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Item 1. Financial Statements

2023-05-01 compared with 2022-10-31 · 154 added, 262 removed, 385 unchanged (52% of the section changed)

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Product sales

9 unchanged sentences

Depreciation, amortization, and accretion

8,634 8,308 24,061 25,495

Impairments and other charges

— — 2,262 449

Insurance recoveries

3 unchanged sentences

36,323 32,420

Exploration and appraisal costs 936 — 3,500 —

Exploration and pre-development costs 720 1,930

General and administrative expense 23,191 20,643

1 unchanged sentence

Other income, net ( 214 ) ( 2,411 )

Income (loss) before taxes and discontinued operations 2,115 3,082 12,329 ( 13,963 )

Income before taxes and discontinued operations 7,534 8,934

Provision for income taxes 1,489 1,200

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

Income before discontinued operations 6,045 7,734

Loss from discontinued operations, net of taxes ( 12 ) ( 15 )

Net income 6,033 7,719

loss (income) attributable to noncontrolling interests (1)

22 — 43 ( 306 )

Loss attributable to noncontrolling interests 7 1

Net income attributable to TETRA stockholders $ 6,040 $ 7,720

Basic net income (loss) per common share:

Income (loss) from continuing operations $ 0.00 $ 0.02 $ 0.08 $ ( 0.13 )

Basic net income per common share:

Income from continuing operations $ 0.05 $ 0.06

Income from discontinued operations — —

1 unchanged sentence

Weighted average basic shares outstanding 128,940 127,259

Diluted net income (loss) per common share:

Income (loss) from continuing operations $ 0.00 $ 0.02 $ 0.08 $ ( 0.13 )

Diluted net income per common share:

Income from continuing operations $ 0.05 $ 0.06

Income from discontinued operations — —

1 unchanged sentence

Weighted average diluted shares outstanding 129,975 129,211

(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

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net income $ 6,033 $ 7,719

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

( 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

Comprehensive (income) loss attributable to noncontrolling interests 22 — 43 ( 306 )

Comprehensive income (loss) attributable to TETRA stockholders $ ( 3,901 ) $ 363 $ 2,342 $ 101,702

Unrealized gain on investment in CarbonFree 121 —

Comprehensive income 7,575 7,911

Comprehensive loss attributable to noncontrolling interests 7 1

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

See Notes to Consolidated Financial Statements

3 unchanged sentences

(In Thousands)

September 30,

2023 December 31,

41 unchanged sentences

(In Thousands, Except Share Amounts)

September 30,

2023 December 31,

22 unchanged sentences

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

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

Additional paid-in capital

1 unchanged sentence

Treasury stock, at cost;

3,138,675 shares held at September 30, 2022 and December 31, 2021

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

( 19,957 ) ( 19,957 )

20 unchanged sentences

Balance at December 31, 2022 $ 1,318 $ 477,820 $ ( 19,957 ) $ ( 48,991 ) $ ( 72 ) $ ( 302,493 ) $ ( 1,228 ) $ 106,397

Net income for first quarter 2022 — — — — — 7,720 ( 1 ) 7,719

Translation adjustment,

net of taxes of $ 0

Net income (loss) for first quarter 2023 — — — — — 6,040 ( 7 ) 6,033

Translation adjustment, net of taxes of $ 0

— — — 1,421 — — — 1,421

Other comprehensive income — — — — 121 — — 121

Comprehensive income 7,575

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

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

Equity-based compensation (1)

— 3,514 — — — — — 3,514

Other comprehensive income (loss) — — — — ( 306 ) — — ( 306 )

Comprehensive income ( 3,923 )

Equity compensation expense — 1,098 — — — — — 1,098

Other 7 ( 1,341 ) — — — — 1 ( 1,333 )

Balance at September 30, 2022 $ 1,318 $ 476,530 $ ( 19,957 ) $ ( 54,027 ) $ ( 306 ) $ ( 300,589 ) $ ( 1,213 ) $ 101,756

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

(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.

Par Value Additional Paid-In

5 unchanged sentences

Balance at December 31, 2021 $ 1,301 $ 475,624 $ ( 19,957 ) $ ( 46,932 ) $ ( 310,332 ) $ ( 1,141 ) $ 98,563

Net income for first quarter 2021 — — — — 108,714 333 109,047

Net income (loss) for first quarter 2022 — — — — 7,720 ( 1 ) 7,719

Translation adjustment, net of taxes of $ 0

1 unchanged sentence

Comprehensive income 7,911

Deconsolidation of CSI Compressco — — — 7,168 — ( 82,775 ) ( 75,607 )

Equity award activity 6 — — — — — 6

Treasury stock activity, net — — ( 449 ) — — — ( 449 )

Equity compensation expense — 1,104 — — — — 1,104

1 unchanged sentence

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

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

3 unchanged sentences

(In Thousands, Unaudited)

Nine Months Ended

September 30,

Three Months Ended

Operating activities:

2 unchanged sentences

Depreciation, amortization, and accretion 8,670 7,679

Gain on GP Sale — ( 120,574 )

Impairment and other charges 2,262 449

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

Equity-based compensation expense 1,276 1,104

Provision for doubtful accounts 31 129

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

Amortization and expense of financing costs 884 780

Insurance recoveries associated with damaged equipment ( 2,850 ) ( 3,750 )

Warrants fair value adjustment — ( 143 )

Gain on sale of assets ( 170 ) ( 218 )

9 unchanged sentences

Purchases of property, plant, and equipment, net ( 12,784 ) ( 9,305 )

Proceeds from GP Sale, net of cash divested — 566

Proceeds from sale of property, plant, and equipment 289 416

3 unchanged sentences

Financing activities:

Proceeds from long-term debt 1,695 —

Principal payments on long-term debt ( 3,292 ) ( 37,477 )

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

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

Payments on financing lease obligations ( 258 ) —

Repurchase of common stock — ( 461 )

Debt issuance costs and other financing activities — ( 718 )

Net cash used in financing activities ( 2,771 ) ( 38,656 )

Net cash provided by financing activities 5,136 722

Effect of exchange rate changes on cash 167 236

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

Increase in cash and cash equivalents 3,091 1,300

Cash and cash equivalents at beginning of period 13,592 31,551

associated with continuing operations

31,551 67,317

Cash and cash equivalents at end of period $ 16,683 $ 32,851

associated with continuing operations

$ 25,247 $ 41,863

See Notes to Consolidated Financial Statements

7 unchanged sentences

and its subsidiaries on a consolidated basis.

Our unaudited consolidated financial statements include the accounts of our wholly owned subsidiaries.

Our unaudited consolidated financial statements include the accounts of our wholly owned or controlled 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.

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.

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

6 unchanged sentences

These financial statements should be read in conjunction with the financial statements for the year ended December 31, 2022 and notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2023 (the “ 2022 Annual Report ”).

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.

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”).

If a corporation experiences an “ownership change,” any NOLs, losses or deductions attributable to a “net unrealized built-in loss” and other Tax Attributes could be substantially limited, and timing of the usage of such Tax Attributes could be substantially delayed.

A corporation generally will experience an ownership change if one or more stockholders (or group of stockholders) who are each deemed to own at least 5% of the corporation’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a testing period (generally, a rolling three-year period).

In adopting the Tax Plan, the Board of Directors declared a dividend of one Series A Junior Participating Preferred Stock purchase right (the “Rights”) for each outstanding share of Common Stock pursuant to the terms of the Tax Plan.

Initially, each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $ 0.01 per share, of the Company (the “Preferred Stock”) at a price of $ 20.00 per one one-thousandth of a share of Preferred Stock (the “Purchase Price”), subject to adjustment.

The Rights will cause substantial dilution to a person or group that acquires 4.99 % or more of the Common Stock (or to a person or group that already owns 4.99 % or more of the Company’s Common Stock if

such person or group acquires additional shares representing 2 % of the Company’s then outstanding shares of Common Stock) without prior approval from the Board of Directors.

The Rights will expire at the earliest of:

(i) the close of business on February 28, 2026 (the “Final Expiration Date”);

(ii) the time at which the Rights are redeemed pursuant to the Tax Plan, (iii) the time at which the Rights are exchanged pursuant to the Tax Plan;

(iv) the closing of any merger or other acquisition transaction involving the Company pursuant to an agreement as described in the penultimate paragraph of Section 1.3 of the Tax Plan;

(v) the close of business on the effective date of the repeal of Section 382 of the Code if the Board determines that the Tax Plan is no longer necessary or desirable for the preservation of the Tax Attributes;

or (vi) the close of business on the first day of a taxable year of the Company following a Board determination that no Tax Attributes may be carried forward or otherwise utilized.

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.

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

The foregoing summary provides only a general description of the Tax Plan and does not purport to be complete.

The Tax Plan, which specifies the terms of the Rights and includes as Exhibit A the Form of Certificate of Designation of Series A Junior Participating Preferred Stock of the Company and as Exhibit B the Form of Right Certificate, is attached to the Company’s Current Report on Form 8-K, which was filed with the SEC on March 1, 2023, as Exhibit 4.1 and is incorporated herein by reference.

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

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 third quarter of 2022.

There have been no significant changes in our accounting policies or the application thereof during the first 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 $( 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.

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.

Fair Value Measurements

2 unchanged sentences

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).

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,

Supplemental cash flow information is as follows:

Three Months Ended

(in thousands)

Supplemental cash flow information (1) :

Interest paid $ 4,513 $ 3,096

$ 11,578 $ 10,954

Income taxes paid $ 1,358 $ 741

$ 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.

March 31, 2023 December 31, 2022

(in thousands)

Accrued capital expenditures $ 2,490 $ 4,901

New Accounting Pronouncements

Standards not yet adopted

Standard adopted during 2023

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.

Measurement of Credit Losses on Financial Instruments”.

ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the previously-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.

On January 1, 2023, we adopted ASU 2016-13.

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.

GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued.

Entities may elect to apply the amendments for contract modifications made on or before December 31, 2022.

During 2021, our asset-based credit agreement and term credit agreement were

amended to allow replacement of LIBOR with another benchmark rate, such as the secured overnight financing rate (“SOFR”) in the event that LIBOR cannot be determined or does not fairly reflect the cost to our lenders of funding our loans.

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 on our consolidated financial statements if or when our contracts are modified to eliminate references to LIBOR.

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.

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.

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 Offshore Division is 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

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

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.

A summary of additional financial information related to our discontinued operations is as follows:

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

March 31, 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 $ 33.4 million and $ 20.5 million as of September 30, 2022 and December 31, 2021, respectively.

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.

Contract assets, along with billed trade accounts receivable, are included in trade accounts receivable in our consolidated balance sheets.

1 unchanged sentence

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.

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.

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 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 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.

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.

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(in thousands)

12 unchanged sentences

NOTE 4 – INVENTORIES

Components of inventories as of September 30, 2022 and December 31, 2021 are as follows:

September 30, 2022 December 31, 2021

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

March 31, 2023 December 31, 2022

(in thousands)

7 unchanged sentences

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.

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

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

March 31, 2023 December 31, 2022

(in thousands)

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Total Investments $ 13,902 $ 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.

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

CarbonFree is a carbon capture company with patented technologies that capture CO 2 and mineralize emissions to make commercial, carbon-negative chemicals.

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.

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

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

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

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

(in thousands)

Swedish Credit Facility December 31, 2022 $ 14 $ —

Asset-based credit agreement (1)

May 31, 2025 — 67

Term Credit Agreement (1)

September 10, 2025 $ 155,282 $ 154,570

Asset-Based Credit Agreement (2)

May 31, 2025 5,229 1,885

Argentina Credit Agreement October 19, 2023 1,700 —

Swedish Credit Facility December 31, 2023 461 3

Total debt 162,672 156,458

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Total long-term debt $ 160,510 $ 156,455

(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.

(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.

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 .

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.

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.

Subject to compliance with the covenants, borrowing base, and other provisions of the ABL Credit Agreement that may limit borrowings, we had availability of $65.4 million under this agreement.

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.

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

The Argentina Credit Facility expires on October 19, 2023 and is backed by a letter of credit under our ABL Credit Agreement.

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.

As of March 31, 2023, we had $ 0.5 million outstanding and availability of approximately $ 4.4 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.

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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.

As of March 31, 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.

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.

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.

As of March 31, 2023, we are in compliance with all covenants under the credit agreements.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

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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.

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 September 30, 2022.

For a discussion of our legal proceedings, please see our 2021 Annual Report .

There have been no other material developments in our legal proceedings during the quarter ended March 31, 2023.

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

Product Purchase Obligations

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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.

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.

NOTE 8 – FAIR VALUE MEASUREMENTS

Financial Instruments

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).

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.

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

Our investments in CSI Compressco and Standard Lithium are recorded in investments on our consolidated balance sheets based on the quoted market stock price (Level 1 fair value measurements).

The stock component of consideration received from Standard Lithium is initially recorded as unearned income based on the quoted market price at the time the stock is received, then recognized in income over the contract term.

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).

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 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.

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:

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

(in thousands)

Balance at beginning of period $ 6,139

Change in fair value of embedded option

Change in fair value of convertible note, excluding embedded option

Balance at end of period $ 5,939

Recurring fair value measurements by valuation hierarchy as of March 31, 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 September 30, 2022 (Level 1) (Level 2) (Level 3)

Description March 31, 2023 (Level 1) (Level 2) (Level 3)

(in thousands)

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Investment in CarbonFree 6,139 — — 6,139

Investment in Standard Lithium 1,180 1,180 — —

Investments $ 14,286

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.

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.

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:

NOTE 9 – NET INCOME 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 per common and common equivalent share:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(in thousands)

1 unchanged sentence

128,940 127,259

Assumed exercise of equity awards and warrants

— 1,961 1,814 —

Assumed vesting of equity awards 1,035 1,952

Average diluted shares outstanding

129,975 129,211

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.

NOTE 10 – INDUSTRY SEGMENTS

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(in thousands)

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(in thousands)

2 unchanged sentences

Interest expense 5,460 3,647

Warrants fair value adjustment (income) expense — ( 3,164 ) — ( 143 )

Other general corporate (income) expense, net 658 ( 1,141 )

1 unchanged sentence

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