TETRA TECHNOLOGIES INC [TTI] Filings

10-Q 1 tti-20220630.htm 10-Q tti-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 1-13455

TETRA Technologies, Inc.

(Exact name of registrant as specified in its charter)


Delaware			74-2148293
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

24955 Interstate 45 North
The Woodlands,
Texas			77380
(Address of Principal Executive Offices)			(Zip Code)

(281) 367-1983

(Registrant’s Telephone Number, Including Area Code)

_______________________________________________________________________

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	TTI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 29, 2022, there were 128,255,427 shares outstanding of the Company’s Common Stock, $0.01 par value per share.


TETRA Technologies, Inc. and Subsidiaries
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			Page
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations			1
Consolidated Statements of Comprehensive Income			2
Consolidated Balance Sheets			3
Consolidated Statements of Equity			5
Consolidated Statements of Cash Flows			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 3. Quantitative and Qualitative Disclosures about Market Risk			30
Item 4. Controls and Procedures			30

PART II—OTHER INFORMATION
Item 1. Legal Proceedings			31
Item 1A. Risk Factors			31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			31
Item 3. Defaults Upon Senior Securities			31
Item 4. Mine Safety Disclosures			31
Item 5. Other Information			32
Item 6. Exhibits			33
SIGNATURES			34

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues:
Product sales	$	70,301	$	62,583	$	140,356	$	107,615
Services	70,415		39,743		130,397		72,035
Total revenues	140,716		102,326		270,753		179,650
Cost of revenues:
Cost of product sales	48,341		42,477		94,345		74,460
Cost of services	54,258		34,731		101,942		63,362
Depreciation, amortization, and accretion	7,748		8,236		15,427		17,187
Impairments and other charges	2,262		449		2,262		449
Insurance recoveries	—		—		(3,750)		(110)
Total cost of revenues	112,609		85,893		210,226		155,348
Gross profit	28,107		16,433		60,527		24,302
Exploration and appraisal costs	634		—		2,564		—
General and administrative expense	23,620		17,351		44,263		37,363
Interest expense, net	3,610		3,886		6,934		8,290


Other (income) expense, net	(1,037)		466		(3,448)		(4,306)
Income (loss) before taxes and discontinued operations	1,280		(5,270)		10,214		(17,045)
(Benefit) provision for income taxes	(479)		1,384		721		1,552
Income (loss) before discontinued operations	1,759		(6,654)		9,493		(18,597)
Discontinued operations:
(Loss) income from discontinued operations, net of taxes	(34)		(126)		(49)		120,864
Net income (loss)	1,725		(6,780)		9,444		102,267
Less: loss (income) attributable to noncontrolling interests(1)	20		27		21		(306)
Net income (loss) attributable to TETRA stockholders	$	1,745	$	(6,753)	$	9,465	$	101,961
Basic net income (loss) per common share:
Income (loss) from continuing operations	$	0.01	$	(0.05)	$	0.07	$	(0.15)
Income from discontinued operations	—		—		—		0.96
Net income (loss) attributable to TETRA stockholders	$	0.01	$	(0.05)	$	0.07	$	0.81
Weighted average basic shares outstanding	127,992		126,583		127,627		126,365
Diluted net income (loss) per common share:
Income (loss) from continuing operations	$	0.01	$	(0.05)	$	0.07	$	(0.15)
Income from discontinued operations	—		—		—		0.96
Net income (loss) attributable to TETRA stockholders	$	0.01	$	(0.05)	$	0.07	$	0.81
Weighted average diluted shares outstanding	130,099		126,583		129,654		126,365

(1) (Income) loss attributable to noncontrolling interests includes zero for the three months ended June 30, 2022 and 2021, respectively, and zero and $(333) income for the six months ended June 30, 2022 and 2021, respectively, related to discontinued operations.

See Notes to Consolidated Financial Statements

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TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In Thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income (loss)	$	1,725	$	(6,780)	$	9,444	$	102,267
Foreign currency translation adjustment from continuing operations, net of taxes of $0 in 2022 and 2021	(3,414)		2,157		(3,222)		(622)

Comprehensive income (loss)	(1,689)		(4,623)		6,222		101,645
Less: Comprehensive (income) loss attributable to noncontrolling interests	20		27		21		(306)
Comprehensive income (loss) attributable to TETRA stockholders	$	(1,669)	$	(4,596)	$	6,243	$	101,339

See Notes to Consolidated Financial Statements

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TETRA Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands)


	June 30, 2022		December 31, 2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	36,332	$	31,551

Trade accounts receivable, net of allowances of $541 in 2022 and $289 in 2021	104,062		91,202
Inventories	62,604		69,098


Prepaid expenses and other current assets	20,698		18,539
Total current assets	223,696		210,390
Property, plant, and equipment:
Land and building	24,420		26,380
Machinery and equipment	342,274		345,454
Automobiles and trucks	14,079		16,174
Chemical plants	59,402		61,565
Construction in progress	12,776		5,349
Total property, plant, and equipment	452,951		454,922
Less accumulated depreciation	(358,233)		(365,946)
Net property, plant, and equipment	94,718		88,976
Other assets:
Patents, trademarks and other intangible assets, net of accumulated amortization of $45,022 in 2022 and $44,323 in 2021	34,752		36,958


Operating lease right-of-use assets	35,127		36,973
Investments	14,167		11,233
Other assets	14,154		13,736
Total other assets	98,200		98,900
Total assets	$	416,614	$	398,266

See Notes to Consolidated Financial Statements

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TETRA Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Share Amounts)


	June 30, 2022		December 31, 2021
	(Unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable	$	44,999	$	37,943
Current portion of long-term debt	11		—
Compensation and employee benefits	23,485		20,811
Operating lease liabilities, current portion	8,255		8,108
Accrued taxes	7,295		7,085
Accrued liabilities and other	24,155		21,810
Current liabilities associated with discontinued operations	1,367		1,385
Total current liabilities	109,567		97,142
Long-term debt, net	153,191		151,936
Operating lease liabilities	29,160		31,429
Asset retirement obligations	13,244		12,984
Deferred income taxes	1,432		1,669

Other liabilities	4,484		4,543
Total long-term liabilities	201,511		202,561
Commitments and contingencies
Equity:
TETRA stockholders’ equity:
Common stock, par value 0.01 per share; 250,000,000 shares authorized at June 30, 2022 and December 31, 2021; 131,394,102 shares issued at June 30, 2022 and 130,075,838 shares issued at December 31, 2021	1,314		1,301
Additional paid-in capital	476,381		475,624
Treasury stock, at cost; 3,138,675 shares held at June 30, 2022, and at December 31, 2021	(19,957)		(19,957)
Accumulated other comprehensive loss	(50,154)		(46,932)
Retained deficit	(300,867)		(310,332)
Total TETRA stockholders’ equity	106,717		99,704
Noncontrolling interests	(1,181)		(1,141)
Total equity	105,536		98,563
Total liabilities and equity	$	416,614	$	398,266

See Notes to Consolidated Financial Statements

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TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Equity

(In Thousands)

(Unaudited)


	Common Stock Par Value		Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Retained Deficit			Noncontrolling Interest			Total Equity
							Currency Translation

Balance at December 31, 2021	$	1,301	$	475,624	$	(19,957)	$	(46,932)		$	(310,332)		$	(1,141)		$	98,563
Net income for first quarter 2022	—		—		—		—			7,720			(1)			7,719
Translation adjustment, net of taxes of $0	—		—		—		192			—			—			192
Comprehensive income																7,911




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

Other	7		(673)		—		—			—			(10)			(676)
Balance at March 31, 2022	$	1,308	$	476,055	$	(19,957)	$	(46,740)		$	(302,612)		$	(1,152)		$	106,902
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


	Common Stock Par Value		Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Deficit		Noncontrolling Interest		Total Equity
							Currency Translation

Balance at December 31, 2020	$	1,289	$	472,134	$	(19,484)	$	(49,914)	$	(413,665)	$	80,702	$	71,062
Net income for first quarter 2021	—		—		—		—		108,714		333		109,047
Translation adjustment, net of taxes of $0	—		—		—		(2,779)		—		—		(2,779)
Comprehensive income													106,268
Deconsolidation of CSI Compressco	—		—		—		7,168		—		(82,775)		(75,607)
Equity award activity	6		—		—		—		—		—		6
Treasury stock activity, net	—		—		(449)		—		—		—		(449)
Equity compensation expense	—		962		—		—		—		580		1,542
Other	—		(574)		—		—		—		219		(355)
Balance at March 31, 2021	$	1,295	$	472,522	$	(19,933)	$	(45,525)	$	(304,951)	$	(941)	$	102,467
Net loss for second quarter 2021	—		—		—		—		(6,753)		(27)		(6,780)
Translation adjustment, net of taxes of $0	—		—		—		2,157		—		—		2,157
Comprehensive loss													(4,623)
Dividend	—		—		—		—		—		(119)		(119)
Equity award activity	2		—		—		—		—		—		2
Treasury stock activity, net	—		—		(6)		—		—		—		(6)
Equity compensation expense	—		1,592		—		—		—		—		1,592
Other	—		(242)		—		—		—		(14)		(256)
Balance at June 30, 2021	$	1,297	$	473,872	$	(19,939)	$	(43,368)	$	(311,704)	$	(1,101)	$	99,057

See Notes to Consolidated Financial Statements

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TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In Thousands, Unaudited)


	Six Months Ended June 30,
	2022		2021
Operating activities:
Net income	$	9,444	$	102,267
Reconciliation of net income to net cash provided by operating activities:
Depreciation, amortization, and accretion	15,427		17,215
Gain on GP Sale	—		(120,574)
Impairment and other charges	2,262		449
Gain on investments	(390)		(5,613)
Equity-based compensation expense	2,263		2,554
Provision for doubtful accounts	244		216

Amortization and expense of financing costs	1,573		1,429
Insurance recoveries associated with damaged equipment	(3,750)		(110)


Warrants fair value adjustment	—		3,021


Gain on sale of assets	(719)		(275)
Other non-cash charges	(313)		(176)
Changes in operating assets and liabilities:
Accounts receivable	(14,581)		(15,694)
Inventories	4,519		5,456
Prepaid expenses and other current assets	(2,282)		(2,442)
Trade accounts payable and accrued expenses	11,185		21,295
Other	(1,079)		(1,411)
Net cash provided by operating activities	23,803		7,607
Investing activities:
Purchases of property, plant, and equipment, net	(20,412)		(12,489)
Proceeds from GP Sale, net of cash divested	—		18
Proceeds from sale of property, plant, and equipment	1,194		754
Proceeds from insurance recoveries associated with damaged equipment	3,750		110
Other investing activities	(451)		1,156
Net cash used in investing activities	(15,919)		(10,451)
Financing activities:
Proceeds from long-term debt	1,667		—
Principal payments on long-term debt	(3,267)		(29,320)
Payments on financing lease obligations	(1,174)		—





Debt issuance costs and other financing activities	—		(455)
Net cash used in financing activities	(2,774)		(29,775)
Effect of exchange rate changes on cash	(329)		(896)
Increase (decrease) in cash and cash equivalents	4,781		(33,515)
Cash and cash equivalents and restricted cash at beginning of period	31,551		83,894
Cash and cash equivalents at beginning of period associated with discontinued operations	—		16,577
Cash and cash equivalents and restricted cash at beginning of period associated with continuing operations	31,551		67,317


Cash and cash equivalents and restricted cash at end of period associated with continuing operations	$	36,332	$	50,379

See Notes to Consolidated Financial Statements

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TETRA Technologies, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

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

Organization

We are an industrial and oil and gas products and services company operating on six continents, focused on bromine-based completion fluids, calcium chloride, water management solutions, frac flowback and production well testing services. We were incorporated in Delaware in 1981 and are composed of two segments – Completion Fluids & Products Division and Water & Flowback Services Division. Unless the context requires otherwise, when we refer to “we,” “us,” and “our,” we are describing TETRA Technologies, Inc. and its subsidiaries on a consolidated basis.

Presentation

Our unaudited consolidated financial statements include the accounts of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The information furnished reflects all normal recurring adjustments, which are, in the opinion of management, necessary to provide a fair statement of the results for the interim periods. Operating results for the period ended June 30, 2022 are not necessarily indicative of results that may be expected for the twelve months ended December 31, 2022.

We have reflected the operations of our former Compression Division and Offshore Division as discontinued operations for all periods presented. See Note 2 - “Discontinued Operations” for further information. Unless otherwise noted, amounts and disclosures throughout these Notes to Consolidated Financial Statements relate solely to continuing operations and exclude all discontinued operations.

The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the U.S. Securities and Exchange Commission (“SEC”) and do not include all information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. These financial statements should be read in conjunction with the financial statements for the year ended December 31, 2021 and notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2022 (the “2021 Annual Report”).

Significant Accounting Policies

Our significant accounting policies are described in the notes to our consolidated financial statements for the year ended December 31, 2021 included in our 2021 Annual Report. There have been no significant changes in our accounting policies or the application thereof during the second quarter of 2022.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses, and impairments during the reporting period. Actual results could differ from those estimates, and such differences could be material.

Reclassifications

Certain previously reported financial information has been reclassified to conform to the current year's presentation. The impact of reclassifications was not significant to the prior year's overall presentation.

Foreign Currency Translation

We have designated the Euro, the British pound, the Canadian dollar, the Brazilian real, and the Mexican peso as the functional currencies for our operations in Finland and Sweden, the United Kingdom, Canada, Brazil,

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and certain of our operations in Mexico, respectively. The United States dollar is the designated functional currency for all of our other non-U.S. operations. The cumulative translation effects of translating the applicable accounts from the functional currencies into the United States dollar at current exchange rates are included as a separate component of equity. Foreign currency exchange (gains) and losses are included in other (income) expense, net and totaled $(0.8) million and $(1.6) million during the three and six months ended June 30, 2022, respectively, and $(0.2) million and $(1.0) million during the three and six months ended June 30, 2021, respectively.

Fair Value Measurements

We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements are utilized on a recurring basis in the determination of the carrying values of certain investments. See Note 8 - “Fair Value Measurements” for further discussion. Fair value measurements are also utilized on a nonrecurring basis in certain circumstances, including the impairment of long-lived assets (a Level 3 fair value measurement).

Supplemental Cash Flow Information

Supplemental cash flow information from continuing and discontinued operations is as follows:


	Six Months Ended June 30,
	2022		2021
	(in thousands)
Supplemental cash flow information(1):
Interest paid	$	8,056	$	7,577
Income taxes paid	1,470		853
Decrease in accrued capital expenditures	1,712		1,434

(1) Prior-year information includes the activity for CSI Compressco for January only.

New Accounting Pronouncements

Standards not yet adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses on financial instruments not accounted for at fair value through net income. The provisions require credit impairments to be measured over the contractual life of an asset and developed with consideration for past events, current conditions, and forecasts of future economic information. Credit impairment will be accounted for as an allowance for credit losses deducted from the amortized cost basis at each reporting date. We are continuing to work through our implementation plan which includes evaluating the impact on our allowance for doubtful accounts methodology, identifying new reporting requirements, and implementing changes to business processes, systems, and controls to support adoption of the standard. Upon adoption, the allowance for doubtful accounts is expected to increase with an offsetting adjustment to retained earnings. Updates at each reporting date after initial adoption will be recorded through selling, general, and administrative expense. ASU 2016-13 will become effective for us in the first quarter of fiscal 2023. We continue to assess the potential effects of these changes to our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. Entities may elect to apply the amendments for contract modifications made on or before December 31, 2022. During 2021, our asset-based credit agreement and term credit agreement were amended to allow replacement of LIBOR with another benchmark rate, such as the secured overnight financing rate (“SOFR”) in the event that LIBOR cannot be determined or does not fairly reflect the cost to our lenders of funding our loans. If LIBOR is not available, we cannot predict what alternative index would be negotiated with our lenders. We will assess the impact of adopting ASU 2020-04 on our consolidated financial statements if or when our contracts are modified to eliminate references to LIBOR.

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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 June 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 three months ended June 30, 2022, we sold equipment to CSI Compressco for approximately $0.3 million. Our interest in CSI Compressco and the general partner represented substantially all of our Compression Division.

In addition, on March 1, 2018, we closed a series of related transactions that resulted in the disposition of our Offshore Division, consisting of our Offshore Services and Maritech segments. Our former Compression and Offshore Divisions are reported as discontinued operations for all periods presented. Our consolidated balance sheets and consolidated statements of operations report discontinued operations separate from continuing operations. Our consolidated statements of comprehensive income, statements of equity and statements of cash flows combine continuing and discontinued operations. Our prior-year consolidated statement of operations, statement of comprehensive income, statement of equity and statement of cash flows include CSI Compressco activity for January 1 through January 29 in 2021. Our consolidated statements of cash flows for the six-month period ended June 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 June 30, 2022
	Offshore Services		Maritech		Total
Major classes of line items constituting loss from discontinued operations

Cost of revenues	$	54	$	—	$	54

General and administrative expense	8		—		$	8

Other expense, net	—		(28)		(28)
Pretax income (loss) from discontinued operations	(62)		28		(34)





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


	Three Months Ended June 30, 2021
	Compression	Offshore Services	Total
Major classes of line items constituting loss from discontinued operations




General and administrative expense	—	5	5

Other (income) expense, net	121	—	121
Pretax loss from discontinued operations	(121)	(5)	(126)





Loss from discontinued operations attributable to TETRA stockholders			$	(126)

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	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 expense, net	—	(28)	(28)
Pretax income (loss) from discontinued operations	(77)	28	(49)





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


	Six Months Ended June 30, 2021
	Compression		Offshore Services		Total
Major classes of line items constituting loss from discontinued operations
Revenue	$	18,968	$	—	$	18,968
Cost of revenues	11,474		28		11,502


General and administrative expense	2,795		—		2,795
Interest expense, net	4,336		—		4,336
Other expense, net	15		—		15
Pretax income (loss) from discontinued operations	348		(28)		320
Pretax gain on disposal of discontinued operations					120,574
Total pretax income from discontinued operations					120,894
Income tax provision					30
Total income from discontinued operations					120,864
Income from discontinued operations attributable to noncontrolling interest					(333)
Income from discontinued operations attributable to TETRA stockholders					$	120,531

Reconciliation of Major Classes of Assets and Liabilities of the Discontinued Operations to Amounts Presented Separately in the Statement of Financial Position

(in thousands)


	June 30, 2022
	Offshore Services		Maritech		Total

	(unaudited)









Carrying amounts of major classes of liabilities included as part of discontinued operations
Trade payables	$	1,272	$	—	$	1,272

Accrued liabilities and other	—		95		95


Total liabilities associated with discontinued operations	$	1,272	$	95	$	1,367


	December 31, 2021
	Offshore Services		Maritech		Total









Carrying amounts of major classes of liabilities included as part of discontinued operations
Trade payables	$	1,157	$	—	$	1,157

Accrued liabilities and other	—		228		228


Total liabilities associated with discontinued operations	$	1,157	$	228	$	1,385

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NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS

Our contract asset balances, primarily associated with contractual invoicing milestones and/or customer documentation requirements, were $32.2 million and $20.5 million as of June 30, 2022 and December 31, 2021, respectively. Contract assets, along with billed trade accounts receivable, are included in trade accounts receivable in our consolidated balance sheets.

Unearned income includes amounts in which the Company was contractually allowed to invoice prior to satisfying the associated performance obligations. We are also party to agreements in which Standard Lithium Ltd. (“Standard Lithium”) has the right to explore, and an option to acquire the rights to produce and extract lithium in our Arkansas leases as well as other potential resources in the Mojave region of California. The Company receives cash and stock of Standard Lithium under the terms of the arrangements. The cash and stock component of consideration received is initially recorded as unearned income based on the quoted market price at the time the stock is received, then recognized in income over the contract term. Unearned income balances were $7.9 million and $3.2 million as of June 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 shares from Standard Lithium. Unearned income is included in accrued liabilities and other in our consolidated balance sheets. We recognized approximately $0.8 million and $0.5 million of income during the six-month periods ended June 30, 2022 and June 30, 2021, respectively, related to the Standard Lithium arrangements. These amounts are included in other income, net in our consolidated statements of operations. Other revenue recognized during the three-month and six-month periods ended June 30, 2022 and the three-month period ended June 30, 2021 deferred as of the beginning of the period was not significant. During the six-month period ended June 30, 2021, we recognized approximately $1.4 million of revenue deferred as of the preceding year end. During the three-month and six-month periods ended June 30, 2022 and June 30, 2021, contract costs were not significant.

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 June 30,
	2022		2021		2022		2021
	(in thousands)
Completion Fluids & Products
United States	$	34,344	$	25,229	$	73,188	$	49,824
International	40,454		39,378		74,804		61,304
	74,798		64,607		147,992		111,128
Water & Flowback Services
United States	61,654		35,463		114,417		64,395
International	4,264		2,256		8,344		4,127
	65,918		37,719		122,761		68,522




Total Revenue
United States	95,998		60,692		187,605		114,219
International	44,718		41,634		83,148		65,431
	$	140,716	$	102,326	$	270,753	$	179,650

NOTE 4 – INVENTORIES

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


	June 30, 2022		December 31, 2021
	(in thousands)
Finished goods	$	52,924	$	59,925
Raw materials	2,872		2,827
Parts and supplies	5,048		4,713
Work in progress	1,760		1,633
Total inventories	$	62,604	$	69,098

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Finished goods inventories include newly manufactured clear brine fluids as well as used brines that are repurchased from certain customers for recycling.

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 June 30, 2022. In addition, we are party to agreements in which Standard Lithium has the right to explore, and an option to acquire the rights to produce and extract lithium in our Arkansas leases as well as additional potential resources in the Mojave region of California. The Company receives cash and stock of Standard Lithium (NYSE:SLI) under the terms of the arrangements. The cash and stock component of consideration received is initially recorded as unearned income based on the quoted market price at the time the stock is received, then recognized in income over the contract term. See Note 8 - “Fair Value Measurements” for further information.

In May 2021, we signed a memorandum of understanding (“MOU”) with CarbonFree, a carbon capture company with patented technologies that capture CO2 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 June 30, 2022 and December 31, 2021, consist of the following:


	June 30, 2022		December 31, 2021
	(in thousands)
Investment in CSI Compressco	$	6,862	$	6,233
Investment in CarbonFree	5,609		5,000
Investment in Standard Lithium	$	1,696	$	—
Total Investments	$	14,167	$	11,233

NOTE 6 – LONG-TERM DEBT AND OTHER BORROWINGS

Consolidated long-term debt as of June 30, 2022 and December 31, 2021, consists of the following:


	Scheduled Maturity	June 30, 2022		December 31, 2021

		(in thousands)
Swedish Credit Facility	December 31, 2022	$	11	$	—
Asset-based credit agreement(1)	May 31, 2025	—		67
Term credit agreement(2)	September 10, 2025	153,191		151,869
Total debt		153,202		151,936
Less current portion		(11)		—
Total long-term debt		$	153,191	$	151,936

(1) Net of unamortized deferred financing costs of zero and $1.5 million as of June 30, 2022 and December 31, 2021, respectively. Deferred financing costs of $1.3 million as of June 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 $4.0 million and $4.5 million as of June 30, 2022 and December 31, 2021, respectively, and net of unamortized deferred financing costs of $5.9 million and $6.7 million as of June 30, 2022 and December 31, 2021, respectively.

Swedish Credit Facility

In January 2022, the Company entered into a revolving credit facility for seasonal working capital needs of subsidiaries in Sweden (“Swedish Credit Facility”). As of June 30, 2022, we had less than US$0.1 million outstanding and availability of approximately US$4.9 million under the Swedish Credit Facility. During each year, all outstanding loans under the Swedish Credit Facility must be repaid for at least 30 consecutive days. Borrowings bear interest at a rate of 2.95% per annum. The Swedish Credit Facility expires on December 31, 2022 and the Company intends to renew it annually.

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Finland Credit Agreement

The Company also entered into a new agreement guaranteed by certain accounts receivable and inventory in Finland (“Finland Credit Agreement”). As of June 30, 2022, there were US$1.4 million of letters of credit outstanding against the Finland Credit Agreement.

ABL Credit Agreement

As of June 30, 2022, our asset-based credit agreement (“ABL Credit Agreement’) provides for a senior secured revolving credit facility of up to $80.0 million, with a $20.0 million accordion. The credit facility is subject to a borrowing base determined monthly by reference to the value of inventory and accounts receivable, and includes a sublimit of $20.0 million for letters of credit, a swingline loan sublimit of $11.5 million, and a $15.0 million sub-facility subject to a borrowing base consisting of certain trade receivables and inventory in the United Kingdom.

As of June 30, 2022, we had zero outstanding and $6.0 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 $61.8 million under this agreement.

Term Credit Agreement

As of June 30, 2022 we had $153.2 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 June 30, 2022, the interest rate per annum on borrowings under the Term Credit Agreement is 7.92%. 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 June 30, 2022, we are in compliance with all covenants under the credit agreements.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Litigation

We are named defendants in several lawsuits and respondents in certain governmental proceedings arising in the ordinary course of business. While the outcome of lawsuits or other proceedings against us cannot be predicted with certainty, management does not consider it reasonably possible that a loss resulting from such lawsuits or other proceedings in excess of any amounts accrued has been incurred that is expected to have a material adverse impact on our financial condition, results of operations, or liquidity.

There have been no material developments in our legal proceedings during the quarter ended June 30, 2022. For a discussion of our legal proceedings, please see our 2021 Annual Report.

Product Purchase Obligations

In the normal course of our Completion Fluids & Products Division operations, we enter into supply agreements with certain manufacturers of various raw materials and finished products. Some of these agreements have terms and conditions that specify a minimum or maximum level of purchases over the term of the agreement. Other agreements require us to purchase the entire output of the raw material or finished product produced by the manufacturer. Our purchase obligations under these agreements apply only with regard to raw materials and finished products that meet specifications set forth in the agreements. We recognize a liability for the purchase of such products at the time we receive them. As of June 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 $104.6 million, including $3.0 million for the remainder of 2022, an average of $15.7 million per year from 2023 to 2026 and $40.2 million thereafter, extending through 2029.

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NOTE 8 – FAIR VALUE MEASUREMENTS

Financial Instruments

Investments

We retained an interest in CSI Compressco (NASDAQ: CCLP) representing approximately 3.7% of CSI Compressco’s outstanding common units as of June 30, 2022.

In December 2021, we invested in a $5.0 million convertible note issued by CarbonFree. Our investment in CarbonFree is recorded in investments on our consolidated balance sheets based on an internal valuation with assistance from a third-party valuation specialist (a Level 3 fair value measurement). The valuation is impacted by key assumptions, including the assumed probability and timing of potential debt or equity offerings.

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