TETRA TECHNOLOGIES INC 10-Q

Item 1. Financial Statements. 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, 2021 2020 2021 2020 Revenues: Product sales $ 46,340 $ 50,009 $ 153,955 $ 187,475 Services 49,134 23,475 121,169 114,782 Total revenues 95,474 73,484 275,124 302,257 Cost of revenues: Cost of product sales 31,805 32,342 106,265 122,661 Cost of services 39,614 21,225 102,976 95,628 Depreciation, amortization, and accretion 8,308 9,657 25,495 28,934 Impairments and other charges — 97 449 97 Insurance recoveries — ( 52 ) ( 110 ) ( 126 ) Total cost of revenues 79,727 63,269 235,075 247,194 Gross profit 15,747 10,215 40,049 55,063 General and administrative expense 18,714 16,123 56,077 60,333 Interest expense, net 4,083 4,338 12,373 14,234 Warrants fair value adjustment expense (income) ( 3,164 ) — ( 143 ) ( 327 ) Other income, net ( 6,968 ) ( 788 ) ( 14,295 ) ( 1,308 ) Income (loss) before taxes and discontinued operations 3,082 ( 9,458 ) ( 13,963 ) ( 17,869 ) Provision for income taxes 587 101 2,139 1,877 Income (loss) before discontinued operations 2,495 ( 9,559 ) ( 16,102 ) ( 19,746 ) Discontinued operations: Income (loss) from discontinued operations, net of taxes 18 ( 12,039 ) 120,882 ( 49,195 ) Net income (loss) 2,513 ( 21,598 ) 104,780 ( 68,941 ) Less: (income) loss attributable to noncontrolling interest (1) — 8,296 ( 306 ) 32,833 Net income (loss) attributable to TETRA stockholders $ 2,513 $ ( 13,302 ) $ 104,474 $ ( 36,108 ) Basic net income (loss) per common share: Income (loss) from continuing operations $ 0.02 $ ( 0.08 ) $ ( 0.13 ) $ ( 0.16 ) Income (loss) from discontinued operations — ( 0.02 ) 0.96 ( 0.13 ) Net income (loss) attributable to TETRA stockholders $ 0.02 $ ( 0.10 ) $ 0.83 $ ( 0.29 ) Weighted average basic shares outstanding 126,733 125,893 126,489 125,789 Diluted net income (loss) per common share: Income (loss) from continuing operations $ 0.02 $ ( 0.08 ) $ ( 0.13 ) $ ( 0.16 ) Income (loss) from discontinued operations — ( 0.02 ) 0.96 ( 0.13 ) Net income (loss) attributable to TETRA stockholders $ 0.02 $ ( 0.10 ) $ 0.83 $ ( 0.29 ) Weighted average diluted shares outstanding 128,694 125,893 126,489 125,789 (1) (Income) loss attributable to noncontrolling interest includes zero and $ 8,342 loss for the three-month periods ended September 30, 2021 and 2020, respectively, and $ 333 income and $ 32,957 loss for the nine-month periods ended September 30, 2021 and 2020, respectively, related to discontinued operations. See Notes to Consolidated Financial Statements 1 Table of Contents TETRA Technologies, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) (In Thousands) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net income (loss) $ 2,513 $ ( 21,598 ) $ 104,780 $ ( 68,941 ) Foreign currency translation adjustment from continuing operations, net of taxes of $ 0 in 2021 and 2020 ( 2,150 ) 2,874 ( 2,772 ) ( 2,498 ) Comprehensive income (loss) 363 ( 18,724 ) 102,008 ( 71,439 ) Less: Comprehensive income (loss) attributable to noncontrolling interest — 8,229 ( 306 ) 32,880 Comprehensive income (loss) attributable to TETRA stockholders $ 363 $ ( 10,495 ) $ 101,702 $ ( 38,559 ) See Notes to Consolidated Financial Statements 2 Table of Contents TETRA Technologies, Inc. and Subsidiaries Consolidated Balance Sheets (In Thousands) September 30, 2021 December 31, 2020 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 41,863 $ 67,252 Restricted cash — 65 Trade accounts receivable, net of allowances of $ 414 in 2021 and $ 6,824 in 2020 79,118 64,078 Inventories 72,286 76,658 Assets of discontinued operations — 710,006 Prepaid expenses and other current assets 16,121 13,487 Total current assets 209,388 931,546 Property, plant, and equipment: Land and building 26,405 26,506 Machinery and equipment 343,181 365,296 Automobiles and trucks 16,335 18,446 Chemical plants 61,374 62,714 Construction in progress 4,575 1,526 Total property, plant, and equipment 451,870 474,488 Less accumulated depreciation ( 364,522 ) ( 377,632 ) Net property, plant, and equipment 87,348 96,856 Other assets: Patents, trademarks and other intangible assets, net of accumulated amortization of $ 69,186 in 2021 and $ 66,078 in 2020 38,071 41,487 Deferred tax assets, net 44 52 Operating lease right-of-use assets 38,795 43,448 Investments 22,412 2,675 Other assets 15,178 16,775 Total other assets 114,500 104,437 Total assets $ 411,236 $ 1,132,839 See Notes to Consolidated Financial Statements 3 Table of Contents TETRA Technologies, Inc. and Subsidiaries Consolidated Balance Sheets (In Thousands, Except Share Amounts) September 30, 2021 December 31, 2020 (Unaudited) LIABILITIES AND EQUITY Current liabilities: Trade accounts payable $ 41,268 $ 22,573 Unearned income 1,432 2,675 Accrued liabilities and other 48,552 38,791 Liabilities of discontinued operations 1,327 734,039 Total current liabilities 92,579 798,078 Long-term debt, net 164,228 199,894 Deferred income taxes 1,817 1,942 Asset retirement obligations 12,840 12,484 Warrants liability 56 198 Operating lease liabilities 33,145 37,569 Other liabilities 6,493 11,612 Total long-term liabilities 218,579 263,699 Commitments and contingencies Equity: TETRA stockholders’ equity: Common stock, par value 0.01 per share; 250,000,000 shares authorized at September 30, 2021 and December 31, 2020; 130,075,838 shares issued at September 30, 2021 and 128,930,047 shares issued at December 31, 2020 1,301 1,289 Additional paid-in capital 474,544 472,134 Treasury stock, at cost; 3,135,434 shares held at September 30, 2021, and 2,953,976 shares held at December 31, 2020 ( 19,945 ) ( 19,484 ) Accumulated other comprehensive loss ( 45,518 ) ( 49,914 ) Retained deficit ( 309,191 ) ( 413,665 ) Total TETRA stockholders’ equity 101,191 ( 9,640 ) Noncontrolling interests ( 1,113 ) 80,702 Total equity 100,078 71,062 Total liabilities and equity $ 411,236 $ 1,132,839 See Notes to Consolidated Financial Statements 4 Table of Contents TETRA Technologies, Inc. and Subsidiaries Consolidated Statements of Equity (In Thousands) (Unaudited) Common Stock Par Value Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Deficit Noncontrolling Interest Total Equity Currency Translation Balance at December 31, 2020 $ 1,289 $ 472,134 $ ( 19,484 ) $ ( 49,914 ) $ ( 413,665 ) $ 80,702 $ 71,062 Net income for first quarter 2021 — — — — 108,714 333 109,047 Translation adjustment, net of taxes of $ 0 — — — ( 2,779 ) — — ( 2,779 ) Comprehensive income 106,268 Deconsolidation of CSI Compressco — — — 7,168 — ( 82,775 ) ( 75,607 ) Equity award activity 6 — — — — — 6 Treasury stock activity, net — — ( 449 ) — — — ( 449 ) Equity compensation expense — 962 — — — 580 1,542 Other — ( 574 ) — — — 219 ( 355 ) Balance at March 31, 2021 $ 1,295 $ 472,522 $ ( 19,933 ) $ ( 45,525 ) $ ( 304,951 ) $ ( 941 ) $ 102,467 Net loss for second quarter 2021 — — — — ( 6,753 ) ( 27 ) ( 6,780 ) Translation adjustment, net of taxes of $ 0 — — — 2,157 — — 2,157 Comprehensive loss ( 4,623 ) Dividend — — — — — ( 119 ) ( 119 ) Equity award activity 2 — — — — — 2 Treasury stock activity, net — — ( 6 ) — — — ( 6 ) Equity compensation expense — 1,592 — — — — 1,592 Other — ( 242 ) — — — ( 14 ) ( 256 ) Balance at June 30, 2021 $ 1,297 $ 473,872 $ ( 19,939 ) $ ( 43,368 ) $ ( 311,704 ) $ ( 1,101 ) $ 99,057 Net income for third quarter 2021 — — — — 2,513 — 2,513 Translation adjustment, net of taxes of $ 0 — — — ( 2,150 ) — — ( 2,150 ) Comprehensive income 363 Equity award activity 4 — — — — — 4 Treasury stock activity, net — — ( 6 ) — — — ( 6 ) Equity compensation expense — 1,057 — — — — 1,057 Other — ( 385 ) — — — ( 12 ) ( 397 ) Balance at September 30, 2021 $ 1,301 $ 474,544 $ ( 19,945 ) $ ( 45,518 ) $ ( 309,191 ) $ ( 1,113 ) $ 100,078 5 Table of Contents Common Stock Par Value Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Loss Retained Deficit Noncontrolling Interest Total Equity Currency Translation Balance at December 31, 2019 $ 1,283 $ 466,959 $ ( 19,164 ) $ ( 52,183 ) $ ( 362,522 ) $ 128,453 $ 162,826 Net loss for first quarter 2020 — — — — ( 1,551 ) ( 8,825 ) ( 10,376 ) Translation adjustment, net of taxes of $ 0 — — — ( 6,238 ) — ( 229 ) ( 6,467 ) Comprehensive loss ( 16,843 ) Distributions to public unitholders — — — — — ( 309 ) ( 309 ) Equity award activity 4 — — — — — 4 Treasury stock activity, net — — ( 89 ) — — — ( 89 ) Equity compensation expense — 1,145 — — — 228 1,373 Other — ( 16 ) — — — ( 15 ) ( 31 ) Balance at March 31, 2020 $ 1,287 $ 468,088 $ ( 19,253 ) $ ( 58,421 ) $ ( 364,073 ) $ 119,303 $ 146,931 Net loss for second quarter 2020 — — — — ( 21,255 ) ( 15,712 ) ( 36,967 ) Translation adjustment, net of taxes of $ 0 — — — 980 — 115 1,095 Comprehensive loss ( 35,872 ) Distributions to public unitholders — — — — — ( 311 ) ( 311 ) Equity award activity 1 — — — — — 1 Treasury stock activity, net — — ( 181 ) — — — ( 181 ) Equity compensation expense — 1,685 — — — 449 2,134 Other — 4 — — — ( 20 ) ( 16 ) Balance at June 30, 2020 $ 1,288 $ 469,777 $ ( 19,434 ) $ ( 57,441 ) $ ( 385,328 ) $ 103,824 $ 112,686 Net loss for third quarter 2020 — — — — ( 13,302 ) ( 8,296 ) ( 21,598 ) Translation adjustment, net of taxes of $ 0 — — — 2,807 — 67 2,874 Comprehensive loss ( 18,724 ) Distributions to public unitholders — — — — — ( 312 ) ( 312 ) Equity award activity 1 — — — — — 1 Treasury stock activity, net — — ( 50 ) — — — ( 50 ) Equity compensation expense — 1,363 — — — 232 1,595 Other — 6 — — — ( 27 ) ( 21 ) Balance at September 30, 2020 $ 1,289 $ 471,146 $ ( 19,484 ) $ ( 54,634 ) $ ( 398,630 ) $ 95,488 $ 95,175 See Notes to Consolidated Financial Statements 6 Table of Contents TETRA Technologies, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In Thousands, Unaudited) Nine Months Ended September 30, 2021 2020 Operating activities: Net income (loss) $ 104,780 $ ( 68,941 ) Reconciliation of net income (loss) to net cash provided by operating activities: Depreciation, amortization, and accretion 25,524 88,906 Gain on GP Sale ( 120,574 ) — Impairment and other charges 449 14,445 Gain on retained CSI Compressco units and Standard Lithium shares ( 11,803 ) — Equity-based compensation expense 3,611 4,847 Amortization and expense of financing costs and deferred financing gains 2,320 3,698 Debt-related expenses — 4,777 Warrants fair value adjustment ( 143 ) ( 326 ) Gain on sale of assets ( 479 ) ( 4,340 ) Other non-cash charges ( 340 ) 5,814 Changes in operating assets and liabilities: Accounts receivable ( 15,246 ) 62,039 Inventories 2,449 11,780 Prepaid expenses and other current assets ( 2,927 ) ( 916 ) Trade accounts payable and accrued expenses 25,231 ( 57,844 ) Other ( 2,428 ) 888 Net cash provided by operating activities 10,424 64,827 Investing activities: Purchases of property, plant, and equipment, net ( 14,620 ) ( 22,011 ) Proceeds from sale of CCLP, net of cash divested 566 — Proceeds on sale of property, plant, and equipment 1,016 24,704 Insurance recoveries associated with damaged equipment 110 643 Other investing activities 764 ( 576 ) Net cash (used in) provided by investing activities ( 12,164 ) 2,760 Financing activities: Proceeds from long-term debt — 404,060 Principal payments on long-term debt ( 37,477 ) ( 408,666 ) CSI Compressco distributions — ( 932 ) Tax remittances on equity based compensation — ( 341 ) Dividend payments attributable to noncontrolling interest ( 99 ) — Debt issuance costs and other financing activities ( 1,080 ) ( 3,897 ) Net cash used in financing activities ( 38,656 ) ( 9,776 ) Effect of exchange rate changes on cash ( 1,635 ) ( 355 ) (Decrease) increase in cash and cash equivalents ( 42,031 ) 57,456 Cash and cash equivalents and restricted cash at beginning of period 83,894 17,768 Cash and cash equivalents at beginning of period associated with discontinued operations 16,577 2,370 Cash and cash equivalents and restricted cash at beginning of period associated with continuing operations 67,317 15,398 Cash and cash equivalents and restricted cash at end of period 41,863 75,224 Cash and cash equivalents at end of period associated with discontinued operations — 6,757 Cash and cash equivalents and restricted cash at end of period associated with continuing operations $ 41,863 $ 68,467 See Notes to Consolidated Financial Statements 7 Table of Contents TETRA Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES Organization We are an industrial and oil and gas products and services company operating on six continents, focused on bromine-based completion fluids, calcium chloride, water management solutions, frac flowback and production well testing services. We were incorporated in Delaware in 1981. We are composed of two segments – Completion Fluids & Products Division and Water & Flowback Services Division. Unless the context requires otherwise, when we refer to “we,” “us,” and “our,” we are describing TETRA Technologies, Inc. and its consolidated subsidiaries on a consolidated basis. Presentation Our unaudited consolidated financial statements include the accounts of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The information furnished reflects all normal recurring adjustments, which are, in the opinion of management, necessary to provide a fair statement of the results for the interim periods. Operating results for the period ended September 30, 2021 are not necessarily indicative of results that may be expected for the twelve months ended December 31, 2021. The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the U.S. Securities and Exchange Commission (“SEC”) and do not include all information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. These financial statements should be read in conjunction with the financial statements for the year ended December 31, 2020 and notes thereto included in our Annual Report on Form 10-K , which we filed with the SEC on March 5, 2021. Significant Accounting Policies Our significant accounting policies are described in the notes to our consolidated financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K . There have been no significant changes in our accounting policies or the application thereof during the third quarter of 2021. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses, and impairments during the reporting period. Actual results could differ from those estimates, and such differences could be material. Reclassifications Certain previously reported financial information has been reclassified to conform to the current year's presentation. For a discussion of the reclassification of the financial presentation of our former Compression Division as discontinued operations, see Note 2 - “Discontinued Operations”. Other than the discontinued operations presentation, the impact of reclassifications was not significant to the prior year's overall presentation. Unless otherwise noted, amounts and disclosures throughout these Notes to Consolidated Financial Statements relate solely to continuing operations and exclude all discontinued operations. Impairments and Other Charges Impairments of long-lived assets, including identified intangible assets, are determined periodically when indicators of impairment are present. If such indicators are present, the determination of the amount of impairment is based on our judgment as to the future undiscounted operating cash flows to be generated from the relevant assets throughout their remaining estimated useful lives. If these undiscounted cash flows are less than the carrying 8 Table of Contents amount of the related assets, an impairment is recognized for the excess of the carrying value over fair value. Fair value of intangible assets is generally determined using the discounted present value of future cash flows using discount rates commensurate with the risks inherent with the specific assets. Assets held for disposal are recorded at the lower of carrying value or estimated fair value less estimated selling costs. During the nine months ended 2021, we recorded an impairment charge of $ 0.4 million related to idle equipment in our Canada office within our Water & Flowback Services Division. There were no significant impairments associated with continuing operations during the nine months ended September 30, 2020. Foreign Currency Translation We have designated the Euro, the British pound, the Canadian dollar, the Brazilian real, and the Mexican peso as the functional currencies for our operations in Finland and Sweden, the United Kingdom, Canada, Brazil, and certain of our operations in Mexico, respectively. During 2021, we determined our business operations in Norway were primarily operating using the United States dollar. Effective July 1, 2021, the functional currency of our operations in Norway was changed from the Norwegian krone to the United States dollar. The United States dollar is also the designated functional currency for all of our other non-U.S. operations. The cumulative translation effects of translating the applicable accounts from the functional currencies into the United States dollar at current exchange rates are included as a separate component of equity. Foreign currency exchange (gains) and losses are included in other (income) expense, net and totaled $( 0.1 ) million and $( 1.1 ) million during the three and nine months ended September 30, 2021, respectively, and $ 1.2 million and $ 2.2 million for the three and nine months ended September 30, 2020, respectively. Fair Value Measurements We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements are utilized on a recurring basis in the determination of the carrying values of certain assets, including our interest in Standard Lithium Ltd. (“Standard Lithium”) and our retained interest in CSI Compressco and liabilities, including the liabilities for the warrants to purchase 11.2 million shares of our common stock (the “Warrants”). See Note 8 - “Fair Value Measurements” for further discussion. Fair value measurements are also utilized on a nonrecurring basis in certain circumstances, including the impairment of long-lived assets (a Level 3 fair value measurement). Supplemental Cash Flow Information Supplemental cash flow information from continuing and discontinued operations is as follows: Nine Months Ended September 30, 2021 2020 (in thousands) Supplemental cash flow information (1) : Interest paid $ 10,954 $ 42,199 Income taxes paid 1,423 4,692 Increase (decrease) in accrued capital expenditures 463 ( 1,614 ) (1) Prior-year information includes the activity for CSI Compressco for the full period. Current-year information includes activity for CSI Compressco for January only. 9 Table of Contents New Accounting Pronouncements Standards adopted in 2021 In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions related to intraperiod tax allocation, interim period income tax calculation methodology, and the recognition of deferred tax liabilities for outside basis differences. It also simplifies certain aspects of accounting for franchise taxes and clarifies the accounting for transactions that results in a step-up in the tax basis of goodwill. On January 1, 2021, we adopted ASU 2019-12. The adoption of this standard did not have a material impact on our consolidated financial statements. Standards not yet adopted In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses on financial instruments not accounted for at fair value through net income. The provisions require credit impairments to be measured over the contractual life of an asset and developed with consideration for past events, current conditions, and forecasts of future economic information. Credit impairment will be accounted for as an allowance for credit losses deducted from the amortized cost basis at each reporting date. We are continuing to work through our implementation plan which includes evaluating the impact on our allowance for doubtful accounts methodology, identifying new reporting requirements, and implementing changes to business processes, systems, and controls to support adoption of the standard. Upon adoption, the allowance for doubtful accounts is expected to increase with an offsetting adjustment to retained earnings. Updates at each reporting date after initial adoption will be recorded through selling, general, and administrative expense. ASU 2016-13 will become effective for us in the first quarter of fiscal 2023. We continue to assess the potential effects of these changes to our consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. Entities may elect to apply the amendments for contract modifications made on or before December 31, 2022. During the three months ended September 30, 2021, our asset-based credit agreement and term credit agreement were amended to allow replacement of LIBOR with another benchmark rate, such as the secured overnight financing rate (“SOFR”) in the event that LIBOR cannot be determined or does not fairly reflect the cost to our lenders of funding our loans. If LIBOR is not available, we cannot predict what alternative index would be negotiated with our lenders. We will assess the impact of adopting ASU 2020-04 on our consolidated financial statements if or when our contracts are modified to eliminate references to LIBOR. NOTE 2 – DISCONTINUED OPERATIONS On January 29, 2021, we entered into the Purchase and Sale Agreement with Spartan Energy Partners, LP (“Spartan”) pursuant to which we sold the general partner of CSI Compressco, including the IDRs in CSI Compressco and approximately 23.1 % of the outstanding limited partner interests in CSI Compressco, in exchange for the combination of $ 13.4 million in cash paid at closing, $ 0.5 million in cash paid on the six-month anniversary of closing and $ 3.1 million in contingent consideration in the form of cash and/or CSI Compressco common units if CSI Compressco achieves certain financial targets on or before December 31, 2022. Throughout this Quarterly Report, we refer to the transaction with Spartan as the “GP Sale.” As a result of these transactions, we no longer consolidate CSI Compressco as of January 29, 2021. We recognized a primarily non-cash accounting gain of $ 120.6 million during the nine-month period ended September 30, 2021 related to the GP Sale. The gain is included in income (loss) from discontinued operations, net of taxes in our consolidated statement of operations. We will also continue to provide back-office support to CSI Compressco under a Transition Services Agreement for up to one year until CSI Compressco has completed a full separation from our back-office support functions. Our interest in CSI Compressco and the general partner represented substantially all of our Compression Division. 10 Table of Contents In addition, on March 1, 2018, we closed a series of related transactions that resulted in the disposition of our Offshore Division, consisting of our Offshore Services and Maritech segments. Our former Compression and Offshore Divisions are reported as discontinued operations for all periods presented. Our consolidated balance sheets and consolidated statements of operations report discontinued operations separate from continuing operations. Our consolidated statements of comprehensive income, statements of equity and statements of cash flows combine continuing and discontinued operations. Our current-year consolidated statement of operations, statement of comprehensive income, statement of equity and statement of cash flows include CSI Compressco activity for January 1 through January 29. Our consolidated statements of cash flows for the nine-month periods ended September 30, 2021 and September 30, 2020 included $ 3.0 million and $ 10.8 million, respectively, of capital expenditures related to our former Compression division, as well as $ 337.5 million of proceeds from long-term debt, $ 341.2 million of payments of long-term debt, $ 21.7 million from proceeds from sale of property, plant and equipment, and $ 2.0 million from amortization of deferred financing discounts, costs and gains for the nine-month period ended September 30, 2020. Our current-year results do not include CSI Compressco depreciation or amortization as the assets were considered held for sale. A summary of financial information related to our discontinued operations is as follows: Reconciliation of the Line Items Constituting Pretax Loss from Discontinued Operations to the After-Tax Loss from Discontinued Operations (in thousands) Three Months Ended September 30, 2021 Compression Offshore Services Total Major classes of line items constituting loss from discontinued operations Cost of revenues $ — $ ( 174 ) $ ( 174 ) General and administrative expense — 6 6 Other expense, net 150 — 150 Pretax (loss) income from discontinued operations ( 150 ) 168 18 Loss from discontinued operations attributable to TETRA stockholders $ 18 Three Months Ended September 30, 2020 Compression Offshore Services Total Major classes of line items constituting loss from discontinued operations Revenue $ 79,117 $ — $ 79,117 Cost of revenues 49,414 2 49,416 Depreciation, amortization, and accretion 19,948 — 19,948 General and administrative expense 9,133 170 9,303 Interest expense, net 13,293 — 13,293 Other expense, net ( 1,348 ) — ( 1,348 ) Pretax loss from discontinued operations ( 11,323 ) ( 172 ) ( 11,495 ) Income tax provision 544 Total loss from discontinued operations ( 12,039 ) Loss from discontinued operations attributable to noncontrolling interest 8,342 Loss from discontinued operations attributable to TETRA stockholders $ ( 3,697 ) 11 Table of Contents Nine Months Ended September 30, 2021 Compression Offshore Services Total Major classes of line items constituting income from discontinued operations Revenue $ 18,968 $ — $ 18,968 Cost of revenues 11,474 ( 146 ) 11,328 General and administrative expense 2,796 6 2,802 Interest expense, net 4,336 — 4,336 Other expense, net 164 — 164 Pretax income from discontinued operations 198 140 338 Pretax gain on disposal of discontinued operations 120,574 Total pretax income from discontinued operations 120,912 Income tax provision 30 Total income from discontinued operations 120,882 Income from discontinued operations attributable to noncontrolling interest ( 333 ) Income from discontinued operations attributable to TETRA stockholders $ 120,549 Nine Months Ended September 30, 2020 Compression Offshore Services Total Major classes of line items constituting loss from discontinued operations Revenue $ 265,727 $ — $ 265,727 Cost of revenues 167,279 ( 332 ) 166,947 Depreciation, amortization, and accretion 59,972 — 59,972 Impairments and other charges 14,348 — 14,348 General and administrative expense 29,474 487 29,961 Interest expense, net 38,839 — 38,839 Other expense, net 2,932 — 2,932 Pretax loss from discontinued operations ( 47,117 ) ( 155 ) ( 47,272 ) Income tax provision 1,923 Total loss from discontinued operations ( 49,195 ) Loss from discontinued operations attributable to noncontrolling interest 32,957 Loss from discontinued operations attributable to TETRA stockholders $ ( 16,238 ) Reconciliation of Major Classes of Assets and Liabilities of the Discontinued Operations to Amounts Presented Separately in the Statement of Financial Position (in thousands) September 30, 2021 Offshore Services Maritech Total Carrying amounts of major classes of liabilities included as part of discontinued operations Trade payables $ 1,099 $ — $ 1,099 Accrued liabilities and other — 228 228 Total liabilities associated with discontinued operations $ 1,099 $ 228 $ 1,327 12 Table of Contents December 31, 2020 Compression Offshore Services Maritech Total Carrying amounts of major classes of assets included as part of discontinued operations Cash and cash equivalents $ 16,577 $ — $ — $ 16,577 Trade receivables 43,837 — — 43,837 Inventories 31,220 — — 31,220 Other current assets 5,231 — — 5,231 Property, plant, and equipment 551,401 — — 551,401 Other assets 61,740 — — 61,740 Total assets associated with discontinued operations $ 710,006 $ — $ — $ 710,006 Carrying amounts of major classes of liabilities included as part of discontinued operations Trade payables $ 19,766 $ 1,222 $ — $ 20,988 Unearned Income 269 — — 269 Accrued liabilities and other 36,318 352 228 36,898 Long-term debt, net 638,631 — — 638,631 Other liabilities 37,253 — — 37,253 Total liabilities associated with discontinued operations $ 732,237 $ 1,574 $ 228 $ 734,039 NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS Our contract asset balances, primarily associated with customer documentation requirements, were $ 16.9 million and $ 12.8 million as of September 30, 2021 and December 31, 2020, respectively. Contract assets, along with billed trade accounts receivable, are included in trade accounts receivable in our consolidated balance sheets. Unearned income includes amounts in which the Company was contractually allowed to invoice prior to satisfying the associated performance obligations. Unearned income balances were $ 1.4 million and $ 2.7 million as of September 30, 2021 and December 31, 2020, respectively, and vary based on the timing of invoicing and performance obligations being met. Revenues recognized during the nine-month periods ended September 30, 2021 and September 30, 2020 deferred as of the end of the preceding year were not significant. During the nine-month periods ended September 30, 2021 and September 30, 2020, contract costs were not significant. We disaggregate revenue from contracts with customers into Product Sales and Services within each segment, as noted in our two reportable segments in Note 10. In addition, we disaggregate revenue from contracts with customers by geography based on the following table below. Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (In Thousands) Completion Fluids & Products United States $ 22,529 $ 15,013 $ 72,353 $ 85,073 International 26,162 36,937 87,466 113,460 48,691 51,950 159,819 198,533 Water & Flowback Services United States 42,234 19,767 106,630 97,016 International 4,549 1,767 8,675 6,708 46,783 21,534 115,305 103,724 Total Revenue United States 64,763 34,780 178,983 182,089 International 30,711 38,704 96,141 120,168 $ 95,474 $ 73,484 $ 275,124 $ 302,257 13 Table of Contents NOTE 4 – INVENTORIES Components of inventories as of September 30, 2021 and December 31, 2020 are as follows: September 30, 2021 December 31, 2020 (In Thousands) Finished goods $ 62,510 $ 68,121 Raw materials 3,604 2,910 Parts and supplies 4,524 4,001 Work in progress 1,648 1,626 Total inventories $ 72,286 $ 76,658 Finished goods inventories include newly manufactured clear brine fluids as well as used brines that are repurchased from certain customers for recycling . NOTE 5 – INVESTMENTS Following the closing of the GP Sale, we continue to own approximately 10.9 % of the outstanding CSI Compressco common units. In addition, we are party to agreements in which Standard Lithium has the right to explore, produce and extract lithium in our Arkansas leases as well as additional potential resources in the Mojave region of California. The Company receives cash and stock of Standard Lithium (NYSE:SLI) under the terms of the arrangements. The cash and stock component of consideration received is initially recorded as unearned income based on the quoted market price at the time the stock is received, then recognized in income over the contract term. See Note 8 - “Fair Value Measurements” for further information. Our investments as of September 30, 2021 and December 31, 2020, consist of the following: September 30, 2021 December 31, 2020 (In Thousands) Investment in CSI Compressco $ 9,404 $ — Investment in Standard Lithium 13,008 2,675 Total Investments $ 22,412 $ 2,675 NOTE 6 – LONG-TERM DEBT AND OTHER BORROWINGS Consolidated long-term debt as of September 30, 2021 and December 31, 2020, consists of the following: Scheduled Maturity September 30, 2021 December 31, 2020 (In Thousands) Asset-based credit agreement May 31, 2025 $ — $ — Term credit agreement (1) September 10, 2025 164,228 199,894 Total long-term debt $ 164,228 $ 199,894 (1) Net of unamortized discount of $ 4.8 million and $ 5.5 million as of September 30, 2021 and December 31, 2020, respectively, and net of unamortized deferred financing costs of $ 7.1 million and $ 8.2 million as of September 30, 2021 and December 31, 2020, respectively. On July 30, 2021, we entered into an amendment to our asset-based credit agreement (“ABL Credit Agreement’) that, among other things, extended the term of the credit facility to May 31, 2025 and revised our commitment to $ 80.0 million, with a $ 20.0 million accordion. The amendment increased the availability by adding the value of accrued Unites States receivables, increased the forward rates on accounts receivable for investment grade customers and incorporated a new $ 15.0 million sub-facility subject to a borrowing base consisting of certain trade receivables and inventory in the United Kingdom. As of September 30, 2021, we had no outstanding balance and $ 6.2 million in letters of credit against our “ABL Credit Agreement. Because there was no outstanding balance on this ABL Credit Agreement, associated deferred financing costs of $ 1.7 million as of September 30, 2021, were classified as other long-term assets on the 14 Table of Contents accompanying consolidated balance sheet. As of September 30, 2021, subject to compliance with the covenants, borrowing base, and other provisions of the ABL Credit Agreement that may limit borrowings, we had an availability of $ 48.2 million under this agreement. Our credit agreements contain certain affirmative and negative covenants, including covenants that restrict the ability to pay dividends or other restricted payments. As of September 30, 2021, we are in compliance with all covenants under the credit agreements. Our term credit agreement requires us to offer to prepay a percentage of Excess Cash Flow (as defined in the term credit agreement) within five business days of filing our Annual Report. The minimum amount of $ 8.2 million that we would have been required to offer to prepay pursuant to this obligation for the year ending December 31, 2021 was paid on July 30, 2021 in connection with the amendment of our ABL Credit Agreement. NOTE 7 – COMMITMENTS AND CONTINGENCIES Litigation We are named defendants in several lawsuits and respondents in certain governmental proceedings arising in the ordinary course of business. While the outcome of lawsuits or other proceedings against us cannot be predicted with certainty, management does not consider it reasonably possible that a loss resulting from such lawsuits or other proceedings in excess of any amounts accrued has been incurred that is expected to have a material adverse impact on our financial condition, results of operations, or liquidity. There have been no material developments in our legal proceedings during the quarter ended September 30, 2021. For a discussion of our legal proceedings, please see our Annual Report on Form 10-K for the year ended December 31, 2020. Investment In May 2021, we signed a memorandum of understanding (“MOU”) with CarbonFree Chemicals Holdings, LLC (“CarbonFree”), a carbon capture company with patented technologies that capture CO 2 and mineralize emissions to make commercial, carbon-negative chemicals. During the one-year MOU period, both Companies will work towards a definitive agreement that might include investments by TETRA into CarbonFree, a joint venture, or other commercial arrangements. On July 23, 2021, we entered into a commitment to invest $ 5.0 million in a convertible note to be issued by CarbonFree. Our investment in CarbonFree is contingent on certain conditions being attained by CarbonFree. NOTE 8 – FAIR VALUE MEASUREMENTS Financial Instruments Investments Our retained investment in CSI Compressco and our investment in Standard Lithium are recorded based on the quoted market stock price in active markets (a Level 1 fair value measurement). The stock component of consideration received for our arrangement with Standard Lithium is initially recorded as unearned income based on the quoted market price at the time the stock is received, then recognized in income over the contract term. The unearned income associated with the stock component of this agreement is not significant as of September 30, 2021 or December 31, 2020. Changes in the value of stock are recorded in other income (expense) in our consolidated statements of operations. Warrants The Warrants are valued using a Black Scholes option valuation model that includes estimates of the volatility of the Warrants (a Level 3 fair value measurement). The Warrants are accounted for as a derivative liability and increases (or decreases) in the fair value of the Warrants are generally associated with increases (or decreases) in the trading price of our common stock, increases in the volatility of our common stock price and decreases in time remaining until expiration of the Warrants, resulting in adjustments to earnings for the associated valuation losses (gains), and resulting in future volatility of our earnings during the period the Warrants are 15 Table of Contents outstanding. The estimated volatility as of September 30, 2021 was 60 %. The outstanding Warrants expire by December 31, 2021. Recurring and nonrecurring fair value measurements by valuation hierarchy as of September 30, 2021 and December 31, 2020, are as follows: Fair Value Measurements Using Total as of Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Other Observable Inputs Significant Unobservable Inputs Description September 30, 2021 (Level 1) (Level 2) (Level 3) (In Thousands) Investment in CSI Compressco $ 9,404 $ 9,404 $ — $ — Investment in Standard Lithium 13,008 13,008 — — Warrants liability ( 56 ) — — ( 56 ) Net asset $ 22,356 Fair Value Measurements Using Total as of Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Other Observable Inputs Significant Unobservable Inputs Description December 31, 2020 (Level 1) (Level 2) (Level 3) (In Thousands) Investment in Standard Lithium $ 2,675 $ 2,675 — $ — Warrants liability ( 198 ) — — ( 198 ) Net asset $ 2,477 The fair values of cash, restricted cash, accounts receivable, accounts payable, accrued liabilities, short-term borrowings and long-term debt pursuant to TETRA’s ABL Credit Agreement and term credit agreement approximate their carrying amounts. See Note 6 - “Long-Term Debt and Other Borrowings” for further discussion. NOTE 9 – NET INCOME (LOSS) PER SHARE The following is a reconciliation of the weighted average number of common shares outstanding with the number of shares used in the computations of net income (loss) per common and common equivalent share: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (In Thousands) Number of weighted average common shares outstanding 126,733 125,893 126,489 125,789 Assumed exercise of equity awards and warrants 1,961 — — — Average diluted shares outstanding 128,694 125,893 126,489 125,789 The average diluted shares outstanding excludes the impact of certain outstanding equity awards and warrants of 1,767 thousand shares for the nine-month period ended September 30, 2021, and 93 thousand and 17 thousand shares for the three and nine-month periods ended September 30, 2020, respectively, as the inclusion of these shares would have been anti-dilutive due to the net loss from continuing operations recorded during these periods. 16 Table of Contents NOTE 10 – INDUSTRY SEGMENTS We manage our operations through two segments: Completion Fluids & Products Division and Water & Flowback Services Division. Summarized financial information concerning the business segments is as follows: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (In Thousands) Revenues from external customers Product sales Completion Fluids & Products Division $ 46,322 $ 49,986 $ 153,905 $ 187,419 Water & Flowback Services Division 18 23 50 56 Consolidated $ 46,340 $ 50,009 $ 153,955 $ 187,475 Services Completion Fluids & Products Division $ 2,369 $ 1,964 $ 5,914 $ 11,114 Water & Flowback Services Division 46,765 21,511 115,255 103,668 Consolidated $ 49,134 $ 23,475 $ 121,169 $ 114,782 Total revenues Completion Fluids & Products Division $ 48,691 $ 51,950 $ 159,819 $ 198,533 Water & Flowback Services Division 46,783 21,534 115,305 103,724 Consolidated $ 95,474 $ 73,484 $ 275,124 $ 302,257 Income (loss) before taxes Completion Fluids & Products Division $ 14,675 $ 11,756 $ 40,113 $ 44,354 Water & Flowback Services Division ( 1,807 ) ( 7,746 ) ( 12,265 ) ( 18,408 ) Interdivision eliminations 3 4 9 10 Corporate Overhead (1) ( 9,789 ) ( 13,472 ) ( 41,820 ) ( 43,825 ) Consolidated $ 3,082 $ ( 9,458 ) $ ( 13,963 ) $ ( 17,869 ) (1) Amounts reflected include the following general corporate expenses: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (In Thousands) General and administrative expense $ 8,409 $ 8,959 $ 30,973 $ 28,650 Depreciation and amortization 228 270 646 643 Interest expense 4,247 4,706 13,354 14,909 Warrants fair value adjustment (income) expense ( 3,164 ) — ( 143 ) ( 327 ) Other general corporate income, net 69 ( 463 ) ( 3,010 ) ( 50 ) Total $ 9,789 $ 13,472 $ 41,820 $ 43,825 17 Table of Contents