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, 2022 2021 2022 2021 Revenues: Product sales $ 55,494 $ 46,340 $ 195,850 $ 153,955 Services 79,518 49,134 209,915 121,169 Total revenues 135,012 95,474 405,765 275,124 Cost of revenues: Cost of product sales 36,571 31,805 130,916 106,265 Cost of services 60,334 39,614 162,276 102,976 Depreciation, amortization, and accretion 8,634 8,308 24,061 25,495 Impairments and other charges — — 2,262 449 Insurance recoveries — — ( 3,750 ) ( 110 ) Total cost of revenues 105,539 79,727 315,765 235,075 Gross profit 29,473 15,747 90,000 40,049 Exploration and appraisal costs 936 — 3,500 — General and administrative expense 23,833 18,714 68,096 56,077 Interest expense, net 3,999 4,083 10,933 12,373 Other income, net ( 1,410 ) ( 10,132 ) ( 4,858 ) ( 14,438 ) Income (loss) before taxes and discontinued operations 2,115 3,082 12,329 ( 13,963 ) Provision for income taxes 2,178 587 2,899 2,139 Income (loss) before discontinued operations ( 63 ) 2,495 9,430 ( 16,102 ) Discontinued operations: Income from discontinued operations, net of taxes 319 18 270 120,882 Net income 256 2,513 9,700 104,780 Less: loss (income) attributable to noncontrolling interests (1) 22 — 43 ( 306 ) Net income attributable to TETRA stockholders $ 278 $ 2,513 $ 9,743 $ 104,474 Basic net income (loss) per common share: Income (loss) from continuing operations $ 0.00 $ 0.02 $ 0.08 $ ( 0.13 ) Income from discontinued operations — — — 0.96 Net income attributable to TETRA stockholders $ 0.00 $ 0.02 $ 0.08 $ 0.83 Weighted average basic shares outstanding 128,407 126,733 127,890 126,489 Diluted net income (loss) per common share: Income (loss) from continuing operations $ 0.00 $ 0.02 $ 0.08 $ ( 0.13 ) Income from discontinued operations — — — 0.96 Net income attributable to TETRA stockholders $ 0.00 $ 0.02 $ 0.08 $ 0.83 Weighted average diluted shares outstanding 128,407 128,694 129,704 126,489 (1) Loss (income) attributable to noncontrolling interests includes zero for the three months ended September 30, 2022 and 2021, respectively, and zero and $ 333 income for the nine months ended September 30, 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 September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net income $ 256 $ 2,513 $ 9,700 $ 104,780 Foreign currency translation adjustment from continuing operations, net of taxes of $ 0 in 2022 and 2021 ( 3,873 ) ( 2,150 ) ( 7,095 ) ( 2,772 ) Unrealized loss on investment in CarbonFree ( 306 ) — ( 306 ) — Comprehensive income (loss) ( 3,923 ) 363 2,299 102,008 Less: Comprehensive (income) loss attributable to noncontrolling interests 22 — 43 ( 306 ) Comprehensive income (loss) attributable to TETRA stockholders $ ( 3,901 ) $ 363 $ 2,342 $ 101,702 See Notes to Consolidated Financial Statements 2 Table of Contents TETRA Technologies, Inc. and Subsidiaries Consolidated Balance Sheets (In Thousands) September 30, 2022 December 31, 2021 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 25,247 $ 31,551 Trade accounts receivable, net of allowances of $ 475 in 2022 and $ 289 in 2021 105,656 91,202 Inventories 71,558 69,098 Prepaid expenses and other current assets 21,831 18,539 Total current assets 224,292 210,390 Property, plant, and equipment: Land and building 24,066 26,380 Machinery and equipment 330,163 345,454 Automobiles and trucks 12,939 16,174 Chemical plants 57,743 61,565 Construction in progress 9,004 5,349 Total property, plant, and equipment 433,915 454,922 Less accumulated depreciation ( 338,890 ) ( 365,946 ) Net property, plant, and equipment 95,025 88,976 Other assets: Patents, trademarks and other intangible assets, net of accumulated amortization of $ 44,994 in 2022 and $ 44,323 in 2021 33,667 36,958 Operating lease right-of-use assets 33,415 36,973 Investments 13,313 11,233 Other assets 13,774 13,736 Total other assets 94,169 98,900 Total assets $ 413,486 $ 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) September 30, 2022 December 31, 2021 (Unaudited) LIABILITIES AND EQUITY Current liabilities: Trade accounts payable $ 46,162 $ 37,943 Current portion of long-term debt 14 — Compensation and employee benefits 29,213 20,811 Operating lease liabilities, current portion 7,858 8,108 Accrued taxes 8,334 7,085 Accrued liabilities and other 19,004 21,810 Current liabilities associated with discontinued operations 919 1,385 Total current liabilities 111,504 97,142 Long-term debt, net 153,873 151,936 Operating lease liabilities 27,724 31,429 Asset retirement obligations 13,368 12,984 Deferred income taxes 1,284 1,669 Other liabilities 3,977 4,543 Total long-term liabilities 200,226 202,561 Commitments and contingencies (Note 7) Equity: TETRA stockholders’ equity: Common stock, par value 0.01 per share; 250,000,000 shares authorized at September 30, 2022 and December 31, 2021; 131,758,500 shares issued at September 30, 2022 and 130,075,838 shares issued at December 31, 2021 1,318 1,301 Additional paid-in capital 476,530 475,624 Treasury stock, at cost; 3,138,675 shares held at September 30, 2022 and December 31, 2021 ( 19,957 ) ( 19,957 ) Accumulated other comprehensive loss ( 54,333 ) ( 46,932 ) Retained deficit ( 300,589 ) ( 310,332 ) Total TETRA stockholders’ equity 102,969 99,704 Noncontrolling interests ( 1,213 ) ( 1,141 ) Total equity 101,756 98,563 Total liabilities and equity $ 413,486 $ 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 Unrealized Gain (Loss) on Investment 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 Net income for second quarter 2022 — — — — — 1,745 ( 20 ) 1,725 Translation adjustment, net of taxes of $ 0 — — — ( 3,414 ) — — — ( 3,414 ) Comprehensive loss ( 1,689 ) Equity compensation expense — 1,159 — — — — — 1,159 Other 6 ( 833 ) — — — — ( 9 ) ( 836 ) Balance at June 30, 2022 $ 1,314 $ 476,381 $ ( 19,957 ) $ ( 50,154 ) $ — $ ( 300,867 ) $ ( 1,181 ) $ 105,536 Net income for third quarter 2022 — — — — — 278 ( 22 ) 256 Translation adjustment, net of taxes of $ 0 — — — ( 3,873 ) — — — ( 3,873 ) Other comprehensive income (loss) — — — — ( 306 ) — — ( 306 ) Comprehensive income ( 3,923 ) Equity compensation expense — 1,098 — — — — — 1,098 Other 4 ( 949 ) — — — — ( 10 ) ( 955 ) Balance at September 30, 2022 $ 1,318 $ 476,530 $ ( 19,957 ) $ ( 54,027 ) $ ( 306 ) $ ( 300,589 ) $ ( 1,213 ) $ 101,756 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, 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 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, 2022 2021 Operating activities: Net income $ 9,700 $ 104,780 Reconciliation of net income to net cash provided by operating activities: Depreciation, amortization, and accretion 24,061 25,524 Gain on GP Sale — ( 120,574 ) Impairment and other charges 2,262 449 Loss (gain) on investments 159 ( 11,803 ) Equity-based compensation expense 3,361 3,611 Provision for doubtful accounts 31 129 Amortization and expense of financing costs 2,378 2,320 Insurance recoveries associated with damaged equipment ( 3,750 ) ( 110 ) Warrants fair value adjustment — ( 143 ) Gain on sale of assets ( 980 ) ( 479 ) Other non-cash credits ( 425 ) ( 359 ) Changes in operating assets and liabilities: Accounts receivable ( 16,661 ) ( 15,246 ) Inventories ( 5,707 ) 2,449 Prepaid expenses and other current assets ( 3,782 ) ( 2,927 ) Trade accounts payable and accrued expenses 17,069 25,231 Other ( 1,768 ) ( 2,428 ) Net cash provided by operating activities 25,948 10,424 Investing activities: Purchases of property, plant, and equipment, net ( 32,678 ) ( 14,620 ) Proceeds from GP Sale, net of cash divested — 566 Proceeds from sale of property, plant, and equipment 1,489 1,016 Proceeds from insurance recoveries associated with damaged equipment 3,750 110 Other investing activities ( 841 ) 764 Net cash used in investing activities ( 28,280 ) ( 12,164 ) Financing activities: Proceeds from long-term debt 1,695 — Principal payments on long-term debt ( 3,292 ) ( 37,477 ) Payments on financing lease obligations ( 1,174 ) — Repurchase of common stock — ( 461 ) Debt issuance costs and other financing activities — ( 718 ) Net cash used in financing activities ( 2,771 ) ( 38,656 ) Effect of exchange rate changes on cash ( 1,201 ) ( 1,635 ) Decrease in cash and cash equivalents ( 6,304 ) ( 42,031 ) Cash and cash equivalents 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 at beginning of period associated with continuing operations 31,551 67,317 Cash and cash equivalents at end of period associated with continuing operations $ 25,247 $ 41,863 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 and 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 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, 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 Annual 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 Annual Report . There have been no significant changes in our accounting policies or the application thereof during the third 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. 8 Table of Contents 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. 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 $( 1.1 ) million and $( 2.7 ) million during the three and nine months ended September 30, 2022, respectively, and $( 0.1 ) million and $( 1.1 ) million during the three and nine months ended September 30, 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 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, 2022 2021 (in thousands) Supplemental cash flow information (1) : Interest paid $ 11,578 $ 10,954 Income taxes paid $ 2,525 $ 1,423 Increase (decrease) in accrued capital expenditures $ ( 4,101 ) $ 463 (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 9 Table of Contents 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 incentive distribution rights (“IDRs”) in CSI Compressco LP, (“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 September 30, 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. During the second quarter of 2022, we sold equipment to CSI Compressco for approximately $ 0.3 million. 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 in 2021. Our consolidated statements of cash flows for the nine-month period ended September 30, 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 September 30, 2022 Offshore Services Major classes of line items constituting income from discontinued operations General and administrative expense $ 510 Pretax loss from discontinued operations ( 510 ) Pretax gain on disposal of discontinued operations 829 Total pretax income from discontinued operations 319 Income from discontinued operations attributable to TETRA stockholders $ 319 10 Table of Contents Three Months Ended September 30, 2021 Compression Offshore Services Total Major classes of line items constituting income from discontinued operations Cost of revenues $ — $ ( 174 ) $ ( 174 ) General and administrative expense — 6 6 Other (income) expense, net 150 — 150 Pretax income (loss) from discontinued operations ( 150 ) 168 18 Income from discontinued operations attributable to TETRA stockholders $ 18 Nine Months Ended September 30, 2022 Offshore Services Maritech Total Major classes of line items constituting income from discontinued operations Cost of revenues $ 54 $ — $ 54 General and administrative expense 533 — 533 Other expense, net — ( 28 ) ( 28 ) Pretax income (loss) from discontinued operations ( 587 ) 28 ( 559 ) Pretax gain on disposal of discontinued operations 829 Total pretax income from discontinued operations 270 Income from discontinued operations attributable to TETRA stockholders $ 270 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 Loss from discontinued operations attributable to noncontrolling interest ( 333 ) Income from discontinued operations attributable to TETRA stockholders $ 120,549 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, 2022 Offshore Services Maritech Total (unaudited) Carrying amounts of major classes of liabilities included as part of discontinued operations Trade payables $ 319 $ — $ 319 Accrued liabilities and other 505 95 600 Total liabilities associated with discontinued operations $ 824 $ 95 $ 919 11 Table of Contents 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/or customer documentation requirements, were $ 33.4 million and $ 20.5 million as of September 30, 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, and an option to acquire the rights to produce and extract lithium in our Arkansas leases as well as other 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 $ 4.1 million and $ 3.2 million as of September 30, 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 cash from Standard Lithium. Unearned income is included in accrued liabilities and other in our consolidated balance sheets. During the three-month and nine-month periods ended September 30, 2022 and September 30, 2021, contract costs were not significant. During the three-month and nine-month periods ended September 30, 2022, we recognized approximately $ 2.6 million and $ 1.7 million of revenue, respectively, deferred in unearned income as of the beginning of the period. These amounts are included in products sales and services revenues in our consolidated statements of operations. Other revenue recognized during the three-month and nine-month periods ended September 30, 2021 deferred in unearned income as of the beginning of the period was not significant. We also recognized approximately $ 2.4 million and $ 1.3 million of income during the nine-month periods ended September 30, 2022 and September 30, 2021, respectively, related to the Standard Lithium arrangements. These amounts are included in other income, net in our consolidated statements of operations. 12 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 10 - “Industry Segments.” 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, 2022 2021 2022 2021 (in thousands) Completion Fluids & Products United States $ 30,261 $ 22,529 $ 103,449 $ 72,353 International 28,902 26,162 103,706 87,466 59,163 48,691 207,155 159,819 Water & Flowback Services United States 67,641 42,234 182,059 106,630 International 8,208 4,549 16,551 8,675 75,849 46,783 198,610 115,305 Total Revenue United States 97,902 64,763 285,508 178,983 International 37,110 30,711 120,257 96,141 $ 135,012 $ 95,474 $ 405,765 $ 275,124 NOTE 4 – INVENTORIES Components of inventories as of September 30, 2022 and December 31, 2021 are as follows: September 30, 2022 December 31, 2021 (in thousands) Finished goods $ 60,069 $ 59,925 Raw materials 4,267 2,827 Parts and supplies 5,735 4,713 Work in progress 1,487 1,633 Total inventories $ 71,558 $ 69,098 Finished goods inventories include newly manufactured clear brine fluids as well as used brines that are repurchased from certain customers for recycling . 13 Table of Contents NOTE 5 – INVESTMENTS Following the closing of the GP Sale, we continue to own approximately 3.7 % of the outstanding CSI Compressco common units as of September 30, 2022. In addition, we are party to agreements in which Standard Lithium has the right to explore, and an option to acquire the rights to 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. In May 2021, we signed a memorandum of understanding (“MOU”) with CarbonFree, a carbon capture company with patented technologies that capture CO 2 and mineralize emissions to make commercial, carbon-negative chemicals. Although the MOU expired in May 2022 at the end of its twelve-month term, we have an intellectual property joint development agreement in place with CarbonFree to evaluate potential new technologies. In December 2021, we invested $ 5.0 million in a convertible note issued by CarbonFree. Our exposure to potential losses by CarbonFree is limited to our investment in the convertible note and associated accrued interest. Our investments as of September 30, 2022 and December 31, 2021 consist of the following: September 30, 2022 December 31, 2021 (in thousands) Investment in CSI Compressco $ 6,128 $ 6,233 Investment in CarbonFree 5,453 5,000 Investment in Standard Lithium 1,732 — Total Investments $ 13,313 $ 11,233 NOTE 6 – LONG-TERM DEBT AND OTHER BORROWINGS Consolidated long-term debt as of September 30, 2022 and December 31, 2021, consists of the following: Scheduled Maturity September 30, 2022 December 31, 2021 (in thousands) Swedish Credit Facility December 31, 2022 $ 14 $ — Asset-based credit agreement (1) May 31, 2025 — 67 Term credit agreement (2) September 10, 2025 153,873 151,869 Total debt 153,887 151,936 Less current portion ( 14 ) — Total long-term debt $ 153,873 $ 151,936 (1) Net of unamortized deferred financing costs of zero and $ 1.5 million as of September 30, 2022 and December 31, 2021, respectively. Deferred financing costs of $ 1.2 million as of September 30, 2022, were classified as other long-term assets on the accompanying consolidated balance sheet as there was no outstanding balance on our asset-based credit agreement. (2) Net of unamortized discount of $ 3.7 million and $ 4.5 million as of September 30, 2022 and December 31, 2021, respectively, and net of unamortized deferred financing costs of $ 5.5 million and $ 6.7 million as of September 30, 2022 and December 31, 2021, respectively. Swedish Credit Facility In January 2022, the Company entered into a revolving credit facility for seasonal working capital needs of subsidiaries in Sweden (“Swedish Credit Facility”). As of September 30, 2022, we had less than US$ 0.1 million outstanding and availability of approximately US$ 4.5 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. 14 Table of Contents Finland Credit Agreement In January 2022, the Company also entered into an agreement guaranteed by certain accounts receivable and inventory in Finland (“Finland Credit Agreement”). As of September 30, 2022, there were US$ 1.4 million of letters of credit outstanding against the Finland Credit Agreement. The Finland Credit Agreement expires on January 31, 2023 and the Company intends to renew it annually. ABL Credit Agreement As of September 30, 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 September 30, 2022, we had zero outstanding and $ 4.7 million in letters of credit and guarantees under our ABL Credit Agreement, respectively. Subject to compliance with the covenants, borrowing base, and other provisions of the ABL Credit Agreement that may limit borrowings, we had availability of $ 62.6 million under this agreement. Term Credit Agreement As of September 30, 2022, we had $ 153.9 million outstanding, net of unamortized discounts and unamortized deferred financing costs under our term credit agreement (“Term Credit Agreement”). The 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 September 30, 2022, the interest rate per annum on borrowings under the Term Credit Agreement is 8.77 %. 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 September 30, 2022, we are in compliance with all covenants under the credit agreements. 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. We have a Bromine Requirements Sales Agreement (“Sales Agreement”) to purchase a certain volume of elemental bromine from LANXESS Corporation (formerly Chemtura Corporation, “LANXESS”), included in Product Purchase Obligations below. LANXESS notified us of a proposed non-ordinary course increase to the price of bromine, which we believe is not justified nor appropriate under the Sales Agreement. After lengthy discussions, we and LANXESS were unable to reach an agreement regarding the validity of the proposed price increase; therefore, we filed for arbitration in May 2022 seeking declaratory relief, among other relief, declaring that the proposed price increase is invalid. In September 2022, LANXESS filed a counterclaim with the American Arbitration Association seeking declaratory relief, among other relief, declaring that the proposed price increase was valid and seeking damages in the amount of the price increase from July 1, 2022 forward. In October 2022, we filed a reply to LANXESS’ counterclaim disputing the counterclaim and amending our original demand. The arbitration is currently pending, and no final hearing date has been set. We are unable to predict the duration, scope or impact of this proceeding on our consolidated financial statements. There have been no other material developments in our legal proceedings during the quarter ended September 30, 2022. For a discussion of our legal proceedings, please see our 2021 Annual Report . 15 Table of Contents Product Purchase Obligations In the normal course of our Completion Fluids & Products Division operations, we enter into supply agreements with certain manufacturers of various raw materials and finished products. Some of these agreements have terms and conditions that specify a minimum or maximum level of purchases over the term of the agreement. Other agreements require us to purchase the entire output of the raw material or finished product produced by the manufacturer. Our purchase obligations under these agreements apply only with regard to raw materials and finished products that meet specifications set forth in the agreements. We recognize a liability for the purchase of such products at the time we receive them. As of September 30, 2022, the aggregate amount of the fixed and determinable portion of the purchase obligation pursuant to our Completion Fluids & Products Division’s supply agreements was approximately $ 120.2 million, including $ 1.0 million for the remainder of 2022, an average of $ 17.9 million per year from 2023 to 2026 and $ 47.5 million thereafter, extending through 2029. NOTE 8 – 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 September 30, 2022. 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 with assistance from a third-party valuation specialist (a Level 3 fair value measurement). The valuation is impacted by key assumptions, including the assumed probability and timing of potential debt or equity offerings. The convertible note includes an option to convert the note into equity interests issued by CarbonFree. The change in the fair value of the embedded option is included in other (income) expense, net in our consolidated statements of operations. The change in the fair value of the convertible note, excluding the embedded option, is included in other comprehensive income in our consolidated statements of comprehensive income. 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. Our investments in CSI Compressco and Standard Lithium are 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. Recurring and nonrecurring fair value measurements by valuation hierarchy as of September 30, 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 September 30, 2022 (Level 1) (Level 2) (Level 3) (in thousands) Investment in CSI Compressco $ 6,128 $ 6,128 $ — $ — Investment in CarbonFree 5,453 — — 5,453 Investment in Standard Lithium 1,732 1,732 — — Investments $ 13,313 16 Table of Contents 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 Impairments During the second quarter of 2022, our Completion Fluids & Products and Water & Flowback Services Divisions each recorded certain inventory and long-lived tangible asset impairments. Our Water & Flowback Services Division recorded impairments, including $ 1.3 million of equipment, $ 0.2 million of inventory, and $ 0.5 million for land and buildings. The Completion Fluids & Products Division also recorded a $ 0.2 million impairment related to obsolete inventory. The inventory and equipment were written down to zero or scrap value. The fair value of land and buildings of $ 0.4 million was estimated based on recent sales price per square acre or square foot of comparable properties (a Level 3 fair value measurement) in accordance with the fair value hierarchy. 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 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, 2022 2021 2022 2021 (in thousands) Number of weighted average common shares outstanding 128,407 126,733 127,890 126,489 Assumed exercise of equity awards and warrants — 1,961 1,814 — Average diluted shares outstanding 128,407 128,694 129,704 126,489 The average diluted shares outstanding excludes the impact of certain outstanding equity awards and warrants of 1.5 million shares for the three-month period ended September 30, 2022 and 1.8 million shares for the nine-month period ended September 30, 2021 as the inclusion of these shares would have been anti-dilutive due to the net loss from continuing operations recorded during these periods. 17 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, 2022 2021 2022 2021 (in thousands) Revenues from external customers Product sales Completion Fluids & Products Division $ 55,354 $ 46,322 $ 195,469 $ 153,905 Water & Flowback Services Division 140 18 381 50 Consolidated $ 55,494 $ 46,340 $ 195,850 $ 153,955 Services Completion Fluids & Products Division $ 3,809 $ 2,369 $ 11,686 $ 5,914 Water & Flowback Services Division 75,709 46,765 198,229 115,255 Consolidated $ 79,518 $ 49,134 $ 209,915 $ 121,169 Total revenues Completion Fluids & Products Division $ 59,163 $ 48,691 $ 207,155 $ 159,819 Water & Flowback Services Division 75,849 46,783 198,610 115,305 Consolidated $ 135,012 $ 95,474 $ 405,765 $ 275,124 Income (loss) before taxes Completion Fluids & Products Division $ 12,357 $ 14,675 $ 46,910 $ 40,113 Water & Flowback Services Division 6,482 ( 1,807 ) 10,808 ( 12,265 ) Interdivision Eliminations 3 3 9 9 Corporate Overhead (1) ( 16,727 ) ( 9,789 ) ( 45,398 ) ( 41,820 ) Consolidated $ 2,115 $ 3,082 $ 12,329 $ ( 13,963 ) (1) Amounts reflected include the following general corporate expenses: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (in thousands) General and administrative expense $ 11,968 $ 8,409 $ 33,856 $ 30,973 Depreciation and amortization 165 228 528 646 Interest expense 4,437 4,247 11,978 13,354 Warrants fair value adjustment (income) expense — ( 3,164 ) — ( 143 ) Other general corporate (income) expense, net 157 69 ( 964 ) ( 3,010 ) Total $ 16,727 $ 9,789 $ 45,398 $ 41,820 18 Table of Contents