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TTI > SEC Filings for TTI > Form 10-Q on 9-May-2013All Recent SEC Filings

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Form 10-Q for TETRA TECHNOLOGIES INC


9-May-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Business Overview

An increase in consolidated revenues and gross profit for the quarter ended March 31, 2013, as compared to the prior year period, reflects the growth of our Fluids, Production Testing, and Compressco segments compared to the quarter ended March 31, 2012. Our Fluids Division growth in revenue and profitability was primarily due to increased offshore demand for its clear brine fluids (CBF) products. U.S. Gulf of Mexico drilling and completion activity, which increased steadily during 2012, continued at increased levels during the first quarter compared to the prior year period. In addition, the growth of our onshore frac water management business has also contributed increased revenues and profitability. Our Production Testing segment revenues increased compared to the prior year period, primarily reflecting the impact of our 2012 acquisitions, which generated approximately $22.8 million of increased revenues during the current year period. These acquisitions strategically expanded the geographic markets served and our services offered by our Production Testing segment. The impact of the increased revenues during the quarter from these acquired businesses was largely offset by the associated operating and administrative costs of the acquired businesses, as well as by decreased activity levels compared to the prior year period in certain other domestic markets in which the segment operates. Our Compressco segment also reported increased revenues and profitability compared to the prior year period, primarily due to increased activity in Latin America. The continuation or increase of current activity levels in Compressco's Latin America operations is dependent, however, on the resolution of specific uncertainties that could affect operations, including resolution of customer budget re-evaluations and the renewal of certain customer contracts. Offsetting a portion of the increases from these segments, our Offshore Services segment reported decreased revenues compared to the prior year period, primarily due to decreased activity levels for its dive services and heavy lift businesses. These businesses were negatively affected by weather delays and continuing market challenges during the quarter. Our Maritech segment also reported decreased profitability due to increased excess decommissioning costs, despite the positive impact of an insurance-related litigation settlement recorded during the current year period.

We continue to utilize our operating cash flows to extinguish Maritech's remaining decommissioning liabilities, fund capital expenditure activity, and further strengthen our consolidated balance sheet. During the three months ended March 31, 2013, we further reduced Maritech's remaining decommissioning liabilities to approximately $71.1 million, as compared to $87.4 million at December 31, 2012, the majority of which is expected be extinguished later during 2013. Approximately $26.4 million was expended during the current year quarter on capital expenditure activity for several of our existing businesses, and we continue to evaluate opportunities to further expand certain of our businesses through acquisitions. In addition, during the three months ended March 31, 2013, we repaid approximately $38.0 million of long-term debt under our revolving credit facility. In April 2013, we issued $35.0 million of new Series 2013 Senior Note debt, the proceeds of which were used to repay the maturity of the Series 2008-B Senior Note obligation. As of May 9, 2013, pursuant to our revolving credit facility, we have available borrowing capacity of approximately $254.7 million to supplement our operating cash flows and to fund future growth opportunities. Cash flows from operating activities increased compared to the prior year period, primarily due to the impact of efforts to improve accounts receivable collections. To further enhance our operating cash flows, we have taken steps during the first four months of 2013 to reduce operating and administrative expenses for several of our businesses, including a reduction in overall headcount. Together with the specific cost reduction steps taken by our Offshore Services segment in late 2012, and excluding the impact of severance costs associated with headcount reductions, these cost reduction efforts are expected to result in further increases in operating cash flows and profitability beginning in the second quarter of 2013.

Critical Accounting Policies

There have been no material changes or developments in the evaluation of the accounting estimates and the underlying assumptions or methodologies pertaining to our Critical Accounting Policies and Estimates disclosed in our Form 10-K for the year ended December 31, 2012. In preparing our consolidated financial statements, we make assumptions, estimates, and judgments that affect the amounts reported. We periodically evaluate these estimates and judgments, including those related to potential impairments of long-lived assets (including goodwill), the collectability of accounts receivable, and the cost of future abandonment and decommissioning obligations. Our estimates are based on historical experience and on future expectations that we believe are reasonable. The fair values of large portions of our total assets and liabilities are measured using significant unobservable inputs. The combination of these factors forms the basis for judgments made about the carrying values of assets and liabilities that are not readily apparent from other sources. These judgments and estimates may change as new events occur, as new information is acquired, and as changes in our operating environments are encountered. Actual results are likely to differ from our current estimates, and those differences may be material.


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