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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 March 31, 2021
or 
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)
 
Delaware74-2148293
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
  
24955 Interstate 45 North 
The Woodlands,
Texas77380
(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 classTrading Symbol(s)Name of each exchange on which registered
Common StockTTINew 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 filerSmaller 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 May 3, 2021, there were 126,587,492 shares outstanding of the Company’s Common Stock, $0.01 par value per share.



TETRA Technologies, Inc. and Subsidiaries
Table of Contents
Page
PART I—FINANCIAL INFORMATION
PART II—OTHER INFORMATION




Table of Contents
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
March 31,
20212020
Revenues:  
Product sales
$45,032$70,215
Services
32,29262,489
Total revenues
77,324132,704
Cost of revenues:  
Cost of product sales
31,98345,288
Cost of services
28,63148,827
Depreciation, amortization, and accretion
8,9519,552
Insurance recoveries
(110)
Total cost of revenues
69,455103,667
Gross profit
7,86929,037
General and administrative expense20,01220,348
Interest expense, net4,4045,292
Warrants fair value adjustment expense (income)323(338)
Other (income) expense, net(5,095)22
(Loss) income before taxes and discontinued operations(11,775)3,713
Provision for income taxes168721
(Loss) income before discontinued operations(11,943)2,992
Discontinued operations:
Income (loss) from discontinued operations, net of taxes120,990(13,368)
Net income (loss)109,047(10,376)
Less: (income) loss attributable to noncontrolling interest ($333 income in 2021 and $8,834 loss in 2020 related to discontinued operations)(333)8,825
Net income (loss) attributable to TETRA stockholders$108,714$(1,551)
Basic net income (loss) per common share: 
(Loss) income from continuing operations attributable to TETRA stockholders$(0.10)$0.02
Income (loss) from discontinued operations attributable to TETRA stockholders0.96(0.03)
Net income (loss) attributable to TETRA stockholders$0.86$(0.01)
Average shares outstanding126,149125,587
Diluted net income (loss) per common share:  
(Loss) income from continuing operations attributable to TETRA stockholders$(0.10)$0.02
Income (loss) from discontinued operations attributable to TETRA stockholders0.96(0.03)
Net income (loss) attributable to TETRA stockholders$0.86$(0.01)
Average diluted shares outstanding126,149125,597

See Notes to Consolidated Financial Statements
1

Table of Contents
TETRA Technologies, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(In Thousands)
(Unaudited)
 
Three Months Ended
March 31,
20212020
Net income (loss)$109,047 $(10,376)
Foreign currency translation adjustment from continuing operations, net of taxes of $0 in 2021 and 2020
(2,779)(6,467)
Comprehensive income (loss)106,268 (16,843)
Less: Comprehensive (loss) income attributable to noncontrolling interest(333)9,054 
Comprehensive income (loss) attributable to TETRA stockholders$105,935 $(7,789)
 

See Notes to Consolidated Financial Statements
2

Table of Contents
TETRA Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands)
 
 March 31,
2021
December 31,
2020
 (Unaudited) 
ASSETS  
Current assets:  
Cash and cash equivalents
$54,163$67,252
Restricted cash
6565
Trade accounts receivable, net of allowances of $6,840 in 2021 and $6,824 in 2020
62,40864,078
Inventories
74,46076,658
Assets of discontinued operations
710,006
Prepaid expenses and other current assets
14,29613,487
Total current assets
205,392931,546
Property, plant, and equipment:  
Land and building
26,44326,506
Machinery and equipment
362,564365,296
Automobiles and trucks
17,98218,446
Chemical plants
61,60562,714
Construction in progress
9551,526
Total property, plant, and equipment
469,549474,488
Less accumulated depreciation
(376,994)(377,632)
Net property, plant, and equipment
92,55596,856
Other assets:  
Patents, trademarks and other intangible assets, net of accumulated amortization of $67,279 in 2021 and $66,078 in 2020
40,34041,487
Deferred tax assets, net
8952
Operating lease right-of-use assets
41,29343,448
Investments13,3202,675
Other assets
14,18916,775
Total other assets
109,231104,437
Total assets$407,178$1,132,839
 

See Notes to Consolidated Financial Statements
3

Table of Contents
TETRA Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share Amounts)
 
 March 31,
2021
December 31,
2020
 (Unaudited) 
LIABILITIES AND EQUITY  
Current liabilities:  
Trade accounts payable
$29,057$22,573
Unearned income
1,2022,675
Accrued liabilities and other
43,06438,791
Liabilities of discontinued operations
1,746734,039
Current portion of long-term debt8,157
Total current liabilities
83,226798,078
Long-term debt, net163,003199,894
Deferred income taxes1,8471,942
Asset retirement obligations12,62012,484
Warrants liability521198
Operating lease liabilities35,60837,569
Other liabilities7,88611,612
Total long-term liabilities
221,485263,699
Commitments and contingencies  
Equity:  
TETRA stockholders’ equity:  
Common stock, par value 0.01 per share; 250,000,000 shares authorized at March 31, 2021 and December 31, 2020; 129,538,442 shares issued at March 31, 2021 and 128,930,047 shares issued at December 31, 2020
1,2951,289
Additional paid-in capital
472,522472,134
Treasury stock, at cost; 3,131,428 shares held at March 31, 2021, and 2,953,976 shares held at December 31, 2020
(19,933)(19,484)
Accumulated other comprehensive (loss)(45,525)(49,914)
Retained deficit
(304,951)(413,665)
Total TETRA stockholders’ equity103,408(9,640)
Noncontrolling interests
(941)80,702
Total equity
102,46771,062
Total liabilities and equity$407,178$1,132,839
 

See Notes to Consolidated Financial Statements
4

Table of Contents
TETRA Technologies, Inc. and Subsidiaries
Consolidated Statements of Equity
(In Thousands)
(Unaudited)
Common Stock
Par Value
Additional Paid-In
Capital
Treasury
Stock
Accumulated Other 
Comprehensive Income (Loss)
Retained
Deficit
Noncontrolling
Interest
Total
Equity
Currency
Translation
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 income106,268 
Deconsolidation of CSI Compressco
— — — 7,168 — (82,775)(75,607)
Equity award activity6  — — — — 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 

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, 2019$1,283 $466,959 $(19,164)$(52,183)$(362,522)$128,453 $162,826 
Net loss for first quarter 2020— — — — (1,551)(8,825)(10,376)
Translation adjustment, net of taxes of $0
— — — (6,238)— (229)(6,467)
Comprehensive loss(16,843)
Distributions to public unitholders— — — — — (309)(309)
Equity award activity4 — — — — — 4 
Treasury stock activity, net— — (89)— — — (89)
Equity compensation expense— 1,145 — — — 228 1,373 
Other— (16)— — — (15)(31)
Balance at March 31, 2020$1,287 $468,088 $(19,253)$(58,421)$(364,073)$119,303 $146,931 

See Notes to Consolidated Financial Statements

5

Table of Contents
TETRA Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands, Unaudited)
 Three Months Ended
March 31,
 20212020
Operating activities:  
Net income (loss)$109,047 $(10,376)
Reconciliation of net income (loss) to net cash provided by operating activities:
Depreciation, amortization, and accretion
8,981 29,460 
Gain on GP Sale(120,574) 
Impairment and other charges
 5,371 
Gain on retained CSI Compressco units and Standard Lithium shares
(3,992) 
Equity-based compensation expense
2,478 784 
Amortization and expense of financing costs and deferred financing gains728 569 
Debt-related expenses93  
Warrants fair value adjustment
323 (337)
Gain on sale of assets
(255)(833)
Other non-cash charges14 1,435
Changes in operating assets and liabilities:
  
Accounts receivable
1,501 3,601 
Inventories
498 (12,414)
Prepaid expenses and other current assets
(1,060)(2,442)
Trade accounts payable and accrued expenses
8,521 8,742 
Other
(478)(1,384)
Net cash provided by operating activities
5,825 22,176 
Investing activities:  
Purchases of property, plant, and equipment, net
(6,761)(12,390)
Proceeds from sale of CCLP, net of cash divested18  
Proceeds on sale of property, plant, and equipment
561 1,425 
Insurance recoveries associated with damaged equipment
110  
Other investing activities
1,771 350 
Net cash used in investing activities(4,301)(10,615)
Financing activities:  
Proceeds from long-term debt
160 56,512 
Principal payments on long-term debt
(29,500)(54,511)
CSI Compressco distributions
 (309)
Tax remittances on equity based compensation
 (319)
Repurchase of common stock(449) 
Debt issuance costs and other financing activities
(98)(235)
Net cash provided by (used in) financing activities
(29,887)1,138 
Effect of exchange rate changes on cash(1,303)(940)
(Decrease) increase in cash and cash equivalents(29,666)11,759 
Cash and cash equivalents and restricted cash at beginning of period 83,894 17,768 
Cash and cash equivalents at beginning of period associated with discontinued operations16,577 2,370 
Cash and cash equivalents and restricted cash at beginning of period associated with continuing operations67,317 15,398 
Cash and cash equivalents and restricted cash at end of period54,228 29,527 
Cash and cash equivalents at end of period associated with discontinued operations 7,416 
Cash and cash equivalents and restricted cash at end of period associated with continuing operations$54,228 $22,111 
See Notes to Consolidated Financial Statements
6

Table of Contents
TETRA Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES

Organization 

We are a geographically diversified oil and gas services company, focused on completion fluids and associated products and services, water management, frac flowback and production well testing. We were incorporated in Delaware in 1981. We are composed of two divisions – Completion Fluids & Products and Water & Flowback Services. Unless the context requires otherwise, when we refer to “we,” “us,” and “our,” we are describing TETRA Technologies, Inc. and its consolidated 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 March 31, 2021 are not necessarily indicative of results that may be expected for the twelve months ended December 31, 2021.
 
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, 2020 and notes thereto included in our Annual Report on Form 10-K, which we filed with the SEC on March 5, 2021.

Significant Accounting Policies

    Our significant accounting policies are described in the notes to our consolidated financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K. There have been no significant changes in our accounting policies or the application thereof during the first quarter of 2021.

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. For a discussion of the reclassification of the financial presentation of our former Compression Division as discontinued operations, see Note 2 - “Discontinued Operations”. Other than the discontinued operations presentation, the impact of reclassifications was not significant to the prior year's overall presentation. Unless otherwise noted, amounts and disclosures throughout these Notes to Consolidated Financial Statements relate solely to continuing operations and exclude all discontinued operations.

Impairments and Other Charges

Impairments of long-lived assets, including identified intangible assets, are determined periodically when indicators of impairment are present. If such indicators are present, the determination of the amount of impairment is based on our judgment as to the future undiscounted operating cash flows to be generated from the relevant assets throughout their remaining estimated useful lives. If these undiscounted cash flows are less than the carrying amount of the related assets, an impairment is recognized for the excess of the carrying value over fair value. Fair
7

Table of Contents
value of intangible assets is generally determined using the discounted present value of future cash flows using discount rates commensurate with the risks inherent with the specific assets. Assets held for disposal are recorded at the lower of carrying value or estimated fair value less estimated selling costs. There were no impairments associated with continuing operations during the three months ended March 31, 2021 or 2020.

Foreign Currency Translation
 
    We have designated the euro, the British pound, the Norwegian krone, the Canadian dollar, the Brazilian real, and the Mexican peso as the functional currencies for our operations in Finland and Sweden, the United Kingdom, Norway, Canada, Brazil, and certain of our operations in Mexico, respectively. The United States dollar is the designated functional currency for all of our other non-U.S. operations. The cumulative translation effects of translating the applicable accounts from the functional currencies into the United States dollar at current exchange rates are included as a separate component of equity. Foreign currency exchange (gains) and losses are included in other (income) expense, net and totaled $(0.6) million and $0.2 million during the three months ended March 31, 2021 and March 31, 2020, 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 assets, including our interest in Standard Lithium Ltd. (“Standard Lithium”) and our retained interest in CSI Compressco and liabilities, including the liabilities for the warrants to purchase 11.2 million shares of our common stock (the “Warrants”). See Note 9 - “Fair Value Measurements” for further discussion.

Fair value measurements are also utilized on a nonrecurring basis in certain circumstances, such as in the allocation of purchase consideration for acquisition transactions to the assets and liabilities acquired, including intangible assets and goodwill (a Level 3 fair value measurement), the initial recording of our asset retirement obligations, and for the impairment of long-lived assets (a Level 3 fair value measurement).
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Supplemental Cash Flow Information

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

 Three Months Ended
March 31,
 20212020
(in thousands)
Supplemental cash flow information(1):
 
Interest paid
$3,973 $15,421 
Income taxes paid
252 1,479 
Decrease in accrued capital expenditures1,051 1,489 
(1) Prior-year information includes the activity for CSI Compressco for the full period. Current-year information includes activity for CSI Compressco for January only.

New Accounting Pronouncements
Standards adopted in 2021

In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions related to intraperiod tax allocation, interim period income tax calculation methodology, and the recognition of deferred tax liabilities for outside basis differences. It also simplifies certain aspects of accounting for franchise taxes and clarifies the accounting for transactions that results in a step-up in the tax basis of goodwill. On January 1, 2021, we adopted ASU 2019-12. The adoption of this standard did not have a material impact on our consolidated financial statements.

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 has an effective date of 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. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. Entities may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020. As of March 31, 2021, we have not modified our credit agreements to remove references to LIBOR. We are currently evaluating the impacts of the provisions of ASU 2020-04 on our consolidated financial statements.
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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 IDRs in CSI Compressco and approximately 23.1% of the outstanding limited partner interests in CSI Compressco, in exchange for the combination of $13.4 million in cash paid at closing, $0.5 million in cash payable on the six-month anniversary of the closing 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 the transaction with Spartan as the “GP Sale.” 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 first quarter of 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 will also continue to provide back-office support to CSI Compressco under a Transition Services Agreement for up to one year until CSI Compressco has completed a full separation from our back-office support functions.

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 current-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. Our consolidated statements of cash flows for the three-month periods ended March 31, 2021 and March 31, 2020 included $3.0 million and $6.5 million, respectively, of capital expenditures related to our former Compression division, as well as amortization of deferred financing discounts, costs and gains of $0.7 million for the three-month period ended March 31, 2020. Our current-year results do not include CSI Compressco depreciation or amortization as the assets were considered held for sale. 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)
Three Months Ended
March 31, 2021
CompressionOffshore ServicesTotal
Major classes of line items constituting income from discontinued operations
Revenue$18,968 $ $18,968 
Cost of revenues11,474 28 11,502 
General and administrative expense2,795 (5)2,790 
Interest expense, net4,336  4,336 
Other expense, net(106) (106)
Pretax income (loss) from discontinued operations469 (23)446 
Pretax gain on disposal of discontinued operations120,574 
Total pretax income from discontinued operations121,020 
Income tax provision30 
Total income from discontinued operations$120,990 
Income from discontinued operations attributable to noncontrolling interest$(333)
Income from discontinued operations attributable to TETRA stockholders$120,657 

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Three Months Ended
March 31, 2020
CompressionOffshore ServicesTotal
Major classes of line items constituting loss from discontinued operations
Revenue$90,238 $ $90,238 
Cost of revenues54,579 (60)54,519 
Depreciation, amortization, and accretion19,908  19,908 
Impairments and other charges5,371  5,371 
General and administrative expense10,189 205 10,394 
Interest expense, net12,564  12,564 
Other expense, net417  417 
Pretax (loss) from discontinued operations(12,790)(145)(12,935)
Income tax provision433 
Total loss from discontinued operations$(13,368)
Loss from discontinued operations attributable to noncontrolling interest$8,834 
Loss from discontinued operations attributable to TETRA stockholders$(4,534)
    
Reconciliation of Major Classes of Assets and Liabilities of the Discontinued Operations to Amounts Presented Separately in the Statement of Financial Position
(in thousands)
March 31, 2021
Offshore ServicesMaritechTotal
Carrying amounts of major classes of liabilities included as part of discontinued operations
Trade payables$1,222 $ $1,222 
Accrued liabilities and other296 228 524 
Total liabilities associated with discontinued operations$1,518 $228 $1,746 

December 31, 2020
CompressionOffshore ServicesMaritechTotal
Carrying amounts of major classes of assets included as part of discontinued operations
Cash and cash equivalents$16,577 $ $ $16,577 
Trade receivables43,837   43,837 
Inventories31,220   31,220 
Other current assets5,231   5,231 
Property, plant, and equipment551,401   551,401 
Other assets61,740   61,740 
Total assets associated with discontinued operations$710,006 $ $ $710,006 
Carrying amounts of major classes of liabilities included as part of discontinued operations
Trade payables$19,766 $1,222 $ $20,988 
Unearned Income269   269 
Accrued liabilities and other36,318 352 228 36,898 
Long-term debt, net638,631   638,631 
Other liabilities37,253   37,253 
Total liabilities associated with discontinued operations$732,237 $1,574 $228 $734,039 

See Note 8 - “Commitments and Contingencies” for further discussion of contingencies associated with discontinued operations.
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NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS
    
Our contract asset balances, primarily associated with customer documentation requirements, were $16.9 million and $12.8 million as of March 31, 2021 and December 31, 2020, 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. Unearned income balances were $1.2 million and $2.7 million as of March 31, 2021 and December 31, 2020, respectively, and vary based on the timing of invoicing and performance obligations being met. Revenues recognized during the three-month periods ended March 31, 2021 and March 31, 2020 deferred as of the end of the preceding year were not significant. During the three-month periods ended March 31, 2021 and March 31, 2020, 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 11. In addition, we disaggregate revenue from contracts with customers by geography based on the following table below.
Three Months Ended
March 31,
20212020
 (In Thousands)
Completion Fluids & Products
United States$24,597 $37,958 
International21,925 37,279 
46,522 75,237 
Water & Flowback Services
United States28,931 54,384 
International1,871 3,083 
30,802 57,467 
Total Revenue
United States53,528 92,342 
International23,796 40,362 
$77,324 $132,704 
NOTE 4 – INVENTORIES

Components of inventories as of March 31, 2021 and December 31, 2020 are as follows: 
 March 31, 2021December 31, 2020
 (In Thousands)
Finished goods$64,484 $68,121 
Raw materials3,288 2,910 
Parts and supplies5,018 4,001 
Work in progress1,670 1,626 
Total inventories
$74,460 $76,658 

Finished goods inventories include newly manufactured clear brine fluids as well as used brines that are repurchased from certain customers for recycling.
NOTE 5 – LEASES

    We have operating leases for some of our transportation equipment, office space, warehouse space, operating locations, and machinery and equipment. We have finance leases for certain storage tanks and equipment rentals. These finance leases are not material to our financial statements. Our leases have remaining lease terms ranging up to 13 years. Some of our leases have options to extend for various periods, while some have termination options with prior notice of generally 30 days or six months. The office space, warehouse space, operating location leases, and machinery and equipment leases generally require us to pay all maintenance and
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insurance costs. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Variable rent expense was not material.

    Our corporate headquarters facility located in The Woodlands, Texas, was sold on December 31, 2012, pursuant to a sale and leaseback transaction. As a condition to the completion of the purchase and sale of the facility, the parties entered into a lease agreement for the facility having an initial lease term of 15 years, which is classified as an operating lease. Under the terms of the lease agreement, we have the ability to extend the lease for five successive five-year periods at base rental rates to be determined at the time of each extension.

    Components of lease expense, included in either cost of revenues or general and administrative expense based on the use of the underlying asset, are as follows (inclusive of lease expense for leases not included on our consolidated balance sheet based on our accounting policy election to exclude leases with a term of 12 months or less):
 Three Months Ended
March 31,
20212020
 (In Thousands)
Operating lease expense$3,241 $3,704 
Short-term lease expense6,457 9,010 
Total lease expense$9,698 $12,714 

Supplemental cash flow information:
 Three Months Ended
March 31,
20212020
 (In Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows - operating leases$3,296 $3,745 
Right-of-use assets obtained in exchange for lease obligations:
     Operating leases$1,017 $4,218 

Supplemental balance sheet information:
 March 31, 2021December 31, 2020
 (In Thousands)
Operating leases:
     Operating lease right-of-use assets$41,293 $43,448 
     Accrued liabilities and other$8,507 $8,795 
     Operating lease liabilities35,608 37,569 
     Total operating lease liabilities$44,115 $46,364 

Additional operating lease information:
 March 31, 2021December 31, 2020
Weighted average remaining lease term:
     Operating leases6.6 years6.8 years
Weighted average discount rate:
     Operating leases9.64 %9.62 %
    
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    Future minimum lease payments by year and in the aggregate, under non-cancellable operating leases with terms in excess of one year consist of the following at March 31, 2021:
 Operating Leases
 (In Thousands)
Remainder of 2021$9,393 
202210,827 
20238,784 
20247,299 
20255,419 
Thereafter18,474 
Total lease payments60,196 
Less imputed interest(16,081)
Total lease liabilities$44,115 
    
    At March 31, 2021, future minimum rental receipts under a non-cancellable sublease for office space in one of our locations totaled $5.2 million. For the three months ended March 31, 2021, we recognized sublease income of $0.3 million.
NOTE 6 – INVESTMENTS
Following the closing of the GP Sale, we continue to own approximately 10.9% of the outstanding CSI Compressco common units. In addition, 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 (TSXV: SLL) 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 9 - “Fair Value Measurements” for further information.
Our investments as of March 31, 2021 and December 31, 2020, consist of the following:
March 31, 2021December 31, 2020
(In Thousands)
Investment in CSI Compressco
$9,533 $ 
Investment in Standard Lithium3,787 2,675 
Total Investments13,320 2,675 
NOTE 7 – LONG-TERM DEBT AND OTHER BORROWINGS
 
Consolidated long-term debt as of March 31, 2021 and December 31, 2020, consists of the following:
 Scheduled MaturityMarch 31, 2021December 31, 2020
  (In Thousands)
TETRA
Asset-based credit agreementSeptember 10, 2023$ $ 
Term credit agreement (1)
September 10, 2025171,160 199,894 
Total long-term debt $171,160 $199,894 
(1) Net of unamortized discount of $5.3 million and $5.5 million as of March 31, 2021 and December 31, 2020, respectively, and net of unamortized deferred financing costs of $7.8 million and $8.2 million as of March 31, 2021 and December 31, 2020, respectively.

    As of March 31, 2021, we had no outstanding balance and $6.9 million in letters of credit against our asset-based credit agreement (“ABL Credit Agreement”). Because there was no outstanding balance on this ABL Credit Agreement, associated deferred financing costs of $0.9 million as of March 31, 2021, were classified as other long-term assets on the accompanying consolidated balance sheet. As of March 31, 2021, subject to compliance with the
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covenants, borrowing base, and other provisions of the ABL Credit Agreement that may limit borrowings, we had an availability of $26.9 million under this agreement.

Our credit agreements contain certain affirmative and negative covenants, including covenants that restrict the ability to pay dividends or other restricted payments. As of March 31, 2021, we are in compliance with all covenants under the credit agreements. Our term credit agreement requires us to offer to prepay a percentage of Excess Cash Flow (as defined in the term credit agreement) following the conclusion of each calendar year. Within five business days of filing our Annual Report Form 10-K for the year ending December 31, 2021, the minimum amount we will be required to offer to prepay pursuant to this obligation is $8.2 million, which is reported as a current liability in our consolidated balance sheet
NOTE 8 – 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.

Contingencies of Discontinued Operations

    In early 2018, we closed the Maritech Asset Purchase and Sale Agreement with Orinoco Natural Resources, LLC (“Orinoco”) that provided for the purchase by Orinoco of Maritech’s remaining oil and gas properties and related assets. Also in early 2018, we closed the Maritech Membership Interest Purchase and Sale Agreement with Orinoco that provided for the purchase by Orinoco of all of the outstanding membership interests in Maritech.

    Under the Maritech Asset Purchase and Sale Agreement, Orinoco assumed all of Maritech’s decommissioning liabilities related to the leases sold to Orinoco (the “Orinoco Lease Liabilities”) and, under the Maritech Membership Interest Purchase and Sale Agreement, Orinoco assumed all other liabilities of Maritech, including the decommissioning liabilities associated with the oil and gas properties previously sold by Maritech (the “Legacy Liabilities”), subject to certain limited exceptions unrelated to the decommissioning liabilities. To the extent that Maritech or Orinoco fails to satisfy decommissioning liabilities associated with any of the Orinoco Lease Liabilities or the Legacy Liabilities, we may be required to satisfy such liabilities under third party indemnity agreements and corporate guarantees that we previously provided to the U.S. Department of the Interior and other parties, respectively.

    Pursuant to a Bonding Agreement entered into as part of these transactions (the “Bonding Agreement”), Orinoco provided non-revocable performance bonds in an aggregate amount of $46.8 million to cover the performance by Orinoco and Maritech of the asset retirement obligations of Maritech (the “Initial Bonds”) and agreed to replace, within 90 days following the closing, the Initial Bonds with other non-revocable performance bonds, meeting certain requirements, in the aggregate sum of $47.0 million (collectively, the “Interim Replacement Bonds”). Orinoco further agreed to replace, within 180 days following the closing, the Interim Replacement Bonds with a maximum of three non-revocable performance bonds in the aggregate sum of $47.0 million, meeting certain requirements (the “Final Bonds”). Among the other requirements of the Final Bonds was that they must provide coverage for all of the asset retirement obligations of Maritech instead of only relating to specific properties. In the event Orinoco does not provide the Interim Replacement Bonds or the Final Bonds, Orinoco is required to make certain cash escrow payments to us.

    The payment obligations of Orinoco under the Bonding Agreement were guaranteed by Thomas M. Clarke and Ana M. Clarke pursuant to a separate guaranty agreement (the “Clarke Bonding Guaranty Agreement”). Orinoco has not delivered such replacement bonds and neither it nor the Clarkes has made any of the agreed upon cash escrow payments and we filed a lawsuit against Orinoco and the Clarkes to enforce the terms of the Bonding Agreement and the Clarke Bonding Guaranty Agreement. A summary judgment was initially granted in favor of Orinoco and the Clarkes which dismissed our claims against Orinoco under the Bonding Agreement and against the Clarkes under the Clarke Bonding Guaranty Agreement. We filed an appeal and also asked the trial court to grant a new trial on the summary judgment or to modify the judgment because we believe this judgment should not have
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been granted. On November 5, 2019, the trial court signed an order granting our motion for new trial and vacating the prior order granting summary judgment for Orinoco and the Clarkes. The parties are awaiting direction from the court on a new scheduling order and/or trial setting. The Initial Bonds, which are non-revocable, remain in effect.

    If we become liable in the future for any decommissioning liability associated with any property covered by either an Initial Bond or an Interim Replacement Bond while such bonds are outstanding and the payment made to us under such bond is not sufficient to satisfy such liability, the Bonding Agreement provides that Orinoco will pay us an amount equal to such deficiency and if Orinoco fails to pay any such amount, such amount must be paid by the Clarkes under the Clarke Bonding Guaranty Agreement. However, if the Final Bonds or the full amount of the escrowed cash have been provided, neither Orinoco nor the Clarkes would be liable to pay us for any such deficiency. Our financial condition and results of operations may be negatively affected if Orinoco is unable to cover any such deficiency or if we become liable for a significant portion of the decommissioning liabilities.

     In early 2018, we also closed the sale of our Offshore Division to Epic Companies, LLC (“Epic Companies,” formerly known as Epic Offshore Specialty, LLC). Part of the consideration we received was a promissory note of Epic Companies in the original principal amount of $7.5 million (the “Epic Promissory Note”). At the end of August 2019, Epic Companies filed for bankruptcy and we recorded a reserve of $7.5 million for the full amount of the promissory note, including accrued interest, and certain other receivables in the amount of $1.5 million during the quarter ended September 30, 2019. The Epic Promissory Note became due on December 31, 2019 and neither Epic nor the Clarkes made payment. TETRA filed a lawsuit against the Clarkes on January 15, 2020 for breach of the promissory note guaranty agreement. In September 2020, the court granted TETRA’s Motion for Summary Judgment and entered Final Judgment in our favor, dismissing counterclaims by the Clarkes and awarded TETRA $7.9 million in damages. The Clarkes have filed an appeal which we will defend. We cannot provide any assurance the Clarkes will pay the judgment or that they will not file for bankruptcy protection. If the Clarkes do file for bankruptcy protection, we likely would be unable to collect all, or even a significant portion of, the judgment owed to us.
NOTE 9 – FAIR VALUE MEASUREMENTS
 
Financial Instruments

Investments

Our retained investment in CSI Compressco and our investment in Standard Lithium are recorded based on the quoted market stock price in active markets (a Level 1 fair value measurement). The stock component of consideration received for our arrangement with 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. The unearned income associated with the stock component of this agreement is not significant as of March 31, 2021 or December 31, 2020. Changes in the value of stock are recorded in other income (expense) in our consolidated statements of operations

Warrants

The Warrants are valued using a Black Scholes option valuation model that includes implied volatility of the trading price (a Level 3 fair value measurement).

Recurring and nonrecurring fair value measurements by valuation hierarchy as of March 31, 2021 and December 31, 2020, are as follows:
  Fair Value Measurements Using
Total as ofQuoted Prices in Active Markets for Identical Assets or LiabilitiesSignificant Other Observable InputsSignificant Unobservable Inputs
DescriptionMarch 31, 2021(Level 1)(Level 2)(Level 3)
(In Thousands)
Investment in CSI Compressco
$9,533 $9,533 $ $ 
Investment in Standard Lithium3,787 3,787   
Warrants liability(521)  (521)
Net asset$12,799 
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   Fair Value Measurements Using
Total as of Quoted Prices in Active Markets for Identical Assets or LiabilitiesSignificant Other Observable InputsSignificant Unobservable Inputs
DescriptionDecember 31, 2020(Level 1)(Level 2)(Level 3)
(In Thousands)
Investment in Standard Lithium$2,675$2,675  $ 
Warrants liability(198)  (198)
Net asset$2,477 

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 and term credit agreement approximate their carrying amounts. See Note 7 - “Long-Term Debt and Other Borrowings” for further discussion.
NOTE 10 – NET INCOME (LOSS) PER SHARE

The following is a reconciliation of the weighted average number of common shares outstanding with the number of shares used in the computations of net income (loss) per common and common equivalent share:
Three Months Ended
March 31,
 20212020
 (In Thousands)
Number of weighted average common shares outstanding
126,149 125,587 
Assumed exercise of equity awards and warrants
 10 
Average diluted shares outstanding
126,149 125,597 

For the three-month period ended March 31, 2021, the average diluted shares outstanding excludes the impact of 1,727 outstanding equity awards and warrants, as the inclusion of these shares would have been anti-dilutive due to the net loss from continuing operations recorded during the period.
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NOTE 11 – INDUSTRY SEGMENTS
 
We manage our operations through two Divisions: Completion Fluids & Products and Water & Flowback Services.

 Summarized financial information concerning the business segments is as follows:
Three Months Ended
March 31,
 20212020
 (In Thousands)
Revenues from external customers  
Product sales  
Completion Fluids & Products Division$45,019 $70,190 
Water & Flowback Services Division13 25 
Consolidated$45,032 $70,215 
Services   
Completion Fluids & Products Division$1,503 $5,047 
Water & Flowback Services Division30,789 57,442 
Consolidated$32,292 $62,489 
Total revenues  
Completion Fluids & Products Division$46,522 $75,237 
Water & Flowback Services Division30,802 57,467 
Consolidated$77,324 $132,704 
Income (loss) before taxes  
Completion Fluids & Products Division$9,010 $19,396 
Water & Flowback Services Division(5,480)(2,244)
Interdivision eliminations3 5 
Corporate Overhead(1)
(15,308)(13,444)
Consolidated$(11,775)$3,713 
(1) Amounts reflected include the following general corporate expenses:
 Three Months Ended
March 31,
 20212020
 (In Thousands)
General and administrative expense$13,020 $8,081 
Depreciation and amortization169 197 
Interest expense5,064 5,455 
Warrants fair value adjustment (income) expense323