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 SEPTEMBER 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 SEPTEMBER 30, 2003, THERE WERE 21,904,272 SHARES OUTSTANDING OF THE COMPANY'S COMMON STOCK, $0.01 PAR VALUE PER SHARE.

TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three Months Ended September 30,		Nine Months Ended September 30,
	2003	2002	2003		2002

Revenues:
Product sales	$32,576	$27,173	$99,871		$80,311
Services	58,494	27,771	137,858		89,019
Total revenues	91,070	54,944	237,729		169,330

Cost of revenues:
Cost of product sales	26,609	20,167	75,649		58,673
Cost of services	45,089	22,984	105,431		69,362
Total cost of revenues	71,698	43,151	181,080		128,035
Gross profit	19,372	11,793	56,649		41,295

General and administrative expense	9,646	10,016	33,707		27,653
Operating income	9,726	1,777	22,942		13,642

Interest expense, net	99	758	376		2,018
Other income (expense)	34	457	501		572
Income before taxes, discontinued operations and cumulative effect of change in accounting principle	9,661	1,476	23,067		12,196
Provision for income taxes	3,198	487	7,940		4,309
Income before discontinued operations and cumulative effect of change in accounting principle	6,463	989	15,127		7,887
Discontinued operations:
Income from discontinued operations, net of taxes	697	53	183		467
Net gain on disposal of discontinued operations, net of taxes	3,585	–	3,585		–
Income from discontinued operations	4,282	53	3,768		467
Net income before cumulative effect of accounting change	10,745	1,042	18,895		8,354
Cumulative effect of change in accounting principle, net of taxes	–	–	(1,464	)	–
Net income	$10,745	$1,042	$17,431		$8,354

Basic net income per common share:
Income before discontinued operations and cumulative effect of change in accounting principle	$0.30	$0.05	$0.70		$0.37
Income from discontinued operations	0.03	–	0.01		0.02
Net gain on disposal of discontinued operations	0.16	–	0.16		–
Cumulative effect of change in accounting principle	–	–	(0.07	)	–
Net income	$0.49	$0.05	$0.80		$0.39
Average shares outstanding	21,904	21,262	21,763		21,272

Diluted net income per common share:
Income before discontinued operations and cumulative effect of change in accounting principle	$0.28	$0.05	$0.66		$0.35
Income from discontinued operations	0.03	–	0.01		0.02
Net gain on disposal of discontinued operations	0.15	–	0.16		–
Cumulative effect of change in accounting principle	–	–	(0.07	)	–
Net income	$0.46	$0.05	$0.76		$0.37
Average diluted shares outstanding	23,326	22,127	22,853		22,351

See Notes to Consolidated Financial Statements

TETRA Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands)

	September 30, 2003		December 31, 2002
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$15,053		$2,374
Restricted cash	247		1,753
Trade accounts receivable net of allowance for doubtful accounts of $2,036 in 2003 and $2,355 in 2002	84,174		56,856
Inventories	34,006		36,702
Deferred tax assets	2,044		3,284
Assets of discontinued operations	2,081		16,153
Assets held for sale	1,031		1,304
Prepaid expenses and other current assets	6,397		6,964
Total current assets	145,033		125,390

Property, plant and equipment:
Land and building	14,522		12,761
Machinery and equipment	158,200		151,021
Automobiles and trucks	12,475		12,263
Chemical plants	36,841		36,135
O&G producing assets	39,526		30,300
Construction in progress	1,729		5,974
	263,293		248,454
Less accumulated depreciation and depletion	(114,560	)	(93,481	)
Net property, plant and equipment	148,733		154,973

Other assets:
Cost in excess of net assets acquired, net of accumulated amortization of $2,494 in 2003 and $2,494 in 2002	18,326		18,326
Patents, trademarks and other intangible assets, net of accumulated amortization of $5,754 in 2003 and $5,054 in 2002	5,907		6,471
Other assets	3,622		3,657
Total other assets	27,855		28,454
	$321,621		$308,817

See Notes to Consolidated Financial Statements

TETRA Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands)

	September 30 , 2003		December 31, 2002
	(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable	$33,457		$22,479
Accrued expenses	26,740		16,356
Liabilities of discontinued operations	117		1,862
Current portion of all long-term debt and capital lease obligations	190		226
Total current liabilities	60,504		40,923

Long-term debt, less current portion	–		37,000
Capital lease obligation, less current portion	84		220
Deferred income taxes	28,790		25,721
Decommissioning liabilities	24,123		20,001
Other liabilities	4,440		800
Total long-term and other liabilities	57,437		83,742

Commitments and contingencies

Stockholders' equity:
Common stock, par value $0.01 per share; 40,000,000 shares authorized; 22,557,130 shares issued at September 30, 2003 and 22,207,385 shares issued at December 31, 2002	226		222
Additional paid-in capital	95,326		92,628
Treasury stock, at cost; 652,858 shares held at September 30, 2003 and 656,526 shares held at December 31, 2002	(7,354	)	(7,313	)
Accumulated other comprehensive income (loss)	(758	)	(194	)
Retained earnings	116,240		98,809
Total stockholders' equity	203,680		184,152
	$321,621		$308,817

See Notes to Consolidated Financial Statements

TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

	Nine Months Ended September 30,
	2003		2002
Operating activities:
Net income	$17,431		$8,354
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, depletion, accretion and amortization	22,523		15,304
Loss on relinquishment of property	1,745		–
Provision for deferred income taxes	6,123		(30	)
Provision for doubtful accounts	(175	)	577
Gain on sale of property, plant and equipment	(727	)	(534	)
Net gain on disposal of discontinued operations	(3,585	)	–
Other non-cash charges and credits	(425	)	–
Cumulative effect of accounting change	1,464		–
Changes in operating assets and liabilities, net of assets acquired:
Trade accounts receivable	(28,060	)	21,077
Inventories	2,696		(1,372	)
Prepaid expenses and other current assets	500		(857	)
Trade accounts payable and accrued expenses	14,700		(17,366	)
Decommissioning liabilities	346		(5,471	)
Discontinued operations: non cash charges and working capital changes	(611	)	(473	)
Other	15		(188	)
Net cash provided by operating activities	33,960		19,021

Investing activities:
Purchases of property, plant and equipment	(8,490	)	(15,990	)
Business combinations, net of cash acquired	–		(11,100	)
Change in restricted cash	1,506		1,312
Decrease (increase) in other assets	417		(5,015	)
Proceeds from sale of subsidiary	17,902		–
Proceeds from sale of property, plant and equipment	2,063		3,081
Investing activities of discontinued operations	(169	)	(476	)
Net cash provided by (used in) investing activities	13,229		(28,188	)