It's because neither of the Pokémon your breeding have their Hidden Ability. You cannot pass down a Hidden Ability if you don't have one to start off with. Squirtle's Normal Ability is Torrent and Lotad's Second Ability is Rain Dish.
You can only get a Squirtle with it's Hidden Ability Rain Dish if you are breeding:
A Female Squirtle, Wartortle or Blastoise with a Male Pokémon in the same Egg Group either of them with their Hidden Ability.
A Male Squirtle, Wartortle or Blastoise with it's Hidden Ability with a Ditto in Generation VI.
Hope I helped :)