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 March 31, 2022 2021 Revenues: Product sales $ 70,055 $ 45,032 Services 59,982 32,292 Total revenues 130,037 77,324 Cost of revenues: Cost of product sales 46,004 31,983 Cost of services 47,684 28,631 Depreciation, amortization, and accretion 7,679 8,951 Insurance recoveries ( 3,750 ) ( 110 ) Total cost of revenues 97,617 69,455 Gross profit 32,420 7,869 Exploration and appraisal costs 1,930 — General and administrative expense 20,643 20,012 Interest expense, net 3,324 4,404 Other income, net ( 2,411 ) ( 4,772 ) Income (loss) before taxes and discontinued operations 8,934 ( 11,775 ) Provision for income taxes 1,200 168 Income (loss) before discontinued operations 7,734 ( 11,943 ) Discontinued operations: (Loss) income from discontinued operations, net of taxes ( 15 ) 120,990 Net income 7,719 109,047 Less: (income) loss attributable to noncontrolling interest (1) 1 ( 333 ) Net income attributable to TETRA stockholders $ 7,720 $ 108,714 Basic net income (loss) per common share: Income (loss) from continuing operations $ 0.06 $ ( 0.10 ) Income from discontinued operations — 0.96 Net income attributable to TETRA stockholders $ 0.06 $ 0.86 Weighted average basic shares outstanding 127,259 126,149 Diluted net income (loss) per common share: Income (loss) from continuing operations $ 0.06 $ ( 0.10 ) Income from discontinued operations — 0.96 Net income attributable to TETRA stockholders $ 0.06 $ 0.86 Weighted average diluted shares outstanding 129,211 126,149 (1) (Income) loss attributable to noncontrolling interest includes zero and $( 333 ) income for the three-month periods ended March 31, 2022 and 2021, 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 (In Thousands) (Unaudited) Three Months Ended March 31, 2022 2021 Net income $ 7,719 $ 109,047 Foreign currency translation adjustment from continuing operations, net of taxes of $ 0 in 2022 and 2021 192 ( 2,779 ) Comprehensive income 7,911 106,268 Less: Comprehensive income (loss) attributable to noncontrolling interest 1 ( 333 ) Comprehensive income attributable to TETRA stockholders $ 7,912 $ 105,935 See Notes to Consolidated Financial Statements 2 Table of Contents TETRA Technologies, Inc. and Subsidiaries Consolidated Balance Sheets (In Thousands) March 31, 2022 December 31, 2021 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 32,851 $ 31,551 Trade accounts receivable, net of allowances of $ 377 in 2022 and $ 289 in 2021 103,461 91,202 Inventories 64,649 69,098 Prepaid expenses and other current assets 16,286 18,539 Total current assets 217,247 210,390 Property, plant, and equipment: Land and building 25,143 26,380 Machinery and equipment 347,336 345,454 Automobiles and trucks 15,630 16,174 Chemical plants 61,084 61,565 Construction in progress 8,298 5,349 Total property, plant, and equipment 457,491 454,922 Less accumulated depreciation ( 368,100 ) ( 365,946 ) Net property, plant, and equipment 89,391 88,976 Other assets: Patents, trademarks and other intangible assets, net of accumulated amortization of $ 45,020 in 2022 and $ 44,323 in 2021 35,846 36,958 Operating lease right-of-use assets 37,313 36,973 Investments 12,333 11,233 Other assets 14,638 13,736 Total other assets 100,130 98,900 Total assets $ 406,768 $ 398,266 See Notes to Consolidated Financial Statements 3 Table of Contents TETRA Technologies, Inc. and Subsidiaries Consolidated Balance Sheets (In Thousands, Except Share Amounts) March 31, 2022 December 31, 2021 (Unaudited) LIABILITIES AND EQUITY Current liabilities: Trade accounts payable $ 39,826 $ 37,943 Current portion of long-term debt 1,533 — Compensation and employee benefits 18,421 20,811 Operating lease liabilities, current portion 8,502 8,108 Accrued taxes 6,252 7,085 Accrued liabilities and other 21,125 21,810 Current liabilities associated with discontinued operations 1,379 1,385 Total current liabilities 97,038 97,142 Long-term debt, net 152,531 151,936 Operating lease liabilities 31,266 31,429 Asset retirement obligations 13,120 12,984 Deferred income taxes 1,635 1,669 Other liabilities 4,276 4,543 Total long-term liabilities 202,828 202,561 Commitments and contingencies Equity: TETRA stockholders’ equity: Common stock, par value 0.01 per share; 250,000,000 shares authorized at March 31, 2022 and December 31, 2021; 130,829,770 shares issued at March 31, 2022 and 130,075,838 shares issued at December 31, 2021 1,308 1,301 Additional paid-in capital 476,055 475,624 Treasury stock, at cost; 3,138,675 shares held at March 31, 2022, and 3,138,675 shares held at December 31, 2021 ( 19,957 ) ( 19,957 ) Accumulated other comprehensive loss ( 46,740 ) ( 46,932 ) Retained deficit ( 302,612 ) ( 310,332 ) Total TETRA stockholders’ equity 108,054 99,704 Noncontrolling interests ( 1,152 ) ( 1,141 ) Total equity 106,902 98,563 Total liabilities and equity $ 406,768 $ 398,266 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, 2021 $ 1,301 $ 475,624 $ ( 19,957 ) $ ( 46,932 ) $ ( 310,332 ) $ ( 1,141 ) $ 98,563 Net income for first quarter 2022 — — — — 7,720 ( 1 ) 7,719 Translation adjustment, net of taxes of $ 0 — — — 192 — — 192 Comprehensive income 7,911 Equity compensation expense — 1,104 — — — — 1,104 Other 7 ( 673 ) — — — ( 10 ) ( 676 ) Balance at March 31, 2022 $ 1,308 $ 476,055 $ ( 19,957 ) $ ( 46,740 ) $ ( 302,612 ) $ ( 1,152 ) $ 106,902 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, 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 See Notes to Consolidated Financial Statements 5 Table of Contents TETRA Technologies, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In Thousands, Unaudited) Three Months Ended March 31, 2022 2021 Operating activities: Net income $ 7,719 $ 109,047 Reconciliation of net income to net cash provided by operating activities: Depreciation, amortization, and accretion 7,679 8,981 Gain on GP Sale — ( 120,574 ) Gain on investments ( 1,100 ) ( 3,992 ) Equity-based compensation expense 1,104 2,478 Provision for doubtful accounts 61 155 Amortization and expense of financing costs 780 728 Insurance recoveries associated with damaged equipment ( 3,750 ) ( 110 ) Gain on sale of assets ( 218 ) ( 255 ) Other non-cash charges ( 101 ) 385 Changes in operating assets and liabilities: Accounts receivable ( 13,185 ) 1,501 Inventories 4,579 498 Prepaid expenses and other current assets 2,510 ( 1,060 ) Trade accounts payable and accrued expenses 9 8,521 Other ( 153 ) ( 478 ) Net cash provided by operating activities 5,934 5,825 Investing activities: Purchases of property, plant, and equipment, net ( 9,305 ) ( 6,761 ) Proceeds from GP Sale, net of cash divested — 18 Proceeds from sale of property, plant, and equipment 416 561 Proceeds from insurance recoveries associated with damaged equipment 3,750 110 Other investing activities ( 453 ) 1,771 Net cash used in investing activities ( 5,592 ) ( 4,301 ) Financing activities: Proceeds from long-term debt 1,533 160 Principal payments on long-term debt ( 811 ) ( 29,500 ) Repurchase of common stock — ( 449 ) Debt issuance costs and other financing activities — ( 98 ) Net cash provided by (used in) financing activities 722 ( 29,887 ) Effect of exchange rate changes on cash 236 ( 1,303 ) Increase (decrease) in cash and cash equivalents 1,300 ( 29,666 ) Cash and cash equivalents and restricted cash at beginning of period 31,551 83,894 Cash and cash equivalents at beginning of period associated with discontinued operations — 16,577 Cash and cash equivalents and restricted cash at beginning of period associated with continuing operations 31,551 67,317 Cash and cash equivalents and restricted cash at end of period associated with continuing operations $ 32,851 $ 54,228 See Notes to Consolidated Financial Statements 6 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 March 31, 2022 are not necessarily indicative of results that may be expected for the twelve months ended December 31, 2022. We have reflected the operations of our former Compression Division and Offshore Division as discontinued operations for all periods presented. See Note 2 - “Discontinued Operations” for further information. Unless otherwise noted, amounts and disclosures throughout these Notes to Consolidated Financial Statements relate solely to continuing operations and exclude all discontinued operations. 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, 2021 and notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2022 (the “ 2021 A nnual Report ”). Significant Accounting Policies Our significant accounting policies are described in the notes to our consolidated financial statements for the year ended December 31, 2021 included in our 2021 A nnual Report . There have been no significant changes in our accounting policies or the application thereof during the first quarter of 2022. 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. The impact of reclassifications was not significant to the prior year's overall presentation. 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, 7 Table of Contents and certain of our operations in Mexico, respectively. The United States dollar is 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 $( 0.8 ) million and $( 0.6 ) million during the three months ended March 31, 2022 and 2021 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 investments. See Note 7 - “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: Three Months Ended March 31, 2022 2021 (in thousands) Supplemental cash flow information (1) : Interest paid $ 3,096 $ 3,973 Income taxes paid 741 252 Decrease in accrued capital expenditures 2,164 1,051 (1) Prior-year information includes the activity for CSI Compressco for January only. New Accounting Pronouncements 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 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. 8 Table of Contents 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 incentive distribution rights (“IDRs”) in CSI Compressco, and approximately 23.1 % of the outstanding limited partner interests in CSI Compressco, in exchange for the combination of $ 13.9 million in cash 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 this transaction as the “GP Sale.” Following the closing of the transaction, we retained an interest in CSI Compressco representing approximately 3.7 % of the outstanding common units as of March 31, 2022. 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 three-month period ended March 31, 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 provided back-office support to CSI Compressco under a Transition Services Agreement that ended during the three-month period ended March 31, 2022. Our interest in CSI Compressco and the general partner represented substantially all of our Compression Division. 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 prior-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 three-month period ended March 31, 2021 included $ 3.0 million, of capital expenditures related to our former Compression division. 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, unaudited) Three Months Ended March 31, 2022 Offshore Services Major classes of line items constituting loss from discontinued operations General and administrative expense $ 15 Pretax loss from discontinued operations ( 15 ) Loss from discontinued operations attributable to TETRA stockholders $ ( 15 ) Three Months Ended March 31, 2021 Compression Offshore Services Total Major classes of line items constituting loss from discontinued operations Revenue $ 18,968 $ — $ 18,968 Cost of revenues 11,474 28 11,502 General and administrative expense 2,795 ( 5 ) 2,790 Interest expense, net 4,336 — 4,336 Other (income) expense, net ( 106 ) — ( 106 ) Pretax income (loss) from discontinued operations 469 ( 23 ) 446 Pretax gain on disposal of discontinued operations 120,574 Total pretax income from discontinued operations 121,020 Income tax provision 30 Total income from discontinued operations 120,990 Income from discontinued operations attributable to noncontrolling interest ( 333 ) Income from discontinued operations attributable to TETRA stockholders $ 120,657 9 Table of Contents Reconciliation of Major Classes of Assets and Liabilities of the Discontinued Operations to Amounts Presented Separately in the Statement of Financial Position (in thousands) March 31, 2022 Offshore Services Maritech Total (unaudited) Carrying amounts of major classes of liabilities included as part of discontinued operations Trade payables $ 1,151 $ — $ 1,151 Accrued liabilities and other — 228 228 Total liabilities associated with discontinued operations $ 1,151 $ 228 $ 1,379 December 31, 2021 Offshore Services Maritech Total Carrying amounts of major classes of liabilities included as part of discontinued operations Trade payables $ 1,157 $ — $ 1,157 Accrued liabilities and other — 228 228 Total liabilities associated with discontinued operations $ 1,157 $ 228 $ 1,385 NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS Our contract asset balances, primarily associated with contractual invoicing milestones and customer documentation requirements, were $ 29.6 million and $ 20.5 million as of March 31, 2022 and December 31, 2021, 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. We are also party to agreements in which Standard Lithium Ltd. (“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 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. Unearned income balances were $ 5.7 million and $ 3.2 million as of March 31, 2022 and December 31, 2021, respectively, and vary based on the timing of invoicing and performance obligations being met and the timing of the receipt of stock and shares from Standard Lithium. Unearned income is included in accrued liabilities and other in our consolidated balance sheets. We recognized approximately $ 0.6 million and $ 0.3 million of income during the three-month periods ended March 31, 2022 and March 31, 2021, respectively, related to the Standard Lithium arrangements. These amounts are included in other income, net in our consolidated statements of operations. During the three-month period ended March 31, 2021, we recognized approximately $ 1.4 million of revenue deferred as of the preceding year end. Other income recognized during the three-month periods ended March 31, 2022 and March 31, 2021 deferred as of the end of the preceding year were not significant. During the three-month periods ended March 31, 2022 and March 31, 2021, contract costs were not significant. 10 Table of Contents We disaggregate revenue from contracts with customers into Product Sales and Services within each segment, as noted in our two reportable segments in Note 9. In addition, we disaggregate revenue from contracts with customers by geography based on the following table below. Three Months Ended March 31, 2022 2021 (in thousands) Completion Fluids & Products United States $ 38,843 $ 24,597 International 34,351 21,925 73,194 46,522 Water & Flowback Services United States 52,763 28,931 International 4,080 1,871 56,843 30,802 Total Revenue United States 91,606 53,528 International 38,431 23,796 $ 130,037 $ 77,324 NOTE 4 – INVENTORIES Components of inventories as of March 31, 2022 and December 31, 2021 are as follows: March 31, 2022 December 31, 2021 (in thousands) Finished goods $ 54,564 $ 59,925 Raw materials 3,450 2,827 Parts and supplies 5,010 4,713 Work in progress 1,625 1,633 Total inventories $ 64,649 $ 69,098 Finished goods inventories include newly manufactured clear brine fluids as well as used brines that are repurchased from certain customers for recycling . NOTE 5 – LONG-TERM DEBT AND OTHER BORROWINGS Consolidated long-term debt as of March 31, 2022 and December 31, 2021, consists of the following: Scheduled Maturity March 31, 2022 December 31, 2021 (in thousands) Swedish Credit Facility December 31, 2022 $ 1,533 $ — Asset-based credit agreement (1) May 31, 2025 — 67 Term credit agreement (2) September 10, 2025 152,531 151,869 Total debt 154,064 151,936 Less current portion ( 1,533 ) — Total long-term debt $ 152,531 $ 151,936 (1) Net of unamortized deferred financing costs of $ 0.8 million and $ 1.6 million as of March 31, 2022 and December 31, 2021, respectively. Additional deferred financing costs of $ 0.6 million as of March 31, 2022, were classified as other long-term assets on the accompanying consolidated balance sheet as the deferred costs exceeded the outstanding balance. (2) Net of unamortized discount of $ 4.2 million and $ 4.5 million as of March 31, 2022 and December 31, 2021, respectively, and net of unamortized deferred financing costs of $ 6.3 million and $ 6.7 million as of March 31, 2022 and December 31, 2021, respectively. 11 Table of Contents Swedish Credit Facility In January 2022, the Company entered into a new revolving credit facility for seasonal working capital needs of subsidiaries in Sweden (“Swedish Credit Facility”). As of March 31, 2022, we had US$ 1.5 million outstanding and availability of approximately US$ 3.8 million under the Swedish Credit Facility. During each year, all outstanding loans under the Swedish Credit Facility must be repaid for at least 30 consecutive days. Borrowings bear interest at a rate of 2.95 % per annum. The Swedish Credit Facility expires on December 31, 2022 and the Company intends to renew it annually. Finland Credit Agreement The Company also entered into a new agreement guaranteed by certain accounts receivable and inventory in Finland (“Finland Credit Agreement”). As of March 31, 2022, there were US$ 1.8 million of letters of credit outstanding against the Finland Credit Agreement. ABL Credit Agreement As of March 31, 2022, our asset-based credit agreement (“ABL Credit Agreement’) provides for a senior secured revolving credit facility of up to $ 80.0 million, with a $ 20.0 million accordion. The credit facility is subject to a borrowing base determined monthly by reference to the value of inventory and accounts receivable, and includes a sublimit of $ 20.0 million for letters of credit, a swingline loan sublimit of $ 11.5 million, and a $ 15.0 million sub-facility subject to a borrowing base consisting of certain trade receivables and inventory in the United Kingdom. As of March 31, 2022, we had $ 0.8 million outstanding and $ 6.0 million in letters of credit and guarantees under our ABL Credit Agreement. Subject to compliance with the covenants, borrowing base, and other provisions of the ABL Credit Agreement that may limit borrowings, we had availability of $ 58.6 million under this agreement. Term Credit Agreement As of March 31, 2022 TETRA had $152.5 million outstanding, net of unamortized discounts and unamortized deferred financing costs under the Term Credit Agreement. 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. As of March 31, 2022, the interest rate per annum on borrowings under the Term Credit Agreement is 7.25%. For additional information on our Term Credit agreement, see our 2021 Annual Report . Our credit agreements contain certain affirmative and negative covenants, including covenants that restrict the ability to pay dividends or other restricted payments. As of March 31, 2022, we are in compliance with all covenants under the credit agreements. NOTE 6 – 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 March 31, 2022. For a discussion of our legal proceedings, please see our 2021 A nnual Report . 12 Table of Contents NOTE 7 – FAIR VALUE MEASUREMENTS Financial Instruments Investments We retained an interest in CSI Compressco (NASDAQ: CCLP) representing approximately 3.7 % of CSI Compressco’s outstanding common units as of March 31, 2022. Our investment in CSI Compressco is recorded based on the quoted market stock price in active markets (a Level 1 fair value measurement). Changes in the value of stock are recorded in other income (expense) in our consolidated statements of operations. In December 2021, we invested in a $ 5.0 million convertible note issued by CarbonFree. Our investment in CarbonFree is recorded in investments on our consolidated balance sheets based on an internal valuation (a Level 3 fair value measurement). Recurring and nonrecurring fair value measurements by valuation hierarchy as of March 31, 2022 and December 31, 2021, 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 March 31, 2022 (Level 1) (Level 2) (Level 3) (in thousands) Investment in CSI Compressco $ 7,333 $ 7,333 $ — $ — Investment in CarbonFree 5,000 — — 5,000 Investments $ 12,333 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, 2021 (Level 1) (Level 2) (Level 3) (in thousands) Investment in CSI Compressco $ 6,233 $ 6,233 $ — $ — Investment in CarbonFree $ 5,000 $ — — $ 5,000 Investments $ 11,233 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, Swedish Credit Agreement and term credit agreement approximate their carrying amounts. See Note 5 - “Long-Term Debt and Other Borrowings” for further discussion. 13 Table of Contents NOTE 8 – 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 March 31, 2022 2021 (in thousands) Number of weighted average common shares outstanding 127,259 126,149 Assumed exercise of equity awards and warrants 1,952 — Average diluted shares outstanding 129,211 126,149 The average diluted shares outstanding excludes the impact of certain outstanding equity awards and warrants of 1,727 thousand shares for the three-month period ended March 31, 2021, as the inclusion of these shares would have been anti-dilutive due to the net loss from continuing operations recorded during these periods. 14 Table of Contents NOTE 9 – 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 March 31, 2022 2021 (in thousands) Revenues from external customers Product sales Completion Fluids & Products Division $ 69,888 $ 45,019 Water & Flowback Services Division 167 13 Consolidated $ 70,055 $ 45,032 Services Completion Fluids & Products Division $ 3,306 $ 1,503 Water & Flowback Services Division 56,676 30,789 Consolidated $ 59,982 $ 32,292 Total revenues Completion Fluids & Products Division $ 73,194 $ 46,522 Water & Flowback Services Division 56,843 30,802 Consolidated $ 130,037 $ 77,324 Income (loss) before taxes Completion Fluids & Products Division $ 19,292 $ 9,010 Water & Flowback Services Division 2,682 ( 5,480 ) Interdivision eliminations 3 3 Corporate Overhead (1) ( 13,043 ) ( 15,308 ) Consolidated $ 8,934 $ ( 11,775 ) (1) Amounts reflected include the following general corporate expenses: Three Months Ended March 31, 2022 2021 (in thousands) General and administrative expense $ 10,346 $ 13,020 Depreciation and amortization 191 169 Interest expense 3,647 5,064 Other general corporate income, net ( 1,141 ) ( 2,945 ) Total $ 13,043 $ 15,308 15 Table of Contents