What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-25 compared with 2024-02-27 · 109 added, 89 removed, 213 unchanged (48% of the section changed)

12 unchanged sentences

We operate through two reporting segments - Completion Fluids & Products Division and Water & Flowback Services Division.

Completion Fluids & Products Division revenues increased during 2023 as a result of increased completions activity in the Gulf of Mexico and international markets, as well as higher volumes in Europe following resolution of raw materials limitations.

As the offshore market continues to improve, our pipeline of TETRA CS Neptune® completion fluid opportunities has continued to grow consistent with deepwater market growth.

The division has also benefited from the December 2022 Peacock acquisition in Europe.

We have also continued to successfully leverage opportunities to expand integrated services to completion fluids customers.

Our Water & Flowback Services revenues increased compared to the prior year, due to margin expansion efforts driven by investments in technology, integration, digitalization, as well as the benefit of having two early production facilities in Latin America operating the entire year and a third beginning in May 2023.

The early production facilities are longer-term, high-margin projects with stable and predictable cash flows.

Our fleet of TETRA SandStorm TM advanced cyclone technology separators remains at high utilization with continued market penetration and positive pricing progression.

Revenue growth was a result of the continued increase in the number of integrated projects and customers, high utilization of SandStorm units and market share gains with private oil and gas operators.

Completion Fluids & Products Division activity for 2024 decreased slightly compared to 2023.

We were awarded a three-well TETRA CS Neptune fluids project in the Gulf of America that is expected to begin in the first quarter of 2025.

TETRA CS Neptune fluids projects are historically higher revenue and margin projects.

We also recently secured a significant multi-well, multi-year deep water completion fluids contract in Brazil.

Our Water & Flowback Services Division activity also decreased compared to 2023 reflecting a slowdown in onshore activity in the Unites States and lower offshore completions fluids activity, as well as lower service revenues following the sale of early production facilities in Latin America.

We initiated a series of cost reduction actions in the second half of 2024 to adjust to market levels.

We are committed to pursuing low-carbon energy initiatives that leverage our fluids and aqueous chemistry core competencies, our significant bromine and lithium assets and technologies, and our leading calcium chloride production capabilities.

In June 2023, we entered into a MOU with Saltwerx, an indirect wholly owned subsidiary of ExxonMobil Corporation, relating to a newly formed Evergreen Brine Unit and potential bromine and lithium production from brine produced from the unit.

The MOU with Saltwerx includes provisions relating to:

(i) initial brine ownership percentages within the Evergreen Brine Unit, including the bromine and lithium contained in the brine, (ii) the transfer of certain leased acres outside the proposed Evergreen Brine Unit from us to Saltwerx, (iii) reimbursement by Saltwerx of certain expenses that we incurred for the development of leased acreage to be included in the Evergreen Brine Unit, and (iv) an allocation of certain future costs for the drilling of a brine production test well and other development operations, including front-end engineering and design studies for bromine and lithium production facilities.

The extraction of lithium and bromine from these brine leases would likely require a significant amount of time and capital, which we are not able to estimate at this time.

We completed an initial preliminary economic assessment in early 2023 for a bromine extraction plant.

We expect an initial economic assessment to follow in early 2024 for a lithium extraction plant, subject to the progress of early engineering.

Only upon completion of a pre-feasibility and/or feasibility study and attainment of capital commitment from either a joint venture partner, governments grants or loans, or other cost-effective sources of capital that will not over-lever TETRA, in addition to confirmation of a successful recapitalization of the long-duration zinc-bromide battery storage manufacturers, would we proceed to a final investment decision.

Substantially all of our former Compression Division’s operations were conducted through our partially-owned CSI Compressco subsidiary.

On January 29, 2021, we closed the GP Sale of the general partner of CSI Compressco, which included the sale of the incentive distribution rights (“IDRs”) in CSI Compressco and approximately 23.1% of the outstanding limited partner interests in CSI Compressco, referred to as the “GP Sale.” We have reflected the operations of our former Compression Division as discontinued operations for all periods

See Note 3 – “Discontinued Operations” in the Notes to Consolidated Financial Statements for further information.

In August 2024, we published a definitive feasibility study and updated technical resources report with respect to bromine from our Evergreen Brine Unit.

We have ongoing negotiations with various bromine providers for bridging supply agreements that, if and when finalized, will give us flexibility on the timing of a plant start-up, allowing us to accumulate additional cash from our base business.

These initiatives are expected to provide us the volumes necessary for the growing deepwater market plus the growing long-duration battery requirements, while deferring investments in Arkansas or scaling up our bromine production at lower levels than previously anticipated.

If and when the bridging supply agreement is finalized, we will announce our revised Arkansas investment and timing plans.

We are prioritizing our strategic investments on projects that can immediately impact our near-term results, with a focus on TETRA CS Neptune fluids in the Gulf of America, TETRA PureFlow+ electrolyte shipments to Eos Energy Enterprises, and further advancing our water desalination commercial pilot units that are expected to subsequently transition into long-term contracts for commercial desalination plants.

Results of Operations

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Interest expense, net 22,465 22,349 116 0.5 %

Loss on debt extinguishment

5,535 — 5,535 100.0 %

Other income, net (6,858) (9,112) 2,254 (24.7) %

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Income before taxes and discontinued operations as a percentage of revenue

Provision for income taxes 6,220 3,565 2,655 74.5 %

Provision (benefit) for income taxes

(84,878) 6,220 (91,098) NM (1)

Income before discontinued operations

113,620 25,479 88,141 345.9 %

Income from discontinued operations, net of taxes 278 195 83 42.6 %

Income (loss) from discontinued operations, net of taxes

(5,340) 278 (5,618) NM (1)

Net income 108,280 25,757 82,523 320.4 %

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Net income attributable to TETRA stockholders $ 108,284 $ 25,784 $ 82,500 320.0 %

Consolidated revenues for 2023 increased compared to the prior year due to higher activity in both our Completion Fluids & Products and Water & Flowback Services divisions, where revenue increased by $39.7 million and $33.4 million, respectively.

The increase in our Completion Fluids & Products division is primarily due to an increase in industrial chemicals product pricing and incremental volumes.

The increase in our Water & Flowback Services division is primarily from an entire year of operations of the first two early production facilities in Latin America which came on line beginning in the third quarter of 2022 and the third early production facility that came online during the second quarter of 2023.

Consolidated gross profit as a percentage of revenue increased due to revenue and margin improvements in both our Completion Fluids & Products and Water & Flowback Services divisions.

(1) Percent change is not meaningful

Consolidated revenues for 2024 decreased compared to the prior year due to lower activity in both our Completion Fluids & Products and Water & Flowback Services divisions, where revenue decreased by $1.7 million and $25.4 million, respectively.

The decrease in our Completion Fluids & Products division is primarily due to lower completion fluid sales volumes from international markets.

The decrease in our Water & Flowback Services division is primarily from an overall decline in the US market for our production testing and water management services.

See Divisional Comparisons section below for a more detailed discussion of the change in our revenues.

Consolidated gross profit as a percentage of revenue decreased slightly due to a decrease in revenue, an increase in operating costs and the effect of changes in product mix.

See Divisional Comparisons section below for additional discussion.

Exploration and Pre-Development Costs

Exploration and pre-development costs increased $5.5 million compared to the prior year due to the increased activities surrounding our Arkansas strategic initiatives, which included additional front-end engineering design studies and completing a second exploration test well.

Exploration and pre-development costs decreased $12.1 million compared to the prior year due to the capitalization of costs beginning in January 2024 following project developments, including the completion of a technical resources report, compared to expensing of costs associated with the front-end engineering and design study and appraisal costs associated with the activity in the prior year.

General and Administrative Expense

Consolidated general and administrative expenses increased during 2023 compared to the prior year primarily due to a $5.1 million increase in employee compensation from additional headcount to support higher activity levels as well as merit and inflationary factors, and additional incentive compensation as a result of higher operational margin performance and the impact of increases in the company’s stock price on long-term incentive awards.

Interest Expense, Net

Consolidated interest expense, net, increased in 2023 compared to the prior year primarily due to an increase in the interest rate on our Term Credit Agreement.

Consolidated general and administrative expenses decreased during 2024 compared to the prior year primarily due to a $7.4 million decrease in employee compensation from a reduction in equity-based compensation expense and incentive compensation as a result of lower operational margin performance.

Loss on Early Extinguishment of Debt

Consolidated loss on debt extinguishment increased $5.5 million from non-cash unamortized finance costs expensed in connection with the repayment of our prior Term Credit Agreement in January 2024.

Other Income, net

Consolidated other (income) expense, net increased during 2023 compared to the prior year primarily due to a $9.3 million reimbursement from our partner associated with the collaborative arrangement related to our Arkansas resource development opportunity, partially offset by a $4.5 million increase in foreign exchange losses, including the impact of currency volatility in Argentina.

Consolidated other income, net decreased during 2024 compared to the prior year primarily due to a $9.3 million reimbursement from our partner associated with the collaborative arrangement related to our Arkansas resource development opportunity prior to capitalization of net pre-development costs beginning in January 2024, and a $1.0 million increase in unrealized losses on our convertible note embedded option.

These decreases were partially offset by a $8.3 million increase in unrealized gains due to the change in the stock price of the Kodiak Gas Services, Inc.

KGS) (“Kodiak”) shares we received in exchange for CSI Compressco LP (“CSI Compressco’) common units we owned in connection with Kodiak’s acquisition of CSI Compressco in April 2024.

Provision for Income Tax

Our consolidated provision for income taxes during 2023 was primarily attributable to taxes in certain foreign jurisdictions and state taxes.

Our consolidated effective tax rate for the year ended December 31, 2024 and December 31, 2023 was (295.3)% and 19.6%, respectively.

The increase in our tax provision compared to the prior year was primarily due to the increase in income before taxes, while our effective tax rate decreased because a significant portion of the increase in income was in jurisdictions for which we were able to utilize net operating losses for which we had established valuation allowances.

The increase in our tax benefit compared to the prior year tax provision was primarily due to the reversal of the valuation allowance related to our United States deferred tax assets (federal and state).

We establish a valuation allowance to reduce the deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Included in our deferred tax assets are $95.0 million of net operating loss carryforwards that may be available to offset future income tax liabilities in the U.S.

as well as in certain international jurisdictions where net operating loss carryforwards exist.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.

As of December 31, 2024, in part because in the current year we achieved three years of cumulative pretax income in the United States tax jurisdiction, management determined that there is sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes of $97.5 million are realizable.

We therefore reduced the valuation allowance accordingly.

Divisional Comparisons

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General and administrative expense as a percentage of revenue 8.3 % 8.9 %

Interest (income) expense, net (647) (1,346) 699 (51.9) %

Other income, net (10,104) (1,183) (8,921) 754.1 %

Income before taxes and discontinued operations

Interest income, net

(713) (646) 67 10.4 %

Other (income) loss, net 1,369 (10,106) 11,475 (113.5) %

Income before taxes and discontinued operations $ 82,895 $ 78,314 $ 4,581 5.8 %

Income before taxes and discontinued operations as a percentage of revenue 26.6 % 25.0 %

25.0 % 21.0 %

Completion Fluids & Products Division revenues increased primarily due to incremental brominated product sales in the United States and Latin America, an increase in European calcium chloride pricing, and higher volumes in Europe as a result of resolution of raw materials limitations as well as the Peacock acquisition in December 2022.

Improved market conditions lead to increased demand and volume and contributed to the increase in revenues compared to the prior period.

Revenues also increased through leveraging opportunities to expand services to completion fluids customers.

Completion Fluids & Products Division gross profit during 2023 increased compared to the prior year due to higher revenue and margin growth as described above, as well as pricing improvements.

The Completion Fluids & Products Division revenues decreased slightly primarily due to a decline of international brominated product sales, particularly in Europe and Latin America, offset by increased volumes and continued favorable pricing for industrial chemicals sales.

The Completion Fluids & Products Division gross profit during 2024 increased compared to the prior year despite slightly lower revenues due to pricing improvements.

Completion Fluids & Products Division profitability in future periods will continue to be affected by the mix of its products and services, market demand for our products and services, drilling and completions activity and commodity prices.

Completion Fluids & Products Division pretax income increased during 2023 compared to the prior year primarily due to the increase in gross profit, along with a $9.3 million increase in other income due to reimbursements from TETRA's partner for the Arkansas resource development, partially offset by the $0.8 million decrease in the unrealized gain on the CarbonFree convertible notes.

The increase in gross profit was also offset by a $5.5 million increase in exploration and pre-development costs due to increased activities for our Arkansas strategic initiatives, which included additional front-end engineering design studies and completing a second exploration test well.

General and administrative expenses increased primarily due to a $1.9 million increase in employee compensation from additional headcount to support higher activity levels as well as merit and inflationary factors and a $0.5 million increase in professional services.

The Completion Fluids & Products Division pretax income increased during 2024 compared to the prior year primarily due to the increase in gross profit, along with a decrease in general and administrative expenses primarily due to a $1.9 million decrease in employee compensation and a $0.9 million decrease in professional services as well as a $0.6 million decrease in unrealized losses from our investment in Standard Lithium shares, which is included in other (income) loss, net.

These changes were partially offset by a $12.1 million decrease in exploration and pre-development costs and a $9.3 million decrease in other income from reimbursements from our partner due to the capitalization of costs net of reimbursements beginning in January 2024.

In addition, the unrealized losses on our convertible notes embedded derivative increased $1.0 million as the notes approach their maturity.

Water & Flowback Services Division

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General and administrative expense as a percentage of revenue 6.6 % 6.2 %

Interest (income) expense, net 205 138 67 48.6 %

Other (income) expense, net

1,757 (2,415) 4,172 NM (1)

Interest expense, net

64 205 (141) (68.8) %

Other expense, net

1,134 1,757 (623) (35.5) %

Income before taxes and discontinued operations

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Income before taxes and discontinued operations as a percentage of revenue

(1) Percent change is not meaningful

Water & Flowback Services Division revenues increased during 2023 compared to the prior year primarily due to improved market conditions.

Our growth has been boosted from investments in our SandStorm advanced cyclone technology to significantly expand our fleet and capture market share.

In addition, revenue increased from an entire year of operations of three early production facilities in Latin America which came on line beginning in the third quarter of 2022.

Revenues also include the sale of one early production facility to the operator in October 2023 for $5.4 million.

The Water & Flowback Services Division gross profit improved primarily due to higher revenues resulting from the increased activity levels described above and pricing improvements as activity levels improved and new projects commenced.

The Water & Flowback Services Division income before taxes increased during 2023 compared to prior year primarily due to the increase in gross profit.

In addition, general and administrative expenses decreased primarily due to a $1.0 million decrease in employee compensation expense primarily due to lower short-term incentive compensation, a $0.7 million decrease in general expenses and a $0.7 million decrease in legal expenses.

Other (income) expense, net moved from income to expenses due to a $3.9 million swing in foreign exchange losses caused by exchange rate devaluation in Argentina.

The Water & Flowback Services Division revenues decreased during 2024 compared to the prior year primarily due to an overall decline in the United States market from both our production testing and water management services.

This was partially offset by improved international market conditions in Latin America including an early production facility expansion as well as a full year of operation of an additional early production facility.

The Water & Flowback Services Division gross profit decreased due to lower revenues resulting from the decreased activity levels described above and operating cost inflation.

The Water & Flowback Services Division income before taxes decreased during 2024 compared to the prior year primarily due the decrease in gross profit, partially offset by a $0.4 million increase in other income, a $0.3 million decrease in general and administrative expenses from headcount reductions, and a $0.2 million increase in unrealized gain on our investment.

Corporate Overhead

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109 777 (668) (86.0) %

Other (income) expense, net (763) (867) 104 (12.0) %

Loss on debt extinguishment

5,535 — 5,535 100.0 %

Other income, net

(9,361) (763) 8,598 1,126.9 %

Loss before taxes and discontinued operations

$ (64,853) $ (72,339) $ 7,486 10.3 %

Corporate Overhead loss before taxes increased during 2023 compared to the prior year primarily due to higher interest expense due to an increase in the interest rate on our Term Credit Agreement, an increase in general administrative expenses primarily due to $4.1 million of increased salary related expense driven by a $2.7 million increase in short and long-term incentive and equity-based compensation expenses, and a $0.8 million impairment of our corporate office lease.

Corporate Overhead loss before taxes decreased during 2024 compared to the prior year primarily due to an $8.3 million increase in unrealized gain on our investment in Kodiak, which acquired CSI Compressco in April 2024.

General administrative expenses decreased primarily due to a $4.5 million decrease in salary related expenses.

Impairments decreased $0.7 million primarily from an impairment of our corporate office lease in the prior year.

These were partially offset by a $5.5 million loss on debt extinguishment from non-cash unamortized finance costs expensed in connection with the repayment of our prior Term Credit Agreement in January 2024 and a $1.0 million increase in professional services.

Non-GAAP Financial Measures

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This measure may not be comparable to similarly titled financial metrics of other entities, as other entities may not calculate Adjusted EBITDA in the same manner as we do.

Management compensates for the limitations of Adjusted EBITDA as analytical tools by reviewing the comparable U.S.

Management compensates for the limitations of Adjusted EBITDA as analytical tools by reviewing

the comparable U.S.

GAAP measures, understanding the differences between the measures, and incorporating this knowledge into management’s decision-making processes.

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Net income (loss) before taxes and discontinued operations 82,895 10,700 (45,099) (19,754) 28,742

Insurance recoveries, net of related expenditures

Completion fluids buy-back allowance adjustment

(1,776) — — — (1,776)

Impairments and other charges — — — 109 109

Exploration, pre-development costs and collaborative arrangements

Former CEO stock appreciation right credit

— — (701) — (701)

Adjustment to long-term incentives — — 1,526 — 1,526

Former CEO stock appreciation right expense — — 237 — 237

Transaction, restructuring and other expenses — — 502 — 502

Transaction, restructuring and other (income) expenses

(26) 349 1,026 — 1,349

Loss on debt extinguishment

— — — 5,535 5,535

Unusual foreign exchange loss

— 1,387 — — 1,387

Interest expense, net (647) 205 — 22,791 22,349

Interest (income) expense, net

(713) 64 — 23,114 22,465

Depreciation, amortization, and accretion

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2,189 — 777 — 2,966

Exploration and pre-development costs

Exploration, pre-development costs, and collaborative arrangements

2,838 — — — 2,838

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Transaction, restructuring, and other expenses

Interest expense, net

— — 502 — 502

Unusual foreign exchange loss

— 2,444 — — 2,444

Interest (income) expense, net

(647) 205 — 22,791 22,349

Depreciation, amortization, and accretion

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We believe that our capital structure allows us to meet our financial obligations and fund future growth as needed, despite uncertain operating conditions and financial markets.

Our liquidity at the end of the fourth quarter of 2023 was $126.3 million consisting of $52.5 million of unrestricted cash plus $73.8 million of availability under our credit agreements.

Liquidity is defined as unrestricted cash plus availability under our revolving credit facilities.

Our liquidity at the end of the fourth quarter of 2024 was $182.2 million consisting of $37.0 million of unrestricted cash, $75.0 million of availability under our delayed draw term loan and $70.2 million of availability under our credit agreements.

Liquidity is defined as unrestricted cash plus availability under the delayed draw from our Term Credit Agreement and availability under our revolving credit facilities.

Our consolidated sources and uses of cash for the years ended December 31, 2024 and 2023 are as follows:

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Operating Activities

Consolidated cash flows provided by operating activities totaled $70.2 million during 2023 compared to $19.0 million during the prior year, an increase of $51.2 million.

Operating cash flows increased compared to the prior year primarily due to increased activity levels and higher consolidated margins from changes in product mix, as well as the effect of working capital movements.

Consolidated cash flows provided by operating activities totaled $36.5 million during 2024 compared to $70.2 million during the prior year, a decrease of $33.7 million.

Operating cash flows decreased compared to the prior year primarily due to decreased activity levels from changes in market conditions and product mix, as well as the effect of working capital movements.

We continue to monitor customer credit risk in the current environment and focus on serving larger capitalized oil and gas operators and national oil companies.

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Our Water & Flowback Services Division spent $23.4 million on capital expenditures, primarily to deploy additional SandStorm units to meet increased demands and maintain, automate and upgrade its water management and flowback equipment fleet.

Water and Flowback Services Division capital expenditures also included expenditures related to construction of the third early production facility in Argentina which became operational in May 2023.

Our Completion Fluids & Products Division spent $11.1 million on capital expenditures during 2023, primarily supporting higher activity levels in the United States and Europe.

Investing activities for 2023 also included $6.7 million proceeds from sales of property, plant and equipment, $3.9 million of proceeds from the sale of marketable securities, and a $2.9 million insurance settlement received from damage to our Lake Charles facility in 2020.

Water and Flowback Services Division capital expenditures also included expenditures for expansion of an early production facility in Argentina.

Our Completion Fluids & Products Division spent $37.0 million on capital expenditures during 2024, including $22.4 million on our strategic initiatives in Arkansas, net of reimbursement from our Evergreen Unit partner, to advance engineering and reservoir studies and began laying the groundwork for plant site preparation and power infrastructure for our bromine project.

We also made additional investments to support higher activity levels in the United States and Europe.

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.

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The extraction of lithium and bromine from these brine leases will likely require a significant amount of time and capital, which are subject to further analysis and consideration.

Only upon completion of a pre-feasibility and/or feasibility study and attainment of capital commitment from either a joint venture partner, government grants or loans, or other cost-effective sources of capital that will not over-lever TETRA, in addition to confirmation of a successful recapitalization of the long-duration zinc-bromide battery storage manufacturers, would we proceed to a final investment decision.

In August 2024, we published a definitive feasibility study and updated technical resources report with respect to bromine from our Evergreen Brine Unit.

If and when the bridging supply agreement is finalized, we will announce our revised Arkansas investment and timing plans.

Historically, a significant majority of our planned capital expenditures have been related to identified opportunities to grow and expand our existing businesses.

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However, we continue to review all capital expenditure plans carefully in an effort to conserve cash.

As of December 31, 2023, we have no long-term capital expenditure commitments.

If the forecasted demand for our products and services increases or decreases, or we proceed with development of brine resources in Arkansas, the amount of planned expenditures on growth and expansion may be adjusted.

Financing Activities

During the year ended December 31, 2023, consolidated net cash used in financing activities was $4.7 million, consisting of $100.5 million borrowings and $97.5 million repayments of our revolving credit facilities, as well as $1.7 million of payments of finance lease obligations in Latin America.

We may supplement our existing cash balances and cash flow from operating activities with short-term borrowings, long-term borrowings, issuances of equity and debt securities, and other sources of capital.

During the year ended December 31, 2024, consolidated net cash used in financing activities was $8.9 million, consisting of $184.8 million borrowings under our new Term Credit Agreement and revolving credit facilities and $163.6 million repayments of our Term Credit Agreement and revolving credit facilities, $6.6 million debt issuance costs associated with our new term loan in January 2024 and the ABL Amendment in May 2024, as well as $1.4 million of payments of finance lease obligations.

We may supplement our existing cash balances and

cash flow from operating activities with short-term borrowings, long-term borrowings, issuances of equity and debt securities, and other sources of capital.

Term Credit Agreement.

As of December 31, 2023, the $163.1 million principal balance of the Term Credit Agreement was due on September 10, 2025.

On January 12, 2024, the Company entered into a New Term Credit Agreement consisting of a $190.0 million funded term loan and a $75.0 million delayed-draw term loan that refinanced the Company’s Term Credit Agreement outstanding as of December 31, 2023 and provided capital to advance the Company’s Arkansas bromine processing project.

On January 12, 2024, the Company entered into a definitive agreement for a $265.0 million credit facility consisting of a $190.0 million funded term loan and a $75.0 million delayed-draw term loan (collectively the “Term Credit Agreement”) that refinanced the Company’s prior Term Credit Agreement and provided capital to advance the Company’s Arkansas bromine processing project.

The maturity date of the New Term Credit Agreement is January 1, 2030.

As of February 23, 2024, $190.0 million in aggregate principal amount of our New Term Credit Agreement was outstanding.

Asset-Based Credit Agreement .

The amended ABL Credit Agreement provides for a senior secured revolving credit facility of up to $80 million, with a $20 million accordion.

The credit facility is subject to a borrowing base to be determined by reference to the value of inventory and accounts receivable, and includes a sublimit of $20 million for letters of credit, a swingline loan sublimit of $11.5 million, and a $15 million sub-facility subject to a borrowing base consisting of certain trade receivables and inventory in the United Kingdom.

On May 13, 2024, we entered into an amendment (the ABL Amendment”) to the Asset-Based Lending agreement dated September 10,2018 (as amended, the “ABL Credit Agreement).

In connection with the ABL Amendment, Bank of America, N.A.

became successor administrative agent to JPMorgan Chase Bank, N.A.

approximately $0.9 million of fees were incurred in connection with the ABL Amendment, which were deferred and will be amortized over the term of the ABL Credit Agreement.

The amended ABL Credit Agreement provides, with certain restrictions, for a senior secured revolving credit facility of up to $100.0 million with a $25.0 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, and a swingline loan sublimit of $11.5 million.

The ABL Credit Agreement may be used for working capital needs, capital expenditures and other general corporate purposes.

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Swedish Credit Facility.

In January 2022, the Company entered into a new revolving credit facility for seasonal working capital needs of subsidiaries in Sweden and Finland (“Swedish Credit Facility”).

In January 2022, the Company entered into a revolving credit facility for seasonal working capital needs of subsidiaries in Sweden and Finland (“Swedish Credit Facility”).

As of December 31, 2024, we had no balance outstanding and availability of approximately $4.5 million under the Swedish Credit Facility.

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In addition to the aforementioned credit facilities and senior notes, we fund our short-term liquidity requirements from cash generated by our operations and from short-term vendor financing.

In addition, as of December 31, 2023, the market value of our equity holdings of CSI Compressco and Standard Lithium were $8.5 million and $1.6 million, respectively, with no holding restrictions on our ability to monetize our investments.

If the pending acquisition of CSI Compressco by Kodiak closes, our common units in CSI Compressco will be exchanged for Kodiak common stock.

In addition, as of December 31, 2024, the market value of our equity holdings of Kodiak and Standard Lithium were $18.4 million and $1.2 million, respectively, with no holding restrictions on our ability to monetize our investments.

In January 2025, we sold our Kodiak shares for proceeds of $19.0 million, net of transaction and broker fees.

Should additional capital be required, the ability to raise such capital through the issuance of additional debt or equity securities may currently be limited.

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If it is necessary to issue additional equity to fund our capital needs, additional dilution of our common stockholders will occur.

We periodically evaluate engaging in strategic transactions and may consider divesting non-core assets where our evaluation suggests such transaction is in the best interest of our business.

We periodically evaluate engaging in strategic transactions and may consider divesting non-core assets where our evaluation

suggests such transaction is in the best interest of our business.

In challenging economic environments, we may experience increased delays and failures by customers to pay our invoices.

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An increase of unpaid receivables would also negatively affect our borrowing availability under the ABL Credit Agreement and Swedish Credit Facility.

We have operating leases for some of our transportation equipment, office space, warehouse space, operating locations, and machinery and equipment.

We have operating leases for some of our transportation equipment, office space, warehouse space, operating locations, and machinery and equipment, as well as a sales-type lease and subleases for certain facilities.

See Note 2 - “Basis of Presentation and Significant Accounting Policies” and Note 8 - “Leases” in the Notes to Consolidated Financial Statements for further information on our lease obligations.

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Critical accounting estimates are estimates that require us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made and if different estimates that we reasonably could have used in the current period, or changes in the accounting estimate that are reasonably likely occur from period to period, have a material impact on the presentation of our financial condition, changes in financial condition or results of operations.

We believe there are currently no critical accounting policies and estimates that affect the preparation of our financial statements.

We believe that of our significant accounting policies described in Note 2 - Basis of

Presentation and Significant Accounting Policies in Part II, Item 8 of this Annual Report on Form 10-K, the critical accounting estimates, assumptions, and judgments that have the most significant impact on our consolidated financial statements are described below.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis amounts.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized.

In making such a determination, we consider available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.

If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

A portion of the carrying value of certain deferred tax assets are subject to a valuation allowance.

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-K

Item 7. Management’s Discussion and Analysis