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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998
Commission file number 0-18335
TETRA TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2148293
(State of incorporation) (I.R.S. Employer
Identification No.)
25025 I-45 NORTH, THE WOODLANDS, TEXAS 77380
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (281) 367-1983
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ---
As of November 7, 1998 there were 13,550,718 shares of the Company's
common stock, $.01 par value per share, issued and outstanding.
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ITEM 1. FINANCIAL STATEMENTS
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
($ THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 31,639 $ 40,796 $ 114,827 $ 110,295
Services 20,675 19,647 68,610 49,412
--------- --------- --------- ---------
TOTAL REVENUES 52,314 60,443 183,437 159,707
Cost of Revenues:
Cost of product sales 24,345 32,412 85,859 81,359
Cost of services 15,250 12,918 49,696 34,207
--------- --------- --------- ---------
Total Cost of Revenues 39,595 45,330 135,555 115,566
--------- --------- --------- ---------
GROSS PROFIT 12,719 15,113 47,882 44,141
General and Administrative Expense 10,144 11,798 29,844 28,534
--------- --------- --------- ---------
OPERATING INCOME 2,575 3,315 18,038 15,607
Interest Expense 1,809 799 4,473 2,095
Interest Income 41 48 112 155
Equity in Earnings from Joint Ventures 0 67 0 290
Other Income (expense) (168) 252 (507) 749
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 639 2,883 13,170 14,706
Provision for Income Taxes 248 1,173 5,130 5,717
--------- --------- --------- ---------
NET INCOME $ 391 $ 1,710 $ 8,040 $ 8,989
========= ========= ========= =========
NET INCOME PER SHARE $ 0.03 $ 0.13 $ 0.59 $ 0.67
========= ========= ========= =========
AVERAGE SHARES 13,551 13,391 13,577 13,325
========= ========= ========= =========
NET INCOME PER DILUTED SHARE $ 0.03 $ 0.12 $ 0.57 $ 0.63
========= ========= ========= =========
AVERAGE DILUTED SHARES 13,784 14,257 14,101 14,158
========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements
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TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
($ THOUSANDS) 1998 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,469 $ 2,839
Trade accounts receivable, net of allowance for doubtful
accounts of $889 in 1998 and $1,023 in 1997 61,349 56,893
Costs and estimated earnings in excess of billings
on incomplete contracts 6,707 4,021
Inventories 56,591 38,715
Deferred tax assets 1,309 1,444
Prepaid expenses and other current assets 4,863 6,012
--------- ---------
Total Current Assets 133,288 109,924
PROPERTY, PLANT AND EQUIPMENT:
Land and building 15,851 12,777
Machinery and Equipment 104,329 72,514
Automobiles and trucks 11,997 10,538
Chemical plants 47,722 46,791
Construction in progress 25,388 27,231
--------- ---------
205,287 169,851
Less accumulated depreciation and amortization (58,883) (48,868)
--------- ---------
Net Property, Plant, and Equipment 146,404 120,983
OTHER ASSETS:
Cost in excess of net assets acquired, net of accumulated
amortization of $2,326 in 1998 and $1,805 in 1997 26,378 24,983
Other, net of accumulated amortization of $3,252 in 1998
and $2,987 in 1997 7,741 7,902
--------- ---------
Total Other Assets 34,119 32,885
--------- ---------
$ 313,811 $ 263,792
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</TABLE>
See Notes to Consolidated Financial Statements
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TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
--------- ---------
($ THOUSANDS)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 26,819 $ 26,181
Accrued expenses 17,906 14,114
Billings in excess of costs and estimated
earnings on incomplete contracts 337 244
Current portions of all long-term debt and capital
lease obligations 1,057 1,309
--------- ---------
Total Current Liabilities 46,119 41,848
LONG-TERM DEBT, LESS CURRENT PORTION 114,000 77,000
CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION 1,313 1,525
DEFERRED INCOME TAXES 13,224 13,365
OTHER LIABILITIES 944 474
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share
40,000,000 shares authorized, with 13,609,418 shares
issued and outstanding in 1998 and 13,480,956 shares
issued and outstanding in 1997 136 135
Additional paid-in capital 77,279 75,902
Treasury stock, at cost, 58,700 shares in 1998 (736) --
Accumulated other comprehensive income (134) (86)
Retained earnings 61,666 53,629
--------- ---------
Total Stockholders' Equity 138,211 129,580
--------- ---------
$ 313,811 $ 263,792
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</TABLE>
See Notes to Consolidated Financial Statements
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TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------
($ THOUSANDS) 1998 1997
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 8,040 $ 8,989
Adjustments to reconcile net income to net cash
provided by operating activities :
Depreciation and amortization 11,829 8,104
Undistributed earnings from joint venture -- (290)
Provision for deferred income taxes (6) 245
Provision for doubtful accounts 72 124
Gain on sale of property, plant and equipment (50) (215)
Non-recurring charge 3,000
Changes in operating assets and liabilities,
net of assets acquired :
Trade accounts receivable (2,201) (11,575)
Costs and estimated earnings in excess
of billings on incomplete contracts (2,686) (1,311)
Inventories (17,577) (11,882)
Prepaid expenses and other current assets (1,178) (1,058)
Trade accounts payable and accrued expenses 4,430 7,706
Billings in excess of costs and estimated
earnings on incomplete contracts 93 (258)
Other 20 (1,456)
---------- ----------
Net cash provided by operating activities 786 123
---------- ----------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (36,825) (30,829)
Business combinations, net of cash acquired (2,112) --
Decrease in other assets 161 --
Proceeds from sale of property, plant and equipment 441 676
---------- ----------
Net cash used by investing activities (38,335) (30,153)
---------- ----------
FINANCING ACTIVITIES:
Net repayments and borrowings from short-term credit lines -- (2,202)
Proceeds from long-term debt and capital
lease obligations 38,650 34,987
Principal payments on long-term debt and capital
lease obligations (2,113) (4,400)
Proceeds from sale of common stock and exercised stock options 642 2,371
---------- ----------
Net cash provided by financing activities 37,179 30,756
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (370) 726
CASH & INVESTMENTS AT BEGINNING OF PERIOD 2,839 2,829
---------- ----------
CASH & INVESTMENTS AT END OF PERIOD $ 2,469 $ 3,555
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly owned. All significant
intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Rule 10-01 of Regulation S-X for interim financial
statements required to be filed with the Securities and Exchange Commission and
do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. However, the
information furnished reflects all normal recurring adjustments, which are, in
the opinion of management, necessary to a fair statement of the results for the
interim periods.
The accompanying financial statements should be read in conjunction
with the audited financial statements for the year ended December 31, 1997.
For the purposes of the statements of cash flows, the Company considers
all highly liquid cash investments with a maturity of three months or less to be
cash equivalents.
Interest paid on debt during the nine months ended September 30, 1998
and 1997 was $4,984,000 and $2,344,000, respectively.
Income tax payments made during the nine months ended September 30,
1998 and 1997 were $2,677,000 and $2,742,000, respectively.
NOTE B - COMMITMENTS AND CONTINGENCIES
The Company, its subsidiaries and other related companies are named
defendants in several lawsuits and respondents in certain governmental
proceedings arising in the ordinary course of business. While the outcome of
lawsuits or other proceedings against the Company cannot be predicted with
certainty, management does not expect these matters to have a material adverse
impact on the Company.
NOTE C - ACQUISITIONS
During the third quarter of 1998, the Company acquired from Cargill,
Inc., the assets of its calcium chloride facility located near Amboy,
California. The Business, which utilizes solar evaporation and other techniques
to produce three grades of calcium chloride from underground brine reserves,
will be integrated into the Specialty Chemicals Division. The Company paid
approximately $2.1 million cash for the assets of the facility. The excess
purchase price over the fair market value of the assets acquired was
approximately $1.9 million.
The Company completed two acquisitions during the third quarter of
1997. The outstanding stock of Perfco Wireline, Inc. and C & T Unlimited, Inc.
(collectively, "Perfco") was acquired in exchange for 146,116 shares of TETRA
stock valued at approximately $4.0 million, plus additional consideration
contingent upon future earnings. Perfco is an electric wireline service company
operating primarily in the Gulf Coast region and was integrated into the Oil &
Gas Services Division. The Company also acquired the remaining 50% interest in
its RETEC-TETRA L.C. joint venture that it did not previously own. RETEC-TETRA,
renamed TETRA Process Services L.C., will continue to be part of the Specialty
Chemicals Division. The Company paid approximately $8.8 million for the
remaining stock. The excess of the purchase price over the book value of the net
assets was approximately $3.9 million for Perfco and $3.0 million for
RETEC-TETRA.
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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 40 years. Pro forma
information for these acquisitions has not been presented, as such amounts are
not material.
NOTE D - NET INCOME PER SHARE
The following is a reconciliation of the weighted average number of
common shares outstanding with the number of shares used in the computations of
net income per common and common equivalent share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Number of weighted average
common shares outstanding ................ 13,550,718 13,390,690 13,577,055 13,235,120
Assumed exercise of stock options .......... 233,672 866,518 524,077 922,767
---------- ---------- ---------- ----------
Average diluted shares outstanding ......... 13,784,390 14,257,208 14,101,132 14,157,887
========== ========== ========== ==========
</TABLE>
In applying the treasury stock method to determine the dilutive effect
of the stock options outstanding during the third quarter of 1998, the average
market price of $13.41 was used.
NOTE E - NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income ("FAS 130"). FAS
130 establishes standards for reporting and display of comprehensive income, its
components and accumulated balances. Comprehensive income includes all changes
in equity except those resulting from investments by owners and distributions to
owners. Other comprehensive income for the Company includes cumulative foreign
currency translation adjustments. No taxes are provided because cumulative
translation adjustments are considered a component of permanently invested
unremitted earnings of subsidiaries outside the United States. Comprehensive
income for the three months ended September 30, 1998 and 1997 was $0.4 million
and $1.7 million, respectively and for the nine months ended September 30, 1998
and 1997 is $8.0 million and $8.5 million, respectively.
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities, which is
required to be adopted in years beginning after June 15, 1999. Because of the
Company's minimal use of derivatives, management does not anticipate that the
adoption of the new Statement will have a significant effect on earnings or the
financial position of the Company.
In April 1998, the AICPA issued SOP98-5, Reporting the Costs of
Start-up Activities. The SOP is effective beginning on January 1, 1999, and
requires that start-up costs capitalized prior to January 1, 1999 be written-off
and any future start-up costs to be expensed as incurred. The unamortized
balance of start-up costs will be written off as a cumulative effect of an
accounting change as of January 1, 1999. The Company estimates this amount to be
approximately $6 million.
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NOTE F - SHAREHOLDERS RIGHTS PLAN
On October 27, 1998, the Board of Directors adopted a stockholder
rights plan (the "Rights Plan") designed to assure that all of the Company's
shareholders receive fair and equal treatment in the event of any proposed
takeover of the Company. The Rights Plan helps to guard against partial tender
offers, open market accumulations and other abusive tactics to gain control of
the Company without paying an adequate and fair price in any takeover attempt.
The Rights are not presently exercisable and are not represented by separate
certificates. The Company is currently not aware of any effort of any kind to
acquire control of the Company.
Terms of the Rights Plan provide for a dividend distribution of one
Preferred Stock Purchase Right for each outstanding share of Common Stock to
holders of record at the close of business on November 6, 1998. The Rights Plan
would be triggered if an acquiring party accumulates or initiates a tender offer
to purchase 20% or more of the Company's Common Stock and would entitle holders
of the Rights to purchase either the Company's stock or shares in an acquiring
entity at half of market value. The Company would generally be entitled to
redeem the Rights at $.01 per Right at any time until the tenth day following
the time the Rights become exercisable. The Rights will expire on November 6,
2008.
For a more detailed description of the Rights Plan, refer to the
Company's Form 8-A filed with the Securities and Exchange Commission on October
28, 1998.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Three months ended September 30, 1998 compared with three months ended September
30, 1997.
Total revenues for the quarter ended September 30, 1998 were $52.3
million compared to $60.4 million in the prior quarter, a decrease of $8.1
million or 13%. The Oil & Gas Services Division's revenues were $32.3 million in
the 1998 quarter compared to $43.1 million in the 1997 quarter. The 25% decline
in revenues is substantially attributable to severe weather disruptions in the
Gulf of Mexico during the latter part of August and most of September. In
addition, spending reductions by the Division's oil and gas customers and
general weak market conditions have resulted in significantly reduced
utilization of new equipment placed into service this year. The Specialty
Chemicals Division revenues of $25.2 million, including intercompany, were up
21% from $20.8 million for the 1997 quarter. The Division's American Microtrace
operations reported significant revenue increases resulting from improved
volumes and pricing in the fertilizer markets. Additionally, the Process
Technologies group also turned in increased revenues from its filtration
business. The Division also benefited from the incorporation of the now wholly
owned TETRA Process Services.
Gross profits were $12.7 million in the 1998 quarter compared to $15.1
million in the 1997 quarter, for a decrease of $2.4 million or 16%. The gross
profit percentage of revenues was 24% in 1998 versus 25% in 1997. Gross profit
percentage improved in the Specialty Chemicals Division due in large part to the
dramatic turnaround accomplished at the American Microtrace plant. However,
reduced margins in the Oil & Gas Service Division's onshore and well abandonment
business negated these gains.
General and administrative expenses were $10.1 million in the third
quarter of 1998 compared to $11.8 million in the third quarter of 1997. The 1997
quarter included a $2.2 million write-off associated with the American
Microtrace operations. G&A costs increased in support of expanded international
and onshore operations of the Oil & Gas Services Division. During the quarter,
the Division has continued to implement various cost cutting and control
measures, including personnel reductions, in an effort to keep its G&A costs in
line with its anticipated revenue levels. The inclusion of expenses associated
with acquired operations also accounted for a portion of the increase. G&A
expenses as a percentage of revenues decreased from 20% in the 1997 quarter to
19% in the 1998 quarter.
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Operating income for the quarter ended September 30, 1998 was $2.6
million, down $.7 million or 21% from $3.3 million in 1997. This decrease is the
combined result of a gross margin decrease of $2.0 million due to volume, a $0.4
million decrease due the lower gross margin rates, and a $1.7 million decrease
in general and administrative expenses.
Interest expense increased approximately $1.0 million during the
current quarter compared to the prior year's quarter due to increased long-term
debt over the past twelve months in support of the Company's acquisition and
internal growth programs.
Net income after taxes for the three months ended September 30, 1998
was $.4 million, down from the prior year's quarter of $1.7 million. Net income
per diluted share was $0.03 in the 1998 quarter based on 13,784,000 average
diluted shares outstanding compared to earnings in 1997 of $0.12 based on
14,257,000 average diluted shares outstanding.
Nine months ended September 30, 1998 compared with nine months ended September
30, 1997.
For the period ended September 30, 1998, total revenues were $183.4
million, up $23.7 million or 15% over the 1997 period of $159.7 million. The Oil
& Gas Services Division's revenues of $115.8 million were up approximately 8%
over the prior year's total of $107.5 million. The well abandonment business
continues to suffer from weak market conditions while the domestic completion
fluid business was adversely impacted from the third quarter weather activity.
All other operations of the Division show revenue increases over the prior year.
International completion and PayZone(TM) Drill-In fluid sales and services,
wireline and well-testing businesses all provided significant revenue increases.
Revenues of the Specialty Chemicals Division were up approximately 30% over
1997, from $62.5 million, including intercompany, to $81.1 million in 1998.
Despite soft winter snow and ice melt demand, sales of dry calcium chloride
increased from the prior year. Also contributing with strong period-to-period
increases were the Process Technologies group, American Microtrace micronutrient
operations and Vapor Products consumer product sales. The Division's revenues
were also impacted favorably from the inclusion of the now wholly-owned TETRA
Process Services.
Gross profits were $47.9 million in the 1998 period compared to $44.1
million in the 1997 period, for an increase of $3.8 million or 9%. The gross
profit margin percentage from operations was 26% in 1998 versus 28% in 1997. The
Specialty Chemicals Division's gross profit percentage was up slightly from the
prior year. Substantially improved volumes and pricing at American Microtrace
helped offset reduced margins in the calcium chloride product line, the result
of market pricing pressures and product mix. The profit percentage was also down
in the Process Technologies group due to project and revenue mix. The gross
profit percentage of the Oil & Gas Services Division also declined in response
to the slowdown in the well abandonment business.
General and administrative expenses were $29.8 million in the 1998
period compared to $28.5 million in the 1997 period, for an increase of $1.3
million or 5%. The 1997 period includes the write-off of $2.2 million associated
with American Microtrace operations. G & A costs increased predominantly in
support of expanded onshore operations of the Oil & Gas Services Division and
for increased advertising of consumer products in the Specialty Chemicals
Division. The inclusion of expenses associated with acquired operations also
accounted for a portion of the increase. G & A expenses as a percentage of
revenues decreased from 18% in the 1997 period to 16% in the 1998 period.
Operating income for the nine months ended September 30, 1998 was $18.0
million, up $2.4 million or 15% from $15.6 million in 1997. This increase is the
combined result of a gross margin increase of $6.2 million due to increased
volume, a $2.5 million decrease due to the lower gross margin rates, and a $1.3
million increase in general and administrative expenses.
Interest expense increased approximately $2.4 million during the
current period compared to the prior year's period due to increased long-term
debt over the past twelve months in support of the Company's acquisition and
internal growth programs.
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For the nine-month period ending September 30, 1998, net income was $8
million, down 11% from the $9 million reported in 1997. Net income per diluted
share was $0.57 in 1998 on 14,101,000 average diluted shares outstanding
compared to earnings in 1997 of $0.63 based on 14,158,000 average diluted
outstanding shares outstanding.
LIQUIDITY AND CAPITAL RESOURCES
The Company's investment in working capital, excluding cash and cash
equivalents, increased to $84.7 million at September 30, 1998 compared to $65.2
million at December 31, 1997. Accounts receivables increased by $2.2 million,
principally in the Process Technologies business. Unbilled project costs of the
Process Technologies operations also increased by $2.7 million as a result of
increased activity in the water treatment business and a significant increase in
larger projects with longer durations. Inventories increased $17.9 million
during this period, primarily in the Oil & Gas Services Division. Inventories of
clear brine fluids along the Gulf of Mexico increased as did pipe inventories
associated with the Division's well abandonment business. In the Specialty
Chemicals Division, bromide inventories increased as the new TETRA/Dow Chemicals
plant at Ludington, Michigan came on-line and dry calcium chloride and feed and
fertilizer inventories increased due to the seasonality of the demand. Trade
payables and accrued expenses increased during the period by $4.4 million. Oil
and gas operations accounted for a substantial portion of this change resulting
from inventory increases and capital equipment acquired. Increased project and
construction costs in the specialty chemicals operations also contributed to
this increase.
To fund its capital and working capital requirements, the Company
uses cash flow as well as its general purpose, unsecured, prime rate/LIBOR-based
line-of-credit with a syndicate of banks led by NationsBank. As of September 30,
1998, the Company has $2 million in letters of credit and $114 million in
long-term debt outstanding against a $120 million line-of-credit, leaving a net
availability of $4 million. The line-of-credit matures in 2002. The Company also
has 4.6 million shares of TETRA common stock available under an S-4 Shelf
Registration Statement to finance its acquisitions.
Major investing activities include the acquisition of a calcium
chloride facility located near Amboy, California from Cargill, Inc. for
approximately $2.1 million. This plant utilizes solar evaporation to produce
calcium chloride from underground brine reserves.
Capital expenditures during the nine months ended September 30, 1998
totaled approximately $36.8 million. Significant components include new inland
water rigs, production testing equipment and well service equipment for the Oil
& Gas Services Division. The Specialty Chemicals Division's expenditures
included the ongoing construction of a new manganous oxide plant in Tampico,
Mexico, construction of a new liquid calcium chloride facility in West Virginia
and the completion of the first stage of the new TETRA/Dow Chemicals bromine
derivatives plant at Ludington, Michigan.
The Company believes that its existing funds, cash generated by
operations, 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 1998 and thereafter.
YEAR 2000
Many computer systems were designed and programmed in such a manner as to be
unable to recognize dates beyond December 31, 1999. In such cases, computer
applications could fail or create erroneous results by or at the year 2000 (the
"Year 2000 Issue").
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Management is currently evaluating the risks of a material effect on the
Company's results of operations and financial condition with respect to its
management information systems and the Year 2000 Issue. The Company uses
application software, including its accounting software, which has been
certified by vendors as being Year 2000 compliant. Additionally, the Company's
mainframe and network software has also been represented as Year 2000-compliant
by the suppliers. Accordingly, management does not believe that the Company's
results of operations or financial condition will be materially affected by any
future costs to make its management information system Year 2000-compliant.
In addition to management information systems, the Company's Year 2000 risks
include those related to "embedded technology", such as micro-controllers, and
to the Year 2000 Issues of third parties with which the Company has material
relationships. The Company has recently begun the initial phase of assessing
these risks. Program costs to comply with Year 2000 requirements are being
expensed as incurred and are not believed to be significant.
With respect to embedded technology, this phase includes surveying each of the
Company's facilities to determine which systems may be subject to disruptions.
These systems may include plant equipment and instrumentation and process
equipment. These systems are being modified as required and will be compliant by
mid 1999.
With respect to third parties, the Company is continuing to communicate with all
of its significant suppliers and customers to determine the likely extent to
which the Company may be affected by third parties' Year 2000 plans and target
dates. In this regard, while the Company does not have a current expectation of
a material loss as a result of the Year 2000 problem, there can be no guarantee
that the systems of other companies or counterparts on which the Company relies
will be remedied on a timely basis, or that a failure to remediate by another
party, or a remediation or conversion that is incompatible with the Company's
systems, would not have a material adverse effect on the Company. The Company
will develop contingency plans by the middle of 1999 to alter business
relationships in the event certain third parties fail to become Year 2000
compliant. Management is not presently aware of any Year 2000 issue related to
embedded technology or third parties that may adversely affect the Company.
CAUTIONARY STATEMENT FOR PURPOSES OF FORWARD LOOKING STATEMENTS
Certain statements contained herein and elsewhere may be deemed to be
forward-looking within the meaning of The Private Securities Litigation Reform
Act of 1995 and are subject to the "safe harbor" provisions of that act,
including without limitation, statements concerning future sales, earnings,
costs, expenses, acquisitions or corporate combinations, asset recoveries,
working capital, capital expenditures, financial condition, and other results of
operations. Such statements involve risks and uncertainties. Actual results
could differ materially from the expectations expressed in such forward-looking
statements. Some of the risk factors that could affect the Company's actual
results and cause actual results to differ materially from any such results that
might be projected, forecast, estimated or budgeted by the Company in such
forward-looking statements are set forth in the section titled "Certain Business
Risks" contained in the Company's report on Form 10-K for the year ended
December 31, 1997.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company, its subsidiaries and other related companies are named
defendants in several lawsuits and respondents in certain governmental
proceedings arising in the ordinary course of business. While the outcome of
lawsuits or other proceedings against the Company cannot be predicted with
certainty, management does not expect these matters to have a material adverse
impact on the Company.
ITEM 6. EXHIBITS
(a) Exhibits
(i) A statement of computation of per share earnings is included
in Note D of the Notes to Consolidated Financial Statements
included in this report and is incorporated by reference into
Part II of this report.
(b) Reports on Form 8-K: None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TETRA Technologies, Inc.
Date: November 12, 1998 By: [Geoffrey M. Hertel]
-------------------------
Geoffrey M. Hertel
Executive Vice President -
Finance and Administration
(Principal Financial Officer)
Date: November 12, 1998 By: [Bruce A. Cobb]
-------------------------
Bruce A. Cobb,
Corporate Controller
(Principal Accounting Officer)
-12-
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,469
<SECURITIES> 0
<RECEIVABLES> 62,238
<ALLOWANCES> 889
<INVENTORY> 56,591
<CURRENT-ASSETS> 133,288
<PP&E> 205,287
<DEPRECIATION> 58,883
<TOTAL-ASSETS> 313,811
<CURRENT-LIABILITIES> 46,119
<BONDS> 115,313
0
0
<COMMON> 136
<OTHER-SE> 138,075
<TOTAL-LIABILITY-AND-EQUITY> 313,811
<SALES> 31,639
<TOTAL-REVENUES> 52,314
<CGS> 24,345
<TOTAL-COSTS> 39,595
<OTHER-EXPENSES> 10,144
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,809
<INCOME-PRETAX> 639
<INCOME-TAX> 248
<INCOME-CONTINUING> 391
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 391
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
