOTAL
COMMON PAID-IN EARNINGS TRANSLATION STOCKHOLDERS'
STOCK CAPITAL (DEFICIT) ADJUSTMENT EQUITY
----- ------- --------- ---------- ------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 ............................ $ 126 $ 60,132 $ 11,132 $ 71,390
Net income for 1994 .................................. 6,058 6,058
Cumulative translation adjustment .................... (48) (48)
Exercise of common stock options ..................... 178 178
Common stock issued for acquisition .................. 55 55
Tax benefit upon exercise of certain non-qualified
and incentive stock options ....................... 54 54
--------- --------- --------- --------- ---------
Balance at December 31, 1994 ............................ 126 60,419 17,190 (48) 77,687
Net Income for 1995 ..................................... 9,366 9,366
Cumulative translation adjustment ....................... (41) (41)
Exercise of common stock options ........................ 1 599 600
Tax benefit upon exercise of certain non-qualified
and incentive stock options ........................ 96 96
Common stock issued for acquisitions .................... 1 1,577 1,578
--------- --------- --------- --------- ---------
Balance at December 31, 1995 ............................ 128 62,691 26,556 (89) $ 89,286
Net Income for 1996 ..................................... 13,137 13,137
Cumulative translation adjustment ....................... 476 476
Exercise of common stock options ........................ 1 815 816
Tax benefit upon exercise of certain non-qualified
and incentive stock options ........................ 307 307
Common stock issued for acquisitions .................... 2 3,998 4,000
--------- --------- --------- --------- ---------
Balance at December 31, 1996 ............................ $ 131 $ 67,811 $ 39,693 $ 387 $ 108,022
========= ========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE> 28
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Operating Activities:
Net income ........................................................... $ 13,137 $ 9,366 $ 6,058
Adjustments to reconcile net income to net cash provided:
Depreciation and amortization ...................................... 8,343 6,059 4,640
Undistributed earnings of joint ventures ........................... (524) 47 (580)
Provision for deferred income taxes ................................ 1,024 121 1,072
Provision for doubtful accounts .................................... 453 123 189
Gain on sale of property, plant and equipment ...................... 2 (78) (171)
Changes in operating assets and liabilities, net of effects from
acquisition of subsidiaries:
Trade accounts receivable ....................................... (8,869) (4,184) (3,060)
Costs and estimated earnings in excess of billings
on incomplete contracts ....................................... 33 (287) (102)
Inventories ..................................................... (6,491) (2,111) 188
Prepaid expenses and other current assets ....................... (364) (461) (270)
Trade accounts payable and accrued expenses ..................... 588 7,790 2,140
Billings in excess of costs and estimated earnings
on incomplete contracts ....................................... 523 (298) (125)
Other ........................................................... 231 85 123
-------- -------- --------
Net cash provided by operating activities ....................... 8,086 16,172 10,102
-------- -------- --------
Investing Activities:
Payments received on notes receivable ................................ 23 422 585
Purchases of property, plant and equipment ........................... (12,113) (18,096) (4,887)
Sale of marketable securities ........................................ -- 4,854 4,904
Investment in joint venture .......................................... (1,075) -- (615)
Purchase 50% of net assets of INTEQ/TETRA,
net of cash acquired of $2,678 ..................................... -- -- (5,844)
Business combinations, net of cash acquired .......................... (18,087) (1,684) (1,145)
Proceeds from sale of property, plant and equipment .................. 218 215 543
(Increase) in other assets ........................................... (779) (2,132) (83)
-------- -------- --------
Net cash provided (used) by investing activities .................. $(31,813) $(16,421) $ (6,542)
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE> 29
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Financing Activities:
Proceeds from long-term debt and exercised stock options ........ $ 24,216 $ 728 $ 211
Net repayment and borrowings under short-term credit lines ...... (60) (64) --
Principal payments on long-term debt and
capital lease obligations ..................................... (5,110) (1,308) (2,223)
-------- -------- --------
Net cash used by financing activities ......................... 19,046 (644) (2,012)
-------- -------- --------
Increase (decrease) in cash ..................................... (4,681) (893) 1,548
-------- -------- --------
Cash and cash equivalents at beginning of period ................... 7,510 8,403 6,855
-------- -------- --------
Cash and cash equivalents at end of period ......................... $ 2,829 $ 7,510 $ 8,403
======== ======== ========
Supplemental Cash Flow Information:
Capital lease obligations incurred ............................. $ 983 $ 516 $ 726
Capital lease obligations terminated ........................... $ 498 $ 235 $ 107
Interest paid .................................................. $ 1,426 $ 585 $ 393
Taxes paid ..................................................... $ 5,633 $ 2,354 $ 1,647
</TABLE>
See Notes to Consolidated Financial Statements
F-7
<PAGE> 30
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE A -- ORGANIZATION AND OPERATIONS OF THE COMPANY
TETRA Technologies, Inc. was incorporated in Delaware in 1981. All
references to the Company or TETRA include TETRA Technologies, Inc., its
subsidiaries, and their predecessors and subsidiaries.
TETRA is a specialty inorganic chemical company selling products, services
and process technologies to a variety of markets, including oil and gas,
agriculture and environmental services. The Company's Specialty Chemicals
Division manufactures, recycles and markets certain specialty chemicals for
various industrial, agricultural and food industry uses. Among other things,
the division converts low-cost chemical by-products produced by other chemical
plants into high-quality commercial products, which are marketed by the
Company.
The Company's Oil & Gas Services Division markets chemicals produced by the
Chemicals Division to the oil and gas industry for use in well completion and
workover operations in both domestic and international markets. They also
provide substantial fluid engineering, on-site fluid management and handling,
filtration, and other services.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly owned. The Company's investment
in joint venture is stated at cost plus equity in undistributed earnings. 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. Cost is determined
using the weighted average method. Inventories consist of finished products.
Financial Instruments
The fair value of the Company's financial instruments which includes cash,
accounts receivable, short-term borrowings and long-term debt approximate their
carrying amounts. Financial instruments which subject the Company to
concentrations of credit risk consist principally of trade receivables. The
Company's policy is to evaluate, prior to shipment, each customer's financial
condition and determine the amount of open credit to be extended. The Company
will require the appropriate, additional collateral as security for credit
amounts in excess of approved limits. The trade receivables include activity
with oil and gas companies, municipalities and other industrial companies.
F-8
<PAGE> 31
Long-Term Contracts
The Company recognizes revenues and expenses from long-term construction
contracts using the percentage of completion method applying the cost to cost
method. These revenues and expenses are included in service revenues and cost
of revenues. Under this method, the Company recognizes as profit that
proportion of the total anticipated profit which the cost of work completed
bears to estimated total cost of the work covered by the contract. As contracts
extend over one year, revisions of cost and profit estimates are made
periodically and are reflected in the accounting period in which they are
determined. If the estimate of total costs indicates a loss, the total
anticipated loss is recognized immediately. Revenues and expenses from rental
and service contracts are recognized on a time and material basis.
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:
<TABLE>
<S> <C>
Building . . . . . . . . . . . . . . . . . . 25 years
Machinery and equipment. . . . . . . . . . . 5 and 10 years
Automobiles and trucks . . . . . . . . . . . 4 years
Chemical plants . . . . . . . . . . . . . . . 15 years
</TABLE>
For income tax purposes, the Company provides for depreciation using
accelerated methods. Capitalized interest charged to construction projects for
the years ended December 31, 1996, 1995 and 1994 was $176,000, $450,000 and
$30,000, respectively.
Patents and Licenses
Patents and licenses are stated on the basis of cost and are amortized over
the estimated useful lives generally ranging from 14 to 20 years.
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.
Stock Compensation
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 123 "Accounting for Stock-Based Compensation". In accordance with
the provisions of SFAS No. 123, the Company applies APB Opinion 25 and related
interpretations in accounting for its stock option plans and continues to
account for stock-based compensation using the intrinsic value method.
Accordingly, 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 for 1995 and 1996 if the Company
had elected to recognize the compensation cost based on the fair value of the
options granted at grant date as prescribed by SFAS No. 123.
F-9
<PAGE> 32
Income per Common and Common Equivalent Share
Income per common and common equivalent share is computed using the
weighted average number of shares of common stock and common stock equivalents
outstanding during the year. Common stock equivalents consist of stock options
(calculated using the treasury stock and if converted methods, as applicable
during the periods such instruments were outstanding). A reconciliation of the
common shares used in the computations of income per common and common
equivalent shares is presented in Note M. Fully diluted earnings per share are
not presented because the result is not materially dilutive.
Foreign Currency Translation
The accounts of the Company's foreign operations are translated into United
States dollars in accordance with SFAS No. 52. 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.
Related Party Transactions
The Company recorded sales and services rendered to unconsolidated joint
ventures of $1,201,000, $726,000, and $625,000 in 1996, 1995 and 1994,
respectively.
Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of
In March 1995, the FASB issued Statement No.121, Accounting for the
Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The adoption of Statement 121 in
the first quarter of 1996 had no effect on the financial statements.
Revenue Recognition
Revenues are recognized when finished products are shipped to unaffiliated
customers or services have been rendered with appropriate provisions for
uncollectible accounts.
F-10
<PAGE> 33
NOTE C -- ACQUISITIONS
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 20 years. Pro forma
information for these acquisitions has not been presented as such amounts are
not material.
In the fourth quarter 1996, the Company acquired the outstanding stock of
three affiliated companies operating under the name of Inland Rigs. The
acquired operations, which are predominantly involved in plugging wells in the
inland waters of Louisiana, were merged into TETRA's plug and abandon oil and
gas well service business. The Company issued 164,101 shares of common stock
valued at $24.38 per share for the acquired companies. The purchase agreement
also provides for additional purchase price consideration to be paid in the
common stock of the Company, contingent upon future incremental profits of the
Inland Rig's operations over the next two years. The fair market value of any
additional shares issued under this agreement will be capitalized as additional
purchase price. The excess of purchase price over the book value of net assets
acquired was approximately $4.4 million.
The Company also consummated two additional acquisitions for cash during
the fourth quarter. The assets of Production Test, Inc., a well testing service
company, were purchased for $1.5 million. These assets were merged into TETRA's
domestic onshore service operations in the Oil & Gas Services Division. The
Company also acquired the stock of Wilchem Corporation for approximately $7.5
million. Wilchem Corporation is a major marketer of mold and mildew
preventative products and will be integrated into the Specialty Chemicals
Division's operations. The excess of the purchase price over the book value of
the net assets acquired of Wilchem Corporation was approximately $7.1 million.
In the second quarter 1996, the Company acquired the outstanding stock of
Industrias Sulfamex, S.A. de C.V. ("Sulfamex") for approximately $8.1 million.
The excess of the purchase price over the book value of the net assets acquired
was approximately $2.2 million. Sulfamex is a Mexican corporation that produces
certain manganese-based chemicals for distribution, predominantly into U.S.
markets and was integrated into the Specialty Chemicals Division's operations.
In the first quarter 1996, the Company purchased the assets of Culberson
Well Service, Inc. for approximately $1.4 million. Culberson Well Service,
Inc. is an oilfield services company providing services along the Gulf Coast.
The assets purchased consisted of machinery and equipment.
In the fourth quarter 1995, the Company purchased American MicroTrace
Corporation ("AMT") for 119,068 shares of common stock; the shares were valued
at $13.25 per share. The purchase agreement also provides for additional
purchase price considerations, to be paid in Company stock, contingent upon
future incremental profits of AMT through October 31, 1997. The fair market
value of any additional shares issued under this agreement will be capitalized
as additional purchase price. AMT is predominately a manufacturer and marketer
of specialty chemicals, most notably zinc sulfate and manganese sulfate. The
excess of purchase price over the book value of net assets acquired was
approximately $.9 million.
F-11
<PAGE> 34
NOTE D -- ACCOUNTING FOR WASTE TREATMENT CONTRACTS
The following summarizes waste treatment contracts in progress at
December 31, 1996 and 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
(IN THOUSANDS)
1996 1995
-------- --------
<S> <C> <C>
Costs and estimated earnings incurred
on contracts in progress ................................ $ 12,664 $ 7,899
Less applicable billings .................................. (11,821) (6,500)
-------- --------
$ 843 $ 1,399
======== ========
</TABLE>
These amounts are included in the accompanying consolidated balance
sheets as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
(IN THOUSANDS)
1996 1995
------- -------
<S> <C> <C>
Costs and estimated earnings in excess of
billings on incomplete contracts ...................... $ 1,410 $ 1,443
Billings in excess of costs and estimated
earnings on incomplete contracts ...................... (567) (44)
------- -------
$ 843 $ 1,399
======= =======
</TABLE>
Receivables under contractual retainage provisions aggregated
approximately $129,000 and $110,000 at December 31, 1996 and 1995,
respectively. Substantially all retainage receivables are expected to be
collected within one year.
NOTE E -- INVESTMENTS IN JOINT VENTURES
The Company owns a 50% interest in RETEC-TETRA, a joint venture with
TETRA and Remediation Technologies, Inc. (RETEC). The joint venture markets
RETEC's proprietary thermal desorption process and TETRA's process technologies
to petroleum refineries.
F-12
<PAGE> 35
NOTE F -- LONG-TERM DEBT AND OTHER BORROWINGS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
(IN THOUSANDS)
1996 1995
-------- --------
<S> <C> <C>
General purpose unsecured, revolving line-of-credit
for $30 million. Borrowings as of 12/31/96
accrued interest at LIBOR plus 1% ............................................. $ 23,405 --
Installment note with a 10.48% interest rate, payable $62,626 monthly and due
in May 1998. The note is secured and fully serviced by a tolling fee of
$62,626 payable to
the Company monthly for five years ............................................ 930 $ 1,547
Term note payable to bank is secured by a lien on realty and a security
agreement on personal property. On June 13, 1995, the Company exercised its
option to convert to a market interest rate of 8.58% for the remainder of the
agreement. Interest is payable monthly. The principal is
payable in monthly installments of $44,118 through June 1, 2001 ............... 2,382 2,912
Other ........................................................................... 875 151
-------- --------
27,592 4,610
Less current portion ............................................................ (3,739) (1,233)
-------- --------
Total long-term debt ......................................................... $ 23,853 $ 3,377
======== ========
</TABLE>
Scheduled maturities for the next five years and thereafter as of
December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . . $ 3,739
1998 . . . . . . . . . . . . . . . . . . . . . 453
1999 . . . . . . . . . . . . . . . . . . . . . 23,400
2000 . . . . . . . . . . . . . . . . . . . . . --
2001 . . . . . . . . . . . . . . . . . . . . . --
Thereafter . . . . . . . . . . . . . . . . . . --
--------
$ 27,592
========
</TABLE>
As of December 31, 1996, the Company has a $30 million working
line-of-credit. Subsequent to year end, this line was expanded to $60 million
maturing on October 31, 1999. At December 31, 1996, approximately $2.6 million
was available on the $30 million line, while $4 million was committed on
outstanding letter of credits.
The Company through its subsidiary, American MicroTrace ("AMT"), has a
revolving working capital agreement with a bank and may borrow up to the sum of
80% of qualifying accounts receivable and 50% of inventories of AMT, but not to
exceed $2,500,000. Interest is payable monthly at rates that vary from quarter
to quarter based on AMT's financial performance. The interest rate in effect
for the period ended December 31, 1996 was the bank's prime rate of 8.25%.
Borrowings under the agreement are secured by a lien on realty and a security
agreement on personal property. Subsequent to year end, this line-of-credit was
paid off and closed with funds from the Company's existing credit line.
F-13
<PAGE> 36
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 2000,
are classified as capital leases. The machinery and equipment leases, which
vary from three to five year terms and expire at various dates through 2001,
are also classified as capital leases. The office leases, which vary from one
to five 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 2000
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:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
(IN THOUSANDS)
1996 1995
------- -------
<S> <C> <C>
Automobiles and trucks .................................... $ 1,338 $ 1,172
Less accumulated amortization ............................. (497) (570)
------- -------
841 602
======= =======
Machinery and equipment ................................... 1,312 825
Less accumulated amortization ............................. (880) (767)
------- -------
$ 432 $ 58
======= =======
</TABLE>
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, 1996:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------ ------
(IN THOUSANDS)
<S> <C> <C>
1997 ............................................... $ 740 $ 1,598
1998 ............................................... 527 961
1999 ............................................... 275 583
2000 ............................................... 87 207
2001 ............................................... 2 30
------- -------
Total minimum lease payments ....................... 1,631 $ 3,379
=======
Amount representing interest ....................... (279)
Present value of net minimum lease payments ........ 1,352
Less current portion ............................... 517
-------
Total long-term portion ....................... $ 835
=======
</TABLE>
Rental expense for all operating leases was $2,819,000, $2,071,000 and
$1,918,000 in 1996, 1995 and 1994, respectively.
F-14
<PAGE> 37
NOTE H -- INCOME TAXES
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, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Deferred Tax Assets: 1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred gains ............................... $ 447 $ 471
Tax inventory over book ...................... 734 385
Allowance for doubtful accounts .............. 474 608
Inventory reserves and accruals .............. 755 926
State tax credit carryforward ................ 460 460
Net operating loss carryforward .............. 673 --
All other, net ............................... (4) 215
------- -------
Total deferred tax assets ................ 3,539 3,065
Valuation reserve ............................ (227) (376)
------- -------
Net deferred tax assets .................. $ 3,312 $ 2,689
======= =======
</TABLE>
<TABLE>
<CAPTION>
Deferred Tax Liabilities: 1996 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Tax over book depreciation ....................... $7,117 $5,043
Goodwill amortization ............................ 902 915
Deferred income from joint venture ............... 151 158
Tax over book amortization of other intangibles .. 144 --
All other ........................................ 9 99
------ ------
Total deferred tax liability ..................... $8,323 $6,215
------ ------
Net deferred tax liability ....................... $5,011 $3,526
====== ======
</TABLE>
Federal and state income taxes for years ended December 31, 1996, 1995
and 1994 consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
(IN THOUSANDS)
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
CURRENT
Federal .................................................. $3,281 $3,465 $1,331
State .................................................... 459 574 99
Foreign .................................................. 2,607 1,034 418
------ ------ ------
6,347 5,073 1,848
DEFERRED
Federal .................................................. 942 17 994
State .................................................... 82 104 78
------ ------ ------
1,024 121 1,072
Total tax provision ...................................... $7,371 $5,194 $2,920
====== ====== ======
</TABLE>
F-15
<PAGE> 38
A reconciliation of the provision for income taxes computed by applying the
federal statutory rate for the years ended December 31, 1996, 1995 and 1994 to
income before income taxes and the reported income taxes is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax provision computed at statutory
federal income tax rates ................................. $ 6,972 $ 4,950 $ 3,053
State income taxes (net of federal benefit) ................ 303 379 116
Research and development tax credit ........................ (100) (350) (500)
Permanent differences ...................................... 181 109 126
Other ...................................................... 15 106 125
------- ------- -------
$ 7,371 $ 5,194 $ 2,920
======= ======= =======
</TABLE>
The provision for deferred income taxes reflects temporary differences
between financial and tax reporting related to the following items:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
(IN THOUSANDS)
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Depreciation ............................................... $ 1,185 $ 195 $ 759
Deferred income from joint venture ......................... 6 98 (204)
Deferred gain .............................................. 7 (116) --
Capital loss carry forward ................................. -- 45 48
Notes receivable reserves .................................. 19 (198) 83
Allowance for doubtful accounts and inventory reserves .... (184) 383 509
Accruals ................................................... 198 (282) (162)
Net operating loss carryforward ............................ (131) --
All other temporary differences ............................ (76) (4) 39
------- ------- -------
$ 1,024 $ 121 $ 1,072
======= ======= =======
</TABLE>
NOTE I - ACCRUED LIABILITIES
Accreud liabilities are detailed as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Compensation and employee benefits ......................... $3,420 $2,757
Taxes payable .............................................. 1,888 2,304
Transportation and distribution costs ...................... 575 614
Plant operating costs ...................................... 595 92
Other accrued liabilities .................................. 2,607 3,044
------ ------
$9,085 $8,811
====== ======
</TABLE>
NOTE J -- COMMITMENTS AND CONTINGENCIES
The Company, its subsidiaries and other related companies are named
defendants in several lawsuits and respondents in certain governmental
proceedings arising in the ordinary course of business. While the outcome of
lawsuits or other proceedings against the Company cannot be predicted with
certainty, management does not expect these matters to have a material adverse
impact on the financial statements.
F-16
<PAGE> 39
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 -- INCENTIVE STOCK OPTION PLAN
In 1985, the Company adopted the TETRA Technologies, Inc. 1985
Incentive Stock Option Plan (the "1985 Plan"). In February 1990, the 1985 Plan
was amended to change the name of the 1985 Plan to the TETRA Technologies, Inc.
1990 Stock Option Plan (the "1990 Plan") and change the number and type of
options that could be granted.
In 1993, the Company adopted the TETRA Technologies, Inc. Director
Stock Option Plan (the "Director's Plan"). The purpose of the Plan is to enable
the Company to attract and retain qualified individuals who are not employees
of the Company to serve as directors.
The following is a summary of stock option activity for the years
ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
SHARES WEIGHTED
UNDER OPTION AVERAGE PRICE
(000'S) PER SHARE
------------ -------------
<S> <C> <C>
Outstanding at December 31, 1993 ................... 844 $ 7.74
=========
Options granted ................................. 491 8.71
Options canceled ................................ (82) 9.89
Options exercised ............................... (60) 3.01
-----
Outstanding at December 31, 1994 ................... 1,193 8.24
Options granted ................................. 57 12.61
Options canceled ................................ (62) 7.87
Options exercised ............................... (92) 6.54
-----
Outstanding at December 31, 1995 ................... 1,096 8.75
</TABLE>
F-17
<PAGE> 40
<TABLE>
<CAPTION>
SHARES WEIGHTED
UNDER OPTION AVERAGE PRICE
(000'S) PER SHARE
------------ -------------
<S> <C> <C>
Options granted ................................. 1,152 16.90
Options canceled ................................ (27) 14.11
Options exercised ............................... (100) 8.96
------
Outstanding at December 31, 1996 ................... 2,121 $12.97
====== ======
</TABLE>
The exercise price of the options outstanding at December 31, 1996
range from $5.88 to $21.63 per share. At December 31, 1996, 1995 and 1994,
there were 273,000, 381,000 and 366,000 shares, respectively, reserved for
future grants under the 1990 Plan. At December 31, 1996, 50,000 shares were
reserved for future grants under the Director's Plan. As of December 31, 1996,
there were 1,001,000 options outstanding which were exercisable under the 1990
Plan and 43,000 options exercisable under the Director's Plan.
At December 31, 1996, the maximum number of shares authorized for
issuance under the 1990 Plan was 3,000,000 shares of common stock. Incentive
options may only be granted until December 31, 1999. As of February 28, 1997,
2,613,000 incentive stock options, 120,000 nonqualified options and no SARs had
been granted under the 1990 Plan. The maximum number of shares of common stock
which may be issued pursuant to options granted under the Director's Plan is
100,000. As of February 28, 1997, 55,000 options had been granted and were
outstanding under the Director's Plan.
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 123 "Accounting for Stock-Based Compensation". In accordance with
the provisions of SFAS No. 123, the Company applies APB Opinion 25 in
accounting for its stock option plans and, accordingly, does not recognize
compensation cost. If the Company had elected to recognize compensation cost
based on the fair value of the options granted at grant date as prescribed by
SFAS No. 123, net income and earnings per share would have been reduced to the
pro forma amounts indicated in the table below (in thousands except per share
amounts):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net Income - as reported ........................ $ 13,137 $ 9,366
========= =========
Net Income - pro forma .......................... $ 12,491 $ 9,323
========= =========
Earnings per share - as reported ................ $ 0.97 $ 0.72
========= =========
Earnings per share - pro forma .................. $ 0.92 $ 0.71
========= =========
</TABLE>
F-18
<PAGE> 41
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 38.2%, expected life of options 4.3 years,
risk-free interest rate 6.00% and expected dividend yield 0.00%. The weighted
average fair value of options granted during 1996 and 1995 was $6.81 and $5.05
per share, respectively. The pro forma effect on net income for 1996 is not
representative of the pro forma effect on net income in future years because it
does not take into consideration pro forma compensation expense related to
grants made prior to 1995.
NOTE M -- INCOME PER SHARE
The following is a reconciliation of the common shares outstanding with
the number of shares used in the computations of income per common and common
equivalent share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
(IN THOUSANDS)
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Number of weighted average common shares outstanding ......... 12,870 12,673 12,554
Acquisitions ................................................. 3 20 6
Assumed exercise of stock options ............................ 672 376 133
------ ------ ------
Weighted average common and common
equivalent shares outstanding .............................. 13,545 13,069 12,693
====== ====== ======
</TABLE>
F-19
<PAGE> 42
NOTE N -- GEOGRAPHIC INFORMATION AND INDUSTRY SEGMENTS
Summarized financial information concerning the geographic areas in
which the Company operated at December 31, 1996, 1995 and 1994 is presented
below.
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNITED EUROPE &
STATES AFRICA OTHER ELIMINATIONS TOTAL
------ ------ ----- ------------ -----
<S> <C> <C> <C> <C> <C>
1996 OPERATIONS BY GEOGRAPHIC AREA:
Revenues from unaffiliated customers:
Sales ............................. $ 96,454 $ 19,088 $ 10,390 $ $125,932
Service and rentals ............... 30,321 1,936 2,601 34,858
Transfers between geographic areas 589 320 1,151 (2,060) --
-------- -------- -------- -------- --------
Total revenue ..................... $127,364 $ 21,344 $ 14,142 $ (2,060) $160,790
======== ======== ======== ======== ========
Operating income .................. $ 10,258 $ 7,326 $ 3,197 $ 20,781
======== ======== ======== ======== ========
Identifiable assets ............... $149,842 $ 20,040 $ 19,906 $(11,282) $178,506
======== ======== ======== ======== ========
1995 OPERATIONS BY GEOGRAPHIC AREA:
Revenues from unaffiliated customers:
Sales ............................. $ 68,712 $ 13,119 $ 5,127 -- $ 86,958
Service and rentals ............... 23,196 1,552 1,762 -- 26,510
Transfers between geographic areas 966 258 149 (1,373) --
-------- -------- -------- -------- --------
Total revenue ..................... $ 92,874 $ 14,929 $ 7,038 $ (1,373) $113,468
======== ======== ======== ======== ========
Operating income .................. $ 9,213 $ 2,575 $ 1,642 $ 13,430
======== ======== ======== ======== ========
Identifiable assets ............... $114,625 $ 16,618 $ 8,648 $ (9,970) $129,921
======== ======== ======== ======== ========
1994 OPERATIONS BY GEOGRAPHIC AREA:
Revenues from unaffiliated customers:
Sales ............................. $ 59,128 $ 7,245 $ 2,208 $ -- $ 68,581
Service and rentals ............... 19,247 37 641 -- 19,925
Transfers between geographic areas 619 656 -- (1,275) --
-------- -------- -------- -------- --------
Total revenue ..................... $ 78,994 $ 7,938 $ 2,849 $ (1,275) $ 88,506
======== ======== ======== ======== ========
Operating income .................. $ 5,836 $ 1,491 $ 635 $ 7,692
======== ======== ======== ======== ========
Identifiable assets ............... $ 89,824 $ 11,382 $ 6,222 $ (5,291) $102,137
======== ======== ======== ======== ========
</TABLE>
Transfers between geographic areas are priced at the estimated fair
value of the products or services negotiated between the selling and receiving
units.
In 1996 and 1995, two customers accounted for more than 10% of
consolidated revenues. Revenues from these customers were $20.7 million and
$15.9 million in 1996 and $20.5 million and $15.2 million in 1995. No single
customer accounted for more than 10% of consolidated revenues in 1994.
F-20
<PAGE> 43
NOTE O -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial data for 1996 and 1995 are as follows
(in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED 1996
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Total Revenue .......................... $34,194 $ 36,710 $45,158 $44,728
Gross Profit ........................... 10,480 11,705 11,888 14,571
Net Income ............................. 2,811 2,905 3,333 4,088
Net earnings per share ................. $ 0.21 $ 0.22 $ 0.25 $ 0.30
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED 1995
----------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Total Revenue .......................... $25,267 $26,075 $28,423 $33,703
Gross Profit ........................... 8,398 8,645 9,221 11,391
Net Income ............................. 1,942 1,965 2,437 3,022
Net earnings per share ................. $ 0.15 $ 0.15 $ 0.19 $ 0.23
</TABLE>
F-21
<PAGE> 44
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
------------------------
CHARGED
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING TO COSTS ACCOUNTS- DEDUCTIONS END
OF PERIOD AND EXPENSES DESCRIBE DESCRIBE OF PERIOD
--------- ------------ -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994:
Allowance for doubtful accounts $ 682 $ 189 $ 373 (2) $ (267)(1) $ 977
Allowance for current portion of
notes and other receivables 726 726
Allowance for noncurrent portion of
notes and other receivables 1,237 (861)(2)(3) 376
------ ------ ------ ------ ------
Totals . . . $2,645 $ 189 $ (488) $ (267) $2,079
====== ====== ====== ====== ======
Year Ended December 31, 1995:
Allowance for doubtful accounts $ 977 $ 123 $ 548 (2) $ (80)(1) $1,568
Allowance for current portion of
notes and other receivables 726 (726)(2)
------ ------ ------ ------ ------
Allowance for noncurrent portion of
notes and other receivables 376 (376)(2)
Totals . . . $2,079 $ 123 $ (554) $ (80) $1,568
====== ====== ====== ====== ======
Year Ended December 31, 1996:
Allowance for doubtful accounts $1,568 $ 453 $ (755)(1) $1,266
====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) Uncollectible accounts written off, net of recoveries.
(2) Recovery of previously reserved noncurrent receivable.
(3) Litigation settlement reclassification.
S-1
<PAGE> 45
INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
3.1 Restated Certificate of Incorporation (filed as an
exhibit to the Company's Registration Statement on
Form S-1 (33-33586) and incorporated herein by
reference).
3.2 Bylaws, as amended (filed as an exhibit to the
Company's Registration Statement on Form S-1
(33-33586) and incorporated herein by reference).
10.1 Asset Purchase Agreement dated as of May 13, 1988
between the Dow Chemical Company and TETRA-Chlor,
Inc (filed as an exhibit to the Company's
Registration Statement on Form S-1 (33-33586) and
incorporated herein by reference).
10.2 Asset Sale and Purchase Agreement dated as of
February 28, 1989 among TETRA-Chlor, Inc., TETRA
Technologies, Inc., Texas United Chemical
Corporation and Texas United Corporation (filed as
an exhibit to the Company's Registration Statement
on Form S-1 (33-33586) and incorporated herein by
reference).
10.3 Registration Rights Agreement dated May 4, 1989 by
and among TETRA Technologies, Inc. and certain
stockholders listed therein (filed as an exhibit to
the Company's Registration Statement on Form S-1
(33-33586) and incorporated herein by reference).
10.4 Loan Agreement dated August 30, 1990 between TETRA
Technologies, Inc. and NCNB Texas National Bank
(filed as an exhibit to the Company's Registration
Statement on Form S-1 (33-39154) and incorporated
herein by reference).
10.5 Promissory Note (Revolving Line-of-credit) dated
August 30, 1990 from TETRA Technologies, Inc. to
NCNB Texas National Bank (filed as an exhibit to
the Company's Registration Statement on Form S-1
(33-39154) and incorporated herein by reference).
10.6 Promissory Note (Installment) dated December 28,
1990 from TETRA Technologies, Inc. to NCNB Texas
National Bank (filed as an exhibit to the Company's
Registration Statement on Form S-1 (33-39154) and
incorporated herein by reference).
10.7 Loan and Security Agreement dated as of April 15,
1988 between TETRA Technologies, Inc. and Metlife
Capital Corporation (filed as an exhibit to the
Company's Registration Statement on Form S-1
(33-33586) and incorporated herein by reference).
10.8 Term Note dated April 15, 1988 from TETRA
Technologies, Inc. to Metlife Capital Corporation
(filed as an exhibit to the Company's Registration
Statement on Form S-1 (33-33586) and incorporated
herein by reference).
10.9* TETRA Technologies, Inc. 1990 Stock Option Plan
(filed as an exhibit to the Company's Registration
Statement on Form S-1 (33-33586) and incorporated
herein by reference).
10.10 TETRA Technologies, Inc. 401(K) Retirement Plan
(effective November 1, 1990) (filed as an exhibit
to the Company's Registration Statement on Form S-1
(33-39154) and incorporated herein by reference).
10.11 Sales Agreement dated June 25, 1987 between Shell
Chemical Company and TETRA Resources, Inc. (filed
as an exhibit to the Company's Registration
Statement on Form S-1 (33-33586) and incorporated
herein by reference).
10.12 Purchase Order No. N21553 dated October 1, 1989
from TETRA Chemicals to Kaskaskia Stone Company
(filed as an exhibit to the Company's Registration
Statement on Form S-1 (33-33586) and incorporated
herein by reference).
<PAGE> 46
10.13 Purchase Order No. N21554 dated October 1, 1989
from TETRA Chemicals to Kaskaskia Stone Company
(filed as an exhibit to the Company's Registration
Statement on Form S-1 (33-33586) and incorporated
herein by reference).
10.14 Letter Agreement dated September 1, 1989 between
Synergy Fluids, a division of Ameribrom, Inc. and
TETRA Resources, Inc. (filed as an exhibit to the
Company's Registration Statement on Form S-1
(33-33586) and incorporated herein by reference).
10.15 Optional Supply Agreement dated February 15, 1989
between Ethyl Corporation and TETRA Technologies,
Inc. (filed as an exhibit to the Company's
Registration Statement on Form S-1 (33-33586) and
incorporated herein by reference).
10.16 Service Agreement dated July 18, 1990 between TETRA
Technologies, Inc. and Inland Steel Co. (filed as
an exhibit to the Company's Registration Statement
on Form S-1 (33-39154) and incorporated herein by
reference).
10.17 Milpark/TETRA Joint Venture Agreement dated May 24,
1991 (filed as an exhibit to the Company's Form
10-K for the year ended December 31, 1991 and
incorporated herein by reference).
10.18 Agreement Between TETRA Technologies, Inc. TETRA
(U.K.) Limited, Severn Trent plc and TETRA Europe
Limited effective October 1, 1991 (filed as an
exhibit to the Company's Form 10-K for the year
ended December 31, 1991 and incorporated herein by
reference).
10.19 Severn Trent Water License Agreement effective
February 5, 1992 Between TETRA Technologies, Inc.
and TETRA Europe Limited and Severn Trent Water
Limited (filed as an exhibit to the Company's Form
10-K for the year ended December 31, 1991 and
incorporated herein by reference).
10.20 TETRA Know-How Transfer Agreement effective October
1, 1991 Between TETRA Technologies, Inc. and TETRA
Europe Limited (filed as an exhibit to the
Company's Form 10-K for the year ended December 31,
1991 and incorporated herein by reference).
10.21 PhoStrip Know-How Transfer Agreement effective
October 1, 1991 Between TETRA Technologies, Inc.
and TETRA Europe Limited (filed as an exhibit to
the Company's Form 10-K for the year ended December
31, 1991 and incorporated herein by reference).
10.22 Amendments 1 and 2 to Loan Agreement dated August
30, 1990 between TETRA Technologies, Inc. and
NationsBank (formerly NCNB Texas National Bank)
(filed as an exhibit to the Company's Form 10-K for
the year ended December 31, 1992 and incorporated
herein by reference).
10.23 Formation Agreement and Regulations of RETEC-TETRA,
Limited Liability Co., dated July 28, 1992 (filed
as an exhibit to the Company's Form 10-K for the
year ended December 31, 1992 and incorporated
herein by reference).
10.24 Agreement dated November 28, 1994 between Olin
Corporation and TETRA-Chlor, Inc. Certain portions
of this exhibit have been omitted pursuant to a
confidential treatment request filed with the
Securities and exchange Commission (filed as an
exhibit to the Company's Form 10-K for the year
ended December 31, 1994 and incorporated herein by
reference).
10.25 Employment Agreement dated April 1, 1996 with Allen
T. McInnes (filed as an exhibit to the Company's
Form 10-Q for the three months ended June 30, 1996
and incorporated herein by reference.)
10.26 Employment Agreement dated April 1, 1996 with
Michael L. Jeane (filed as an exhibit to the
Company's Form 10-Q for the three months ended June
30, 1996 and incorporated herein by reference.)
10.27 Long-term Supply Agreement with Bromine Compounds
Ltd. Certain portions of this exhibit have been
omitted pursuant to a confidential treatment
request filed with the Securities and Exchange
Commission.
21 Subsidiaries of the Company.
23 Consent of Ernst & Young, LLP.
27 Financial Data Schedule
____________________
*Management contract or compensatory plan.
<PAGE> 1
EXHIBIT 10.27
LONG-TERM SUPPLY AGREEMENT
DULY MADE AND EXECUTED ON THIS 19 DAY OF MARCH, 1996
BY AND BETWEEN
BROMINE COMPOUNDS LTD.
an Israeli Company
of Makleff House
12 Kroitzer Street, PO Box 180, Beer Sheva 84101, Israel
for itself and/or on behalf of its Affiliates
("BCL")
of the first part
AND
TETRA TECHNOLOGIES, INC.
a Delaware corporation
of 25025 1-45 North, The Woodlands, Texas, USA
for itself and/or on behalf of its Affiliates
("TETRA")
of the second part
WHEREAS TETRA wishes to purchase from BCL Calcium Bromide ***
solution meeting the specifications set for on Appendix A
hereto (the "Product") and BCL wishes to supply the Product to
TETRA, on the terms and conditions detailed in this Agreement:
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
promises contained herein, the parties stipulate, affirm and agree as follows:
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 2
1. PURCHASE AND SALE
During the term of this Agreement, TETRA agrees to purchase at lease
ninety percent (90%) of the entire external requirements of TETRA of
the Product from BCL and BCL agrees to supply such quantities of the
Product to TETRA, according to the terms detailed below.
***
2. SPECIFICATIONS
Specifications for the Product shall be as detailed in APPENDIX A
hereto (the "Specifications").
3. PRICING AND PAYMENT
3.1 Pricing: The prices for the Product will be determined as
specified in APPENDIX B hereto.
By not later than *** of every year commencing ***, the
parties will re-evaluate and agree upon the prices for the
Product which will be effective during the following year. ***
3.2 Invoices and Payment: BCL or its designated Affiliate shall
invoice TETRA on the date of each delivery. All payments
shall be made in US dollars unless otherwise agreed from time
to time by the parties, within *** days of each invoice. All
payments shall be made by TETRA by bank transfer to an account
designated by BCL. Late payments will bear interest at the
rate of *** per month.
3.3 Governmental Charges and Taxes: All taxes, duties, excises,
levies and assessments of any nature or description, except
(1) taxes imposed on or measured by BCL's income and (ii) any
taxes, duties, excises, levies and assessments imposed on the
export of Product by BCL that may be imposed or assessed by
any government body or authority based on sales of Product
under this Agreement will be for the sold account of TETRA and
TETRA shall indemnify and hold BCL harmless from any such
taxes, duties, levies and assessments paid for or on behalf of
BCL.
<PAGE> 3
4. FORECASTS AND ORDERS
4.1 Firm Orders and Forecasts:
4.1.1 On or before *** of each year during the term of this
Agreement, TETRA shall notify BCL or its designated
Affiliate in writing of its a good faith estimate of
90% of the entire external requirements of TETRA for
Product for the next year (the "Base Amount"). TETRA
estimates that the Base Amount for *** will be ***.
Each year during the term hereof, TETRA agrees to
purchase, ***, at least *** of the Base Amount, as
equally as reasonably possible over the calendar
quarters covered by the Base Amount for such year.
TETRA agrees that it will not adjust the Base Amount
(upward or downward) from one contract year to the
next during the term hereof by more than *** from the
actual purchases by TETRA hereunder during the 12
month period immediately preceding such estimate;
provided, however, that, for purposes of making this
adjustment, TETRA may elect to exclude amounts
purchased hereunder that were in excess of *** of the
Base Amount, if any, from the amount of such actual
purchases.
4.1.2 BCL agrees to supply Product ordered by TETRA
hereunder, up to a maximum of *** of the Base Amount
for each year during the term hereof. If TETRA
requires more than *** of the Base Amount, BCL shall
not be obligated but shall have the right of first
refusal to supply *** of such excess, if a price can
be mutually agreed to by TETRA and BCL. *** .
4.2 Purchase Orders: TETRA shall fax or otherwise transmit
purchase orders or verbal instructions for firm quantities of
Product to BCL or its designated Affiliate. Each such
purchase order shall specify the requested (A) quantity of
Product, (B) delivery time, (C) destination, and (D) labeling
instructions and may include other specific shipping, freight
or delivery instructions. In the event of a conflict between
the terms of any purchase order of TETRA and this Agreement,
this Agreement shall control.
<PAGE> 4
5. DELIVERY AND ACCEPTANCE OF PRODUCTS
5.1 Shipping: Products will be shipped *** or as agreed upon by
both parties to the destination specified by TETRA in its
purchase order and approved by BCL.
5.2 Title and Risk of Loss: Title to and risk of loss of Products
sold pursuant to this Agreement shall pass to TETRA ***
5.3 Certificate of Analysis, Quality, Inspection and Acceptance:
BCL agrees to provide to TETRA, promptly after shipment, a
certificate of quality for each bulk shipment of Product sold
to TETRA hereunder with regard to the characteristics set
forth on the Specifications. All quantities of the Product
delivered Pursuant to this Agreement shall be subject to
inspection, sampling and sampling retainage by Tetra at the
time the Product is delivered to determine their material
conformity with the Specifications. If Product delivered does
not materially conform with the Specifications, TETRA shall
notify BCL of such non-conformity and shall promptly ship one
kilogram of the Product to BCL for evaluation. BCL shall
promptly evaluate such Product and, if BCL determines that, as
a result of BCL's act or omission, the quality of Product does
not conform Specifications, then BCL shall, at Tetra's option,
either (i) credit Tetra's account by an agreed-upon amount, or
(ii) replace the non-conforming product and BCL shall notify
TETRA as to whether to return the non-conforming Product to
BCL. BCL shall be responsible for all costs and related
expenses of return or disposal of non-conforming Product. In
the event TETRA and BCL disagree as to whether the conforms to
the Specifications, the parties agree that a sample of the
allegedly non-conforming Product shall be provided to an
independent testing laboratory as to the conformity of the
Product to the Specifications shall be binding upon the
parties. Credit of TETRA's account or replacement, at no
charge, of non-conforming quantities of the Product shall be
the sole and exclusive remedy of TETRA in the event of
non-conformance of the Product to the Specifications.
6. FORCE MAJEURE
6.1 No Default: The failure of either BCL or TETRA to perform its
obligations under this Agreement, if caused by "Force Majeure"
(as hereinafter defined), shall not constitute a default
hereunder nor subject the party so failing to any liability to
the other; provided, however, that the party affected by such
Force Majeure shall promptly notify the other of (i) the
existence of such Force Majeure, (ii) its expected duration,
(iii) the estimated effect such Force Majeure will have on the
affected party's ability to perform its obligations hereunder,
and (iv) when such Force Majeure circumstance has ceased to
affect its ability to perform its obligations hereunder.
6.2 Definition: As used herein, the term "Force Majeure" shall
mean and include any circumstance beyond the reasonable
control of the affected party, including
<PAGE> 5
without limitation, the following;. any act of God or the
public enemy, accident, explosion, fire, storm, earthquake,
flood, drought, perils of the sea, casualty, strikes, lockouts,
labor troubles (whether or not such labor trouble is within the
reasonable control of the party affected thereby), riots,
sabotage, embargo, war (whether or not declared and whether or
not the USA. or Israel is a participant), any applicable law,
regulation, order (whether of the USA. or otherwise) (including
laws, regulations and orders pertaining to protection of the
environment, licenses, priority, seizure or requisition),
failure or delay of transportation, and shortage of or
inability to purchase supplies (including from other companies
in the Israeli Chemicals Ltd. group), equipment, fuel or labor
and, ***.
6.3 Reasonable Efforts: BCL and TETRA shall each use all
commercially reasonable efforts to eliminate any circumstance
of Force Majeure which affects its ability to carry out its
responsibilities under this Agreement.
7. APPORTIONMENT
In the event of a shortage or anticipated shortage of Product
available to BCL for supply hereunder, BCL agrees to allocate the
amount of Product available to BCL to ensure that TETRA receives an
equitable portion thereof ***
8. RIGHT OF FIRST REFUSAL
TETRA hereby grants to BCL a right of first refusal during the term of
this Agreement to supply to TETRA and its Affiliates *** of all the
external requirements (as defined in Section 1 above) of brominated
clear brine fluids (other than Product) produced by Israeli Chemicals
Ltd. Group for oil and gas well applications ("CBF") of TETRA and its
Affiliates. TETRA will notify BCL of the quantities of the required
CBF and the price and other material terms at which TETRA is prepared
to purchase same. If TETRA has received a third party quote, it
shall submit same to BCL. BCL will have thirty (30) days to notify
TETRA of its agreement to supply such CBF at the specified price and
terms more favorable. ***
9. TERM, DEFAULT AND TERMINATION
9.1 Term: The term of this Agreement will commence as of January
1, 1996 and will extend *** unless terminated (i) by either
party at any time and for any reason, by giving at least ***
prior written notice to the other party, or (ii) according to
Section 9.4 below. In order to remove doubt this Agreement
shall continue to be in full force and effect during such
period of notice.
<PAGE> 6
9.2 Supply during Notice Period. In the event BCL terminates this
Agreement under Section 9.1 above, during the *** period
referred to in Section 9.1 above, prices for Product under this
Agreement shall be ***
9.3 Default: Either party shall be in default under this
Agreement if it fails to perform any of its undertakings or
obligations contained in this Agreement in any material
respect. Either party shall also be in default under this
Agreement if it makes an assignment for the benefit of its
creditors; files an action or petition for relief under
applicable bankruptcy or insolvency laws; has filed against it
an involuntary petition to have it declared bankrupt in which
it acquiesces or which is not being actively disputed by TETRA
within sixty (60) days from the date of such filing or the
appointment if a receiver for all or substantially al of its
business or assets.
9.4 Termination upon Default: Upon default by either party under
this Agreement, the non-defaulting party may give written
notice of its intention to terminate this Agreement detailing
the alleged default. The defaulting party shall have thirty
(30) days from the date of receipt of such notice to cure the
default. If the default is not cured within such (30) day
period, the non-defaulting party shall have the right to
terminate this Agreement immediately by giving written notice
thereof to the defaulting party. The failure of the
non-defaulting party to so terminate this Agreement shall not
preclude it from giving notice under this Section to the
defaulting party with regard to the same or similar defaults
at any time in the future.
9.5 Survival of Sections: Articles 10 and 11 shall survive
termination of this Agreement for any reason.
<PAGE> 7
9.6 Limitation of Liability: IN NO EVENT WILL EITHER PARTY TO
THIS AGREEMENT BE LIABLE TO THE OTHER FOR ANY INCIDENTAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER THE CLAIM
FOR DAMAGES IS BASED ON CONTRACT BREACH OF WARRANTY,
NEGLIGENCE, STRICT LIABILITY OR OTHERWISE.
10. INDEMNIFICATION
TETRA agrees to indemnify and hold BCL harmless from and against any
and all claims, damages and liabilities whatsoever, asserted by any
person or entity, resulting directly or indirectly from the use of the
Product either alone or in connection with TETRA's products.
11. CONFIDENTIALITY
11.1 Confidential Information: In this Section, "Confidential
Information" shall mean (I) any confidential or proprietary
information relating to the activities and business of either
of the parties that is disclosed during the term of this.
Agreement by either of the parties to the other in connection
with this Agreement and (ii) confidential or proprietary
information relating to technology or know-how that is
disclosed during the term of this Agreement by either of the
parties to the other that is disclosed to the other in
connection with this Agreement. Except as otherwise required
by law or court order or as expressly authorized in writing by
the party disclosing the Confidential Information (the
"Disclosing Party"), during the term of this Agreement and for
a period of *** following any termination of this Agreement,
the recipient of such information (the "Recipient") agrees to
hold all Confidential information received hereunder in strict
confidence and not to disclose it to any other person. In
addition, the Recipient agrees not to use any Confidential
Information except for the purposes contemplated by this
Agreement. The parties agree to hold in strict confidence and
not to disclose to any other person the existence and terms of
this Agreement, except as may be required by any applicable
law, rule or regulation, including any regulation of the
United States Securities and Exchange Commission or its
counterpart in Israel. However, this obligation of
nondisclosure shall not apply to such information which is
publicly disclosed as required by such applicable law, rule or
regulation.
11.2 Exclusions: The term "Confidential Information" shall not
include information (i) which was already in the possession of
the Recipient, as evidenced by its written records (including,
for this purpose, any information that is recorded on computer
readable media), at the time of disclosure pursuant to this
Agreement, (ii) which is lawfully received by the Recipient
after the date hereof from a third party which is not,
directly or indirectly, under a secrecy obligation to the
Disclosing Party, or (iii) which is, at the time of disclosure
to the Recipient, or
<PAGE> 8
subsequently becomes, public knowledge otherwise than through
a breach of the obligations of the Recipient under this
Agreement.
11.3 Permitted Disclosures: A party may disclose Confidential
information employees of any Affiliate who have a need to
carry out the responsibilities of the party under this
Agreement, provided that each recipient of such information:
11.3.1 shall be informed of the Recipient's obligations with
respect to such information pursuant to this
Agreement, and
11.3.2 shall be bound to comply with the terms of this
Agreement or the equivalent thereof.
11.4 Enforcement and Indemnity: Each party will, upon written
request from the other (i) enforce the provisions of this
Article 11 against an such employee (including a former
employee) who received Confidential Information during the
course of his or her employment with a party (an "Employee"),
or permit the Disclosing Party to enforce said provisions
against any such Employee on its behalf, and (ii) indemnify
the other party upon demand against all loss, damage,
liability or expense caused by wrongful disclosure or use of
Confidential information by such Employee.
12. MISCELLANEOUS
12.1 Affiliate: For the purposes of this Agreement, "Affiliate"
shall mean any entity (i) which owns, directly or indirectly,
at least 50% of the outstanding voting securities of a party
hereto, or (ii) at least 50% of whose outstanding voting
securities (or other ownership interests) are directly or
indirectly owned by a party hereto or by a person who directly
or indirectly owns at least 50% of the voting securities of a
party hereto.
12.2 Status of Parties: No agency, partnership or joint venture
relationship is or is intended to be created or implied by
this Agreement.
12.3 Severability: If any provision of this Agreement or the
application of any such provision to any party or
circumstances shall be determined by any court of competent
jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such
provision to such person or circumstances, other than those to
which it is so determined to be invalid and unenforceable
shall not be affected thereby, and each provision hereof shall
be validated and shall be enforced to the fullest extent
permitted by law.
12.4 Governing Law: This Agreement shall be governed, construed
and interpreted in accordance with the laws of England.
<PAGE> 9
12.5 Arbitration: Any disputes arising under or in
connection with the validity interpretation and
performance of this Agreement that cannot be resolved
amicably by the parties shall be finally settled in
arbitration before a single arbitrator. The parties
shall endeavor in good faith to mutually agree on the
selection of an arbitrator of commercial disputes
practicing in London, England. If the parties cannot
mutually agree on the selection of an arbitrator
within sixty (60) days of the request, they shall
apply to the London Chamber of Commercial Arbitration
to appoint one. The arbitrator thus selected shall
be empowered to adopt the procedural rules that will
govern the arbitration, but will be otherwise bound
by the substantive laws of England. The arbitration
proceeding shall be held in London, England.
Arbitration proceeding shall be conducted in the
English language and all documents submitted as
evidence in such proceedings shall be in the English
language. The arbitrator will be required to give
detailed reasons for his determination. The decision
of any such arbitrator shall be final and binding on
the parties.
Notwithstanding the aforesaid, the parties hereby acknowledge
that a breach by either party of this Agreement may not be
adequately compensated by monetary damages. Accordingly, in
the event of such a breach, the parties recognize that the
non-breaching party may have the immediate right to secure an
order from any competent court enjoining such breach. This
right shall be enforceable without prejudice to any other
rights the non-breaching party has in law or under this
Agreement.
12.6 Waiver: Any failure by either party to this Agreement to
comply with any of its obligations, agreements or covenants
hereunder may be expressly waived by the other party. No
waiver by any part of any of its rights hereunder shall be
construed as a waiver of such rights in connection with any
subsequent failure.
12.7 Entire Agreement: This Agreement, together with the
Appendices described herein and delivered in connection
herewith, embodies the entire Agreement and understanding of
the parties hereto and supersedes any prior agreements or
understanding, written or oral, and all discussions between
the parties. This Agreement can only be amended by a written
document duly executed by the parties and referencing that
this Agreement is being amended.
12.8 Headings: Headings of the Sections of this Agreement are for
reference purposes only and shall not be deemed to have any
substantive effect.
<PAGE> 10
12.9 Assignment: This Agreement is personal and may not be
assigned by either party without the prior written consent of
the other; which shall not be unreasonably withheld; provided,
however, that (i) BCL and TETRA may each assign any or all of
its obligations hereunder to any of their Affiliates (provided
that the assigning party remains ultimately responsible
according to this Agreement), (ii) TETRA may assign this
Agreement and its rights hereunder at any time during the term
hereof as security to any entity that provides financing to
TETRA (although any assignment by such entity upon foreclosure
must be approved by BCL in its reasonable discretion.
12.10 Binding Effect; Benefits: This Agreement shall inure to the
benefits of and be binding upon the parties hereto and their
respective successors and permitted assigns; provided,
however, that nothing in this Agreement shall be construed to
confer any rights, remedies, obligations or liabilities on any
person other than the parties hereto or their respective
successors and permitted assigns.
12.11 Notices: Any notice to be given under this Agreement shall be
in writing and may be delivered or be sent by prepaid
registered post sent airmail addressed to the party at the
address set forth on the first page of this Agreement.
Notices served by post shall be deemed served on the (14th)
business day after the date of posting. For this purpose,
"business day" means any day other than a Saturday, Sunday or
a day which is a public holiday in either Israel or the United
States. This Section shall not preclude the giving of notice
by other methods of instantaneous written communications,
including fax, which notices shall be deemed received within
forty-eight (48) hours after being successfully sent.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written:
BROMINE COMPOUNDS LTD. TETRA TECHNOLOGIES, INC.
By: /s/ [illegible] By: /s/ Michael L. Jeane
--------------------- --------------------------
Title: President Title: President and CEO
<PAGE> 11
APPENDIX A
SPECIFICATION
PRODUCT: CALCIUM BROMIDE ***
SYNONYMS/
ABBREVIATIONS:
DATE: 31/08/93
- -----
Appearance: Clear ***
Assay (as CaBr2) %: ***
Density 20/20 C G/ML: ***
Crystallization pt. C: ***
pH (1:10 Dilution): ***
Packing: Bulk
<PAGE> 12
APPENDIX B
(Section 3)
PRICING
***
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OR OTHER RELATED ENTITIES
TETRA International, Inc.
TETRA Technologies Fluids de Completacion y Servicios de Venezuela,
S.V., S.A.
TETRA Technologies (U.K.) Limited
TETRA Technologies de Mexico, S.A. de C.V.
TETRA Technologies Nigeria Ltd.
TETRA de Mexico, S.A. de C.V.
TETRA Applied Technologies, Inc.
Bay Barge Co., Inc.
TETRA Services, Inc.
P.F.I. Corporation
P.F.I. de Mexico, S.A. de C.V.
TETRA (U.K.) Limited
TETRA Europe Limited
TETRA Thermal, Inc.
RETEC/TETRA, L.C.
TETRA F.S.C. Limited
American MicroTrace Corporation
Seajay Industries, Inc.
Industrias Sulfamex, S.A. de C.V.
Impreval, S. de R.L. de C.V.
Merklin Systems, Inc.
Wilchem Corporation
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-3 (No. 33-99810), Registration Statement on Form S-4 (No. 33-80881) and
the Registration Statements on Form S-8 ( Nos. 33-41337, 33-35750, 33-76804,
33-76806, 333-04284 and 333-09889) of TETRA Technologies, Inc. of our report
dated February 19, 1997 with respect to the consolidated financial statements
and schedule of TETRA Technologies, Inc. and subsidiaries included in this
Annual Report on Form 10-K for the year ended December 31, 1996.
ERNST & YOUNG LLP
Houston, Texas
March 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,829
<SECURITIES> 0
<RECEIVABLES> 45,034
<ALLOWANCES> 1,266
<INVENTORY> 24,360
<CURRENT-ASSETS> 76,126
<PP&E> 107,604
<DEPRECIATION> 35,436
<TOTAL-ASSETS> 178,506
<CURRENT-LIABILITIES> 38,728
<BONDS> 24,688
0
0
<COMMON> 131
<OTHER-SE> 170,891
<TOTAL-LIABILITY-AND-EQUITY> 178,506
<SALES> 125,932
<TOTAL-REVENUES> 160,790
<CGS> 87,775
<TOTAL-COSTS> 112,146
<OTHER-EXPENSES> 27,863
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,250
<INCOME-PRETAX> 20,508
<INCOME-TAX> 7,371
<INCOME-CONTINUING> 13,137
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,137
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.97
</TABLE>
