TETRA TECHNOLOGIES INC - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-18335

TETRA Technologies, Inc.

(Exact name of registrant as specified in its charter)

Delaware	74-2148293
(State of incorporation)	(IRS Employer Identification No.)

25025 Interstate 45 North, The Woodlands, Texas 77380

(Address of principal executive offices and zip code)

(281) 367-1983

(Registrant's telephone number, including area code)

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 TWELVE 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 WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN RULE 12b-2 OF THE EXCHANGE ACT). YES [ X ] NO [ ]

AS OF JUNE 30, 2003, THERE WERE 14,494,033 SHARES OUTSTANDING OF THE COMPANY'S COMMON STOCK, $0.01 PAR VALUE PER SHARE.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2003		2002		2003		2002

Revenues:
Product sales	$38,212		$28,897		$72,660		$58,020
Services	49,762		33,819		80,564		62,497
Total revenues	87,974		62,716		153,224		120,517

Cost of revenues:
Cost of product sales	27,257		20,731		52,219		41,328
Cost of services	35,990		25,700		62,928		47,393
Total cost of revenues	63,247		46,431		115,147		88,721
Gross profit	24,727		16,285		38,077		31,796

General and administrative expense	14,841		9,878		25,638		19,265
Operating income	9,886		6,407		12,439		12,531

Interest expense, net	69		597		277		1,260
Other income (expense)	(90	)	(265	)	493		120
Income before taxes and cumulative effect of change in accounting principle	9,727		5,545		12,655		11,391

Provision for income taxes	3,463		1,916		4,505		4,079

Income before cumulative effect of change in accounting principle	6,264		3,629		8,150		7,312

Cumulative effect of change in accounting principle, net of taxes	–		–		(1,464	)	–

Net income	$6,264		$3,629		$6,686		$7,312

Net income per share before cumulative effect of change in accounting principle	$0.43		$0.25		$0.56		$0.52
Cumulative effect per share of change in accounting principle	–		–		(0.10	)	–
Net income per share	$0.43		$0.25		$0.46		$0.52
Average shares	14,494		14,251		14,460		14,184

Net income per diluted share before cumulative effect of change in accounting principle	$0.41		$0.24		$0.54		$0.49
Cumulative effect per share of change in accounting principle	–		–		(0.10	)	–
Net income per diluted share	$0.41		$0.24		$0.44		$0.49
Average diluted shares	15,272		15,093		15,075		14,977

See Notes to Consolidated Financial Statements

TETRA Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands)

	June 30, 2003		December 31, 2002
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$621		$3,366
Restricted cash	247		1,753
Trade accounts receivable net of allowance for doubtful accounts of $2,418 in 2003 and $2,385 in 2002	84,316		58,544
Inventories	36,002		37,428
Deferred tax assets	2,642		3,284
Assets held for sale	1,031		1,304
Prepaid expenses and other current assets	9,177		7,064
Total current assets	134,036		112,743

Property, plant and equipment:
Land and building	14,740		13,085
Machinery and equipment	165,091		159,291
Automobiles and trucks	12,453		12,312
Chemical plants	36,841		36,135
O&G producing assets	38,236		30,300
Construction in progress	2,586		5,975
	269,947		257,098
Less accumulated depreciation and depletion	(108,977	)	(95,534	)
Net property, plant and equipment	160,970		161,564

Other assets:
Cost in excess of net assets acquired, net of accumulated amortization of $3,540 in 2003 and $3,540 in 2002	24,382		24,382
Patents, trademarks and other intangible assets, net of accumulated amortization of $5,526 in 2003 and $5,054 in 2002	6,135		6,471
Other assets	3,463		3,657
Total other assets	33,980		34,510
	$328,986		$308,817

See Notes to Consolidated Financial Statements

TETRA Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands)

	June 30 , 2003		December 31, 2002
	(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable	$31,857		$22,893
Accrued expenses	28,268		17,804
Current portions of all long-term debt and capital lease obligations	198		226
Total current liabilities	60,323		40,923

Long-term debt, less current portion	22,000		37,000
Capital lease obligation, less current portion	125		220
Deferred income taxes	26,832		25,721
Decommissioning liabilities	24,074		20,001
Other liabilities	4,317		800
Total long-term and other liabilities	77,348		83,742

Commitments and contingencies

Stockholders' equity:
Common stock, par value $0.01 per share; 40,000,000 shares authorized with 14,494,033 shares issued and outstanding at June 30, 2003 and 14,367,239 shares issued and outstanding at December 31, 2002	149		148
Additional paid-in capital	94,015		92,702
Treasury stock, at cost; 441,239 shares at June 30, 2003 and 437,684 shares at December 31, 2002	(7,354	)	(7,313	)
Accumulated other comprehensive income (loss)	(990	)	(194	)
Retained earnings	105,495		98,809
Total stockholders' equity	191,315		184,152
	$328,986		$308,817

See Notes to Consolidated Financial Statements

TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

	Six Months Ended June 30,
	2003		2002
Operating activities:
Net income	$6,686		$7,312
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, depletion, accretion and amortization	15,356		10,030
Provision for deferred income taxes	2,561		(30	)
Provision for doubtful accounts	224		511
Amortization of gain on leaseback	(101	)	(451	)
Gain on sale of property, plant and equipment	(644	)	(113	)
Cumulative effect of accounting change	1,464		–
Changes in operating assets and liabilities, net of assets acquired
Trade accounts receivable	(26,711	)	8,738
Inventories	1,426		(2,170	)
Prepaid expenses and other current assets	(2,164	)	(1,591	)
Trade accounts payable and accrued expenses	14,320		(4,442	)
Decommissioning liabilities	433		(4,506	)
Discontinued operations: working capital changes	–		580
Other	151		332
Net cash provided by operating activities	13,001		14,200

Investing activities:
Purchases of property, plant and equipment	(5,766	)	(12,272	)
Change in restricted cash	1,506		–
Decrease (increase) in other assets	435		(4,629	)
Proceeds from sale of property, plant and equipment	1,929		1,276
Net cash used by investing activities	(1,896	)	(15,625	)

Financing activities:
Proceeds from long-term debt and capital lease obligations	6,850		3,000
Principal payments on long-term debt and capital lease obligations	(21,973	)	(12,270	)
Proceeds from sale of common stock and exercised stock options	1,273		3,073
Net cash used in financing activities	(13,850	)	(6,197	)

Decrease in cash and cash equivalents	(2,745	)	(7,622	)
Cash and cash equivalents at beginning of period	3,366		13,115
Cash and cash equivalents at end of period	$621		$5,493

Supplemental cash flow information:
Capital lease obligations paid	$122		$242
Interest paid	995		1,358
Taxes paid	2,573		1,280

Supplemental disclosure of non-cash investing and financing activities:
O&G properties acquired through assumption of decomm. liabilities	9,427