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Item 1. Financial Statements

2023-07-31 compared with 2023-05-01 · 149 added, 78 removed, 461 unchanged (33% of the section changed)

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Product sales

9 unchanged sentences

Depreciation, amortization, and accretion

8,457 7,748 17,127 15,427

Impairments and other charges

777 2,262 777 2,262

Insurance recoveries

30 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Net income $ 18,197 $ 1,725 $ 24,230 $ 9,444

Foreign currency translation adjustment from continuing operations, net of taxes of $ 0 in 2023 and 2022

1,045 ( 3,414 ) 2,466 ( 3,222 )

Unrealized gain on investment in CarbonFree 207 — 328 —

Comprehensive income 7,575 7,911

Comprehensive income (loss) 19,449 ( 1,689 ) 27,024 6,222

Comprehensive loss attributable to noncontrolling interests 18 20 25 21

Comprehensive income attributable to TETRA stockholders $ 7,582 $ 7,912

Comprehensive income (loss) attributable to TETRA stockholders $ 19,467 $ ( 1,669 ) $ 27,049 $ 6,243

See Notes to Consolidated Financial Statements

70 unchanged sentences

Common stock, par value 0.01 per share;

250,000,000 shares authorized at March 31, 2023 and December 31, 2022;

132,522,347 shares issued at March 31, 2023 and 131,800,975 shares issued at December 31, 2022

250,000,000 shares authorized at June 30, 2023 and December 31, 2022;

132,695,294 shares issued at June 30, 2023 and 131,800,975 shares issued at December 31, 2022

Additional paid-in capital

1 unchanged sentence

Treasury stock, at cost;

3,138,675 shares held at March 31, 2023 and December 31, 2022

3,138,675 shares held at June 30, 2023 and December 31, 2022

( 19,957 ) ( 19,957 )

25 unchanged sentences

Comprehensive income 7,575

Treasury stock activity, net — — — — — — — —

Equity-based compensation (1)

2 unchanged sentences

Balance at March 31, 2023 $ 1,325 $ 479,993 $ ( 19,957 ) $ ( 47,570 ) $ 49 $ ( 296,453 ) $ ( 1,234 ) $ 116,153

Net income (loss) for second quarter 2023 — — — — — 18,215 ( 18 ) 18,197

Translation adjustment,

net of taxes of $ 0

— — — 1,045 — — — 1,045

Other comprehensive income — — — — 207 — — 207

Comprehensive income 19,449

Equity-based compensation — 1,507 — — — — — 1,507

Other 2 ( 52 ) — — — — ( 2 ) ( 52 )

Balance at June 30, 2023 $ 1,327 $ 481,448 $ ( 19,957 ) $ ( 46,525 ) $ 256 $ ( 278,238 ) $ ( 1,254 ) $ 137,057

(1) Equity-based compensation for the three months ended March 31, 2023 includes $ 2.3 million for a portion of short-term incentive compensation that was settled through grants of restricted stock units rather than cash.

13 unchanged sentences

Balance at March 31, 2022 $ 1,308 $ 476,055 $ ( 19,957 ) $ ( 46,740 ) $ ( 302,612 ) $ ( 1,152 ) $ 106,902

Net income (loss) for second quarter 2022 — — — — 1,745 ( 20 ) 1,725

Translation adjustment, net of taxes of $ 0

— — — ( 3,414 ) — — ( 3,414 )

Comprehensive income (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

See Notes to Consolidated Financial Statements

3 unchanged sentences

(In Thousands, Unaudited)

Three Months Ended

Six Months Ended

Operating activities:

2 unchanged sentences

Depreciation, amortization, and accretion 17,127 15,427

Loss (gain) on investments 505 ( 1,100 )

Impairment and other charges 777 2,262

Gain on investments ( 403 ) ( 390 )

Equity-based compensation expense 2,768 2,263

Provision for (recovery of) credit losses ( 21 ) 61

Provision for credit losses 720 244

Amortization and expense of financing costs 1,781 1,573

13 unchanged sentences

Proceeds from insurance recoveries associated with damaged equipment 2,850 3,750

Purchase of investment ( 250 ) —

Other investing activities ( 1,827 ) ( 451 )

1 unchanged sentence

Financing activities:

Proceeds from long-term debt and credit agreements 52,756 1,533

Principal payments on long-term debt and credit agreements ( 47,362 ) ( 811 )

Proceeds from credit agreements and long-term debt 97,169 1,667

Principal payments on credit agreements and long-term debt ( 98,237 ) ( 3,267 )

Payments on financing lease obligations ( 689 ) ( 1,174 )

Net cash provided by financing activities 5,136 722

Net cash used in financing activities ( 1,757 ) ( 2,774 )

Effect of exchange rate changes on cash 487 ( 329 )

7 unchanged sentences

NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES

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 are an energy services and solutions company operating on six continents, focused on calcium chloride, completion fluids and associated products and services, comprehensive water management solutions, frac flowback, production well testing and offshore rig cooling.

We were incorporated in Delaware in 1981 and are composed of two segments – Completion Fluids & Products Division and Water & Flowback Services Division.

4 unchanged sentences

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, 2023 are not necessarily indicative of results that may be expected for the twelve months ended December 31, 2023.

Operating results for the period ended June 30, 2023 are not necessarily indicative of results that may be expected for the twelve months ended December 31, 2023.

We have reflected the operations of our former Compression Division and Offshore Division as discontinued operations for all periods presented.

7 unchanged sentences

Tax Benefits Preservation Plan

On February 28, 2023, the Board of Directors adopted a Tax Benefits Preservation Plan (the “Tax Plan”) designed to protect the availability of the Company’s net operating loss carryforwards and other tax attributes (collectively, the “Tax Attributes”), which may be utilized in certain circumstances to reduce the Company’s future income tax obligations.

On February 28, 2023, the Board of Directors adopted a Tax Benefits Preservation Plan (the “Tax Plan”) designed to protect the availability of the Company’s net operating loss carryforwards (“NOLs”) and other tax attributes (collectively, the “Tax Attributes”), which may be utilized in certain circumstances to reduce the Company’s future income tax obligations.

The Tax Plan is intended to reduce the likelihood that any changes in the Company’s investor base would limit the Company’s future use of its Tax Attributes as a result of the Company experiencing an “ownership change” under Section 382 (“Section 382”) of the Internal Revenue Code of 1986, as amended (the “Code”).

12 unchanged sentences

The Tax Plan adopted by the Board of Directors is similar to plans adopted by other publicly held companies with significant NOLs or other substantial tax benefits and is not designed to prevent any action that the Board of Directors determines to be in the best interest of the Company and its stockholders.

As discussed further in the Company’s definitive proxy statement for the annual meeting of stockholders, which is anticipated to be held on May 24, 2023, the Company intends to submit the Tax Plan to our stockholders for ratification at such meeting.

At the Company’s 2023 annual meeting of stockholders held on May 24, 2023, the Company’s stockholders ratified the adoption of the Tax Plan.

The Rights are in all respects subject to and governed by the provisions of the Tax Plan.

2 unchanged sentences

The foregoing summary should be read together with the entire Tax Plan and is qualified in its entirety by reference to the Tax Plan.

Mineral Resources Arrangement

We have rights to the brine underlying our approximately 40,000 gross acres of brine leases in the Smackover Formation in Southwest Arkansas, including rights to the bromine and lithium contained in the brine.

We recognized approximately $ 2.3 million and $ 3.1 million of expense during the three-month and six-month periods ended June 30, 2023, respectively, and $ 0.6 million and $ 2.6 million of expense during the three-month and six-month periods ended June 30, 2022, respectively, for exploration and pre-development costs representing expenditures incurred to evaluate potential future development of our lithium and bromine properties in Arkansas.

In June 2023, we entered into a memorandum of understanding (“MOU”) with Saltwerx LLC (“Saltwerx”), an indirect wholly owned subsidiary of a Fortune 500 company, relating to a newly-proposed brine unit in the Smackover Formation in Southwest Arkansas and potential bromine and lithium production from brine produced from the unit.

The binding provisions of the MOU provide, among other things, that (i) we will file an amended brine unit application (“the Application”) covering approximately 6,138 acres, which expands the size of the unit area and also combines brine acreage that was previously leased by each of TETRA and Saltwerx (“the Brine Unit”), with the Arkansas Oil & Gas Commission (“AOGC”) and (ii) Saltwerx will provide a letter to us in support of the Application.

The MOU also contains provisions effective after, and contingent on, the approval of the Brine Unit by the AOGC, including provisions relating to:

(i) initial brine ownership percentages within the Brine Unit, including the bromine and lithium contained in the brine, (ii) the transfer of certain leased acres outside the proposed Brine Unit from the Company to Saltwerx, (iii) Saltwerx reimbursing the Company for certain expenses incurred by the Company to date regarding the development of leased acreage to be included in the Brine Unit, and (iv) an allocation of certain future costs for the drilling of a brine production test well and other development operations, including FEED studies for bromine and lithium production facilities.

We recognized approximately $ 4.7 million of income during the three-month and six-month periods ended June 30, 2023 for income from collaborative arrangement representing the portion of exploration and pre-development costs that are reimbursable by Saltwerx and is included in other income, net in our consolidated statements of operations.

Significant Accounting Policies

Our significant accounting policies are described in the notes to our consolidated financial statements for the year ended December 31, 2022 included in our 2022 Annual Report .

There have been no significant changes in our accounting policies or the application thereof during the first quarter of 2023.

There have been no significant changes in our accounting policies or the application thereof during the second quarter of 2023.

Use of Estimates

9 unchanged sentences

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 $ 0.2 million and $( 0.8 ) million during the three months ended March 31, 2023 and 2022, respectively.

Foreign currency exchange gains are included in other (income) expense, net and totaled losses of $ 67,000 and $ 0.2 million during the three and six months ended June 30, 2023, respectively, and gains of $ 0.8 million and $ 1.6 million during the three and six months ended June 30, 2022, respectively.

Fair Value Measurements

2 unchanged sentences

See Note 8 - “Fair Value Measurements” for further discussion.

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).

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 is as follows:

Three Months Ended

Six Months Ended

(in thousands)

1 unchanged sentence

Income taxes paid $ 2,012 $ 1,470

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(in thousands)

1 unchanged sentence

New Accounting Pronouncements

Standard adopted during 2023

Standards adopted during 2023

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326):

6 unchanged sentences

The adoption of this standard did not have a material impact on our consolidated financial statements.

Standard not yet adopted

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”, which provides optional expedients and exceptions for applying U.S.

1 unchanged sentence

In December 2022, the FASB issued ASU 2022-06, “Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848.” Entities may elect to apply the amendments for contract modifications made on or before December 31, 2024.

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, as extended by ASU 2022-06, on our consolidated financial statements when our contracts are modified to eliminate references to LIBOR.

Deferral of the Sunset Date of Topic 848.” During the three months ended June 30, 2023, our asset-based credit agreement and term credit agreement were amended to replace LIBOR and Eurodollar rates with the secured overnight financing rate (“SOFR”).

There were no significant costs associated with the amendments and the amendments did not have a significant impact on our consolidated financial statements.

NOTE 2 – DISCONTINUED OPERATIONS

3 unchanged sentences

Our consolidated statements of comprehensive income, statements of equity and statements of cash flows combine continuing and discontinued operations.

Our loss from discontinued operations for the three months ended March 31, 2023 and 2022 consist of general and administrative expense associated with ongoing litigation for our former Offshore Division.

Our loss from discontinued operations for the three and six months ended June 30, 2023 consist of general and administrative expense associated with ongoing litigation for our former Offshore Division.

A summary of additional 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

June 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 8 — 8

Other income, net — ( 28 ) ( 28 )

Pretax income (loss) from discontinued operations ( 62 ) 28 ( 34 )

Loss from discontinued operations attributable to TETRA stockholders $ ( 34 )

Six Months Ended

June 30, 2022

Offshore Services Maritech Total

Major classes of line items constituting income from discontinued operations

Cost of revenues $ 55 $ — $ 55

General and administrative expense 22 — 22

Other income, net — ( 28 ) ( 28 )

Pretax income (loss) from discontinued operations ( 77 ) 28 ( 49 )

Loss from discontinued operations attributable to TETRA stockholders $ ( 49 )

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, 2023

June 30, 2023

Offshore Services Maritech Total

10 unchanged sentences

NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS

Our contract asset balances, primarily associated with contractual invoicing milestones and/or customer documentation requirements, were $ 28.8 million and $ 33.1 million as of March 31, 2023 and December 31, 2022, respectively.

Our contract asset balances, primarily associated with contractual invoicing milestones and/or customer documentation requirements, were $ 36.7 million and $ 33.1 million as of June 30, 2023 and December 31, 2022, 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.

SLI) (“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.

We are also party to agreements whereby Standard Lithium Ltd.

SLI) (“Standard Lithium”) has the right to explore for, and an option to acquire the rights to produce and extract lithium in our Arkansas leases and 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 $ 4.2 million and $ 3.7 million as of March 31, 2023 and December 31, 2022, 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 balances were $ 5.1 million and $ 3.7 million as of June 30, 2023 and December 31, 2022, respectively, and vary based on the timing of (i) invoicing, (ii) performance obligations being met and (iii) 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 periods ended March 31, 2023 and March 31, 2022, contract costs were not significant.

During the three-month periods ended March 31, 2023 and March 31, 2022, we recognized approximately $ 0.7 million and $ 0.3 million of revenue, respectively, deferred in unearned income as of the beginning of the period.

We also recognized approximately $ 0.9 million and $ 0.6 million of income during the three-month periods ended March 31, 2023 and March 31, 2022, respectively, related to the Standard Lithium arrangements.

These amounts are included in other income, net in our consolidated statements of operations.

During the six-month periods ended June 30, 2023 and June 30, 2022, contract costs were not significant.

We recognized approximately $ 1.4 million and $ 0.9 million of revenue during the three-month and six-month periods ended June 30, 2023, respectively, and $ 0.2 million and $ 0.5 million of revenue during the three-month and six-month periods ended June 30, 2022, respectively, deferred in unearned income as of the beginning of the period.

We also recognized approximately $ 0.8 million and $ 1.4 million of income during the three-month and six-month periods ended June 30, 2023, respectively, and $ 0.9 million and $ 1.5 million of income during the three-month and six-month periods ended June 30, 2022, respectively, related to the Standard Lithium arrangements deferred in unearned income as of the beginning of the period and included in other income, net in our consolidated statements of operations.

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

June 30, Six Months Ended

2023 2022 2023 2022

(in thousands)

12 unchanged sentences

NOTE 4 – INVENTORIES

Components of inventories as of March 31, 2023 and December 31, 2022 are as follows:

March 31, 2023 December 31, 2022

Components of inventories as of June 30, 2023 and December 31, 2022 are as follows:

June 30, 2023 December 31, 2022

(in thousands)

7 unchanged sentences

NOTE 5 – INVESTMENTS

Our investments as of March 31, 2023 and December 31, 2022 consist of the following:

March 31, 2023 December 31, 2022

Our investments as of June 30, 2023 and December 31, 2022 consist of the following:

June 30, 2023 December 31, 2022

(in thousands)

3 unchanged sentences

Investment in Standard Lithium 3,600 1,180

Other investment 250 —

Total Investments $ 16,718 $ 14,286

Following the January 2021 sale of the general partner of CSI Compressco LP (“CSI Compressco”), we continue to own approximately 3.7 % of the outstanding CSI Compressco common units (NASDAQ:

CCLP) as of March 31, 2023.

CCLP) as of June 30, 2023.

We have an intellectual property joint development agreement in place with CarbonFree to evaluate potential new technologies.

1 unchanged sentence

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 capitalized and accrued interest.

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.

Our exposure to potential losses by CarbonFree are limited to our investments and capitalized and accrued interest associated with the CarbonFree convertible note.

In addition, we are party to agreements whereby Standard Lithium has the right to explore for, and an option to acquire the rights to produce and extract, lithium in our Arkansas leases and other additional potential resources in the Mojave region of California.

The Company receives cash and stock of Standard Lithium under the terms of the arrangements.

2 unchanged sentences

NOTE 6 – LONG-TERM DEBT AND OTHER BORROWINGS

Consolidated long-term debt as of March 31, 2023 and December 31, 2022 consists of the following:

Scheduled Maturity March 31, 2023 December 31, 2022

Consolidated long-term debt as of June 30, 2023 and December 31, 2022 consists of the following:

Scheduled Maturity June 30, 2023 December 31, 2022

(in thousands)

8 unchanged sentences

Total long-term debt $ 156,007 $ 156,455

(1) Net of unamortized discount of $ 3.1 million and $ 3.4 million as of March 31, 2023 and December 31, 2022, respectively, and net of unamortized deferred financing costs of $ 4.7 million and $ 5.1 million as of March 31, 2023 and December 31, 2022, respectively.

(2) Net of unamortized deferred financing costs of $ 1.0 million and $ 1.1 million as of March 31, 2023 and December 31, 2022, respectively.

(1) Net of unamortized discount of $ 2.8 million and $ 3.4 million as of June 30, 2023 and December 31, 2022, respectively, and net of unamortized deferred financing costs of $ 4.2 million and $ 5.1 million as of June 30, 2023 and December 31, 2022, respectively.

(2) Net of unamortized deferred financing costs of $ 1.1 million as of December 31, 2022.

Deferred financing costs of $ 0.9 million as of June 30, 2023, 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.

Term Credit Agreement

As of March 31, 2023, we had $ 155.3 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 March 31, 2023, the interest rate per annum on borrowings under the Term Credit Agreement is 10.88 %.

For additional information on our Term Credit agreement, see our 2022 Annual Report .

As of June 30, 2023, we had $ 156.0 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 up to 50 % of Excess Cash Flow (as defined in the Term Credit Agreement) from the most recent full fiscal year within five business days of filing our Annual Report.

If our Leverage Ratio (as defined in

the Term Credit Agreement) at year-end is less than 2.00 to 1.00, the prepayment requirement is decreased to 25 %.

If our Leverage Ratio at year-end is less than 1.50 to 1.00, then no prepayment is required.

The Term Credit Agreement was amended in June 2023 to remove references to LIBOR and Eurodollar rates.

Borrowings under the Term Credit Agreement bear interest at a rate per annum equal to, at the option of TETRA, either (i) SOFR (subject to a 1% floor) plus a margin of 6.25 % per annum or (ii) a base rate plus a margin of 5.25 % per annum.

As of June 30, 2023, the interest rate per annum on borrowings under the Term Credit Agreement is 11.40 %.

In addition to paying interest on the outstanding principal under the Term Credit Agreement, TETRA is required to pay a commitment fee in respect of the unutilized commitments at the rate of 1.0 % per annum, paid quarterly in arrears based on utilization of the commitments under the Term Credit Agreement.

All obligations under the Term Credit Agreement and the guarantees of those obligations are secured, subject to certain exceptions, by a security interest for the benefit of the Term Lenders on substantially all of the personal property of TETRA and certain of its subsidiaries, the equity interests in certain domestic subsidiaries, and a maximum of 65 % of the equity interests in certain foreign subsidiaries.

ABL Credit Agreement

As of March 31, 2023, 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.

As of June 30, 2023, 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, 2023, we had $ 6.2 million outstanding and $ 8.3 million in letters of credit and guarantees under our ABL Credit Agreement, respectively.

As of June 30, 2023, we had no balance outstanding and $ 11.5 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 $ 66.6 million under this agreement.

The ABL Credit Agreement was amended in May 2023 to remove references to LIBOR.

Borrowings under the ABL Credit Agreement bear interest at a rate per annum equal to, at the option of TETRA, either (i) SOFR plus 0.10 %, (ii) a base rate plus a margin based on a fixed charge coverage ratio, (iii) the Daily Simple Risk Free Rate plus 0.10 %, or (iv) with respect to borrowings denominated in Sterling, the Daily Simple Risk Free Rate for Sterling plus 0.0326 %.

The base rate is determined by reference to the highest of (a) the prime rate of interest as announced from time to time by JPMorgan Chase Bank, N.A.

(b) the Federal Funds Effective Rate (as defined in the ABL Credit Agreement) plus 0.5 % per annum and (c) SOFR (adjusted to reflect any required bank reserves) for a one-month period on such day plus 1.0 % per annum.

In addition to paying interest on the outstanding principal under the ABL Credit Agreement, TETRA is required to pay a commitment fee in respect of the unutilized commitments at an applicable rate ranging from 0.375 % to 0.5 % per annum, paid monthly in arrears based on utilization of the commitments under the ABL Credit Agreement.

TETRA is also required to pay a customary letter of credit fee equal to the applicable margin on LIBOR-based loans and fronting fees.

All obligations under the ABL Credit Agreement and the guarantees of those obligations are secured, subject to certain exceptions, by a security interest for the benefit of the ABL Lenders on substantially all of the personal property of TETRA and certain subsidiaries of TETRA, the equity interests in certain domestic subsidiaries, and a maximum of 65 % of the equity interests in certain foreign subsidiaries.

Argentina Credit Agreement

In January 2023, the Company entered into a revolving credit facility for certain working capital and capital expenditure needs for its subsidiary in Argentina (“Argentina Credit Facility”).

As of March 31, 2023, we had $ 1.7 million outstanding and availability of approximately $ 0.3 million under the Argentina Credit Agreement.

As of June 30, 2023, we had $ 1.9 million outstanding and availability of $ 0.1 million under the Argentina Credit Agreement.

Borrowings bear interest at a rate of 2.50 % per annum.

2 unchanged sentences

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 March 31, 2023, we had $ 0.5 million outstanding and availability of approximately $ 4.4 million under the Swedish Credit Facility.

As of June 30, 2023, we had no balance outstanding and availability of approximately $ 4.6 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.

3 unchanged sentences

In January 2022, the Company also entered into an agreement guaranteed by certain accounts receivable and inventory in Finland (“Finland Credit Agreement”).

As of March 31, 2023, there were $ 1.5 million of letters of credit outstanding against the Finland Credit Agreement.

As of June 30, 2023, there were $ 1.5 million of letters of credit outstanding against the Finland Credit Agreement.

The Finland Credit Agreement expires on January 31, 2024 and the Company intends to renew it annually.

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, 2023, we are in compliance with all covenants under the credit agreements.

As of June 30, 2023, we are in compliance with all covenants under the credit agreements.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

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.

LANXESS notified us of a proposed non-ordinary course increase to the price of bromine.

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 the final hearing is set to begin on March 4, 2024.

Discussions with LANXESS regarding this arbitration are ongoing.

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 March 31, 2023.

In September 2022, LANXESS filed a counterclaim with the American Arbitration Association seeking declaratory relief, among other relief.

On May 25, 2023, TETRA entered into the Third Amendment to Bromine Requirements Sales Agreement (the “Amendment”) with LANXESS.

The Amendment has an effective date of April 1, 2023 and was entered into in connection with the entry into a settlement agreement in the Company’s arbitration with LANXESS.

The Amendment provides for, among other things, revised volume requirements and related terms.

On June 14, 2023, in light of the settlement agreement, and in response to the parties’ stipulated motion to dismiss, the arbitration panel issued an Order of Dismissal, which dismissed all claims in the arbitration with prejudice.

There have been no other material developments in our legal proceedings during the quarter ended June 30, 2023.

For additional discussion of our legal proceedings, please see our 2022 Annual Report .

5 unchanged sentences

We recognize a liability for the purchase of such products at the time we receive them.

As of March 31, 2023, 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 $ 113.9 million, including $ 11.4 million for the remainder of 2023, an average of $ 17.9 million per year from 2024 to 2027 and $ 30.8 million thereafter, extending through 2029.

Asset Purchase Obligation

In March 2023, we signed a purchase and sale agreement to acquire a chemical plant in Brazil to expand our completion fluids operational capacity.

The new facility is adjacent to our existing facility.

and the purchase price is $ 3.2 million, consisting of $ 0.6 million due at closing and two payments of $ 1.3 million due on each of the first and second anniversary of closing.

The acquisition is expected to close during the second quarter of 2023, subject to government approval.

This investment, in addition to the Gulf of Mexico and North Sea investments during the fourth quarter of 2022, complete our planned expansions in three of our key offshore markets.

As of June 30, 2023, 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 $ 63.6 million, including $ 5.2 million for the remainder of 2023, $ 21.4 million in 2024, $ 19.3 million in 2025, $ 13.0 million in 2026, and $ 4.7 million in 2027 .

NOTE 8 – FAIR VALUE MEASUREMENTS

Financial Instruments

We retained an interest in CSI Compressco representing approximately 3.7 % of CSI Compressco’s outstanding common units as of March 31, 2023 and in December 2021, we invested in a $ 5.0 million convertible note issued by CarbonFree.

We retained an interest in CSI Compressco representing approximately 3.7 % of CSI Compressco’s outstanding common units as of June 30, 2023.

In December 2021, we invested in a $ 5.0 million convertible note issued by CarbonFree.

In addition, we receive cash and stock of Standard Lithium under the terms of our arrangements as noted in Note 5 - “Investments.”

2 unchanged sentences

Changes in the value of stock are recorded in other (income) expense, net in our consolidated statements of operations.

Our investment in CarbonFree is recorded in our consolidated financial statements based on an internal valuation with assistance from a third-party valuation specialist (a Level 3 fair value measurement).

Our investment in convertible notes issued by CarbonFree is recorded in our consolidated financial statements based on an internal valuation with assistance from a third-party valuation specialist (Level 3 fair value measurement).

The valuation is impacted by key assumptions, including the assumed probability and timing of potential debt or equity offerings.

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The change in the fair value of the convertible note, excluding the embedded option, is included in other comprehensive income (loss) in our consolidated statements of comprehensive income.

The change in our investment in CarbonFree for the three-month period ended March 31, 2023 is as follows:

Three Months Ended March 31, 2023

The change in our investment in CarbonFree for the six-month period ended June 30, 2023 is as follows:

Six Months Ended June 30, 2023

(in thousands)

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Balance at end of period $ 6,269

Recurring fair value measurements by valuation hierarchy as of March 31, 2023 and December 31, 2022 are as follows:

Recurring fair value measurements by valuation hierarchy as of June 30, 2023 and December 31, 2022 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, 2023 (Level 1) (Level 2) (Level 3)

Description June 30, 2023 (Level 1) (Level 2) (Level 3)

(in thousands)

3 unchanged sentences

Investment in Standard Lithium 3,600 3,600 — —

Other investment 250 — — 250

Investments $ 16,718

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Investments $ 14,286

During the second quarter of 2023, we recorded a $0.8 million impairment of our corporate office lease.

The fair values were estimated based on the discounted cash flows from our lease and sublease agreements, including the rent rate per square foot (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 our Term Credit Agreement, ABL Credit Agreement, Argentina Credit Agreement, and Swedish Credit Agreement approximate their carrying amounts.

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(in thousands)

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(in thousands)

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Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(in thousands)

1 unchanged sentence

Depreciation and amortization 92 172 202 363

Impairments and other charges 777 — 777 —

Interest expense 5,813 3,894 11,273 7,541

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements