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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 March 31, 2000
Commission file number 0-18335
TETRA TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2148293
(State of incorporation) (I.R.S. Employer
Identification No.)
25025 I-45 NORTH, THE WOODLANDS, TEXAS 77380
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (281) 367-1983
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X]. No [ ].
As of April 30, 2000 there were 13,564,462 shares of the Company's common
stock, $.01 par value per share, issued and outstanding.
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<PAGE>
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
---------------------------
($ THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999
-------- --------
Revenues:
Product sales .............................. $ 41,221 $ 37,865
Services ................................... 21,994 20,132
-------- --------
Total Revenues ......................... 63,215 57,997
Cost of Revenues:
Cost of product sales ...................... 34,702 30,451
Cost of services ........................... 15,635 13,402
-------- --------
Total Cost of Revenues ................. 50,337 43,853
-------- --------
Gross Profit ........................... 12,878 14,144
General and Administrative Expense ............. 10,132 10,521
Special Charge ................................. -- 4,745
-------- --------
Operating Income .................... 2,746 (1,122)
Gain on sale of Administration Building ........ -- 6,731
Interest Expense, net .......................... 1,567 2,213
Other Income (expense) ......................... (103) 107
-------- --------
Income Before Income Taxes and
cumulative effect of accounting change ..... 1,076 3,503
Provision for Income Taxes ..................... 390 1,400
-------- --------
Income before cumulative effect of
accounting change .......................... 686 2,103
Cumulative effect of accounting change
(net of income tax effect) ............... -- (5,782)
-------- --------
Net Income (loss) ............... $ 686 $ (3,679)
======== ========
Net Income per share before cumulative
effect of acounting change .................. $ 0.05 $ 0.16
Cumulative effect of accounting change ........ -- $ (0.43)
-------- --------
Net Income per share ........................... $ 0.05 $ (0.27)
======== ========
Average shares ................................. 13,554 13,521
======== ========
Net Income per diluted share before
cumulative effect accounting change ......... $ 0.05 $ 0.16
Cumulative effect of accounting change ........ -- $ (0.43)
-------- --------
Net Income per diluted share ................... $ 0.05 $ (0.27)
======== ========
Average diluted shares ......................... 13,736 13,555
======== ========
See Notes to Consolidated Financial Statements
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<PAGE>
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
($ THOUSANDS) 2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents .......................................... $ 2,581 $ 4,184
Restricted cash .................................................... 2,000 2,000
Trade accounts receivable, net of allowance for doubtful
accounts of $1,978 in 2000 and $1,868 in 1999 ................... 58,475 50,220
Inventories ........................................................ 52,740 57,020
Deferred tax assets ................................................ 4,483 4,483
Prepaid expenses and other current assets .......................... 7,019 3,701
--------- ---------
Total Current Assets .......................................... 127,298 121,608
Property, Plant and Equipment:
Land and building .................................................. 12,724 12,646
Machinery and Equipment ............................................ 112,794 112,026
Automobiles and trucks ............................................. 9,461 9,261
Chemical plants .................................................... 52,244 52,195
Construction in progress ........................................... 9,813 7,538
--------- ---------
197,036 193,666
Less accumulated depreciation and amortization ..................... (67,206) (63,555)
--------- ---------
Net Property, Plant, and Equipment ............................ 129,830 130,111
Other Assets: ........................................................... `
Cost in excess of net assets acquired, net of accumulated
amortization of $3,438 in 2000 and $3,210 in 1999 .............. 33,098 33,328
Other, net of accumulated amortization of $3,420 in 2000
and $3,309 in 1999 .............................................. 5,509 5,589
--------- ---------
Total Other Assets ............................................ 38,607 38,917
--------- ---------
$ 295,735 $ 290,636
========= =========
</TABLE>
See Notes ot Consolidated Financial Statements.
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<PAGE>
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
($ THOUSANDS) 2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable ............................................... $ 31,490 $ 25,939
Accrued expenses ..................................................... 16,699 17,729
Unearned revenue ..................................................... 1,002 1,002
Current portions of all long-term debt and capital
lease obligations .................................................. 724 2,232
--------- ---------
Total Current Liabilities ....................................... 49,915 46,902
Long-term Debt, less current portion ...................................... 76,000 74,000
Capital Lease Obligations, less current portion ........................... 584 1,026
Deferred Income Taxes ..................................................... 18,780 18,792
Other liabilities ......................................................... 242 495
Commitments and contingencies
Stockholders' Equity:
Common stock, par value $.01 per share
40,000,000 shares authorized, with 13,554,272 shares
issued and outstanding in 2000 and 13,529,201 shares
issued and outstanding in 1999 ..................................... 136 136
Additional paid-in capital ........................................... 78,236 77,988
Treasury stock, at cost, 94,000 shares in 2000 and in 1999 ........... (1,107) (1,107)
Accumulated other comprehensive income ............................... (496) (355)
Retained earnings .................................................... 73,445 72,759
--------- ---------
Total Stockholders' Equity ...................................... 150,214 149,421
--------- ---------
$ 295,735 $ 290,636
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------
($ THOUSANDS) 2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income ............................................................. $ 686 $ (3,679)
Adjustments to reconcile net income to net cash
provided by operating activities :
Depreciation and amortization ...................................... 4,055 4,175
Provision for deferred income taxes ................................ (12) (318)
Provision for doubtful accounts .................................... 223 153
Gain on sale of property, plant and equipment ..................... -- (20)
Special charges .................................................... -- 4,745
Gain on the sale of the administration building .................... -- (6,731)
Cumulative effect of accounting change, net of tax ................. -- 5,782
Changes in operating assets and liabilities,
net of assets acquired :
Trade accounts receivable ........................................ (8,478) (346)
Costs and estimated earnings in excess
of billings on incomplete contracts .......................... -- (857)
Inventories ..................................................... 4,280 963
Prepaid expenses and other current assets ....................... (3,318) (701)
Trade accounts payable and accrued expenses ..................... 4,521 2,877
Billings in excess of costs and estimated
earnings on incomplete contracts ............................. -- (531)
Other ........................................................... (34) (72)
-------- --------
Net cash provided by operating activities ........................ 1,923 5,440
-------- --------
Investing Activities:
Purchases of property, plant and equipment ............................ (3,790) (3,171)
Business combinations, net of cash acquired ........................... -- (11,658)
Decrease (increase) in other assets .................................. (34) (445)
Proceeds from sale of property, plant and equipment ................... -- 9,580
-------- --------
Net cash used by investing activities .............................. (3,824) (5,694)
-------- --------
Financing Activities:
Net repayments and borrowings from short-term credit lines ............ -- --
Proceeds from long-term debt and capital
lease obligations ................................................... 7,051 10,512
Principal payments on long-term debt and capital
lease obligations ................................................... (7,001) (11,042)
Proceeds from sale of common stock and exercised stock options ........ 248 62
-------- --------
Net cash provided by financing activities .......................... 298 (468)
-------- --------
Increase (decrease) in cash and cash equivalents ....................... (1,603) (722)
Cash & Cash Equivalents at Beginning of Period .......................... 4,184 2,803
-------- --------
Cash & Cash Equivalents at End of Period ................................ $ 2,581 $ 2,081
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly owned. All significant
intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Rule 10-01 of Regulation S-X for interim financial
statements required to be filed with the Securities and Exchange Commission and
do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. However, the
information furnished reflects all normal recurring adjustments, which are, in
the opinion of management, necessary to a fair statement of the results for the
interim periods.
The accompanying financial statements should be read in conjunction with
the audited financial statements for the year ended December 31, 1999.
For the purposes of the statements of cash flows, the Company considers
all highly liquid cash investments with a maturity of three months or less to be
cash equivalents.
Interest paid on debt during the three months ended March 31, 2000 and
1999 was $1,839,000 and $2,417,000, respectively.
Income tax payments made during the three months ended March 31, 2000 and
1999 were $67,000 and $25,300, respectively.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, REPORTING THE COSTS OF START-UP ACTIVITIES
("SOP 98-5"), which requires that costs related to start-up activities be
expensed as incurred. Prior to 1999, the Company capitalized those costs
incurred in connection with opening a new production facility. The Company
adopted the provisions of the SOP 98-5 in its financial statements for the year
ended December 31, 1999. The effect of adoption of SOP 98-5 was to record a
charge for the cumulative effect of an accounting change of $5.8 million ($0.43
per share), net of taxes of $3.9 million, to expense costs that had been
previously capitalized prior to 1999.
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which is
required to be adopted in years beginning after June 15, 2001. Because of the
Company's minimal use of derivatives, management does not anticipate the
adoption of the new Statement will have a significant effect on earnings or the
financial position of the Company.
NOTE B - COMMITMENTS AND CONTINGENCIES
The Company, its subsidiaries and other related companies are named
defendants in several lawsuits and respondents in certain governmental
proceedings arising in the ordinary course of business. While the outcome of
lawsuits or other proceedings against the Company cannot be predicted with
certainty, management does not expect these matters to have a material adverse
impact on the Company.
NOTE C - ACQUISITIONS AND DISPOSITIONS
In January 1999, the Company acquired WyZinCo, Inc., CoZinCo Sales, Inc.
and certain assets of CoZinCo, Inc. for approximately $11.7 million in cash and
notes. The acquisition, which was accounted for under the purchase method of
accounting, was funded primarily through the Company's credit facility and the
sale of its corporate headquarters building. The excess of purchase price over
the fair value of assets acquired was approximately $8.3 million. The
acquisition will significantly expand the Company's presence in the
micronutrients market.
In March 1999, the Company sold its corporate headquarters building
realizing a pretax gain of approximately $6.7 million. The Company subsequently
signed a ten-year lease agreement for space within the building.
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<PAGE>
NOTE D - NET INCOME PER SHARE
The following is a reconciliation of the weighted average number of common
shares outstanding with the number of shares used in the computations of net
income per common and common equivalent share:
THREE MONTHS ENDED
MARCH 31
2000 1999
---------- ----------
Number of weighted average
common shares outstanding ................ 13,554,272 13,520,968
Assumed exercise of stock options .......... 182,086 33,541
---------- ----------
Average diluted shares outstanding ......... 13,736,358 13,554,509
========== ==========
In applying the treasury stock method to determine the dilutive effect of
the stock options outstanding during the first quarter of 2000, the average
market price of $9.70 was used.
NOTE E - COMPREHENSIVE INCOME (LOSS)
Comprehensive income for the three months ended March 31, 2000 and 1999 is
as follows:
THREE MONTHS ENDED
MARCH 31
2000 1999
------- -------
Net Income (loss) ........................... $ 686 $(3,679)
Translation Adjustment ...................... 141 (145)
------- -------
Comprehensive Income (loss) .............. $ 827 $(3,824)
======= =======
NOTE F - INDUSTRY SEGMENTS
The Company continues to manage its business in two segments: Oil & Gas
Services and Chemicals. The Oil & Gas Services segment provides a broad range of
products and services to its customers in the energy industry. The Chemicals
segment manufactures and markets a variety of commercial products which are
produced from low-cost feedstocks.
During the fourth quarter of 1999, the Company implemented a strategic
restructuring program to refocus its effort in the energy services business.
This program will concentrate the Company's efforts on developing its oil and
gas services business and will sell or consolidate non-core operations. To
achieve this strategy, the Company is actively pursuing the disposition of its
micronutrients business, as well as several smaller chemicals-relate operations.
Additionally, the Company has implemented plans to exit certain product lines
and businesses which are not core to its new strategic direction. The remaining
chemicals business will consist primarily of a commodity products based
operations which significantly supports the energy service markets.
The Company evaluates performance and allocates resources based on profit
or loss from operations, excluding special charges and before income taxes. The
accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies. Transfers between segments,
as well as geographic areas, are priced at the estimated fair value of the
products or services as negotiated between the two operating units. Other
includes corporate expenses and elimination of intersegment revenues.
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<PAGE>
In 1999, the management reporting responsibilities for TETRA Process
Services were transferred from the Chemicals Division to the Oil & Gas Services
Division. The amounts in the table below have been restated to reflect this
transfer. Summarized financial information concerning the business segments is
as follows:
<TABLE>
<CAPTION>
OIL & GAS
SERVICES CHEMICALS
DIVISION DIVISION OTHER CONSOLIDATED
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 2000
Revenues from external customers ................ $ 38,449 $24,765 $ -- $ 63,214
Intersegmented revenues ......................... 18 4,702 (4,720) --
-------- -------- -------- --------
Total revenues .............................. 38,467 29,467 (4,720) 63,214
Income Before Taxes ............................. 3,727 1,078 (3,729) 1,076
Total Assets .................................... $154,828 $133,297 $ 7,610 $295,735
THREE MONTHS ENDED MARCH 31, 1999
Revenues from external customers ................ $ 32,723 $ 25,274 $ -- $ 57,997
Intersegmented revenues ......................... 128 3,180 (3,308) --
-------- -------- -------- --------
Total revenues .............................. 32,851 28,454 (3,308) 57,997
Income before Taxes and cumulative effect
of accounting change ........................ 2,989 2,453 (1,939)(1) 3,503
Total Assets .................................... $152,974 $149,536 $ 5,442 $307,952
</TABLE>
(1) Includes gain on the sale of corporate headquarters building of $6,731,
special charge of $4,745 and excludes the cumulate effect of accounting change
of $5,782, net of taxes. Substantially all of the special charge relates to the
Chemicals Division.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Three months ended March 31, 2000 compared with three months ended March 31,
1999.
Total revenues for the quarter ended March 31, 2000 were $63.2 million
compared to $58.0 million in the prior period, an increase of $5.2 million or
9.0%. Revenues from the Oil & Gas Services Division were $38.5 million, up
approximately $5.6 million or 17.0% from the 1999 level of $32.9 million. The
largest revenue growth came in the onshore product line with the Company
realizing much improved equipment utilization, particularly in the plug and
abandonment operations. The Process Services segment also showed strong revenue
improvement offsetting a still sluggish domestic clear brines fluids market.
Chemicals Division revenues for the first quarter were $29.5 million, including
intercompany, up $1.0 million or 3.5% over the first quarter 1999 total of $28.5
million. The 1999 quarter revenues included approximately $3.2 million from the
Process Technologies business, which was sold during the second quarter of 1999.
The Chemicals Division revenues increased in every major product line. The
chlorides business was up on the strength of much improved liquid calcium
chloride volumes. The micronutrients business increased as a result of
significantly improved zinc sulfate fertilizer sales, while the bromines
business improved due to significant increases in zinc bromine sales into
oilfield markets.
Gross profits were $12.9 million in 2000 compared to $14.1 million in
1999, a decrease of $1.2 million or 8.5%. Gross profit as a percentage of
revenues was 20.4% in 2000 versus 24.4% in 1999. Gross profits in the Oil & Gas
Services Division increased, with the profit percentage also improving slightly.
Rig utilization in the plug and abandonment/decommissioning business has
improved substantially over the prior year, generating greatly improved
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<PAGE>
profits. However, pricing pressures in the Gulf Coast fluids business have
reduced the profitability of this product line and somewhat offset the profit
percentage growth of the Division. Excluding the profits from Process
Technologies, the Chemicals Division gross profits and profits percentage
declined quarter-to-quarter. A significant portion of this decrease came in the
micronutrients business where gross profits were down due to pricing pressures
in the feed markets and higher production costs caused by reduced production
rates at the Cheyenne, Wyoming plant.
General and administrative expenses were $10.1 million, down from $10.5
million in the prior year.
The Company recorded a special charge in the quarter ended March 31, 1999
of $4.7 million related to the following:
In March 1999, the Company was verbally notified of the early termination
of a significant liquid calcium chloride contract. The Company was subsequently
notified in writing. Under the terms of the contract, the Company is required to
terminate its operations at that location and vacate the facility within two
years from the date of written notification. The Company is also required to
remove all of its equipment and fixtures, at its own cost. As a result of the
early termination of the contract, the Company recorded an impairment of these
Chemicals Division assets of approximately $1.4 million. These assets are
currently in service through the end of the contract.
Also during the first quarter of 1999, the Company committed to certain
actions which resulted in the impairment of other plant assets in the Company's
Chemicals Division. As a result of increased production volumes achieved at the
new calcium chloride dry plant in Lake Charles, Louisiana, the Company no longer
needed the previously existing dry plant and has subsequently dismantled it,
resulting in an impairment charge of approximately $1.8 million. In addition,
the Company recently completed modifications on the West Memphis, Arkansas
bromine plant. The assets related to the old zinc bromide production unit, which
had a carrying value of approximately $0.4 million, were taken out of service in
the first quarter of 1999. The abandoned assets of both plant facilities were
written off during the quarter of 1999. Finally, the Company recognized the
impairment of certain micronutrients' assets totaling approximately $1.1
million. These assets were deemed impaired with the acquisitions of the WyZinCo
Company and the CoZinCo assets and were written off during the first quarter of
1999.
During the fourth quarter of 1999, the Company implemented a strategic
restructuring program to refocus its effort in the energy services business.
Under this program, the Company will concentrate its efforts on developing its
oil and gas services business and will sell or consolidate non-core operations.
To achieve this strategy, the Company is actively pursuing the disposition of
its micronutrients business, as well as several smaller operations.
Additionally, the Company has implemented plans to exit certain product lines
and businesses which are not core to its new strategic direction. The remaining
chemicals business will consist primarily of a commodity products based
operations, which significantly supports the energy service markets. The Company
has also embarked on an aggressive program to reorganize its overhead structure
to reduce costs and improve operating efficiencies in support of the energy
services operations.
As a result of this change in strategy, the Company recorded a $2.3
million, pretax, restructuring charge in the fourth quarter of 1999. The
following table details the activity in the restructuring during the first
quarter of 2000.
12/31/99 03/31/00
LIABILITY CASH LIABILITY
BALANCE PAYMENTS BALANCE
--------- -------- ---------
Involuntary termination costs ........ $1,170 $ 280 $ 890
Contractual costs .................... 760 -- 760
Exit costs ........................... 390 -- 390
------ ------ ------
$2,320 $ 280 $2,040
====== ====== ======
Involuntary termination costs consist of severance costs associated with
the termination of six management level employees associated with the Company's
restructuring. Contractual costs include obligations triggered in two chemicals
product lines when the Company decided to exit these businesses. The Company is
currently operating under a sublease agreement which expires in July 2000. The
remaining exit costs are additional liabilities realized by exiting certain
portions of the specialty chemicals business. Of the total restructuring charge
at December 31, 1999, approximately $1.7 million is associated with the
Chemicals Division, $0.1 million with the Oil & Gas Services
- 8 -
<PAGE>
Division and $0.5 million with corporate administrative activities. The majority
of the costs are expected to be paid within the next 18 months and will be
funded using cash flow from operations. These restructuring activities may
result in additional expenses to be incurred in 2000, which the Company is
unable to quantify at this time.
Operating income for the quarter ended March 31, 2000 was $2.7 million
compared to a loss of ($1.1) million in 1999. The increase in earnings
quarter-to-quarter reflects improved oil and gas profitability, a first quarter
1999 special charge of $4.7 million, netted by a loss of earnings in the current
quarter associated with the sale of TETRA Process Technologies in 1999 and
reduced micronutrient earnings.
Interest expense decreased during the current quarter compared to the
prior year's quarter, due to decreased long-term debt over the past twelve
months.
In March 1999, the Company sold its corporate headquarters building
realizing a gain of approximately $6.7 million. The Company subsequently signed
a ten-year lease agreement for space within the building.
Net income before cumulative effect of accounting change was $0.7 million
in 2000 and $2.1 million in 1999. Net income per diluted share before the
cumulative effect of accounting change was $0.05 in 2000 based on 13,736,000
average diluted shares outstanding and $0.16 in 1999 based on 13,555,000 average
diluted shares outstanding.
In April 1998, the American Institute of Certified Public Accountants
issued STATEMENT OF POSITION 98-5, REPORTING THE COSTS OF START-UP ACTIVITIES,
which requires that costs associated with start-up activities be expensed as
incurred. Prior to 1999, the Company capitalized those costs incurred in
connection with opening a new production facility. The Company adopted the
provisions SOP 98.5 in its financial statements for the year ended December 31,
1999. The effect of adoption of SOP 98-5 was to record a charge for the
cumulative effect of an accounting charge of $5.8 million ($0.43 per share), net
of taxes of $3.9 million, to expense costs that had been previously capitalized
prior to 1999.
After the cumulative effect adjustments, the Company reported a net loss
of $3.7 million or $(0.27) per share in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's investment in working capital, excluding cash, cash
equivalents and restricted cash increased to $72.8 million at March 31, 2000
from $68.5 million at December 31, 1999. Working capital decreased $6.7 million
with the sale of TETRA Process Technologies. Accounts receivables increased
approximately $8.5 million, primarily in the micronutrients area as a result of
the seasonal increase in sales volumes. Inventories were down $4.3 million,
mainly in the chlorides and micronutrients operations resulting from increased
activity. Prepaid expenses increased as a result of seasonal insurance and
advertising expenses and advance payments made for chemicals inventories.
Finally, accounts payables and accrued expenses increased in the Gulf Coast and
Chemicals area due to increased inventory purchases to support increased sales
activity.
To fund its capital and working capital requirements, the Company uses
cash flow as well as its general purpose, unsecured prime rate/LIBOR-based
line-of-credit with a syndicate of banks led by Bank of America. As of March 31,
1999, the Company has $3.3 million in letters of credit and $76.0 million in
long-term debt outstanding. The line-of-credit matures in 2002.
The Company's credit facility is subject to typical financial ratio
covenants. These include, among others, a debt to EBITDA ratio, a fixed charge
coverage ratio, a net worth minimum and dollar limits on the total amount of
capital expenditures and acquisitions the Company may undertake in any given
year. The Company has amended its existing credit facility to include an
asset-based component of up to $50 million and a term component of up to $50
million secured with property and equipment. The Company believes this new
credit facility will meet all its capital and working capital requirements. The
new financial covenants, which are effective December 31, 1999, are consistent
with its 2000 business plan.
Capital expenditures during the three months ended March 31, 2000 totaled
approximately $3.8 million. Significant components include purchase of
additional Process Services equipment, oil and gas production testing equipment
and production equipment for the Company's Damp Rid(R) consumer products
business.
- 9 -
<PAGE>
The Company believes that its existing funds, cash generated by
operations, funds available under its recently negotiated bank line-of-credit,
as well as other traditional financing arrangements, such as secured credit
facilities, leases with institutional leasing companies and vendor financing,
will be sufficient to meet its current and anticipated operations and its
anticipated capital expenditures through 2000 and thereafter.
YEAR 2000
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. The Company experienced no significant disruptions in
information technology or any other systems. The Company is not aware of any
material problems resulting from Year 2000 issues, either with its products, its
internal systems, or the products and services of third parties. The Company
expensed approximately $250,000 during 1999 in connection with remediation its
systems. The Company will continue to monitor its mission critical computer
applications and those of its suppliers and vendors throughout the year to
ensure that any latent Year 2000 matters that may arise are addressed promptly.
CAUTIONARY STATEMENT FOR PURPOSES OF FORWARD LOOKING STATEMENTS
Certain statements contained herein and elsewhere may be deemed to be
forward-looking within the meaning of The Private Securities Litigation Reform
Act of 1995 and are subject to the "safe harbor" provisions of that act,
including without limitation, statements concerning future sales, earnings,
costs, expenses, acquisitions or corporate combinations, asset recoveries,
working capital, capital expenditures, financial condition, and other results of
operations. Such statements involve risks and uncertainties. Actual results
could differ materially from the expectations expressed in such forward-looking
statements. Some of the risk factors that could affect the Company's actual
results and cause actual results to differ materially from any such results that
might be projected, forecast, estimated or budgeted by the Company in such
forward-looking statements are set forth in the section titled "Certain Business
Risks" contained in the Company's report on Form 10-K for the year ended
December 31, 1999.
- 10 -
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company, its subsidiaries and other related companies are named
defendants in several lawsuits and respondents in certain governmental
proceedings arising in the ordinary course of business. While the outcome of
lawsuits or other proceedings against the Company cannot be predicted with
certainty, management does not expect these matters to have a material adverse
impact on the Company.
ITEM 6. EXHIBITS
(a) Exhibits
A statement of computation of per share earnings is included in Note D
of the Notes to Consolidated Financial Statements included in this
report and is incorporated by reference into Part II of this report.
(b) Reports on Form 8-K: None
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<PAGE>
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: May 12, 2000 By: [GEOFFREY M. HERTEL]
Geoffrey M. Hertel
Chief Operating Officer
Chief Financial Officer
(Principal Financial Officer)
Date: May 12, 2000 By: [BRUCE A. COBB]
Bruce A. Cobb,
Corporate Controller
(Principal Accounting Officer)
- 12 -
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