UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. - )
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TETRA TECHNOLOGIES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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Dear Fellow Stockholders:
We seek your support at our 2018 annual meeting of stockholders and ask that you vote:
FOR Proposal 3, the approval, by non-binding vote, of our named executive officer compensation as disclosed in our Proxy Statement for the 2018 annual meeting of stockholders (the “Say-on-Pay Proposal”).
In its 2018 report, Institutional Shareholder Services Inc. (“ISS”) recommended that its clients vote against the Say-on-Pay Proposal. The recommendations were primarily driven by a perceived “pay-for-performance misalignment.” We respectfully disagree with ISS’s recommendation for the reasons presented herein. As outlined in our Proxy Statement and this supplemental disclosure:
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TETRA executives’ pay aligns with performance and business strategy; |
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TETRA financial results are strong compared to peers; and |
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Our Compensation Committee is responsive to best practices and stockholder input. |
We value your support of TETRA and ask that you vote "FOR" the Say on Pay Proposal at our annual meeting.
Thomas R. Bates, Jr.,
Chairman of the Compensation Committee
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Pay for performance is integral to compensation philosophy at TETRA |
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Realized CEO pay in 2017 was half of target consistent with low Total Shareholder Return (“TSR”) |
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84% of target CEO pay is at risk |
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CEO pay ranks below midpoint of TETRA’s and ISS’ peers |
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Glass-Lewis supports Say on Pay proposal |
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Data shows TETRA’s performance exceeds CEO pay relative to TETRA’s and ISS’ peers |
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Industry downturn during 2014-2017 lead to low TSR |
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Significant accomplishments include: |
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Accretive acquisition in water management business (commenced in 2017 and completed in Q1 of 2018) |
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Sale of loss-generating TETRA Offshore Services division (commenced in 2017 and completed in Q2 of 2018) |
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Elimination of asset retirement obligations associated with Offshore Services (commenced in 2017 and completed in Q2 2018) |
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Strong balance sheet at TTI |
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Improved balance sheet at CCLP |
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Top quartile TSR relative to TETRA’s and ISS’ peers from 2015 to 2017 |
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Top quartile EBITDA growth in 2017 relative to TETRA’s and ISS’ peers |
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Enhancement to top management team |
FINANCIAL PERFORMANCE AND COMPENSATION PRACTICES
Compensation practices are aligned with business strategy
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In 2015, when the long-term performance-based incentive cash awards were made, the energy industry was facing the worst downturn in history. Oil prices fell from $115 to $26 a barrel. Many of TETRA’s peer companies did not survive. |
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Important to TETRA’s economic health was the ability to generate cash. The Compensation Committee (“Committee”) made Cumulative Free Cash Flow a metric for our long-term incentive (“LTI”) Cash awards (50% weight) |
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The second metric was relative TSR (“RTSR”) (50% weight) gauging relative performance. During the three year measurement period, many of our peers went bankrupt |
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Competitive equity grant structure including restricted share value was critical to navigating the downturn, ensuring key executives were extended material equity value to off-set lower overall pay |
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With wage reductions of approximately 20% and curtailment of certain benefits to preserve cash, time-based restricted share grants were used to drive retention value consistent with industry practice |
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NEOs have a large variable pay component of overall compensation |
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84% of CEO’s target total direct compensation is ‘at risk’ |
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Structure of TETRA compensation plans is well aligned with energy peers |
TETRA financial results are strong compared to peers
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Strong post-downturn revenue growth trend |
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Top quartile EBITDA growth performance vs. TETRA and ISS peer groups |
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Attained 87.2% of 2017 Adjusted EBITDA target resulting in a bonus for all management employees |
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2015-2017 relative TSR at 79th percentile against TETRA peers and 66th percentile against ISS peers |
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TETRA remained free cash flow positive throughout downturn |
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Highest operating cash flow of ISS identified peers |
CEO pay and TETRA TSR performance versus ISS peer group indicates performance significantly better than pay for three years ending in 2017
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Note: The chart above reflects an analysis by Pearl Meyer using the ISS reported peer group.
100% TSR PERFORMANCE -percentile rank (3 year) LOW PAY HIGH PERFORMANCE TTI HIGH PAY LOW PERFORMANCE 50% 0% 0% 50% 100% CEO PAY percentile rank (3 year)
TARGET VS. REALIZED COMPENSATION
2017 increase to CEO realized compensation driven by short-term incentive bonus payout resulting from strong Adjusted EBITDA performance and higher LTI Cash payout stemming from top quartile RTSR performance against TETRA peers.
$4,000 $3,000 $2,000 $1,000 StockOptionsRestrictedStockLong-termCashShort-termCashBaseSalaryTSR $120 $90 $60 $30 Total Compensation ($000) Total Shareholder Return (Indexed to $100) $0 $0 Target Realized Target Realized Target Realized FY2015 FY2016 FY2017