UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTONWashington D.C. 20549
FORM 10-Q
 (Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2018For the quarterly period ended MARCH 31, 2019
or 
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD For the transition period from            FROM TOto           .
 
COMMISSION FILE NUMBERCommission File Number 1-13455

TETRA Technologies, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware74-2148293
(State or Other Jurisdiction of incorporation)Incorporation or Organization)(I.R.S. Employer Identification No.)
  
24955 Interstate 45 North 
The Woodlands, Texas77380
(Address of principal executive offices)Principal Executive Offices)(zip code)Zip Code)
 
(281) 367-1983
(Registrant’s telephone number, including area code)Telephone Number, Including Area Code)

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

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 [ X ]  No [   ]
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [ X ]  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. (Check One):
Large accelerated filer [ ] Accelerated filer [ X ] 
Non-accelerated filer [   ] (Do not check if a smaller reporting company)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 [ X ]
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

As of August 9, 2018,May 8, 2019, there were 125,679,432125,609,276 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
Item 1. Financial Statements
Consolidated Statements of Operations
1
Consolidated Statements of Comprehensive Income (Loss)
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
21
Item 3. Quantitative and Qualitative Disclosures about Market Risk
31
Item 4. Controls and Procedures
32
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
32
Item 1A. Risk Factors
32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
33
Item 3. Defaults Upon Senior Securities
33
Item 4. Mine Safety Disclosures
33
Item 5. Other Information
33
Item 6. Exhibits
34
SIGNATURES
35



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,		Three Months Ended
March 31,
2018 2017 2018 20172019 2018
Revenues: 
  
       
Product sales$107,687
 $86,180
 $183,066
 $154,158
$91,781
 $75,953
Services152,385
 93,751
 276,387
 185,182
151,947
 123,428
Total revenues260,072
 179,931
 459,453
 339,340
243,728
 199,381
Cost of revenues: 
  
       
Cost of product sales86,115
 61,767
 146,329
 111,349
74,588
 60,214
Cost of services97,177
 62,845
 181,920
 126,494
102,156
 84,743
Depreciation, amortization, and accretion28,979
 25,784
 55,420
 52,308
30,628
 26,441
Impairments and other charges146
 —
Total cost of revenues212,271
 150,396
 383,669
 290,151
207,518
 171,398
Gross profit47,801
 29,535
 75,784
 49,189
36,210
 27,983
General and administrative expense33,617
 29,460
 64,420
 56,211
34,277
 30,803
Interest expense, net18,379
 14,328
 33,352
 28,095
18,379
 14,973
Warrants fair value adjustment (income) expense2,195
 (5,545) 201
 (11,521)407
 (1,994)
CCLP Series A Preferred Units fair value adjustment (income) expense(512) (4,834) 846
 (3,203)1,163
 1,358
Litigation arbitration award income—
 —
 —
 (12,816)
Other expense, net3,808
 775
 6,584
 1,236
Other (income) expense, net(951) 2,776
Loss before taxes and discontinued operations(9,686) (4,649) (29,619) (8,813)(17,065) (19,933)
Provision for income taxes2,446
 3,317
 3,570
 3,398
1,609
 1,124
Loss before discontinued operations(12,132) (7,966) (33,189) (12,211)(18,674) (21,057)
Discontinued operations:          
Loss from discontinued operations (including 2018 loss on disposal of $33.8 million), net of taxes(21) (6,653) (41,727) (13,660)
Loss from discontinued operations (including 2018 loss on disposal of $31.5 million), net of taxes(426) (41,706)
Net loss(12,153) (14,619) (74,916) (25,871)(19,100) (62,763)
Loss attributable to noncontrolling interest6,188
 3,628
 15,303
 12,417
Loss attributable to TETRA stockholders$(5,965) $(10,991) $(59,613) $(13,454)
Basic net income (loss) per common share: 
      
Income (loss) before discontinued operations attributable to TETRA stockholders$(0.05) $(0.04) $(0.14) $0.00
Less: loss attributable to noncontrolling interest8,262
 9,115
Net loss attributable to TETRA stockholders$(10,838) $(53,648)
Basic net loss per common share:   
Loss before discontinued operations attributable to TETRA stockholders$(0.09) $(0.10)
Loss from discontinued operations attributable to TETRA stockholders$0.00
 $(0.06) $(0.33) $(0.12)$0.00
 $(0.36)
Net loss attributable to TETRA stockholders$(0.05) $(0.10) $(0.47) $(0.12)$(0.09) $(0.46)
Average shares outstanding122,474
 114,534
 125,553
 114,375
125,681
 117,598
Diluted net income (loss) per common share: 
  
    
Income (loss) before discontinued operations attributable to TETRA stockholders$(0.05) $(0.04) $(0.14) $0.00
Diluted net loss per common share:   
Loss before discontinued operations attributable to TETRA stockholders$(0.09) $(0.10)
Loss from discontinued operations attributable to TETRA stockholders$0.00
 $(0.06) $(0.33) $(0.12)$0.00
 $(0.36)
Net loss attributable to TETRA stockholders$(0.05) $(0.10) $(0.47) $(0.12)$(0.09) $(0.46)
Average diluted shares outstanding122,474
 114,534
 125,553
 114,375
125,681
 117,598
See Notes to Consolidated Financial Statements


TETRA Technologies, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(In Thousands)
(Unaudited)
 
Three Months Ended 
 June 30,		 Six Months Ended 
 June 30,		Three Months Ended
March 31,
2018 2017 2018 20172019 2018
Net loss$(12,153) $(14,619) $(74,916) $(25,871)$(19,100) $(62,763)
Foreign currency translation adjustment(9,249) 2,968
 (7,966) 5,161
Foreign currency translation adjustment, net of taxes of $0 in 2019 and 2018(406) 1,283
Comprehensive loss(21,402) (11,651) (82,882) (20,710)(19,506) (61,480)
Comprehensive loss attributable to noncontrolling interest7,942
 3,303
 17,442
 12,233
Less: Comprehensive loss attributable to noncontrolling interest8,086
 9,500
Comprehensive loss attributable to TETRA stockholders$(13,460) $(8,348) $(65,440) $(8,477)$(11,420) $(51,980)
 

See Notes to Consolidated Financial Statements


TETRA Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands)
 
June 30,
2018		 December 31,
2017		March 31,
2019		 December 31,
2018
(Unaudited)  
(Unaudited)  
ASSETS 
  
 
  
Current assets: 
  
 
  
Cash and cash equivalents$70,157
 $26,128
$36,868
 $40,038
Restricted cash4,273
 261
65
 64
Trade accounts receivable, net of allowances of $1,380 in 2018 and $1,286 in 2017181,454
 144,051
Trade accounts receivable, net of allowances of $1,651 in 2019 and $2,583 in 2018183,646
 187,592
Inventories133,367
 115,438
156,628
 143,571
Assets of discontinued operations1,538
 121,134
1,422
 1,354
Notes receivable7,586
 7,544
Prepaid expenses and other current assets19,457
 17,597
24,078
 20,528
Total current assets410,246
 424,609
410,293
 400,691
Property, plant, and equipment: 
  
 
  
Land and building79,000
 78,559
78,183
 78,746
Machinery and equipment1,207,766
 1,167,680
1,286,832
 1,265,732
Automobiles and trucks36,502
 34,744
35,519
 35,568
Chemical plants188,135
 186,790
189,522
 188,641
Construction in progress44,590
 31,566
49,540
 44,419
Total property, plant, and equipment1,555,993
 1,499,339
1,639,596
 1,613,106
Less accumulated depreciation(722,915) (689,907)(778,647) (759,175)
Net property, plant, and equipment833,078
 809,432
860,949
 853,931
Other assets: 
  
 
  
Goodwill22,197
 6,636
25,859
 25,859
Patents, trademarks and other intangible assets, net of accumulated amortization of $74,149 in 2018 and $71,114 in 201785,878
 47,405
Patents, trademarks and other intangible assets, net of accumulated amortization of $82,634 in 2019 and $80,401 in 201880,293
 82,184
Deferred tax assets, net10
 10
13
 13
Notes receivable7,501
 44
Operating lease right-of-use assets60,149
 —
Other assets20,709
 20,478
21,969
 22,849
Total other assets136,295
 74,573
188,283
 130,905
Total assets$1,379,619
 $1,308,614
$1,459,525
 $1,385,527
 

See Notes to Consolidated Financial Statements


TETRA Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share Amounts)
 
June 30,
2018		 December 31,
2017		March 31,
2019		 December 31,
2018
(Unaudited)  
(Unaudited)  
LIABILITIES AND EQUITY 
  
 
  
Current liabilities: 
  
 
  
Trade accounts payable$55,292
 $70,847
$88,223
 $80,279
Unearned income30,718
 18,701
50,379
 26,695
Accrued liabilities72,829
 58,478
Accrued liabilities and other77,107
 89,232
Liabilities of discontinued operations8,343
 73,913
3,529
 4,145
Total current liabilities167,182
 221,939
219,238
 200,351
Long-term debt, net810,739
 629,855
845,843
 815,560
Deferred income taxes3,889
 4,404
3,456
 3,242
Asset retirement obligations, net of current portion12,073
 11,738
Asset retirement obligations12,331
 12,202
CCLP Series A Preferred Units45,644
 61,436
18,278
 27,019
Warrants liability13,403
 13,202
2,480
 2,073
Operating lease liabilities49,632
 —
Other liabilities15,627
 13,479
8,157
 12,331
Total long-term liabilities901,375
 734,114
940,177
 872,427
Commitments and contingencies 
  
 
  
Equity: 
  
 
  
TETRA stockholders' equity: 
  
 
  
Common stock, par value $0.01 per share; 250,000,000 shares authorized at June 30, 2018 and December 31, 2017; 128,349,334 shares issued at June 30, 2018 and 118,515,797 shares issued at December 31, 20171,283
 1,185
Common stock, par value $0.01 per share; 250,000,000 shares authorized at March 31, 2019 and December 31, 2018; 128,412,688 shares issued at March 31, 2019 and 128,455,134 shares issued at December 31, 20181,284
 1,285
Additional paid-in capital457,082
 425,648
462,241
 460,680
Treasury stock, at cost; 2,015,775 shares held at June 30, 2018, and 2,638,093 shares held at December 31, 2017(18,865) (18,651)
Treasury stock, at cost; 2,785,981 shares held at March 31, 2019, and 2,717,569 shares held at December 31, 2018(19,105) (18,950)
Accumulated other comprehensive income (loss)(49,594) (43,767)(52,245) (51,663)
Retained earnings (deficit)(215,948) (156,335)
Retained deficit(225,947) (217,952)
Total TETRA stockholders' equity173,958
 208,080
166,228
 173,400
Noncontrolling interests137,104
 144,481
133,882
 139,349
Total equity311,062
 352,561
300,110
 312,749
Total liabilities and equity$1,379,619
 $1,308,614
$1,459,525
 $1,385,527
 

See Notes to Consolidated Financial Statements

TETRA Technologies, Inc. and Subsidiaries
Consolidated Statements of Equity
(In Thousands)

 
Common Stock
Par Value
 
Additional Paid-In
Capital
 
Treasury
Stock
 
Accumulated Other 
Comprehensive Income (Loss)
 
Retained
Earnings
 
Noncontrolling
Interest
 
Total
Equity
    
Currency
Translation
   
              
Balance at December 31, 2018$1,285
 $460,680
 $(18,950) $(51,663) $(217,952) $139,349
 $312,749
Net loss for first quarter 2019—
 —
 —
 —
 (10,838) (8,262) (19,100)
Translation adjustment, net of taxes of $0—
 —
 —
 (582) —
 176
 (406)
Comprehensive loss—
 —
 —
 —
 —
 —
 (19,506)
Distributions to public unitholders—
 —
 —
 —
 —
 (307) (307)
Equity award activity(1) —
 —
 —
 —
 —
 (1)
Treasury stock activity, net—
 —
 (155) —
 —
 —
 (155)
Equity compensation expense—
 1,628
 —
 —
 —
 311
 1,939
Conversions of CCLP Series A Preferred—
 —
 —
 —
 —
 2,539
 2,539
Cumulative effect adjustment—
 —
 —
 —
 2,843
 —
 2,843
Other—
 (67) —
 —
 —
 76
 9
Balance at March 31, 2019$1,284
 $462,241
 $(19,105) $(52,245) $(225,947) $133,882
 $300,110

 
Common Stock
Par Value
 
Additional Paid-In
Capital
 
Treasury
Stock
 
Accumulated Other 
Comprehensive Income (Loss)
 
Retained
Earnings
 
Noncontrolling
Interest
 
Total
Equity
    
Currency
Translation
   
              
Balance at December 31, 2017$1,185
 $425,648
 $(18,651) $(43,767) $(156,335) $144,481
 $352,561
Net loss for first quarter 2018—
 —
 —
 —
 (53,648) (9,115) (62,763)
Translation adjustment, net of taxes of $0—
 —
 —
 1,668
 —
 (385) 1,283
Comprehensive loss—
 —
 —
 —
 —
 —
 (61,480)
Distributions to public unitholders—
 —
 —
 —
 —
 (4,358) (4,358)
Equity award activity20
 —
 —
 —
 —
 —
 20
Treasury stock activity, net—
 —
 (170) —
 —
 —
 (170)
Issuance of common stock for business combination77
 28,135
 —
 —
 —
 —
 28,212
Equity compensation expense—
 1,434
 —
 —
 —
 (655) 779
Conversions of CCLP Series A Preferred—
 —
 —
 —
 —
 10,103
 10,103
Other—
 (171) —
 —
 —
 (35) (206)
Balance at March 31, 2018$1,282
 $455,046
 $(18,821) $(42,099) $(209,983) $140,036
 $325,461



TETRA Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited) 
Six Months Ended June 30,Three Months Ended March 31,
2018 20172019 2018
Operating activities: 
  
 
  
Net loss$(74,916) $(25,871)$(19,100) $(62,763)
Reconciliation of net loss to cash used in operating activities:   
Reconciliation of net loss to cash provided by (used in) operating activities:   
Depreciation, amortization, and accretion57,505
 58,098
30,627
 28,509
Provision (benefit) for deferred income taxes(280) (316)
Impairment and other charges146
 —
Benefit for deferred income taxes229
 (61)
Equity-based compensation expense3,422
 5,444
2,165
 876
Provision for doubtful accounts665
 1,244
627
 453
Non-cash loss on disposition of business32,369
 —
—
 32,369
Amortization of deferred financing costs2,133
 2,266
953
 1,224
CCLP Series A Preferred offering costs—
 37
CCLP Series A Preferred redemption premium397
 —
CCLP Series A Preferred accrued paid in kind distributions2,838
 3,797
599
 1,523
CCLP Series A Preferred fair value adjustment846
 (3,203)1,163
 1,358
Warrants fair value adjustment201
 (11,521)407
 (1,994)
Contingent consideration liability fair value adjustment4,300
 —
(400) —
Expense for unamortized finance costs and other non-cash charges and credits3,616
 (335)339
 3,668
Gain on sale of assets(65) (533)(201) 90
Changes in operating assets and liabilities: 
  
 
  
Accounts receivable(46) (30,970)2,353
 6,584
Inventories(18,398) (10,690)(15,809) (13,467)
Prepaid expenses and other current assets(2,434) (1,983)(3,222) (4,311)
Trade accounts payable and accrued expenses(23,246) 14,605
6,638
 (24,586)
Decommissioning liabilities—
 (497)
Other(637) (133)(499) (733)
Net cash used in operating activities(12,127) (561)
Net cash provided by (used in) operating activities7,412
 (31,261)
Investing activities: 
  
 
  
Purchases of property, plant, and equipment, net(67,441) (16,643)(32,409) (28,892)
Acquisition of businesses, net of cash acquired(42,002) —
—
 (42,002)
Proceeds from disposal of business3,121
 —
—
 3,121
Proceeds on sale of property, plant, and equipment307
 380
364
 76
Other investing activities(332) 235
319
 146
Net cash used in investing activities(106,347) (16,028)(31,726) (67,551)
Financing activities: 
  
 
  
Proceeds from long-term debt508,250
 178,700
66,000
 474,550
Principal payments on long-term debt(325,300) (156,550)(35,451) (278,150)
CCLP distributions(8,982) (10,944)(307) (4,358)
Redemptions of CCLP Series A Preferred(8,346) —
Tax remittances on equity based compensation(593) (407)(429) (293)
Debt issuance costs(7,881) (1,291)(155) (6,139)
Net cash provided by financing activities165,494
 9,508
21,312
 185,610
Effect of exchange rate changes on cash1,021
 530
(167) (96)
Increase (decrease) in cash and cash equivalents48,041
 (6,551)(3,169) 86,702
Cash and cash equivalents and restricted cash at beginning of period26,389
 36,531
40,102
 26,389
Cash and cash equivalents and restricted cash at end of period$74,430
 $29,980
$36,933
 $113,091
      
      
Supplemental cash flow information: 
   
  
Interest paid$18,610
 $22,716
$15,544
 $17,710
Income taxes paid3,314
 4,416
1,644
 1,331
See Notes to Consolidated Financial Statements


TETRA Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
NOTE A – 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, production well testing and offshore rig cooling services, and compression services and equipment. We were incorporated in Delaware in 1981. Following the acquisition and disposition transactions that closed during the three month period ended March 31, 2018, we reorganized our reporting segments andWe are now composed of three divisions – Completion Fluids & Products, Water & Flowback Services, and Compression. 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 accountsbalances 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, 2018March 31, 2019 are not necessarily indicative of results that may be expected for the twelve months ended December 31, 2018.2019.

We consolidate the financial statements of CSI Compressco LP and its subsidiaries ("CCLP") as part of our Compression Division, as we determined that CCLP is a variable interest entity and we are the primary beneficiary. We control the financial interests of CCLP and have the ability to direct the activities of CCLP that most significantly impact its economic performance through our ownership of its general partner. The share of CCLP net assets and earnings that is not owned by us is presented as noncontrolling interest in our consolidated financial statements. Our cash flows from our investment in CCLP are limited to the quarterly distributions we receive on our CCLP common units and general partner interest (including incentive distribution rights) and the amounts collected for services we perform on behalf of CCLP, as TETRA's capital structure and CCLP's capital structure are separate, and do not include cross default provisions, cross collateralization provisions, or cross guarantees.
 
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 connectionconjunction with the financial statements for the year ended December 31, 2017,2018 and notes thereto included in our Annual Report on Form 10-K, whichwe filed with the SEC on March 5, 2018.4, 2019.

Significant Accounting Policies

We have added policies for the recording of leases in conjunction with the adoption of the new lease standard discussed in our "Leases" and "New Accounting Pronouncements" sections below. Other than the additional lease policies described herein, there have been no significant changes in our accounting policies or the application of these policies.

Use of Estimates
 
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP")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.

ReclassificationsLeases

Certain previously reported financial information has been reclassifiedAs a lessee, unless the lease meets the criteria of short-term and is excluded per our policy election described below, we initially recognize a lease liability and related right-of-use asset on the commencement date.

The right-of-use asset represents our right to conformuse an underlying asset and the lease liability represents our obligation to make lease payments to the current period’s presentation. Forlessor over the lease term.    

Long-term operating leases are included in operating lease right-of-use assets, accrued liabilities and other, and operating lease liabilities in our consolidated balance sheet as of March 31, 2019. Long-term finance leases are included in property, plant and equipment, accrued liabilities and other, and other liabilities in our consolidated balance sheet as of March 31, 2019. We determine whether a discussioncontract is or contains a lease at inception of the reclassification ofcontract. Where we are a lessee in a contract that includes an option to extend or terminate the financial presentation oflease, we include the extension period or exclude the period covered by the termination option in our Offshore Division as discontinued operations, see Note C - "Discontinued Operations."lease term, if it is reasonably certain that we would exercise the option.

Cash Equivalents
We consider all highly liquid cash investmentsAs an accounting policy election, we do not include short-term leases on our balance sheet. Short-term leases include leases with a maturityterm of three12 months or less, when purchasedinclusive of renewal options we are reasonably certain to be cash equivalents.
exercise. The lease payments for short-term leases are included as operating lease costs on a straight-line basis over the lease term in cost of revenues or general and administrative expense based on the use of the underlying asset. We recognize lease costs for variable lease payments not included in the determination of a lease liability in the period in which an obligation is incurred.


Restricted Cash
Restricted cash is classifiedAs allowed by U.S. GAAP, we do not separate nonlease components from the associated lease component for our compression services contracts and instead account for those components as a current asset when itsingle component based on the accounting treatment of the predominant component. In our evaluation of whether Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 842 "Leases" or ASC 606 "Revenue from Contracts with Customers" is expectedapplicable to be repaid or settledthe combined component based on the predominant component, we determined the services nonlease component is predominant, resulting in the next twelve month period. Restricted cash asongoing recognition of June 30, 2018 consistsour compression services contracts following ASC 606.

Our operating and finance leases are recognized at the present value of cashlease payments over the lease term. When the implicit discount rate is not readily determinable, we use our incremental borrowing rate to calculate the discount rate used to secure outstanding lettersdetermine the present value of creditlease payments. Consistent with other long-lived assets or asset groups that are held and used, we test for impairment of our Compression Division.
Inventories
Inventoriesright-of-use assets when impairment indicators are stated at the lower of cost or net realizable value. Except for work in progress inventory discussed below, cost is determined using the weighted average method. Components of inventories as of June 30, 2018 and December 31, 2017 are as follows: 
 June 30, 2018 December 31, 2017
 (In Thousands)
Finished goods$60,011
 $66,377
Raw materials3,934
 4,027
Parts and supplies44,585
 33,632
Work in progress24,837
 11,402
Total inventories$133,367
 $115,438

Finished goods inventories include newly manufactured clear brine fluids as well as used brines that are repurchased from certain customers for recycling. Recycled brines are recorded at cost, using the weighted average method. Work in progress inventory consists primarily of new compressor packages located in the CCLP fabrication facility in Midland, Texas. The cost of work in progress is determined using the specific identification method. We write down the value of inventory by an amount equal to the difference between its cost and its estimated net realizable value.

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 
 June 30,		 Six Months Ended 
 June 30,
 2018 2017 2018 2017
 (In Thousands)
Number of weighted average common shares outstanding122,474
 114,534
 125,553
 114,375
Assumed exercise of equity awards and warrants—
 —
 —
 —
Average diluted shares outstanding122,474
 114,534
 125,553
 114,375
For thethree and six month periods ended June 30, 2018 and June 30, 2017, the average diluted shares outstanding excludes the impact of all outstanding equity awards and warrants, as the inclusion of these shares would have been anti-dilutive due to the net losses recorded during the periods. In addition, for the three and six month periods ended June 30, 2018 and June 30, 2017, the calculation of diluted earnings per common share excludes the impact of the CCLP Preferred Units, as the inclusion of the impact from conversion of the CCLP Preferred Units into CCLP common units would have been anti-dilutive.present.

Foreign Currency Translation
 
We have designated the euro, the British pound, the Norwegian krone, the Canadian dollar, theBrazilian real, the Argentine peso, and theMexican peso, as the functional currencies for our operations in Finland and Sweden, the United Kingdom, Norway, Canada, Brazil, Argentina,and certain of our operations in Mexico, respectively. The U.S. dollar is the designated functional currency for all of our other foreign operations. The cumulative translation effects of translating the applicable accounts from the functional currencies into the U.S. 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 $(0.3)$1.2 million during the


three months ended March 31, 2019 and six month periods ended June 30, 2018 and $0.6 million and $1.2$0.9 million during the three and six month periods ended June 30, 2017, respectively.

On June 30, 2018, we determined the economy in Argentina to be highly inflationary. As a result of this determination, beginning July 1, 2018, our reporting of our operations in Argentina will reflect the remeasurement of the functional currency from the Argentine peso to the U.S. dollar.

Income Taxes

Our consolidated provision for income taxes during the first six months of 2017 and 2018 is primarily attributable to taxes in certain foreign jurisdictions and Texas gross margin taxes. Our consolidated effective tax rate for the six month period ended June 30, 2018 of negative 12.1% was primarily the result of losses generated in entities for which no related tax benefit has been recorded. The losses generated by these entities do not result in tax benefits due to offsetting valuation allowances being recorded against the related net deferred tax assets. We establish a valuation allowance to reduce the deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Included in our deferred tax assets are net operating loss carryforwards and tax credits that are available to offset future income tax liabilities in the U.S. as well as in certain foreign jurisdictions.

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. At June 30, 2018 and December 31, 2017, we had not completed our accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, we made reasonable estimates of the effects and recorded provisional amounts. We will continue to make and refine our calculations as additional analysis is completed. The accounting for the tax effects of the Act will be completed in 2018 as provided by the U.S. Securities and Exchange Commission’s SAB No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act. We recognized an income tax expense of $54.1 million in the fourth quarter of 2017 associated with the impact of the Act, which was fully offset by a decrease in the valuation allowance previously recorded on our net deferred tax assets. As such, the Act resulted in no net tax expense in the fourth quarter of 2017. We have considered in our estimated annual effective tax rate for 2018, the impact of the statutory changes enacted by the Act, including reasonable estimates of those provisions effective for the 2018 tax year. Our estimate on Global Intangible Low Taxed Income (“GILTI”), Foreign Derived Intangible Income (“FDII”), Base Erosion and Anti-Abuse Tax (“BEAT”), and IRC Section 163(j) interest limitation do not impact our effective tax rate for the three and six month periods ended June 30, 2018.

Asset Retirement Obligations

We operate facilities in various U.S. and foreign locations that are used in the manufacture, storage, and sale of our products, inventories, and equipment. These facilities are a combination of owned and leased assets. We are required to take certain actions in connection with the retirement of these assets. The values of our asset retirement obligations for these properties were $12.1 million and $11.7 million as of June 30, 2018 and December 31, 2017, respectively. Asset retirement obligations are recorded in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 410, "Asset Retirement and Environmental Obligations," whereby the estimated fair value of a liability for asset retirement obligations is recognized in the period in which it is incurred and in which a reasonable estimate can be made. Such estimates are based on relevant assumptions that we believe are reasonable. We have reviewed our obligations in this regard in detail and estimated the cost of these actions. The associated asset retirement costs are capitalized as part of the carrying amount of these long-lived assets and are depreciated on a straight-line basis over the life of the assets.

The changes in the values of our asset retirement obligations during the three and six month period ended June 30, 2018, are as follows:


 Three Months Ended June 30, 2018 Six Months Ended June 30, 2018
 (In Thousands)
Beginning balance for the period, as reported$11,929
 $11,738
Activity in the period:   
Accretion of liability150
 309
Revisions in estimated cash flows(6) 26
Ending balance$12,073
 $12,073

We review the adequacy of our asset retirement obligation liabilities whenever indicators suggest that the estimated cash flows underlying the liabilities have changed.
Fair Value Measurements
Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” within an entity’s principal market, if any. The principal market is the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity, regardless of whether it is the market in which the entity will ultimately transact for a particular asset or liability or if a different market is potentially more advantageous. Accordingly, this exit price concept may result in a fair value that may differ from the transaction price or market price of the asset or liability.
Under U.S. generally accepted accounting principles ("GAAP"), the fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value. Fair value measurements should maximize the use of observable inputs and minimize the use of unobservable inputs, where possible. Observable inputs are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs may be needed to measure fair value in situations where there is little or no market activity for the asset or liability at the measurement date and are developed based on the best information available in the circumstances, which could include the reporting entity’s own judgments about the assumptions market participants would utilize in pricing the asset or liability.
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 the liabilities for the warrants to purchase 11.2 million shares of our common stock (the "Warrants") and the CCLP Preferred Units (as herein defined). We also utilize fair value measurements on a recurring basis in the accounting for our foreign currency derivative contracts. For these fair value measurements, we utilize the quoted value as determined by our counterparty financial institution (a level 2 fair value measurement). 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, including goodwill (a level 3 fair value measurement). The fair values of certain of our financial instruments, which include cash, restricted cash, accounts receivable, accounts payable, short-term borrowings, and long-term debt pursuant to our bank credit agreement, approximate their carrying amounts. The aggregate fair values of our long-term 11% Senior Note at June 30, 2018 and December 31, 2017, were approximately $128.2 million and $130.8 million, respectively, based on current interest rates on those dates, which were different from the stated interest rate on the 11% Senior Note. Those fair values compare to the face amount of the 11% Senior Note of $125.0 million both at June 30, 2018 and December 31, 2017. The fair values of the publicly traded CCLP 7.25% Senior Notes (as herein defined) at June 30, 2018 and December 31, 2017, were approximately $271.5 million and $279.7 million, respectively. Those fair values compare to the face amount of $295.9 million both at June 30, 2018 and December 31, 2017. The fair value of the publicly traded CCLP 7.50% Senior Secured Notes at June 30, 2018 was approximately $351.8 million. This fair value compares to aggregate principal amount of such notes at June 30, 2018 of $350.0 million. We calculated the fair values of our 11% Senior Note as of June 30, 2018 and December 31, 2017 internally, using current market conditions and average cost of debt (a level 2 fair value measurement). We based the fair values of the CCLP 7.25% Senior Notes and the CCLP 7.50% Senior Secured Notes as of June 30, 2018 on recent trades for these notes (a level 1 fair value measurement). See Note D - "Long-Term Debt and Other Borrowings," for further discussion.



The CCLP Preferred Units are valued using a lattice modeling technique that, among a number of lattice structures, includes significant unobservable items (a Level 3 fair value measurement). These unobservable items include (i) the volatility of the trading price of CCLP's common units compared to a volatility analysis of equity prices of CCLP's comparable peer companies, (ii) a yield analysis that utilizes market information related to the debt yields of comparable peer companies, and (iii) a future conversion price analysis. The fair valuation of the CCLP Preferred Units liability is increased by, among other factors, projected increases in CCLP's common unit price and by increases in the volatility and decreases in the debt yields of CCLP's comparable peer companies. Increases (or decreases) in the fair value of CCLP Preferred Units will increase (decrease) the associated liability and result in future adjustments to earnings for the associated valuation losses (gains). During the three and six month periods ended June 30, 2018, the changes in the fair value of the CCLP Preferred Units resulted in $0.5 million being credited to earnings and $0.8 million charged to earnings, respectively, in the consolidated statement of operations.

The Warrants are valued either by using their traded market prices (a level 1 fair value measurement) or, for periods when market prices are not available, by using the Black Scholes option valuation model that includes estimates of the volatility of the Warrants implied by their trading prices (a level 3 fair value measurement). As of June 30, 2018and December 31, 2017, the fair valuation methodology utilized for the Warrants was a level 3 fair value measurement, as there were no available traded market prices to value the Warrants. The fair valuation of the Warrants liability is increased by, among other factors, increases in our common stock price, and by increases in the volatility of our common stock price. Increases (or decreases) in the fair value of the Warrants will increase (decrease) the associated liability and result in future adjustments to earnings for the associated valuation losses (gains). During the three and six month periods ended June 30, 2018, the changes in the fair value of the Warrants liability resulted in $2.2 million being charged to earnings and $0.2 million being charged to earnings, respectively, in the consolidated statement of operations.

During the third quarter of 2017 and the first quarter of 2018, we issued stand-alone, cash-settled stock appreciation rights awards to an executive officer. These awards are valued by using the Black Scholes option valuation model and such fair value is recognized based on the portion of the requisite service period satisfied as of each valuation date. The fair valuation of the stock appreciation rights liability is increased by, among other factors, increases in our common stock price, and by increases in the volatility of our common stock price. These stock appreciation rights awards are reflected as an accrued liability in our consolidated balance sheet. Increases (or decreases) in the fair value of the stock appreciation rights awards will increase (decrease) the associated liability and result in future adjustments to earnings for the associated valuation losses (gains). During the six months ended June 30,March 31, 2018, the fair value of the stock appreciation rights increased $0.2 million, which was charged to earnings in the consolidated statement of operations.

A summary of these fair value measurements as of June 30, 2018 and December 31, 2017, is 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
DescriptionJune 30, 2018 (Level 1) (Level 2) (Level 3)
 (In Thousands)
CCLP Series A Preferred Units$(45,644) $—
 $—
 $(45,644)
Warrants liability(13,403) —
 —
 (13,403)
Cash-settled stock appreciation rights(287) —
 —
 (287)
Asset for foreign currency derivative contracts180
 —
 180
 —
Liability for foreign currency derivative contracts(241) —
 (241) —
Net liability$(59,395)      



   Fair Value Measurements Using
 Total as of Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Other Observable Inputs Significant Unobservable Inputs
DescriptionDecember 31, 2017 (Level 1) (Level 2) (Level 3)
 (In Thousands)
CCLP Series A Preferred Units$(61,436) $—
 $—
 $(61,436)
Warrants liability(13,202) —
 —
 (13,202)
Cash-settled stock appreciation rights(97) —
 —
 (97)
Asset for foreign currency derivative contracts241
 —
 241
 —
Liability for foreign currency derivative contracts(378) —
 (378) —
Net liability$(74,872)      
respectively.

New Accounting Pronouncements

Standards adopted in 2019

In May 2014,February 2016, the Financial Accounting Standards Board ("FASB")FASB issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers." This ASU supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") 605, "Revenue Recognition," and most industry-specific guidance. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those years, under either full or modified retrospective adoption.

On January 1, 2018, we adopted ASU 2014-09 and all related amendments ("ASU 2014-09"). We utilized the modified retrospective method of adoption. Comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also provides a five-step model for determining revenue recognition for arrangements that are within the scope of the standard: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of ASU 2014-09, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. For a complete discussion of accounting for revenues, see Note J - Revenue from Contracts with Customers.
The impact from the adoption of ASU 2014-09 to our January 1, 2018 consolidated balance sheet, our June 30, 2018 consolidated balance sheet, and our consolidated results of operations for the three and six month periods ended June 30, 2018 was immaterial. The adoption of ASU 2014-09 had no impact to cash provided by operating, financing, or investing activities in our consolidated statement of cash flows. We do not expect the adoption of the new revenue standard to have a material impact to our net income on an ongoing basis.
In February 2016, the FASB issued ASU 2016-02, "Leases""Leases (Topic 842)" to increase comparability and transparency among different organizations. Organizations are required to recognize right-of-use lease assets and lease liabilities onin the balance sheet related to the right to use the underlying asset for the lease term.In addition, through improved disclosure requirements, the ASUASC 842 will enable users of financial statements to further understand the amount, timing, and uncertainty of cash flows arising from leases. We are currently assessingadopted the potentialstandard effective January 1, 2019. The standard had a material impact on our consolidated balance sheet, specifically, the reporting of our operating leases. The impact in the reporting of our finance leases was insignificant.

We chose to transition using a modified retrospective approach which allows for the recognition of a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption rather than the earliest period presented. Comparative information is reported under the accounting standards that were in effect for those periods. In addition, upon transition, we elected the package of practical expedients, which allows us to continue to apply historical lease classifications to existing contracts. Upon adoption, we recognized $60.6 million in operating right-of-use assets, $12.0 million in accrued liabilities and other, and $50.7 million in operating lease liabilities in our consolidated balance sheet. In addition, we also recognized a $2.8 million cumulative effect adjustment to increase retained earnings, primarily as a result of a deferred gain from a previous sale and

leaseback transaction on our corporate headquarters facility that was accounted for as an operating lease. Refer to Note K - “Leases” for further information on our leases.    

In February 2018, the FASB issued ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220)" that gives entities the option to reclassify the income tax effects of these changesthe Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. This is effective for us on January 1, 2019, however, as we do not have associated tax effects in accumulated other comprehensive income, there was no impact.

In June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” to align the measurement and classification guidance for share-based payments to nonemployees with the guidance currently applied to employees, with certain exceptions. We adopted this ASU during the three months ended March 31, 2019, with no material impact to our consolidated financial statements. Our current operating lease portfolio consists primarily of real estate, vehicles, and equipment leases. Based on our preliminary assessment, upon adoption of the ASU, we will record significant right-to-use assets and lease obligations pursuant to the new requirements. We


Standards not yet adopted
are evaluating our portfolio of existing leases for consideration of the accounting impact of each lease. We are also evaluating and are developing internal policies to address the requirements under this ASU.
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. ASU 2016-13 which has an effective date of the first quarter of fiscal 2022, also applies to employee benefit plan accounting.2020. We are currently assessing the potential effects of these changes to our consolidated financial statements and employee benefit plan accounting.
In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" to reduce diversity in practice in classification of certain transactions in the statement of cash flows. The ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods, with early adoption permitted, under a retrospective transition adoption. We adopted this ASU during the three month period ended March 31, 2018, with no material impact to our consolidated financial statements.
In November 2016, the FASB issued ASU 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory" which requires companies to account for the income tax effects of intercompany transfers of assets other than inventory when the transfer occurs. We adopted this ASU during the three month period ended March 31, 2018. The adoption of this standard did not have a material impact to our consolidated financial statements due to a previously recorded valuation allowance on our net deferred tax assets.
Additionally, in November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" to reduce diversity in the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. We adopted this ASU during the three month period ended March 31, 2018, resulting in restricted cash being classified with cash and cash equivalents in our consolidated statement of cash flows.
In January 2017, the FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment"Impairment," which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. The ASU is effective for annual periods beginning after December 15, 2020,2019, and interim periods within those annual periods, with early adoption permitted, under a prospective adoption. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting" to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. We adopted this ASU during the three month period ended March 31, 2018, with no material impact to our consolidated financial statements.
In July 2017, the FASB issued ASU 2017-11, "Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception" to consider “down round” features when determining whether certain equity-linked financial instruments or embedded features are indexed to an entity’s own stock. Entities that present EPS under ASC 260 will recognize the effect of a down round feature in a freestanding equity-classified financial instrument only when it is triggered. The effect of triggering such a feature will be recognized as a dividend and a reduction to income available to common shareholders in basic EPS. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. We are currently assessing the potential effects of these changes to our consolidated financial statements.
In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" to change how companies account for and disclose hedges. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. We are currently assessing the potential effects of these changes to our consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” to align the measurement and classification guidance for share-based payments to nonemployees with the guidance currently applied to employees, with certain exceptions. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods


within those annual periods, with early adoption permitted. We are currently assessing the potential effects of these changes to our consolidated financial statements.

NOTE B – ACQUISITIONS AND DISPOSITIONSINVENTORIES

AcquisitionComponents of SwiftWater Energy Services

On February 28, 2018, pursuant to a purchase agreement dated February 13, 2018 (the "SwiftWater Purchase Agreement"), we purchased allinventories as of the equity interests in SwiftWater Energy Services, LLC ("SwiftWater"), which is engaged in the business of providing water managementMarch 31, 2019 and water solutions to oil and gas operators in the Permian Basin market of Texas. Strategically, the acquisition of SwiftWater enhances our position as one of the leading integrated water management companies, providing water transfer, storage, and treatment services, along with proprietary automation technology and numerous other water-related services.

Under the terms of the SwiftWater Purchase Agreement, consideration of $42.0 million of cash, subject to a working capital adjustment, and 7,772,021 shares of our common stock (valued at $28.2 million) were paid at closing. Subsequent to closing, in August 2018, a working capital adjustment of approximately $1.0 million was paid. The sellers will also have the right to receive contingent consideration payments, in an aggregate amount of up to $15.0 million, calculated on EBITDA and revenue (each as defined in the SwiftWater Purchase Agreement) of the water management business of SwiftWater and all of our pre-existing operations in the Permian Basin in respect of the period from January 1, 2018 through December 31, 2019. The contingent consideration may be paid in cash or shares of our common stock, at our election.

As of June 30, 2018 our preliminary allocation of the SwiftWater purchase price isare as follows (in thousands):

follows: 
Current assets$16,880
Property and equipment11,631
Intangible assets41,960
Goodwill15,560
Total assets acquired86,031
  
Current liabilities7,189
Total liabilities assumed7,189
Net assets acquired$78,842
 March 31, 2019 December 31, 2018
 (In Thousands)
Finished goods$72,831
 $69,762
Raw materials3,279
 3,503
Parts and supplies44,915
 47,386
Work in progress35,603
 22,920
Total inventories$156,628
 $143,571

The above allocation of the purchase price to the SwiftWater net tangible assets and liabilities considers approximately $7.6 million of the initial estimated fair value for the liabilities associated with the contingent purchase price consideration. The fair value of the obligation to pay the contingent purchase price consideration was calculated based on the anticipated EBITDA and revenue as of the closing date for the operations of SwiftWater and our pre-existing operations in the Permian Basin and could increase (to $15.0 million) or decrease (to $0) depending on the actual earnings from these operations going forward. Increases or decreases in the value of the anticipated contingent purchase price consideration liability due to changes in the amounts paid or expected to be paid will be charged or credited to earnings in the period in which such changes occur. During the period from the closing date to June 30, 2018, the estimated fair value for the liabilities associated with the contingent purchase price consideration increased to $11.9 million, resulting in $4.3 million being charged to other expense during the three month period ended June 30, 2018.

The allocation of the purchase price to the SwiftWater net tangible assets and liabilities and identifiable intangible assets,Finished goods inventories include newly manufactured clear brine fluids as well as the contingent consideration liabilities, asused brines that are repurchased from certain customers for recycling. Work in progress inventory consists primarily of February 28, 2018, is preliminary and subject to revisions to the fair value calculations for certain of the tangible and identified intangible assets as well as the fair value calculation of the contingent purchase price consideration liability. The final purchase price allocation could differ materially from the preliminary allocation notednew compressor packages located in the summary above. The preliminary allocation of purchase price includes approximately $15.6 million of deductible goodwill allocated to our Water & Flowback Services segment, and is supported by the strategic benefits discussed above and expected to be generated fromCCLP fabrication facility in Midland, Texas.


the acquisition. The acquired property and equipment is stated at fair value, and depreciation on the acquired property and equipment is computed using the straight-line method over the estimated useful lives of each asset. Machinery and equipment is depreciated using useful lives of 3 to 15 years; and automobiles and trucks are depreciated using useful lives of 3 to 4 years. The acquired intangible assets include $3.3 million for the trademark/tradename, $37.2 million for customer relationships, and $1.5 million of other intangible assets that are stated at estimated fair value and are amortized on a straight-line basis over their estimated useful lives, ranging from 5 to 16 years. These identified intangible assets are recorded net of $1.0 million of accumulated amortization as of June 30, 2018.

For the six month period ended June 30, 2018, our revenues, depreciation and amortization, and pretax earnings included $36.6 million, $2.1 million, and $7.0 million, respectively, associated with the SwiftWater acquisition after the closing on February 28, 2018. In addition, SwiftWater acquisition-related costs of approximately $0.4 million were incurred during the six month period ended June 30, 2018, consisting of external legal fees, transaction consulting fees, and due diligence costs. These costs have been recognized in general and administrative expenses in the consolidated statement of operations.NOTE C – NET INCOME (LOSS) PER SHARE

The pro forma information presented below hasfollowing 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,
 2019 2018
 (In Thousands)
Number of weighted average common shares outstanding125,681
 117,598
Assumed exercise of equity awards and warrants—
 —
Average diluted shares outstanding125,681
 117,598

For thethree month periods ended March 31, 2019 and March 31, 2018, the average diluted shares outstanding excludes the impact of all outstanding equity awards and warrants, as the inclusion of these shares would have been prepared to give effectanti-dilutive due to the SwiftWater acquisition as ifnet losses recorded during the transaction had occurred atperiods. In addition, for the beginningthree month periods ended March 31, 2019 and March 31, 2018, the calculation of diluted earnings per common share excludes the impact of the periods presented. The pro forma information includesCCLP Preferred Units (as defined in Note F), as the inclusion of the impact from the allocationconversion of the acquisition purchase price on depreciation and amortization. The pro forma information also excludes the SwiftWater acquisition-related costs charged to earnings during the 2018 period. The pro forma information is presented for illustrative purposes only and is based on estimates and assumptions we deemed appropriate. The following pro forma information is not necessarily indicative of the historical results thatCCLP Preferred Units into CCLP common units would have been achieved if the acquisition transaction had occurred in the past, and our operating results may have been different from those reflected in the pro forma information below. Therefore, the pro forma information should not be relied upon as an indication of the operating results that we would have achieved if the transaction had occurred at the beginning of the periods presented or the future results that we will achieve after the transaction.

 Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017
 (In Thousands)
Revenues$260,072
 $191,891
 $473,603
 $362,824
Depreciation, amortization, and accretion$28,979
 $27,197
 $56,397
 $54,949
Gross profit$47,801
 $33,115
 $79,749
 $57,668
        
Net income (loss) from continuing operations$(12,132) $(6,594) $(30,988) $(9,285)
Net income (loss) attributable to TETRA stockholders$(5,965) $(9,619) $(57,412) $(10,528)
        

Sale of Offshore Division

On March 1, 2018, we closed a series of related transactions that resulted in the disposition of our Offshore Division. Pursuant to an Asset Purchase and Sale Agreement (the "Maritech Asset Purchase Agreement") with Orinoco Natural Resources, LLC ("Orinoco"), Orinoco purchased certain remaining offshore oil, gas and mineral leases and related assets of Maritech (the "Maritech Properties"). Immediately thereafter, we closed the transactions contemplated by a Membership Interest Purchase and Sale Agreement (the "Maritech Equity Purchase Agreement") with Orinoco, whereby Orinoco purchased all of the equity interests of Maritech (the "Maritech Equity Interests"). Immediately thereafter, we closed the transactions contemplated by an Equity Interest Purchase Agreement (the "Offshore Services Purchase Agreement") with Epic Offshore Specialty, LLC, an affiliate of Orinoco ("Epic Offshore"), whereby Epic Offshore (the "Offshore Services Sale") purchased all of the equity interests in the wholly owned subsidiaries that comprised our Offshore Services segment operations (the "Offshore Services Equity Interests").
Under the terms of the Maritech Asset Purchase Agreement, the Maritech Equity Purchase Agreement, and the Offshore Services Purchase Agreement, the consideration delivered by Orinoco and Epic Offshore for the Maritech Properties, the Maritech Equity Interests and the Offshore Services Equity Interests consisted of (i) the assumption by Orinoco of substantially all of the liabilities and obligations relating to the ownership, operation and


condition of the Maritech Properties and the provision of certain indemnities by Orinoco to us under the Maritech Asset Purchase Agreement, (ii) the assumption by Orinoco of substantially all of the liabilities of Maritech and the provision of certain indemnities by Orinoco under the Maritech Equity Purchase Agreement, (iii) the assumption by Epic Offshore of substantially all of the liabilities of the Offshore Services Equity Interests relating to the periods following the closing of the Offshore Services Sale and the provision of certain indemnities by Epic Offshore under the Offshore Services Purchase Agreement, (iv) cash in the amount $3.1 million, (v) a promissory note in the original principal amount of $7.5 million payable by Epic Offshore to us in full, together with interest at a rate of 1.52% per annum, on December 31, 2019, (vi) performance by Orinoco under a Bonding Agreement executed in connection with the Maritech Asset Purchase Agreement and the Maritech Equity Purchase Agreement whereby Orinoco provided at closing non-revocable performance bonds in an amount equal to $46.8 million to cover the performance by Orinoco and Maritech of the asset retirement obligations of Maritech, and (vii) the delivery of a personal guaranty agreement from Thomas M. Clarke and Ana M. Clarke guaranteeing the payment obligations of Orinoco under the Bonding Agreement (collectively, the "Transaction Consideration"). Pursuant to the Bonding Agreement, Orinoco is required to replace, within 90 days following the closing, the initial bonds delivered at closing with non-revocable performance bonds, meeting certain requirements, in the aggregate sum of $47.0 million. Orinoco has not delivered such replacement bonds and we are seeking to enforce the terms of the Bonding Agreement. The non-revocable performance bonds delivered at the closing remain in effect.

As a result of these transactions, we have effectively exited the businesses of our Offshore Services and Maritech segments, and these operations are reflected as discontinued operations in our consolidated financial statements. See Note C - "Discontinued Operations" for further discussion. Our consolidated pre-tax results of operations for the six month period ending June 30, 2018 included a loss on the disposal of our Offshore Division of $33.8 million, net of tax, including transaction costs of $1.4 million.

anti-dilutive.
NOTE CD – DISCONTINUED OPERATIONS

As discussed in Note B - "Acquisitions and Dispositions," onOn March 1, 2018, we closed a series of related transactions that resulted in the disposition of our Offshore Division. As a result, we have accounted for our Offshore Division, consisting of our Offshore Services and Maritech segments, as discontinued operations and have revised prior period financial statements to exclude these businesses from continuing operations. 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 June 30, 2018 Three Months Ended June 30, 2017Three Months Ended March 31, 2019 Three Months Ended March 31, 2018
Offshore Services Maritech Total Offshore Services Maritech TotalOffshore Services Maritech Total Offshore Services Maritech Total
Major classes of line items constituting pretax loss from discontinued operations                      
Revenue$10
 $—
 $10
 $28,262
 $175
 $28,437
$—
 $—
 $—
 $4,477
 $186
 $4,663
Cost of revenues(235) (98) (333) 27,933
 314
 28,247
22
 —
 22
 11,123
 238
 11,361
Depreciation, amortization, and accretion—
 —
 —
 2,463
 373
 2,836
—
 —
 —
 1,856
 213
 2,069
General and administrative expense284
 —
 284
 1,594
 174
 1,768
404
 —
 404
 1,253
 186
 1,439
Other (income) expense, net55
 —
 55
 2,718
 (565) 2,153
—
 —
 —
 39
 —
 39
Pretax loss from discontinued operations(94) 98
 4
 (6,446) (121) (6,567)(426) —
 (426) (9,794) (451) (10,245)
Pretax loss on disposal of discontinued operations    (25)     —
    —
 
 
 (33,788)
Total pretax loss from discontinued operations    (21)     (6,567)    (426)     (44,033)
Income tax expense    —
     86
Income tax benefit    —
     (2,327)
Total loss from discontinued operations    $(21)     $(6,653)    $(426)     $(41,706)


 Six Months Ended June 30, 2018 Six Months Ended June 30, 2017
 Offshore Services Maritech Total Offshore Services Maritech Total
Major classes of line items constituting pretax loss from discontinued operations           
Revenue$4,487
 $187
 $4,674
 $36,623
 $406
 $37,029
Cost of revenues10,888
 139
 11,027
 38,672
 601
 39,273
Depreciation, amortization, and accretion1,873
 212
 2,085
 5,046
 743
 5,789
General and administrative expense1,537
 187
 1,724
 3,063
 411
 3,474
Other (income) expense, net78
 —
 78
 2,623
 (565) 2,058
Pretax loss from discontinued operations(9,889) (351) (10,240) (12,781) (784) (13,565)
Pretax loss on disposal of discontinued operations    (33,813) 
 
 —
Total pretax loss from discontinued operations    (44,053)     (13,565)
Income tax (benefit) expense    (2,326)     95
Total loss from discontinued operations    $(41,727)     $(13,660)





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, 2018 December 31, 2017
 Offshore Services Maritech Total Offshore Services Maritech Total
Carrying amounts of major classes of assets included as part of discontinued operations           
Trade receivables$161
 $1,341
 $1,502
 $27,385
 $1,542
 $28,927
Inventories—
 —
 —
 4,616
 —
 4,616
Property, plant, and equipment—
 —
 —
 85,873
 —
 85,873
Other assets54
 (18) 36
 1,674
 44
 1,718
Total major classes of assets of the discontinued operations$215
 $1,323
 $1,538
 $119,548
 $1,586
 $121,134
            
Carrying amounts of major classes of liabilities included as part of discontinued operations           
Trade payables1,676
 —
 1,676
 13,942
 87
 14,029
Accrued liabilities4,608
 2,059
 6,667
 10,944
 2,278
 13,222
Decommissioning and other asset retirement obligations—
 —
 —
 —
 46,662
 46,662
Total major classes of liabilities of the discontinued operations$6,284
 $2,059
 $8,343
 $24,886
 $49,027
 $73,913
 March 31, 2019 December 31, 2018
 Offshore Services Maritech Total Offshore Services Maritech Total
Carrying amounts of major classes of assets included as part of discontinued operations           
Trade receivables$81
 $1,340
 $1,421
 $—
 $1,340
 $1,340
Other current assets1
 —
 1
 14
 —
 14
Assets of discontinued operations$82
 $1,340
 $1,422
 $14
 $1,340
 $1,354
            
Carrying amounts of major classes of liabilities included as part of discontinued operations           
Trade payables$616
 $—
 $616
 $740
 $—
 $740
Accrued liabilities838
 2,075
 2,913
 1,330
 2,075
 3,405
Liabilities of discontinued operations$1,454
 $2,075
 $3,529
 $2,070
 $2,075
 $4,145




NOTE DE – LONG-TERM DEBT AND OTHER BORROWINGS
 
We believe TETRA'sour capital structure, excluding CCLP, ("TETRA") and CCLP's capital structure should be considered separately, as there are no cross default provisions, cross collateralization provisions, or cross guarantees between CCLP's debt and TETRA's debt.

Consolidated long-term debt as of June 30, 2018March 31, 2019 and December 31, 2017,2018, consists of the following:
  June 30, 2018 December 31, 2017  March 31, 2019 December 31, 2018
  (In Thousands)  (In Thousands)
TETRA Scheduled Maturity    Scheduled Maturity   
Bank revolving line of credit facility (presented net of the unamortized deferred financing costs of $1.0 million as of June 30, 2018) September 30, 2019$59,906
 $—
11.0% Senior Note, Series 2015 (presented net of the unamortized discount of $3.6 million as of June 30, 2018 and $3.9 million as of December 31, 2017 and net of unamortized deferred financing costs of $3.1 million as of June 30, 2018 and $3.4 million as of December 31, 2017) November 5, 2022118,341
 117,679
Asset-based credit agreement (presented net of unamortized deferred financing costs of $1.6 million as of March 31, 2019) September 10, 2023$29,131
 $—
Term credit agreement (presented net of the unamortized discount of $7 million as of March 31, 2019 and $7.2 million as of December 31, 2018 and net of unamortized deferred financing costs of $10 million as of March 31, 2019 and $10.2 million as of December 31, 2018) September 10, 2025183,020
 182,547
TETRA total debt  178,247
 117,679
  212,151
 182,547
Less current portion  —
 —
  —
 —
TETRA total long-term debt  $178,247
 $117,679
  $212,151
 $182,547
        
CCLP        
CCLP Bank Credit Facility (presented net of the unamortized deferred financing costs of $4.0 million as of December 31, 2017), terminated March 22, 2018 August 4, 2019—
 223,985
CCLP New Credit Agreement June 29, 2023—
 —
CCLP 7.25% Senior Notes (presented net of the unamortized discount of $2.5 million as of June 30, 2018 and $2.8 million as of December 31, 2017 and net of unamortized deferred financing costs of $4.4 million as of June 30, 2018 and $5.0 million as of December 31, 2017) August 15, 2022288,989
 288,191
CCLP 7.50% Senior Secured Notes (presented net of unamortized deferred financing costs of $6.5 million as of June 30, 2018) April 1, 2025343,503
 —
CCLP asset-based credit agreement June 29, 2023—
 —
CCLP 7.25% Senior Notes (presented net of the unamortized discount of $2.1 million as of March 31, 2019 and $2.2 million as of December 31, 2018 and net of unamortized deferred financing costs of $3.6 million as of March 31, 2019 and $3.9 million as of December 31, 2018) August 15, 2022290,204
 289,797
CCLP 7.50% Senior Secured Notes (presented net of unamortized deferred financing costs of $6.5 million as of March 31, 2019 and $6.8 million as of December 31, 2018) April 1, 2025343,488
 343,216
CCLP total debt 632,492
 512,176
 633,692
 633,013
Less current portion —
 —
 —
 —
Consolidated total long-term debt $810,739
 $629,855
 $845,843
 $815,560

As of June 30, 2018,March 31, 2019, TETRA (excluding CCLP) had a $61.0$30.7 million outstanding balance and $6.89.0 million in letters of credit against its asset-based credit agreement ("ABL Credit Agreement, leaving a netAgreement"). As of March 31, 2019, subject to compliance

with the covenants, borrowing base, and other provisions of the agreement that may limit borrowings, TETRA had an availability of $132.2 million.$27.3 million under this agreement. There was no balance outstanding under the CCLP Newasset-based credit agreement ("CCLP Credit Agreement") as of March 31, 2019. As of March 31, 2019, and subject to compliance with the covenants, borrowing base, and other provisions of the agreements that may limit borrowings under the CCLP Credit Agreement, (as defined below) asCCLP had availability of June 30, 2018.$18.4 million.

As described below, weTETRA and CCLP are in compliance with all covenants of our respective debtcredit and senior note agreements as of June 30, 2018.
Our Long-Term Debt

Our Credit Agreement.



At June 30, 2018, our consolidated leverage ratio was 2.18 to 1 (compared to a 4.75 to 1 maximum allowed under the Credit Agreement) and our fixed charge coverage ratio was 2.87 to 1 (compared to a 1.25 to 1 minimum required under the Credit Agreement).

CCLP Long-Term Debt

CCLP Senior Secured Notes. On March 8, 2018, CCLP, and its wholly owned subsidiary, CSI Compressco Finance Inc. (together with CCLP, the "CCLP Issuers") entered into the Purchase Agreement (the “Purchase Agreement”) with Merrill Lynch, Pierce, Fenner & Smith Incorporated as representative of the initial purchasers listed in Schedule A thereto (collectively, the “Initial Purchasers”), pursuant to which the CCLPIssuers agreed to issue and sell to the Initial Purchasers $350 million aggregate principal amount of the CCLP Issuers’ 7.50% Senior Secured First Lien Notes due 2025 (the "CCLP Senior Secured Notes") (the "CCLP Offering") pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act").

The CCLP Issuers closed the Offering on March 22, 2018. The CCLP Senior Secured Notes were issued at par for net proceeds of approximately $343.8 million, after deducting certain financing costs. CCLP used a portion of the net proceeds to repay in full and terminate its existing bank Credit Agreement and plans to use the remainder for general partnership purposes, including the expansion of its compression fleet. The CCLP Senior Secured Notesare jointly and severally, and fully and unconditionally, guaranteed (the "Guarantees" and, together with the CCLP Senior Secured Notes, the "CCLP Senior Secured Note Securities")on a senior secured basis initially by each of CCLP's domestic restricted subsidiaries (other than CSI Compressco Finance Inc., certain immaterial subsidiaries and certain other excluded domestic subsidiaries) and are secured by a first-priority security interest in substantially all of the CCLP Issuers' and the Guarantors' assets (other than certain excluded assets) (the "Collateral") as collateral security for their obligations under the CCLP Senior Secured Notes, subject to certain permitted encumbrances and exceptions. On the closing date, CCLP entered into an indenture (the "Indenture") by and among the Obligors and U.S. Bank National Association, as trustee with respect to the Securities. The CCLP Senior Secured Notesaccrue interest at a rate of 7.50% per annum. Interest on the CCLP Senior Secured Notes is payable semi-annually in arrears on April 1 and October 1 of each year, beginning October 1, 2018. The CCLP Senior Secured Notes are scheduled to mature on April 1, 2025. During the six months ended June 30, 2018, CCLP incurred total financing costs of $6.7 million related to theCCLP Senior Secured Notes. These costs are deferred, netting against the carrying value of the amount outstanding.

On and after April 1, 2021, CCLP may redeem all or a part of the CCLP Senior Secured Notes, from time to time, at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest thereon to, but not including, the applicable redemption date, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the 12-month period beginning on April 1 of the years indicated below:

   
Date Price
2021 105.625%
2022 103.750%
2023 101.875%
2024 100.000%

In addition, at any time and from time to time before April 1, 2021, CCLP may, at its option, redeem all or a portion of the CCLP Senior Secured Notes at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined in the Indenture) with respect to the CCLP Senior Secured Notes plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date, subject to the rights of holders of the CCLP Senior Secured Notes on the relevant record date to receive interest due on the relevant interest payment date.

Prior to April 1, 2021, CCLP may on one or more occasions redeem up to 35% of the principal amount of the CCLP Senior Secured Notes with an amount of cash not greater than the amount of the net cash proceeds from one or more equity offerings at a redemption price equal to 107.500% of the principal amount of the CCLP Senior Secured Notes to be redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption, subject to the right of holders of record on the relevant record date to receive interest due on the


relevant interest payment date, provided that (a) at least 65% of the aggregate principal amount of the CCLP Senior Secured Notes originally issued on the issue date (excluding notes held by CCLP and its subsidiaries) remains outstanding after each such redemption; and (b) the redemption occurs within 180 days after the date of the closing of the equity offering.
If CCLP experiences certain kinds of changes of control, each holder of the CCLP Senior Secured Notes will be entitled to require CCLP to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess of $2,000) of that holder’s CCLP Senior Secured Notes pursuant to an offer on the terms set forth in the Indenture. CCLP will offer to make a cash payment equal to 101% of the aggregate principal amount of the CCLP Senior Secured Notes repurchased plus accrued and unpaid interest, if any, on the CCLP Senior Secured Notes repurchased to the date of repurchase, subject to the rights of holders of the CCLP Senior Secured Notes on the relevant record date to receive interest due on the relevant interest payment date.

The Indenture contains customary covenants restricting CCLP's ability and the ability of CCLP restricted subsidiaries to: (i) pay distributions on, purchase or redeem CCLP common units or purchase or redeem any CCLP subordinated debt; (ii) incur or guarantee additional indebtedness or issue certain kinds of preferred equity securities; (iii) create or incur certain liens securing indebtedness; (iv) sell assets, including dispositions of the Collateral; (v) consolidate, merge or transfer all or substantially all of its assets; (vi) enter into transactions with affiliates; and (vii) enter into agreements that restrict distributions or other payments from its restricted subsidiaries to CCLP. These covenants are subject to a number of important limitations and exceptions, including certain provisions permitting CCLP, subject to the satisfaction of certain conditions, to transfer assets to certain of CCLP's unrestricted subsidiaries. Moreover, if the CCLP Senior Secured Notes receive an investment grade rating from at least two rating agencies and no default has occurred and is continuing under the Indenture, many of the restrictive covenants in the Indenture will be terminated. The Indenture also contains customary events of default and acceleration provisions relating to such events of default, which provide that upon an event of default under the Indenture, the Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding CCLP Senior Secured Notes may declare all of the CCLP Senior Secured Notes to be due and payable immediately.

On March 22, 2018, CCLP, the grantors named therein, the Trustee and U.S. Bank National Association, as the collateral trustee (the “Collateral Trustee”), entered into a collateral trust agreement (the “Collateral Trust Agreement”) pursuant to which the Collateral Trustee will receive, hold, administer, maintain, enforce and distribute the proceeds of all of its liens upon the collateral for the benefit of the current and future holders of the CCLP Senior Secured Notes and any future priority lien obligations, if any.

CCLP Bank Credit Facilities.

On March 22, 2018, in connection with the closing of the CCLP Offering, CCLP repaid all outstanding borrowings and obligations under its existing CCLP Credit Agreement with a portion of the net proceeds from the CCLP Offering, and terminated the CCLP Credit Agreement. As a result of the termination of the CCLP Credit Agreement, associated unamortized deferred financing costs of $3.5 million were charged to other (income) expense, net, during the three month period ended March 31, 2018.

On June 29, 2018, CCLP and two of its wholly owned subsidiaries (collectively the "CCLP Borrowers"), and certain of its wholly owned subsidiaries named therein as guarantors (the "CCLP New Credit Agreement Guarantors"), entered into a Loan and Security Agreement (the "CCLP New Credit Agreement") with the lenders thereto (the "Lenders"), and Bank of America, N.A., in its capacity as administrative agent, collateral agent, letter of credit issuer, and swing line lender. All of the CCLP Borrowers' obligations under the CCLP New Credit Agreement are guaranteed by certain of their existing and future domestic subsidiaries. The CCLP New Credit Agreement includes a maximum credit commitment of $50.0 million available for loans, letters of credit (with a sublimit of $25.0 million) and swingline loans (with a sublimit of $5.0 million). Such maximum credit commitment may be increased by $25.0 million in accordance with the terms and conditions of the CCLP New Credit Agreement.

The CCLP Borrowers may borrow funds under the CCLP New Credit Agreement to pay fees and expenses related to the CCLP New Credit Agreement and for the Borrower's ongoing working capital needs and for general business purposes. The revolving loans under the CCLP New Credit Agreement may be voluntarily prepaid, in whole or in part, without premium or penalty, subject to breakage or similar costs. The maturity date of the CCLP New Credit Agreement is June 29, 2023. As of June 30, 2018, no balance was outstanding under the CCLP New Credit Agreement. Because there was no outstanding balance on the CCLP New Credit Agreement, associated


deferred financing costs of $1.3 million as of June 30, 2018, were classified as other assets on the accompanying consolidated balance sheet.

Borrowings under the CCLP New Credit Agreement will bear interest at a rate per annum equal to, at the option of the CCLP Borrowers, either (i) London InterBank Offered Rate (“LIBOR”) (adjusted to reflect any required bank reserves) for an interest period equal to 30, 60, 90, 180 or 360 days (as selected by the CCLP Borrowers, subject to availability and with the consent of the Lenders for 360 days) plus a margin based on average daily excess availability or (ii) a base rate plus a margin based on average daily excess availability; such base rate shall be determined by reference to the highest of (a) the prime rate of interest announced from time to time by Bank of America, N.A., (b) the Federal Funds Rate (as defined in the CCLP New Credit Agreement) rate plus 0.5% per annum and (c) LIBOR (adjusted to reflect any required bank reserves) for a 30-day interest period on such day plus 1.0% per annum. Initially, from June 29, 2018 until the delivery of the financial statements for the fiscal quarter ending December 31, 2018, LIBOR-based loans will have an applicable margin of 2.00% per annum and base-rate loans will have an applicable margin of 1.00% per annum; thereafter, the applicable margin will range between 1.75% and 2.25% per annum for LIBOR-based loans and 0.75% and 1.25% per annum for base-rate loans, according to average daily excess availability when financial statements are delivered. In addition to paying interest on outstanding principal under the CCLP New Credit Agreement, the CCLP Borrowers will be required to pay a commitment fee in respect of the unutilized commitments thereunder, initially at the rate of 0.375% per annum until the delivery of the financial statements for the fiscal quarter ending September 30, 2018 and thereafter at the applicable rate ranging from 0.250% to 0.375% per annum, paid quarterly in arrears based on utilization of the commitments under the CCLP New Credit Agreement. The CCLP Borrowers will also be required to pay a customary letter of credit fee equal to the applicable margin on revolving credit LIBOR loans and fronting fees.

The CCLP New Credit Agreement containscontain certain affirmative and negative covenants, including covenants that restrict the ability of theto pay dividends or other restricted payments. TETRA and CCLP Borrowers, the CCLP New Credit Agreement Guarantors and certainare both in compliance with all covenants of their subsidiaries to take certain actions including, among other thingsrespective credit and subject to certain significant exceptions, the incurrencesenior note agreements as of debt, the granting of liens, the making of investments, entering into transactions with affiliates, the payment of dividends and the sale of assets. The CCLP New Credit Agreement also contains a requirement that the CCLP Borrowers comply, during certain periods, with a fixed charge coverage ratio of 1.0 to 1.0.

All obligations under the CCLP New Credit Agreement and the guarantees of those obligations are secured, subject to certain exceptions, by a first priority security interest for the benefit of the Lenders in the CCLP Borrowers’ and the CCLP New Credit Agreement Guarantors’ present and future accounts receivable, inventory and related assets and proceeds of the foregoing (the “CCLP ABL Collateral”).

March 31, 2019.
NOTE EF – CCLP SERIES A CONVERTIBLE PREFERRED UNITS

During 2016, CCLP entered into Series A Preferred Unit Purchase Agreements (the “CCLP Unit Purchase Agreements”) with certain purchasers to issue and sell in two private placements (the "Initial Private Placement" and "Subsequent Private Placement," respectively)issued an aggregate of 6,999,126 of CSI Compressco LP Series A Convertible Preferred Units representing limited partner interests in CCLP (the “CCLP Preferred Units”) for a cash purchase price of $11.43 per CCLP Preferred Unit (the “Issue Price”), resulting in total 2016 net proceeds to CCLP, after deducting certain offering expenses, of $77.3 million.. We purchased 874,891 of the CCLP Preferred Units in the Initial Private Placement at the aggregate Issue Price of $10.0 million.

We and the other holders of CCLP Preferred Units (each,Unless otherwise redeemed for cash, a “CCLP Preferred Unitholder”) receive quarterly distributions, which are paid in kind in additional CCLP Preferred Units, equal to an annual rate of 11.00% of the Issue Price ($1.2573 per unit annualized), subject to certain adjustments. The rights of the CCLP Preferred Units include certain anti-dilution adjustments, including adjustments for economic dilution resulting from the issuance of CCLP common units in the future below a set price.

A ratable portion of the CCLP Preferred Units has been, and will continue to be, converted into CCLP common units on the eighth day of each month over a period of thirty months that began in March 2017 and will end in August 2019 (each, a “Conversion Date”), subject to certain provisions of the Second Amended and Restated CCLP Partnership Agreement that may delay or accelerate all or a portion of such monthly conversions. On each Conversion Date, a portion of the CCLP Preferred Units will convert into CCLP common units representing limited partner interests in CCLP in an amount equal to, with respect to each CCLP Preferred Unitholder, the number of CCLP Preferred Units held by such CCLP Preferred Unitholder divided by the number of Conversion Dates remaining, subject to


adjustment described in the Second Amended and Restated CCLP Partnership Agreement, with the conversion price (the "Conversion Price") determined by the trading prices of the common units over the prior month, among other factors, and as otherwise impacted by the existence of certain conditions related to the CCLP common units.. Based on the number of CCLP Preferred Units outstanding as of June 30, 2018,March 31, 2019, the maximum aggregate number of CCLP common units that could be required to be issued pursuant to the conversion provisions of the CCLP Preferred Units is approximately 25.510.2 million CCLP common units; however, CCLP may, at its option, pay cash, or a combination of cash and common units, to the holders of the CCLP Preferred UnitholdersUnits instead of issuing common units on any Conversion Date, subject to certain restrictions as described in the Second Amended and Restated CCLP Partnership Agreement and the CCLP Credit Agreement. Beginning with the January 2019 Conversion Date, CCLP has elected to redeem the remaining CCLP Preferred Units for cash, resulting in 783,046 CCLP Preferred Units being redeemed during the three months ended March 31, 2019 for $8.3 million, which includes approximately $0.4 million of redemption premium that was paid and charged to other (income) expense, net in the accompanying consolidated statements of operations. The total number of CCLP Preferred Units outstanding as of June 30, 2018March 31, 2019 was 4,458,803,1,779,417, of which we held 559,975.

Because the CCLP Preferred Units may be settled using a variable number of CCLP common units, the fair value of the CCLP Preferred Units, net of the units we purchased, is classified as long-term liabilities on our consolidated balance sheet in accordance with ASC 480 "Distinguishing Liabilities and Equity." The fair value of the CCLP Preferred Units as of June 30, 2018 was $45.6 million. During the three and six month period ended June 30, 2018, changes in the fair value during each period, resulted in $0.5 million being credited to earnings and $0.8 million being charged to earnings, respectively, in the accompanying consolidated statements of operations. During the three and six month period ended June 30, 2017, changes in the fair value resulted in $4.8 million being credited to earnings and $3.2 million being credited to earnings, respectively, in the accompanying consolidated statements of operations.223,474.

Based on the conversion provisions of the CCLP Preferred Units, and using the Conversion Price calculated as of June 30, 2018,March 31, 2019, using the trading prices of the common units over the prior month, along with other factors, and as otherwise impacted by the existence of certain conditions related to the CCLP common units (the "Conversion Price"), the theoretical number of CCLP common units that would be issued if all of the outstanding CCLP Preferred Units were converted on June 30, 2018March 31, 2019 on the same basis as the monthly conversions would be approximately 9.97.4 million CCLP common units, with an aggregate market value of $55.2$21.0 million. AIf converted to CCLP common units, a $1 decrease in the Conversion Price would result in the issuance of 2.42.8 million additional CCLP common units pursuant to these conversion provisions.

NOTE FG – MARKET RISKS AND DERIVATIVE CONTRACTSFAIR VALUE MEASUREMENTS
 
WeFinancial Instruments

CCLP Preferred Units

The CCLP Preferred Units are exposedvalued using a lattice modeling technique that, among a number of lattice structures, includes significant unobservable items (a Level 3 fair value measurement). These unobservable items include (i) the volatility of the trading price of CCLP's common units compared to financiala volatility analysis of equity prices of CCLP's comparable peer companies, (ii) a yield analysis that utilizes market information related to the debt yields of comparable peer companies, and market risks that affect our businesses. We have concentrations of credit risk as(iii) a result of trade receivables owed to us by companiesfuture conversion price analysis. During the three month periods ended March 31, 2019 and March 31, 2018, the changes in the energy industry. We have currency exchange rate risk exposure relatedfair value of the CCLP Preferred Units resulted in $1.2 million and $1.4 million being charged to transactions denominatedearnings, respectively, in foreign currencies as well asthe 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). During the three month periods ended March 31, 2019 and March 31, 2018, the changes in the fair value of the Warrants liability resulted in $0.4 million being charged to investmentsearnings and $2.0 million being credited to earnings, respectively, in certainthe consolidated statement of operations.

Contingent Consideration

The fair value of the contingent consideration associated with the February 2018 acquisition of SwiftWater Energy Services, LLC ("SwiftWater") is based on a probability simulation utilizing forecasted revenues and EBITDA of the water management business of SwiftWater and all of our international operations. Aspre-existing operations in the Permian Basin (a Level 3 fair value measurement). At March 31, 2019, the estimated fair value for the liability associated with the contingent purchase price consideration was $10.6 million, resulting in $0.4 million being credited to other (income) expense, net, during the three months ended March 31, 2019. In addition, as part of the purchase of JRGO Energy Services LLC ("JRGO") during December 2018, the sellers have the right to receive contingent consideration of up to $1.5 million to be paid during 2019, based on JRGO's performance during the fourth quarter of 2018. Approximately $11.5 million of the $12.1 million combined contingent consideration liability is based on actual 2018 performance and was paid in April 2019, with the remaining being a resultfair value measurement based on a forecast of our variable rate bank credit facility, we face market risk exposure related to changes in applicable interest rates. Our financial risk management activities may at times involve, among other measures, the use of derivative financial instruments, such as swapSwiftWater 2019 revenues and collar agreements, to hedge the impact of market price risk exposures.EBITDA.

Derivative Contracts

Foreign Currency Derivative Contracts. We and CCLP each enter into 30-dayshort term foreign currency forward derivative contracts with third parties as part of a program designed to mitigate the currency exchange rate risk exposure on selected transactions of certain foreign subsidiaries. As of June 30, 2018,March 31, 2019, we and CCLP had the following foreign currency derivative contracts outstanding relating to portions of our foreign operations:
Derivative Contracts US Dollar Notional Amount Traded Exchange Rate Settlement Date US Dollar Notional Amount Traded Exchange Rate Settlement Date

 (In Thousands) 
 
 (In Thousands) 
 
Forward purchase Euro $464
 1.16 7/19/2018 $7,245
 1.14 6/19/2019
Forward sale Euro 1,139
 1.14 4/17/2019
Forward sale pounds sterling 2,521
 1.33 7/19/2018 1,329
 1.33 4/17/2019
Forward sale Canadian dollar 5,941
 1.31 7/19/2018
Forward purchase Mexican peso 1,692
 20.68 7/19/2018 820
 19.52 4/17/2019
Forward purchase Norwegian krone 985
 8.12 7/19/2018
Forward sale Norwegian krone 527
 8.53 4/17/2019
Forward sale Mexican peso 6,083
 20.71 7/19/2018 6,301
 19.52 4/17/2019

Derivative Contracts Swedish Krona Notional Amount Traded Exchange Rate Settlement Date British Pound Notional Amount Traded Exchange Rate Settlement Date
 (In Thousands)   (In Thousands)  
Forward purchase Euro 27,437
 10.16 7/19/2018 1,535
 0.85 4/17/2019

Derivative Contracts Swedish Krona Notional Amount Traded Exchange Rate Settlement Date
  (In Thousands)    
Forward sale Euro 14,041
 10.40 4/17/2019

Under this program, we and CCLP may enter into similar derivative contracts from time to time. Although contracts pursuant to this program will serve as an economic hedge of the cash flow of our currency exchange risk exposure, they are not formally designated as hedge contracts or qualify for hedge accounting treatment. Accordingly, any change in the fair value of these derivative instruments during a period will be included in the determination of earnings for that period.


The fair values of foreign currency derivative instruments are based on quoted market values as reported to us by our counterparty (a levelLevel 2 fair value measurement). The fair values of our and CCLP's foreign currency derivative instruments as of June 30, 2018March 31, 2019 and December 31, 2017,2018, are as follows:

Foreign currency derivative instrumentsForeign currency derivative instrumentsBalance Sheet Location  Fair Value at June 30, 2018  Fair Value at December 31, 2017Foreign currency derivative instrumentsBalance Sheet Location  Fair Value at March 31, 2019  Fair Value at December 31, 2018

 
 (In Thousands) 
 (In Thousands)
Forward purchase contracts Current assets $158
 $111
 Current assets $27
 $41
Forward sale contracts Current assets 22
 130
 Current assets 49
 76
Forward sale contracts Current liabilities (241) (255) Current liabilities (22) (126)
Forward purchase contracts Current liabilities —
 (113) Current liabilities (100) (168)
Net asset (liability) $(61) $(127) $(46) $(177)

None of the foreign currency derivative contracts contain credit risk related contingent features that would require us to post assets or collateral for contracts that are classified as liabilities. During the three months ended March 31, 2019 and six month periods ended June 30,March 31, 2018, we recognized $0.7 million and $0.8$0.6 million of net gains (losses), respectively, reflected in other (income) expense, net, associated with our foreign currency derivative program. During the three and six month periods ended June 30, 2017, we recognized $0.4 million and $1.1 million$28,000 of net gains (losses), respectively, reflected in other (income) expense, net, associated with our foreign currency derivative program.



NOTE G – EQUITY
Changes in equity for the threeA summary of these recurring fair value measurements by valuation hierarchy as of March 31, 2019 and six month periods ended June 30,December 31, 2018, and 2017 are is 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
DescriptionMarch 31, 2019 (Level 1) (Level 2) (Level 3)
 (In Thousands)
CCLP Series A Preferred Units$(18,278) $—
 $—
 $(18,278)
Warrants liability(2,480) —
 —
 (2,480)
Asset for foreign currency derivative contracts75
 —
 75
 —
Liability for foreign currency derivative contracts(121) —
 (121) —
Acquisition contingent consideration liability(12,052) —
 —
 (12,052)
Net liability$(32,856)      

 Three Months Ended June 30,
 2018 2017
 TETRA Non-
controlling
Interest		 Total TETRA Non-
controlling
Interest		 Total
 (In Thousands)
Beginning balance for the period$185,425
 $140,036
 $325,461
 $234,578
 $154,349
 $388,927
Net income (loss)(5,965) (6,188) (12,153) (10,991) (3,628) (14,619)
Foreign currency translation adjustment(7,495) (1,754) (9,249) 3,293
 (325) 2,968
Comprehensive Income (loss)(13,460) (7,942) (21,402) (7,698) (3,953) (11,651)
Issuance of common stock, net2
 —
 2
 (5) —
 (5)
Conversions of CCLP Series A Preferred—
 9,272
 9,272
 —
 7,632
 7,632
Distributions to CCLP public unitholders—
 (4,624) (4,624) —
 (3,696) (3,696)
Equity-based compensation1,905
 358
 2,263
 2,039
 783
 2,822
Treasury stock and other86
 4
 90
 (241) (61) (302)
Ending balance as of June 30$173,958
 $137,104
 $311,062
 $228,673
 $155,054
 $383,727
            
            
            
 Six Months Ended June 30,
 2018 2017
 TETRA Non-
controlling
Interest		 Total TETRA Non-
controlling
Interest		 Total
 (In Thousands)
Beginning balance for the period$208,080
 $144,481
 $352,561
 $233,523
 $166,943
 $400,466
Net income (loss)(59,613) (15,303) (74,916) (13,454) (12,417) (25,871)
Foreign currency translation adjustment(5,827) (2,139) (7,966) 5,345
 (184) 5,161
Comprehensive Income (loss)(65,440) (17,442) (82,882) (8,109) (12,601) (20,710)
Issuance of stock for business combination and other28,117
 —
 28,117
 (16) —
 (16)
Conversions of CCLP Series A Preferred—
 19,375
 19,375
 —
 10,020
 10,020
Distributions to CCLP public unitholders—
 (8,982) (8,982) —
 (10,944) (10,944)
Equity-based compensation3,339
 (297) 3,042
 3,552
 1,739
 5,291
Treasury stock and other(138) (31) (169) (277) (103) (380)
Ending balance as of June 30$173,958
 $137,104
 $311,062
 $228,673
 $155,054
 $383,727
   Fair Value Measurements Using
 Total as of Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Other Observable Inputs Significant Unobservable Inputs
DescriptionDecember 31, 2018 (Level 1) (Level 2) (Level 3)
 (In Thousands)
CCLP Series A Preferred Units$(27,019) $—
 $—
 $(27,019)
Warrants liability(2,073) —
 —
 (2,073)
Asset for foreign currency derivative contracts117
 —
 117
 —
Liability for foreign currency derivative contracts(294) —
 (294) —
Acquisition contingent consideration liability(12,452) —
 —
 (12,452)
Net liability$(41,721)      

Activity withinThe 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, and the foreign currency translation adjustment account duringCCLP Credit Agreement approximate their carrying amounts. The fair values of the periods includes no reclassificationspublicly traded CCLP 7.25% Senior Notes at March 31, 2019 and December 31, 2018, were approximately $264.9 million and $266.3 million, respectively. Those fair values compare to net income (loss).the face amount of $295.9 million both at March 31, 2019 and

December 31, 2018. The fair value of the publicly traded CCLP 7.50% Senior Secured Notes at March 31, 2019 and December 31, 2018 were approximately $336.0 million and $332.5 million, respectively. This fair value compares to aggregate principal amount of such notes at both March 31, 2019 and December 31, 2018, of $350.0 million. We based the fair values of the CCLP 7.25% Senior Notes and the CCLP 7.50% Senior Secured Notes as of March 31, 2019 on recent trades for these notes.
NOTE H – 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.

On March 18, 2011, we filed a lawsuit in the Circuit CourtContingencies of Union County, Arkansas, asserting claims of professional negligence, breach of contract and other claims against the engineering firm we hired for engineering design, equipment, procurement, advisory, testing and startup services for our El Dorado, Arkansas chemical production facility. The engineering firm disputed our claims and promptly filed a motion to compel the matter toDiscontinued Operations


arbitration. After a lengthy procedural dispute in Arkansas state court, arbitration proceedings were initiated on November 15, 2013. Ultimately, on December 16, 2016, the arbitration panel ruled in our favor, declared us as the prevailing party, and awarded us a total net amount of $12.8 million. We received full payment of the $12.8 million final award on January 5, 2017, and this amount was credited to earnings in the accompanying consolidated statement of operations for the six months ended June 30, 2017.

Other Contingencies

During 2011, in connection with the sale of a significant majority of Maritech's oil and gas producing properties, the buyers of the properties assumed the associated decommissioning liabilities pursuant to the purchase and sale agreements. To the extent that a buyer of these properties fails to perform the abandonment and decommissioning work required, a previous owner, including Maritech, may be required to perform the abandonment and decommissioning obligation. As the former parent company of Maritech, we also may be responsible for performing these abandonment and decommissioning obligations. In March 2018, we closed the Maritech Asset Purchase Agreement with Orinoco Natural Resources, LLC ("Orinoco") that provided for the purchase by Orinoco of the Maritech Properties. Also in March 2018, we finalized the Maritech Equity Purchase Agreement with Orinoco that provided for the purchase by Orinoco of the Maritech Equity Interests. Pursuant to a bonding agreement as part of these transactions (the "Bonding Agreement"), Orinoco is required to replace, within 90 days following the closing, the initial bonds delivered at closing with non-revocable performance bonds, meeting certain requirements, in the aggregate sum of $47.0 million. Orinoco has not delivered such replacement bonds and we are seeking to enforce the terms of the Bonding Agreement. The non-revocable performance bonds delivered at the closing remain in effect. As a result of these transactions, we have effectively exited the businesses of our Offshore Services and Maritech segments and Orinoco has assumed all of Maritech's remaining abandonment and decommissioning obligations. For further discussion of the sale of the Maritech Properties, see Note B - "Acquisitions and Dispositions."

NOTE I – INDUSTRY SEGMENTS
 
Following the transactions closed during the three month period ended March 31, 2018, we reorganized our reporting segments and nowWe manage our operations through three Divisions: Completion Fluids & Products, Water & Flowback Services, and Compression. Our Completion Fluids & Products Division was previously reported as our Fluids Division, and included our water management services operations. Following the acquisition of SwiftWater in February 2018, our expanded water management operations are now included with our production testing operations as part of our Water & Flowback Services Division. The operations of our previous Offshore Division, consisting of our previous Offshore Services and Maritech segments, are now reported as discontinued operations following their disposal in March 2018.
Our Completion Fluids & Products Division manufactures and markets clear brine fluids, additives, and associated products and services to the oil and gas industry for use in well drilling, completion, and workover operations in the United States and in certain countries in Latin America, Europe, Asia, the Middle East, and Africa. The division also markets liquid and dry calcium chloride products manufactured at its production facilities or purchased from third-party suppliers to a variety of markets outside the energy industry.
Our Water & Flowback Services Division provides domestic onshore oil and gas operators with comprehensive water management services. The division also provides frac flowback, production well testing, offshore rig cooling, and other associated services in many of the major oil and gas producing regions in the United States, Mexico, and Canada, as well as in basins in certain regions in South America, Africa, Europe, the Middle East, and Australia.
The Compression Division is a provider of compression services and equipment for natural gas and oil production, gathering, transportation, processing, and storage. The Compression Division's equipment sales business includes the fabrication and sale of standard compressor packages, custom-designed compressor packages, and oilfield pump systems designed and fabricated at the division's facilities. The Compression Division's aftermarket services business provides compressor package reconfiguration and maintenance services as well as providing compressor package parts and components manufactured by third-party suppliers. The Compression Division provides its services and equipment to a broad base of natural gas and oil exploration and production, midstream, transmission, and storage companies operating throughout many of the onshore producing regions of the United States as well as in a number of foreign countries, including Mexico, Canada, and Argentina.
We generally evaluate the performance of and allocate resources to our segments based on profit or loss from their operations before income taxes and nonrecurring charges, return on investment, and other criteria. Transfers between segments and geographic areas are priced at the estimated fair value of the products or services as negotiated between the operating units. “Corporate overhead” includes corporate general and administrative expenses, corporate depreciation and amortization, interest income and expense, and other income and expense.


 Summarized financial information concerning the business segments is as follows:

 Three Months Ended 
 June 30,		 Six Months Ended 
 June 30,
 2018 2017 2018 2017
 (In Thousands)
Revenues from external customers 
  
  
  
Product sales 
  
    
Completion Fluids & Products Division$72,287
 $67,308
 $123,344
 $119,519
Water & Flowback Services Division—
 145
 676
 6,258
Compression Division35,400
 18,727
 59,046
 28,381
Consolidated$107,687
 $86,180
 $183,066
 $154,158
        
Services 
  
    
Completion Fluids & Products Division$4,268
 $6,687
 $6,317
 $10,703
Water & Flowback Services Division83,593
 30,479
 143,770
 61,989
Compression Division64,524
 56,585
 126,300
 112,490
Consolidated$152,385
 $93,751
 $276,387
 $185,182
        
Interdivision revenues 
  
    
Completion Fluids & Products Division$1
 $—
 $(1) $1
Water & Flowback Services Division53
 462
 275
 1,018
Compression Division—
 —
 —
 

Interdivision eliminations(54) (462) (274) (1,019)
Consolidated$—
 $—
 $—
 $—
        
Total revenues 
  
    
Completion Fluids & Products Division$76,556
 $73,995
 $129,660
 $130,223
Water & Flowback Services Division83,646
 31,086
 144,721
 69,265
Compression Division99,924
 75,312
 185,346
 140,871
Interdivision eliminations(54) (462) (274) (1,019)
Consolidated$260,072
 $179,931
 $459,453
 $339,340
        
Income (loss) before taxes 
  
    
Completion Fluids & Products Division$9,981
 $16,616
 $12,430
 $36,088
Water & Flowback Services Division8,311
 (3,920) 14,859
 (5,186)
Compression Division(8,655) (6,180) (22,673) (20,513)
Interdivision eliminations4
 4
 4
 (161)
Corporate Overhead(1)
(19,327) (11,169) (34,239) (19,041)
Consolidated$(9,686) $(4,649) $(29,619) $(8,813)




June 30, 2018 December 31, 2017Three Months Ended
March 31,
(In Thousands)2019 2018
Total assets 
  
(In Thousands)
Revenues from external customers 
  
Product sales   
Completion Fluids & Products Division$303,396
 $293,507
$57,328
 $51,057
Water & Flowback Services Division228,368
 139,771
364
 1,250
Compression Division880,385
 784,745
34,089
 23,646
Corporate Overhead and eliminations(34,068) (30,543)
Assets of discontinued operations1,538
 121,134
Consolidated$1,379,619
 $1,308,614
$91,781
 $75,953
   
Services   
Completion Fluids & Products Division$4,253
 $2,049
Water & Flowback Services Division78,314
 59,603
Compression Division69,380
 61,776
Consolidated$151,947
 $123,428
   
Interdivision revenues   
Completion Fluids & Products Division$—
 $(2)
Water & Flowback Services Division—
 222
Compression Division—
 —
Interdivision eliminations—
 (220)
Consolidated$—
 $—
   
Total revenues   
Completion Fluids & Products Division$61,581
 $53,104
Water & Flowback Services Division78,678
 61,075
Compression Division103,469
 85,422
Interdivision eliminations—
 (220)
Consolidated$243,728
 $199,381
   
Income (loss) before taxes   
Completion Fluids & Products Division$6,186
 $2,449
Water & Flowback Services Division2,231
 6,548
Compression Division(7,801) (14,018)
Interdivision eliminations6
 —
Corporate Overhead(1)
(17,687) (14,912)
Consolidated$(17,065) $(19,933)

(1)Amounts reflected include the following general corporate expenses:
 Three Months Ended 
 June 30,		 Six Months Ended 
 June 30,
 2018 2017 2018 2017
 (In Thousands)
General and administrative expense$11,871
 $12,051
 $24,469
 $21,606
Depreciation and amortization164
 118
 315
 209
Interest expense4,877
 4,240
 8,884
 8,014
Warrants fair value adjustment (income)/expense2,195
 (5,545) 201
 (11,521)
Other general corporate (income) expense, net220
 305
 370
 733
Total$19,327
 $11,169
 $34,239
 $19,041


 Three Months Ended
March 31,
 2019 2018
 (In Thousands)
General and administrative expense$12,089
 $12,598
Depreciation and amortization168
 151
Interest expense5,342
 4,007
Warrants fair value adjustment (income) expense407
 (1,994)
Other general corporate (income) expense, net(319) 150
Total$17,687
 $14,912

NOTE J – REVENUE FROM CONTRACTS WITH CUSTOMERS

Performance Obligations. Revenue is generally recognized when performance obligations under the terms of a contract with our customer are satisfied. Generally this occurs with thewe transfer of control of our products or services to our customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or providing services to our customers. For a general discussion of the nature of the goods and services that we provide, see Note I - "Industry Segments."

Product Sales. Product sales revenues are generally recognized at a point in time when we transfer control of our product offerings to our customers, generally when we ship products from our facility to our customer. The product sales for our Completion Fluid & Products Division consist primarily of clear brine fluids ("CBFs"), additives, and associated manufactured products. Product sales for our Water & Flowback Services Division are typically attributed to specific performance obligations within certain production testing service arrangements. Parts and equipment sales comprise the product sales for the Compression Division.

Services. Service revenues represent revenue recognized over time, as our customer arrangements typically provide agreed upon day-rates (monthly service rates for compression services) and we recognize service revenue based upon the number of days services have been performed. Service revenue recognized over time is associated with a majority of our Water & Flowback Services Division arrangements, compression service and aftermarket service contracts within our Compression Division, and a small portion of Completion Fluids & Products Division revenue that is associated with completion fluid service arrangements. With the exception of the initial terms of the compression services contracts for medium- and high-horsepower compressor packages of our Compression Division, our customer contracts are generally for terms of one year or less. The majority of the service arrangements in the Water & Flowback Services Division are for a period of 90 days or less. Within our Compression Division service revenue, most aftermarket service revenues are recognized at a point in time when we transfer control of our products and complete the delivery of services to our customers.

We receive cash equal to the invoice price for most product sales and services and payment terms typically range from 30 to 60 days from the date we invoice our customer. Since the period between when we deliver products or services and when the customer pays for products or services are not expected to exceed one year, we have elected not to calculate or disclose a financing component for our customer contracts.

Depending on the terms of the arrangement, we may also defer the recognition of revenue for a portion of the consideration received because we have to satisfy a future performance obligation. For example, consideration received from customers during the fabrication of new compressor packages is typically deferred until control of the compressor package is transferred to our customer. For any arrangements with multiple performance obligations, we use management's estimated selling price to determine the stand-alone selling price for separate performance obligations. For revenue associated with mobilization of service equipment as part of a service contract arrangement, such revenue, if significant, is deferred and amortized over the estimated service period. As of June 30, 2018,March 31, 2019, we had $6.4$24.6 million of remaining performance obligations related to our compression service contracts. As a practical expedient, this amount does not reflect revenue for compression service contracts whose original expected duration is less than 12 months andand does not consider the effects of the time value of moneymoney. T. Thehe remaining performance obligations are expected to be recognized through 2022 as follows (in thousands):

 2018 2019 2020 2021 2022 Total
 (In Thousands)
Compression service contracts remaining performance obligations$1,791
 $3,209
 $1,027
 $253
 $77
 $6,357
 2019 2020 2021 2022 2023 Total
 (In Thousands)
Compression service contracts remaining performance obligations$10,444
 $9,851
 $4,240
 $32
 $—
 $24,567

Sales taxes, value added taxes, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. We have elected to recognize the cost for freight and shipping costs as part of cost of product sales when control over our products (i.e. delivery) has transferred to the customer.

Use of Estimates. Contracts where the amount of revenue that will ultimately be realized is subject to uncertainties not fully known as of the time revenue is recognized are known as variable consideration arrangements. In recognizing revenue for thesevariable consideration arrangements, the amount of variable consideration recognized is limited so that it is probable that significant amounts of revenues will not be reversed in future periods when the


uncertainty is resolved. For products returned by the customer, we estimate the expected returns based on an analysis of historical experience. For volume discounts earned by the customer, we estimate the discount (if any) based on our estimate of the total expected volume of products sold or services to be provided to the customer during the discount period. In certain contracts for the sale of clear brine fluids,CBF, we may agree to issue credits for the repurchase of reclaimable used fluids from certain customers at an agreed price that is based on the condition of the fluids. For sales of clear brine fluids,CBF, we adjust the revenue recognized in the period of shipment by the estimated amount of the credit expected to be issued to the customer, and this estimate is based on historical

experience. As of June 30, 2018,March 31, 2019, the amount of remaining credits expected to be issued for the repurchase of reclaimable used fluids was $1.1 million that were recorded in inventory (right of return asset) and accounts payable. There were no material differences between amounts recognized during the three month period ended June 30, 2018,March 31, 2019, compared to estimates made in a prior period from these variable consideration arrangements.

Contract Assets and Liabilities. Contract assets arise when we transfer products or perform services in fulfillment of a contract obligation but must perform other performance obligations before being entitled to payment. Generally, once we have transferred products or performed services for the customer pursuant to a contract, we recognize revenue and trade accounts receivable, as we are entitled to payment that is unconditional. Any contract assets, along with billed and unbilled accounts receivable, are included in Trade Accounts Receivabletrade accounts receivable in our consolidated balance sheets. Contract liabilities arise when we receive consideration, or consideration is unconditionally due, from a customer prior to transferring products or services to the customer under the terms of a sales contract. We classify contract liabilities as Unearned Income in our consolidated balance sheets. Such deferred revenue typically results from advance payments received on sales oforders for new compressor equipment prior to when itthe time such equipment is completed and transferred to the customer in accordance with the customer contract.

As of June 30, 2018March 31, 2019 and December 31, 2017,2018, contract assets were immaterial. The following table reflects the changes in our contract liabilities during the sixthree month period ended June 30, 2018:March 31, 2019:
June 30, 2018March 31, 2019
(In Thousands)(In Thousands)
Unearned Income, beginning of period$17,050
$25,333
Additional unearned income59,360
49,363
Revenue recognized(47,276)(24,858)
Unearned income, end of period$29,134
$49,838

Bad debt expense on accounts receivables and contract assets was $0.1 million and $0.3 million during the three and six month periods ended June 30, 2018, respectively, and $0.3 million and $0.9 million during the three and six month periods ended June 30, 2017, respectively. During the three month period ended June 30, 2018,March 31, 2019, contract liabilities increased due to unearned income for consideration received on new compressor equipment being fabricated. During the sixthree month period ended June 30, 2018,March 31, 2019, $47.3$24.9 million of unearned income was recognized as product sales revenue, primarily associated with deliveries of new compression equipment.

Contract Costs. When costs are incurred to obtain contracts, such as professional fees and sales bonuses, such costs are deferred and amortized over the expected period of benefit. Costs of mobilizing service equipment necessary to perform under service contracts, if significant, are deferred and amortized over the estimated service period, which is generally a few weeks. As of June 30,March 31, 2019 and March 31, 2018, such contract costs were immaterial. Where applicable, we establish provisions for estimated obligations pursuant to product warranties by accruing for estimated future product warranty cost in the period of the product sale. Such estimates are based on historical warranty loss experience. Major components of fabricated compressor packages have manufacturer warranties that we pass through to the customer.

Disaggregation of Revenue. We disaggregate revenue from contracts with customers into Product Sales and Services within each segment, as noted in our three reportable segments in Note I. In addition, we disaggregate revenue from contracts with customers by geography based on the following table below.

 Three months ended March 31,
 2019 2018
 (In Thousands)
Completion Fluids & Products   
U.S.$31,606
 $27,909
International29,975
 25,195
 61,581
 53,104
Water & Flowback Services   
U.S.73,199
 47,038
International5,479
 14,037
 78,678
 61,075
Compression   
U.S.93,517
 76,980
International9,952
 8,442
 103,469
 85,422
Interdivision eliminations   
U.S.—
 2
International—
 (222)
 —
 (220)
Total Revenue   
U.S.198,322
 151,929
International45,406
 47,452
 $243,728
 $199,381

NOTE K – 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. Our leases have remaining lease terms ranging from 1 to 16 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 insurance costs. We do not have leases that have not yet commenced that create significant rights and obligations. 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 consummation 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, 2019
 (In Thousands)
Operating lease expense$5,044
Short-term lease expense11,161
Finance lease cost: 
     Accumulated depreciation31
     Interest on lease liabilities3
Total lease expense$16,239
Supplemental cash flow information:
 Three Months Ended March 31, 2019
 (In Thousands)
Cash paid for amounts included in the measurement of lease liabilities: 
     Operating cash flows - operating leases$4,657
     Financing cash flows - finance leases$43
     Operating cash flows - finance leases$3
  
Right-of-use assets obtained in exchange for lease obligations: 
     Operating leases$3,257
     Finance leases$—


Supplemental balance sheet information:
 Three months ended June 30, Six months ended June 30,
 2018 2017 2018 2017
 (In Thousands)
Completion Fluids & Products       
U.S.34,112
 40,870
 62,020
 81,672
International42,444
 33,125
 67,640
 48,551
 76,556
 73,995
 129,660
 130,223
Water & Flowback Services       
U.S.70,838
 24,277
 117,877
 48,417
International12,808
 6,809
 26,844
 20,848
 83,646
 31,086
 144,721
 69,265
Compression       
U.S.90,927
 68,887
 167,907
 126,856
International8,997
 6,425
 17,439
 14,015
 99,924
 75,312
 185,346
 140,871
Interdivision eliminations       
U.S.—
 —
 1
 (1)
International(54) (462) (275) (1,018)
 (54) (462) (274) (1,019)
Total Revenue       
U.S.195,877
 134,034
 347,805
 256,944
International64,195
 45,897
 111,648
 82,396
 260,072
 179,931
 459,453
 339,340
 March 31, 2019
 (In Thousands)
Operating leases: 
     Operating lease right-of-use assets$60,149
  
     Accrued liabilities and other$12,659
     Operating lease liabilities49,632
     Total operating lease liabilities$62,291
  
Finance leases: 
     Property, plant and equipment$875
     Accumulated depreciation(664)
     Net property, plant and equipment$211
  
     Accrued liabilities and other$147
     Other liabilities48
     Total finance lease liabilities$195

Additional operating and finance lease information:
March 31, 2019
Weighted average remaining lease term:
     Operating leases7 years
     Finance leases1 year
Weighted average discount rate:
     Operating leases9.37%
     Finance leases5.80%
Future minimum lease payments by year and in the aggregate, under non-cancelable finance and operating leases with terms in excess of one year consist of the following at March 31, 2019:
 Finance Leases Operating Leases
 (In Thousands)
    
2019$148
 $13,350
202033
 15,536
202117
 11,488
2022—
 9,009
2023—
 7,770
Thereafter—
 29,351
Total lease payments198
 86,504
Less imputed interest(3) (24,213)
Total lease liabilities$195
 $62,291
At March 31, 2019, future minimum rental receipts under a non-cancelable sublease for office space in one of our locations totaled $6.1 million. For the three months ended March 31, 2019, we recognized sublease income of $0.2 million.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and accompanying notes included in this Quarterly Report. In addition, the following discussion and analysis also should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 20172018 filed with the SEC on March 5, 2018.4, 2019 ("2018 Annual Report"). This discussion includes forward-looking statements that involve certain risks and uncertainties.

Business Overview  

Our consolidated resultsThe growth in revenues for each of operationsour divisions during the three month periodmonths ended June 30, 2018, reflect the increased demand for many of our products and servicesMarch 31, 2019, resulted in consolidated revenues increasing 22.2% compared to the corresponding prior year period. Consolidated revenues increased by 44.5% compared to the corresponding prior year quarter, improving for each of our divisions. This increase was led by a significant increase inquarter. Our Water & Flowback Services Division reported a 28.8% growth in revenues, which includedprimarily due to the impact of our2018 acquisition activity, including the impact from the February 2018 acquisition of SwiftWater Energy Services, LLC ("SwiftWater"), along with strong growth in our existing operations. Increased domestic onshore rig count and activity levels in key markets has driven the improved operating results. The contribution from SwiftWater on Water & Flowback Services Division revenues and earnings is expected to continue going forward as we capture additional operating and administrative efficiencies with the acquired operations. Our Compression Division also reported increased revenues,strong growth, as increasedcontinued high demand for compression equipment and services, has resulted in increased utilization and customer contract pricing. New compressor equipment sales have also increased, and new orders for equipment have maintained the existingreflected by a strong new equipment sales backlog.backlog and increased compression fleet utilization, resulted in a 21.1% increase in Compression Division revenues compared to the prior year quarter. Our Completion Fluids & Products Division also reported increased revenues, a modest16.0% increase in revenues, as offshore activity levels remain challenged, although earnings decreased compared to the prior year quarter, primarily due to increased international CBF product sales. Demand for many of our products and services remains strong despite continued volatility in pricing for oil, which affects the completionplans of a TETRA CS Neptune(R) completion fluid project during 2017. In July 2018, we announced that we have entered into a global joint marketing and development agreement with Halliburton Energy Services, Inc. ("Halliburton") for the sale and distributionmany of TETRA CS Neptune completion fluids. Through this collaborative agreement with Halliburton, we expect to expand sales and jointly develop newour oil and gas completion fluid product offerings based on our respective technologies and resource capabilities. Despiteoperations customers. Consolidated gross profit increased, consolidated operating and administrative expenses and the working capital challenges accompanying our growing


operations, we anticipate continuingprimarily due to improved revenues and increasing operating cash flows during the remainder of 2018.

Following the strategic transactions that closed during the first quarter of 2018, we have continued to grow our core businesses to capitalize on the improving demand for our products and services. While continuing to consider suitable acquisition opportunities, we have grown organically through an increased capital expenditure program for our core businesses in selected markets. Our Compression Division increased its growth capital expenditure levels during the first six months of 2018 compared to the corresponding prior year period, as it continues to increase its compression equipment fleet to meet the increasing customer demand for compression services. In addition, we have also increased capital expenditure levelsprofitability, and despite continuing pricing and operating cost challenges in certain markets for our Water & Flowback Services Division as we selectively grow our capacityand Completion Fluids & Products Division. Consolidated increases in certain markets. As a result,interest expense and general and administrative costs, attributed to the overall growth capital expenditures have increased significantlyin operations, partially offset the improved profitability during the first half of 2018three months ended March 31, 2019 compared to the prior year period. Toquarter.     

Funding for the expected continuing growth in our operations remains a key focus. Consolidated capital expenditures and consolidated cash provided by operating activities during the three months ended March 31, 2019 both increased compared to the prior year quarter. Following the financing restructuring transactions completed during 2018, we have capacity under our term credit agreement (the “Term Credit Agreement”) and our asset-based lending credit agreement (the “ABL Credit Agreement”) to fund itsour growth capital expenditure plans, as well as potential acquisition transactions. These growth plans, particularly of our Water & Flowback Services Division, are designed to enable us to capitalize on the current demand for domestic onshore services that support hydraulic fracturing in unconventional oil and gas reservoirs. In addition, our Compression Division, through the separate capital structure of our CSI Compressco LP ("CCLP") subsidiary, enhanced its long-term debt structure. Following the March 2018 repayment of its previous bank credit facility and the issuance of the 7.50% Senior Secured First Lien Notes due 2025 (the "CCLP Senior Secured Notes"), in June 2018, CCLP entered into that certain Loan and Security Agreement (the "CCLP New Credit Agreement"), which provides up to $50.0 millionexpects to fund ongoing workingadditional 2019 growth capital and letterexpenditures for new compression services equipment through $16.9 million of credit needs and for general business purposes. CCLP also had $51.4 million ofcurrently available cash as of June 30, 2018, which is availableMarch 31, 2019, expected operating cash flows, and through up to fund additional Compression Division$15.0 million of new compression services equipment to be purchased by us, and leased to CCLP. These sources are expected to enable CCLP to meet its growth capital expenditures.expenditure requirements without having to access available borrowings under its credit agreement (the "CCLP Credit Agreement") and without having to access the current debt and equity markets. We alsoand CCLP are pursuing opportunitiesaggressively managing our working capital and capital expenditure needs in order to enhancemaximize our liquidity in the current environment. The earliest maturity date of our long-term debt structure in order to position us to support further strategic growth inis September 2023 and the current market environment.earliest maturity date of CCLP's long-term debt is August 2022.

Approximately $632.5$633.7 million of our consolidated debt balance carrying value is owed by CCLP, serviced by CCLP's existing cash balances and cash provided by CCLP's operations (less its capital expenditures), and $343.5 million of which is secured by certain assets of CCLP. The following table provides condensed consolidating balance sheet information reflecting ourTETRA's net assets and CCLP's net assets that service and secure ourTETRA's and CCLP's respective capital structures.

 June 30, 2018
Condensed Consolidating Balance SheetTETRA CCLP Eliminations Consolidated
 (In Thousands)
Cash, excluding restricted cash$18,787
 $51,370
 $—
 $70,157
Affiliate receivables2,670
 —
 (2,670) —
Other current assets205,992
 134,097
 —
 340,089
Property, plant and equipment, net213,417
 619,661
 —
 833,078
Other assets, including investment in CCLP44,468
 34,385
 57,442
 136,295
Total assets$485,334
 $839,513
 $54,772
 $1,379,619
        
Affiliate payables$—
 $2,670
 $(2,670) $—
Other current liabilities89,613
 77,569
 —
 167,182
Long-term debt, net178,247
 632,492
 —
 810,739
CCLP Series A Preferred Units—
 52,200
 (6,556) 45,644
Warrants liability13,403
 —
 —
 13,403
Other non-current liabilities30,113
 1,476
 —
 31,589
Total equity173,958
 73,106
 63,998
 311,062
Total liabilities and equity$485,334
 $839,513
 $54,772
 $1,379,619

Consolidated cash used by operating activities for the six months ended June 30, 2018 was $12.1 million compared to $0.6 million for the six months ended June 30, 2017, an increase of $11.6 million, despite improved operating profitability, primarily due to cash utilized due to timing of payments of accounts payable. Consolidated capital expenditures, net of sales proceeds, were $67.1 million during the six months ended June 30, 2018, and included $47.3 million of capital expenditures by our Compression Division, primarily for growth capital expenditures. Corresponding prior year period consolidated capital expenditures, net of sales proceeds, were $16.3 million, including $11.5 million by our Compression Division. Although our capital expenditure levels are expected to continue to be increased going forward, we defer or reduce capital expenditure projects where possible in order to conserve cash. Key objectives associated with our capital structure (excluding the capital structure of CCLP) include the ongoing management of amounts outstanding and available under our bank revolving credit facility and repayment of our 11% Senior Note. CCLP also continues to carefully monitor its 2018 capital expenditure program


in order to conserve its cash. During the first six months of 2018, we received $5.9 million from CCLP as our share of CCLP common unit and general partner distributions. 

 March 31, 2019
Condensed Consolidating Balance SheetTETRA CCLP Eliminations Consolidated
 (In Thousands)
Cash, excluding restricted cash$19,998
 $16,870
 $—
 $36,868
Affiliate receivables9,856
 —
 (9,856) —
Other current assets233,774
 139,651
 —
 373,425
Property, plant and equipment, net210,898
 650,051
 —
 860,949
Long-term affiliate receivables2,402
 —
 (2,402) —
Other assets, including investment in CCLP71,750
 43,297
 73,236
 188,283
Total assets$548,678
 $849,869
 $60,978
 $1,459,525
        
Affiliate payables$—
 $9,856
 $(9,856) $—
Other current liabilities102,643
 116,595
 —
 219,238
Long-term debt, net212,151
 633,692
 —
 845,843
CCLP Series A Preferred Units—
 20,890
 (2,612) 18,278
Warrants liability2,480
 —
 —
 2,480
Long-term affiliate payable—
 2,402
 (2,402) —
Other non-current liabilities65,176
 8,400
 —
 73,576
Total equity166,228
 58,034
 75,848
 300,110
Total liabilities and equity$548,678
 $849,869
 $60,978
 $1,459,525
Critical Accounting Policies
 
There have been no material changes or developments in the evaluation of the accounting estimates and
the underlying assumptions or methodologies pertaining to our Critical Accounting Policies and Estimates disclosed
in our 2018 Annual Report. In preparing our consolidated financial statements, we make assumptions, estimates, and judgments that affect the amounts reported. We base these estimates on historical experience, available information, and various other assumptions that we believe are reasonable.We periodically evaluate these estimates and judgments, including those related to potential impairments of long-lived assets (including goodwill), the collectability of accounts receivable, the current cost of future asset retirement obligations, and the allocation of acquisition purchase price. The fair values of portions of our total assets and liabilities are measured using significant unobservable inputs. The combination of these factors forms the basis for judgments made about the carrying values of assets and liabilities that are not readily apparent from other sources. These judgments and estimates may change as new events occur, as new information is acquired, and as changes in our operating environments are encountered. Actual results are likely to differ from our current estimates, and those differences may be material.

Acquisition Purchase Price Allocations
We account for acquisitions of businesses using the purchase method, which requires the allocation of the purchase price based on the fair values of the assets and liabilities acquired. We estimate the fair values of the assets and liabilities acquired using accepted valuation methods, and, in many cases, such estimates are based on our judgments as to the future operating cash flows expected to be generated from the acquired assets throughout their estimated useful lives.Following the February 28, 2018 acquisition of SwiftWater, we have accounted for the various assets (including intangible assets) and liabilities acquired based on our estimate of their fair values. Goodwill represents the excess of acquisition purchase price over the estimated fair values of the net assets acquired. Our estimates and judgments of the fair value of acquired businesses are imprecise, and the use of inaccurate fair value estimates could result in the improper allocation of the acquisition purchase price to acquired assets and liabilities, which could result in asset impairments,therecording of previously unrecorded liabilities, and other financial statement adjustments. The difficulty in estimating the fair values of acquired assets and liabilities is increased during periods of economic uncertainty.



Results of Operations

Three months ended June 30, 2018March 31, 2019 compared with three months ended June 30, 2017.March 31, 2018.

Consolidated Comparisons
Three Months Ended 
 June 30,		 Period to Period ChangeThree Months Ended March 31, Period to Period Change
2018 2017 2018 vs 2017 % Change2019 2018 2019 vs 2018 % Change
(In Thousands, Except Percentages)(In Thousands, Except Percentages)
Revenues$260,072
 $179,931
 $80,141
 44.5 %$243,728
 $199,381
 $44,347
 22.2%
Gross profit47,801
 29,535
 18,266
 61.8 %36,210
 27,983
 8,227
 29.4%
Gross profit as a percentage of revenue18.4 % 16.4 %  
  
14.9 % 14.0 %  
  
General and administrative expense33,617
 29,460
 4,157
 14.1 %34,277
 30,803
 3,474
 11.3%
General and administrative expense as a percentage of revenue12.9 % 16.4 %  
  
14.1 % 15.4 %  
  
Interest expense, net18,379
 14,328
 4,051
 28.3 %18,379
 14,973
 3,406
 22.7%
Warrants fair value adjustment (income) expense2,195
 (5,545) 7,740
  407
 (1,994) 2,401
  
CCLP Series A Preferred Units fair value adjustment (income) expense(512) (4,834) 4,322
  1,163
 1,358
 (195)  
Other (income) expense, net3,808
 775
 3,033
  (951) 2,776
 (3,727)  
Loss before taxes and discontinued operations(9,686) (4,649) (5,037) (108.3)%(17,065) (19,933) 2,868
 14.4%
Loss before taxes and discontinued operations as a percentage of revenue(3.7)% (2.6)%  
  
(7.0)% (10.0)%  
  
Provision for income taxes2,446
 3,317
 (871)  1,609
 1,124
 485
  
Loss before discontinued operations(12,132) (7,966) (4,166)  (18,674) (21,057) 2,383
  
Discontinued operations:              
Loss from discontinued operations, net of taxes(21) (6,653) 6,632
  
Loss from discontinued operations (including 2018 loss on disposal of $31.5 million), net of taxes(426) (41,706) 41,280
  
Net loss(12,153) (14,619) 2,466
  (19,100) (62,763) 43,663
  
Loss attributable to noncontrolling interest6,188
 3,628
 2,560
  
8,262
 9,115
 (853)  
Net loss attributable to TETRA stockholders$(5,965) $(10,991) $5,026
  $(10,838) $(53,648) $42,810
  

Consolidated revenues duringfor the current yearfirst quarter of 2019 increased compared to the prior year quarter, primarily due to a $52.6 million increase inincreased Compression Division and Water & Flowback Services Division revenues.revenues, which increased by $18.0 millionand $17.6 million, respectively. Our Compression Division reported increased revenues of $18.0 million, primarily due to increased new compressor equipment sales activity. The increase in Water & Flowback Services Division revenues was primarily driven by increased activity in certain domestic and international markets and the impact of a full quarter of SwiftWater, which was acquired on February 28, 2018 acquisition of SwiftWater.2018. Our CompressionCompletion Fluids & Products Division also reported increased revenues, of $24.6 million, primarily due to increased compressor equipment sales activity.international product sales. See Divisional Comparisons section below for additional discussion.

Consolidated gross profit increased during the current year quarter compared to the prior year quarter primarily due to the increased revenues of our Compression Division and our Completion Fluids & Products Division. The increased gross profit from these divisions more than offset the lower gross profit of our Water & Flowback Services Division, which experienced increased costs and Compression Division.challenging customer pricing in competitive markets compared to the prior year quarter. Despite the improvement in the activity levels of certain of our businesses, offshore U.S. Gulf of Mexico activity levels remain flat and the impact of pricing pressures continues to impactchallenge profitability in certain onshore markets. Operating expenses reflect the increase in consolidated revenues, although we remain aggressive in managing operating costs and minimizing increased headcount, despite the increased operations.

Consolidated general and administrative expenses increased during the secondcurrent year quarter of 2018 compared to the prior year quarter, primarily due to $3.9 million of increased salary related expenses and employee expenses$0.3 million of $1.7 million, increased insurance and other general expenses, partially offset by $0.6 million of $1.4 million, as well as increaseddecreased professional services fees, and $0.2 million of $0.9 million.decreased consulting and other expenses. Increased general and administrative expenses were driven primarily by our Compression and Water & Flowback Services Divisions. Due to the increased consolidated revenues discussed above, general and administrative expense as a percentage of revenues decreased compared to the prior year quarter.period.

 
Consolidated interest expense, net, increased duringin the second quarter of 2018 compared to the priorcurrent year quarter primarily due to Compression Division interest expense. Compression Division interest expense increased due to thehigher CCLP outstanding debt balances and a higher interest rate on the CCLP Senior Secured Notes, a portion of the proceeds of which were used to repay the balance outstanding under the previous CCLP bank credit facility. Corporate interest expense also increased due to higher outstanding debt balances under the TETRA Term Credit Agreement and is expected to remain increased compared


to prior year periods.ABL Credit Agreement. Interest expense during the2019 and 2018 and 2017 periods includes $0.9$1.0 million and $1.2 million, respectively, of finance cost amortization.

The Warrants are accounted for as a derivative liability in accordance with Accounting Standards Codification ("ASC") 815 and therefore they are classified as a long-term liability on our consolidated balance sheet at their fair value. Increases (or decreases) in the fair value of the Warrants are generally associated with increases (or decreases) in the trading price of our common stock, resulting in adjustments to earnings for the associated valuation losses (gains), and resulting in future volatility of our earnings during the period the Warrants are outstanding.

The CCLP Preferred Units may be settled using a variable number of CCLP common units, and therefore the fair value of the CCLP Preferred Units is classified as a long-term liability on our consolidated balance sheet in accordance with ASC 480. Because the CCLP Preferred Units are convertible into CCLP common units at the option of the holder, the fair value of the CCLP Preferred Units will generally increase or decrease with the trading price of the CCLP common units, and this increase (decrease) in CCLP Preferred Unit fair value will be charged (credited) to earnings, as appropriate, resulting in future volatility of our earnings during the period the CCLP Preferred Units are outstanding.

Consolidated other (income) expense, net, was $3.8$1.0 million of other expenseincome during the current year quarter compared to $0.8$2.8 million of other expense during the prior year quarter, primarily due to $4.3$3.5 million of increased expense related to the unamortized deferred financing costs charged to earnings during the prior year quarter as a result of the termination of the CCLP Bank Credit Facility. In addition, other income during the current year period includes $0.4 million associated with the remeasurement of the contingent purchase price consideration for SwiftWater. This increase was offset by decreased other bank fees of $0.3 million and increased miscellaneous income of $0.4 million.the SwiftWater acquisition.

Our consolidated provision for income taxes during the second quarterfirst three months of 20182019 is primarily attributable to taxes in certain foreign jurisdictions and Texas gross margin taxes. Our consolidated effective tax rate for the three month period ended June 30,March 31, 2019 and March 31, 2018 of negative 25.3%9.4% and negative 5.6%, respectively, was primarily the result of losses generated in entities for which no related tax benefit has been recorded. The losses generated by these entities do not result in tax benefits due to offsetting valuation allowances being recorded against the related net deferred tax assets. We establish a valuation allowance to reduce the deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Included in our deferred tax assets are net operating loss carryforwards and tax credits that are available to offset future income tax liabilities in the U.S. as well as in certain foreign jurisdictions.

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. At June 30, 2018 and December 31, 2017, we had not completed our accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, we made reasonable estimates of the effects and recorded provisional amounts. We will continue to make and refine our calculations as additional analysis is completed. The accounting for the tax effects of the Act will be completed in 2018 as provided by the U.S. Securities and Exchange Commission’s SAB No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act. We recognized an income tax expense of $54.1 million in the fourth quarter of 2017 associated with the impact of the Act, which was fully offset by a decrease in the valuation allowance previously recorded on our net deferred tax assets. As such, the Act resulted in no net tax expense in the fourth quarter of 2017. We have considered in our estimated annual effective tax rate for 2018 the impact of the statutory changes enacted by the Act, including reasonable estimates of those provisions effective for the 2018 tax year. Our estimate on Global Intangible Low Taxed Income (“GILTI”), Foreign Derived Intangible Income (“FDII”), Base Erosion and Anti-Abuse Tax (“BEAT”), and IRC Section 163(j) interest limitation do not impact our effective tax rate for the three months ended June 30, 2018.



Divisional Comparisons
 
Completion Fluids & Products Division
Three Months Ended 
 June 30,		 Period to Period ChangeThree Months Ended March 31, Period to Period Change
2018 2017 2018 vs 2017 % Change2019 2018 2019 vs 2018 % Change
(In Thousands, Except Percentages)(In Thousands, Except Percentages)
Revenues$76,556
 $73,995
 $2,561
 3.5 %$61,581
 $53,104
 $8,477
 16.0%
Gross profit14,396
 22,358
 (7,962) (35.6)%10,664
 6,686
 3,978
 59.5%
Gross profit as a percentage of revenue18.8% 30.2%  
  
17.3% 12.6%  
 

General and administrative expense4,462
 5,247
 (785) (15.0)%4,728
 4,640
 88
 1.9%
General and administrative expense as a percentage of revenue5.8% 7.1%  
  
7.7% 8.7%  
  
Interest (income) expense, net(131) 27
 (158)  
(179) (233) 54
  
Other (income) expense, net84
 468
 (384)  
(71) (170) 99
  
Income before taxes$9,981
 $16,616
 $(6,635) (39.9)%$6,186
 $2,449
 $3,737
 152.6%
Income before taxes as a percentage of revenue13.0% 22.5%  
  
10.0% 4.6%  
  
 
The increase in Completion Fluids & Products Division revenues during the current year quarter compared to the prior year quarter was primarily due to $5.0$6.3 million of increased product sales revenue attributedprimarily due to increased manufacturedinternational CBF product sales revenue. This increase more thanand domestic manufactured products sales, partially offset a decrease in clear brine fluids ("CBF") and associatedby reduced CBF product sales revenues in the U.S. Gulf of Mexico as a result of a TETRA CS NeptuneMexico. Additionally, service revenues increasedcompletion fluid project that was completed during 2017. Service revenues decreased $2.4$2.2 million, primarily due to a reduction inincreased international completion services activity. Offshore U.S. Gulf of Mexico activity associated withlevels remain challenged, and the 2017 TETRA CS Neptunecompletion fluid project.impact of pricing pressures continues to hamper profitability.

Completion Fluids & Products Division gross profit during the current year quarter decreasedincreased significantly compared to the prior year quarter primarily due to the decreased revenues and profitability associated with the mix of CBFincreased manufactured products and services, including the prior year impactinternational CBF sales revenues. Gross profit was negatively affected by approximately $0.7 million of the TETRA CS Neptune completion fluid project discussed above.costs associated with a damaged manufactured products facility, a portion of which is expected to be reimbursed from insurance proceeds in future periods. Completion Fluids & Products Division profitability in future periods will continue to be affected by the mix of its products and services, including the timing of TETRA CS Neptune completion fluid projects.

The Completion Fluids & Products Division reported a decreasesignificant increase in pretax earnings during the current year quarter compared to the prior year quarter primarily due to decreasedthe increase in gross profit discussed above.above . Completion Fluids & Products Division administrative cost levels decreasedremained level compared to the prior year quarter,period, as $0.7$0.4 million of increased legal and professional fees and $0.2 million of increased general expenses were partially offset by $0.5 million of decreased salary and employee related expenses and $0.3$0.1 million of decreased bad debt expense were offset by $0.1 million of increased legal and professional fees and $0.1 million of increased general expenses. The Completion Fluids & Products Division continues to review opportunities to further reduce its administrative costs. Other expense decreased primarily due to $0.2 million of increased miscellaneous income and increased foreign currency gains.expense.

Water & Flowback Services Division
Three Months Ended 
 June 30,		 Period to Period ChangeThree Months Ended March 31, Period to Period Change
2018 2017 2018 vs 2017 % Change2019 2018 2019 vs 2018 % Change
(In Thousands, Except Percentages)(In Thousands, Except Percentages)
Revenues$83,646
 $31,086
 $52,560
 169.1%$78,678
 $61,075
 $17,603
 28.8 %
Gross profit (loss)18,631
 (245) 18,876
  
Gross profit8,851
 11,404
 (2,553) (22.4)%
Gross profit as a percentage of revenue22.3% (0.8)%  
  
11.2% 18.7%  
  
General and administrative expense6,444
 3,941
 2,503
 63.5%6,796
 5,278
 1,518
 28.8 %
General and administrative expense as a percentage of revenue7.7% 12.7 %  
  
8.6% 8.6%  
  
Interest (income) expense, net(1) (125) 124
  
4
 (15) 19
  
Other (income) expense, net3,877
 (141) 4,018
  
(180) (407) 227
  
Income (loss) before taxes$8,311
 $(3,920) $12,231
  
Income (loss) before taxes as a percentage of revenue9.9% (12.6)%  
  
Income before taxes$2,231
 $6,548
 $(4,317) 65.9 %
Income before taxes as a percentage of revenue2.8% 10.7%  
  
 
Water & Flowback Services Division revenues increased during the current year quarter compared to the prior year quarter primarily due to increased water management services.services activity. Water management and flowback services activityrevenues increased $52.7$18.5 million during the current year quarter compared to the prior year quarter primarily resulting from the impact of increased demand, reflecting the growth in domestic onshore rig count. Approximately $28.6 million of the water management increase was generated from the operationsa full quarter of SwiftWater, which was acquired on February 28, 2018.2018, the impact of the December 2018 acquisition of JRGO, and increased demand in completion activity. Product sales revenue decreased by $0.9 million, due to an international equipment sale in the prior period.

The Water & Flowback Services Division reflected increaseddecreased gross profit during the current year quarter compared to the prior year quarter, despite increased revenues, due to a shift in revenue mix away from smaller, capital constrained customers towards larger operators with stronger balance sheets. The costs to demobilize from one customer to mobilize for another within the increase in revenues and improving customer pricing levels. However, customer pricing continues to be challenging due to excess availability ofsame quarterly period had a meaningful impact on profitability. We also experienced high maintenance costs on our flowback service equipment in certain markets. The Water & Flowback Services Division continues to monitor its cost structure, minimizing increased costs despite increasing activity levels, and looking to capture additional synergies following the SwiftWater acquisition.significant activity experienced in the fourth quarter of 2018, which was our highest flowback service revenue quarter in over three years.
 
The Water & Flowback Services Division reported decreased pretax income during the current year quarter compared to a pretax loss during the prior year quarter, primarily due to the improvement in gross profit described above. General and administrative expenses levels increased compared to the prior year quarter, primarily due to the acquisitiondecrease in gross profit described above. General and administrative expenses increased primarily due to the $1.1 million impact from additional administrative expenses from the operations added as a result of SwiftWater,the 2018 acquisitions. Total general and administrative increases included increased salarywage and employeebenefit related expenses of $2.0$1.1 million, increased professional feessales and marketing expenses of $0.3$0.4 million, and increased insurance and other general expenses of $0.1 million, offset by decreased professional fees of $0.1 million. Other (income) expense increased primarily due to $4.3income, net, decreased during the current year period despite $0.4 million of increased expenseincome associated with the remeasurement of the contingent purchase price consideration for SwiftWater, offset byprimarily due to increased foreign currency gains of $0.3 million.losses.


Compression Division
Three Months Ended 
 June 30,		 Period to Period ChangeThree Months Ended March 31, Period to Period Change
2018 2017 2018 vs 2017 % Change2019 2018 2019 vs 2018 % Change
(In Thousands, Except Percentages)(In Thousands, Except Percentages)
Revenues$99,924
 $75,312
 $24,612
 32.7 %$103,469
 $85,422
 $18,047
 21.1%
Gross profit14,933
 7,533
 7,400
 98.2 %16,859
 10,040
 6,819
 67.9%
Gross profit as a percentage of revenue14.9 % 10.0 %  
  
16.3 % 11.8 %  
  
General and administrative expense10,841
 8,222
 2,619
 31.9 %10,664
 8,286
 2,378
 28.7%
General and administrative expense as a percentage of revenue10.8 % 10.9 %  
  
10.3 % 9.7 %  
  
Interest expense, net13,634
 10,184
 3,450
  
13,213
 11,214
 1,999
  
CCLP Series A Preferred fair value adjustment income(512) (4,834) 4,322
  
CCLP Series A Preferred fair value adjustment1,163
 1,358
 (195)  
Other (income) expense, net(375) 141
 (516)  
(380) 3,200
 (3,580)  
Loss before taxes$(8,655) $(6,180) $(2,475) (40.0)%$(7,801) $(14,018) $6,217
 44.4%
Loss before taxes as a percentage of revenue(8.7)% (8.2)%  
  
(7.5)% (16.4)%  
  
    
Compression Division revenues increased during the current year quarter compared to the prior year quarter, primarily due to a $16.7$10.4 million increase in product sales revenues, due to a higher number ofimproving demand. Demand for new compressor equipment remains strong, and the current equipment sales backlog has decreased only slightly compared to the prior year quarter. Demand for new compressor equipment continues to improve, and the currentquarter, despite significant sales recorded. Changes in our new equipment sales backlog has increased significantly compared to the prior year quarter.are a function of additional customer orders less completed orders that result in equipment sales revenues. In addition, current year revenues reflect a $7.9$7.6 million increase in service revenues from compression and aftermarket services operations. This increase in service revenues was primarily due to increasing demand for compression services, as reflected by increased compressor fleet utilization rates. Overall utilization of the Compression Division's compressor fleet has improved sequentially for seven consecutive quarterly periods, led by increased utilization of the high- and medium-horsepower fleet.

Compression Division gross profit increased during the current year quarter compared to the prior year quarter due to increased revenues discussed above. Higher compressor fleet utilization rates have led to increases in customer contract pricing.
The Compression Division recorded an increased pretax loss during the current year quarter compared to the prior year quarter despite increased gross profit discussed above. Interest expense increased compared to the priorpast two year period, due to the higher interest rate on the CCLP Senior Secured Notes, which were issued in March 2018, compared to the interest rate on the previous CCLP Credit Agreement. Increased interest expense is expected to continue compared to the prior year periods. General and administrative expense levels increased


compared to the prior year quarter, due to increased salary and employee-related expenses, including equity compensation, of $1.6 million, increased other general expenses of $0.8 million and decreased bad debt expense of $0.1 million. Series A fair value adjustment resulted in $4.3 million decreased credit to earnings in the current year quarter compared to the prior year period. Other (income) expense, net, reflected income primarily due to increased foreign currency gains.

Corporate Overhead
 Three Months Ended 
 June 30,		 Period to Period Change
 2018 2017 2018 vs 2017 % Change
 (In Thousands, Except Percentages)
Gross profit (loss) (depreciation expense)$(164) $(118) $(46) (39.0)%
General and administrative expense11,871
 12,051
 (180) (1.5)%
Interest (income) expense, net4,877
 4,240
 637
  
Warrants fair value adjustment (income)/expense2,195
 (5,545) 7,740
  
Other (income) expense, net220
 305
 (85)  
Loss before taxes$(19,327) $(11,169) $(8,158) (73.0)%

Corporate Overhead pretax loss increased during the current year quarter compared to the prior year quarter, primarily due to the Warrants fair value adjustment. The fair value of the outstanding Warrants liability resulted in a $2.2 million charge to earnings during 2018 compared to a $5.5 million credit to earnings in the prior year quarter. In addition, interest expense increased due to increased borrowings. Corporate general and administrative expense decreased due to $1.2 million of decreased salary, incentives and employee related expenses, which was partially offset by $0.5 million of increased professional service fees, $0.4 million of increased other general expenses, and $0.1 million of increased consulting marketing fees.



Results of Operations

Six months ended June 30, 2018 compared with six months ended June 30, 2017.

Consolidated Comparisons
 Six Months Ended June 30, Period to Period Change
 2018 2017 2018 vs 2017 % Change
 (In Thousands, Except Percentages)
Revenues$459,453
 $339,340
 $120,113
 35.4 %
Gross profit75,784
 49,189
 26,595
 54.1 %
Gross profit as a percentage of revenue16.5 % 14.5 %  
  
General and administrative expense64,420
 56,211
 8,209
 14.6 %
General and administrative expense as a percentage of revenue14.0 % 16.6 %  
  
Interest expense, net33,352
 28,095
 5,257
 18.7 %
Warrants fair value adjustment (income) expense201
 (11,521) 11,722
  
CCLP Series A Preferred Units fair value adjustment (income) expense846
 (3,203) 4,049
  
Litigation arbitration award income—
 (12,816) 12,816
  
Other (income) expense, net6,584
 1,236
 5,348
  
Loss before taxes and discontinued operations(29,619) (8,813) (20,806) (236.1)%
Loss before taxes and discontinued operations as a percentage of revenue(6.4)% (2.6)%  
  
Provision for income taxes3,570
 3,398
 172
  
Loss before discontinued operations(33,189) (12,211) (20,978)  
Discontinued operations:       
Loss from discontinued operations (including 2018 loss on disposal of $33.8 million), net of taxes(41,727) (13,660) (28,067)  
Net loss(74,916) (25,871) (49,045)  
Loss attributable to noncontrolling interest15,303
 12,417
 2,886
  
Net loss attributable to TETRA stockholders$(59,613) $(13,454) $(46,159)  

Consolidated revenuesfor 2018 increased compared to the prior year period, primarily due to increased Water & Flowback Services Division revenues, which increased by $75.5 million. The increase in Water & Flowback Services Division revenues was primarily driven by increased activity in certain domestic and international markets and the February 28, 2018 acquisition of SwiftWater. Our Compression Division reported increased revenues of $44.5 million, primarily due to increased compressor equipment sales activity. See Divisional Comparisons section below for additional discussion.

Consolidated gross profit increased during the current year period compared to the prior year period primarily due to the increased revenues of our Water & Flowback Services Division and Compression Division. Despite the improvement in activity levels of certain of our businesses, the impact of pricing pressures continues to challenge profitability in certain markets. Operating expenses reflect the increase in consolidated revenues, although we remain aggressive in managing operating costs and minimizing increased headcount, despite the increased operations.

Consolidated general and administrative expenses increased during the current year periodcompared to the prior year period, primarily due to $3.1 million of increased professional services fees, $2.7 million of increased salary related expenses and $2.3 million of insurance and other general expenses. Increased general and administrative expenses were driven primarily by our Compression and Water & Flowback Services Divisions. Due to the increased consolidated revenues discussed above, general and administrative expense as a percentage of revenues decreased compared to the prior year period.


Consolidated interest expense, net, increased in the current year period primarily due to Compression Division interest expense. Compression Division interest expense increased due to the higher interest rate on the CCLP Senior Secured Notes, a portion of the proceeds of which were used to repay the balance outstanding under the CCLP Credit Agreement, and is expected to remain increased compared to prior year periods. Interest expense during 2018 and 2017 includes $2.1 million and $2.3 million, respectively, of finance cost amortization.
The Warrants are accounted for as a derivative liability in accordance with ASC 815 and therefore they are classified as a long-term liability on our consolidated balance sheet at their fair value. Increases (or decreases) in the fair value of the Warrants are generally associated with increases (or decreases) in the trading price of our common stock, resulting in adjustments to earnings for the associated valuation losses (gains), and resulting in future volatility of our earnings during the period the Warrants are outstanding.

The CCLP Preferred Units may be settled using a variable number of CCLP common units, and therefore the fair value of the CCLP Preferred Units is classified as a long-term liability on our consolidated balance sheet in accordance with ASC 480. Because the CCLP Preferred Units are convertible into CCLP common units at the option of the holder, the fair value of the CCLP Preferred Units will generally increase or decrease with the trading price of the CCLP common units, and this increase (decrease) in CCLP Preferred Unit fair value will be charged (credited) to earnings, as appropriate, resulting in future volatility of our earnings during the period the CCLP Preferred Units are outstanding.

In January 2017, our Completion Fluids & Products Division collected $12.8 million from a legal arbitration award, resulting in a credit to earnings. See Commitments and Contingencies - Litigation section below for additional discussion.

Consolidated other (income) expense, net, was $6.6 million of expense during the current year period compared to $1.2 million of expense during the prior year period, primarily due to $4.3 million of increased expense associated with the remeasurement of the contingent purchase price consideration for SwiftWater and
$3.5 million of increased expense related to the unamortized deferred financing costs charged to earnings as a result of the termination of the CCLP Credit Agreement. Partially offsetting these increases in expense were $1.4 million of increased foreign currency gains, $0.6 million of miscellaneous income, and $0.5 million of decreased other bank fees.

Our consolidated provision for income taxes during the first six months of 2018 is primarily attributable to taxes in certain foreign jurisdictions and Texas gross margin taxes. Our consolidated effective tax rate for the six month period ended June 30, 2018 of negative 12.1% was primarily the result of losses generated in entities for which no related tax benefit has been recorded. The losses generated by these entities do not result in tax benefits due to offsetting valuation allowances being recorded against the related net deferred tax assets. We establish a valuation allowance to reduce the deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Included in our deferred tax assets are net operating loss carryforwards and tax credits that are available to offset future income tax liabilities in the U.S. as well as in certain foreign jurisdictions.

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. At June 30, 2018 and December 31, 2017, we had not completed our accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, we made reasonable estimates of the effects and recorded provisional amounts. We will continue to make and refine our calculations as additional analysis is completed. The accounting for the tax effects of the Act will be completed in 2018 as provided by the U.S. Securities and Exchange Commission’s SAB No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act. We recognized an income tax expense of $54.1 million in the fourth quarter of 2017 associated with the impact of the Act, which was fully offset by a decrease in the valuation allowance previously recorded on our net deferred tax assets. As such, the Act resulted in no net tax expense in the fourth quarter of 2017. We have considered in our estimated annual effective tax rate for 2018 the impact of the statutory changes enacted by the Act, including reasonable estimates of those provisions effective for the 2018 tax year. Our estimate on Global Intangible Low Taxed Income (“GILTI”), Foreign Derived Intangible Income (“FDII”), Base Erosion and Anti-Abuse Tax (“BEAT”), and IRC Section 163(j) interest limitation do not impact our effective tax rate for the six months ended June 30, 2018.



Divisional Comparisons
Completion Fluids & Products Division
 Six Months Ended June 30, Period to Period Change
 2018 2017 2018 vs 2017 % Change
 (In Thousands, Except Percentages)
Revenues$129,660
 $130,223
 $(563) (0.4)%
Gross profit21,082
 33,688
 (12,606) (37.4)%
Gross profit as a percentage of revenue16.3% 25.9%  
 

General and administrative expense9,102
 9,931
 (829) (8.3)%
General and administrative expense as a percentage of revenue7.0% 7.6%  
  
Interest (income) expense, net(365) 40
 (405)  
Litigation arbitration award income—
 (12,816) 12,816
  
Other (income) expense, net(85) 445
 (530)  
Income before taxes$12,430
 $36,088
 $(23,658) (65.6)%
Income before taxes as a percentage of revenue9.6% 27.7%  
  
The decrease in Completion Fluids & Products Division revenues during the current year period compared to the prior year period was primarily due to $4.4 million of decreased service revenues, primarily due to a reduction in completion services activity associated with a 2017 TETRA CS Neptunecompletion fluid project. This decrease was offset by $3.8 million of increased product sales revenue, attributed to increased manufactured products sales, which were partially offset by reduced clear brine fluids ("CBF") and associated product sales revenues in the U.S. Gulf of Mexico. This decrease in CBF product sales was primarily due to the completion of the TETRA CS Neptune project during the prior year.

Completion Fluids & Products Division gross profit during the current year period decreased significantly compared to the prior year period primarily due to the profitability associated with the mix of CBF products and services, particularly for offshore completion fluids products. Completion Fluids & Products Division profitability in future periods will continue to be affected by the mix of its products and services, including the timing of TETRA CS Neptunecompletion fluid projects.

The Completion Fluids & Products Division reported a significant decrease in pretax earnings during the current year period compared to the prior year period due to the reduction in gross profit discussed above and due to the collection of an arbitration award of $12.8 million during January 2017 that was credited to earnings. Completion Fluids & Products Division administrative cost levels decreased compared to the prior year period, as $1.0 million of decreased salary and employee related expenses, $0.2 million of decreased bad debt expense, and $0.1 million of decreased general expenses were partially offset by $0.3 million of increased legal and professional fees. The Completion Fluids & Products Division continues to review opportunities to further reduce its administrative costs.



Water & Flowback Services Division
 Six Months Ended June 30, Period to Period Change
 2018 2017 2018 vs 2017 % Change
 (In Thousands, Except Percentages)
Revenues$144,721
 $69,265
 $75,456
 108.9%
Gross profit30,035
 2,003
 28,032
 

Gross profit as a percentage of revenue20.8% 2.9 %  
  
General and administrative expense11,722
 7,682
 4,040
 52.6%
General and administrative expense as a percentage of revenue8.1% 11.1 %  
  
Interest (income) expense, net(16) (246) 230
  
Other (income) expense, net3,470
 (247) 3,717
  
Income (loss) before taxes$14,859
 $(5,186) $20,045
 386.5%
Income (loss) before taxes as a percentage of revenue10.3% (7.5)%  
  
Water & Flowback Services Division revenues increased during the current year period compared to the prior year period primarily due to increased water management services activity. Water management and flowback services revenues increased $81.0 million during the current year period compared to the prior year period resulting from the impact of increased demand, reflecting the growth in the domestic onshore rig count. Approximately $36.6 million of the water management increase was generated from the operations of SwiftWater, which was acquired on February 28, 2018. Product sales revenue decreased by $5.6 million, due to an international equipment sale in the prior period.

The Water & Flowback Services Division reflected increased gross profit during the current year period compared to the prior year period, due to the increase in revenues and improving customer pricing levels. However, customer pricing continues to be challenging due to excess availability of equipment in certain markets. The Water & Flowback Services Division continues to monitor its cost structure, minimizing increased costs despite increasing activity levels, and looking to capture additional synergies following the SwiftWater acquisition.
The Water & Flowback Services Division reported pretax income compared to a pretax loss during the prior year period, primarily due to the improvement in gross profit described above. General and administrative expenses increased primarily due to the acquired SwiftWater operations, with increased wage and benefit related expenses of $3.3 million, increased professional fees of $0.3 million, and increased general expenses of $0.3 million. Other expense, net, was recorded during the current year period primarily due to $4.3 million of increased expense associated with the remeasurement of the contingent purchase price consideration for SwiftWater offset by increased foreign currency gains of $0.5 million.

Compression Division
 Six Months Ended June 30, Period to Period Change
 2018 2017 2018 vs 2017 % Change
 (In Thousands, Except Percentages)
Revenues$185,346
 $140,871
 $44,475
 31.6 %
Gross profit24,973
 13,698
 11,275
 82.3 %
Gross profit as a percentage of revenue13.5 % 9.7 %  
  
General and administrative expense19,127
 16,991
 2,136
 12.6 %
General and administrative expense as a percentage of revenue10.3 % 12.1 %  
  
Interest expense, net24,848
 20,287
 4,561
  
CCLP Series A Preferred fair value adjustment846
 (3,201) 4,047
  
Other (income) expense, net2,825
 134
 2,691
  
Income (loss) before taxes$(22,673) $(20,513) $(2,160) (10.5)%
Income (loss) before taxes as a percentage of revenue(12.2)% (14.6)%  
  


Compression Division revenues increased during the current year period compared to the prior year period, primarily due to a $30.7 million increase in product sales revenues, due to a higher number of new compressor equipment sales compared to the prior year period. Demand for new compressor equipment continues to improve, and the current equipment sales backlog has increased significantly compared to the prior year period. In addition, current year revenues reflect a $13.8 million increase in service revenues from compression and aftermarket services operations. This increase in service revenues was primarily due to increasing demand for compression services, as reflected by increased compressor fleet utilization rates. Overall utilization of the Compression Division's compressor fleet has improved sequentially for seven consecutive quarterly periods, led by increased utilization of the high- and medium-horsepower fleet.

Compression Division gross profit increased during the current year period compared to the prior year due to increased revenues discussed above. The increased compressor fleet utilization rates have led to increases in customer contract pricing.

The Compression Division recorded an increaseda decreased pretax loss despiteprimarily due to the increased gross profit discussed above. Interest expense increased compared to the prior year period due to thehigher outstanding CCLP debt balances and a higher interest rate from the CCLP Senior Secured Notes, which were issued in March 2018, when compared to the previous CCLP Credit Agreement. Increased interest expense is expected to continue compared to the prior year periods. In addition, other (income) expense, net, reflected an increased expense primarily due to $3.5 million of unamortized deferred financing costs charged to earnings as a result of the termination of the CCLP Credit Agreement. In addition, the Series A Preferred fair value adjustment resulted in a charge to earnings during the current year period compared to abank credit to earnings in the prior year period.facility. General and administrative expense levels increased compared to the prior year period, due to increased salary and employee-related expenses, including the impact of increased headcount, incentives and equity compensation, of $1.0$2.1 million and increased other general expenses of $1.1 million, and increased professional fees of $0.3 million, partially offset by $0.2$0.1 million of decreased bad debt expense.sales and marketing expenses. Largely offsetting the increase in general and administrative and interest expense, prior year other expense, net, reflected $3.5 million of unamortized deferred financing costs charged to earnings as a result of the termination of the previous CCLP bank credit facility. In addition, the Series A Preferred fair value adjustment resulted in a $1.2 million charge to earnings during the current year period compared to a $1.4 million charge to earnings in the prior year period.

Corporate Overhead
Six Months Ended June 30, Period to Period ChangeThree Months Ended March 31, Period to Period Change
2018 2017 2018 vs 2017 % Change2019 2018 2019 vs 2018 % Change
(In Thousands, Except Percentages)(In Thousands, Except Percentages)
Gross profit (loss) (depreciation expense)$(315) $(209) $(106) (50.7)%$(168) $(151) $(17) (11.3)%
General and administrative expense24,469
 21,606
 2,863
 13.3 %12,089
 12,598
 (509) (4.0)%
Interest expense, net8,884
 8,014
 870
  
5,342
 4,007
 1,335
  
Warrants fair value adjustment (income)/expense201
 (11,521) 11,722
  407
 (1,994) 2,401
  
Other (income) expense, net370
 733
 (363)  
(319) 150
 (469)  
Loss before taxes$(34,239) $(19,041) $(15,198) (79.8)%$(17,687) $(14,912) $(2,775) (18.6)%


Corporate Overhead pretax loss increased during the current year period compared to the prior year period,quarter, primarily due to the adjustment of the fair value of the outstanding Warrants liability that resulted in a $0.2$0.4 million charge to earnings compared to an $11.5$2.0 million credit to earnings during the prior year period.quarter. Corporate general and administrative expense increaseddecreased primarily due to $2.2 million of increased professional fees, including $0.9 million of transaction costs, $0.8decreased professional fees, $0.4 million of increaseddecreased general expenses, and $0.5 million of increaseddecreased consulting fees. These increasesdecreases were offset by $0.6increased salary related expense of $1.1 million. In addition, other income of $0.3 million was recorded during the current year quarter, compared to $0.2 million of decreased salary and employee-related expenses, including equity compensation. In addition, interest expense increasedduring the prior year quarter, primarily due to increased borrowings. Other expense decreased due to reduced commitment and bank fees.

foreign currency gains.
Liquidity and Capital Resources
    
We reported an increase in consolidated cash flows used in operating activities during the first six months of 2018 compared to the corresponding prior year period. This increase occurred despite the improved profitability of our operations, due to increased working capital needs largely due to the timing of payments of accounts payable. CCLP used $4.3 million of our consolidated operating cash flows during the six months ended June 30, 2018. We received $5.9 million of cash distributions from CCLP during the six months ended June 30, 2018 compared to $8.4 million during the corresponding prior year period. We believe that the capital structure steps we have taken during the past three years continue to support our ability to meet our financial obligations and fund


future growth as needed, despite current uncertain operating and financial markets. WeAs of March 31, 2019, we and CCLP are in compliance with all covenants of our respective debt agreements. Information about the terms and covenants of debt agreements as of June 30, 2018.can be found in our 2018 Annual Report.

Our consolidated sources and uses of cash during the six months ended June 30, 2018 and 2017 are as follows:

 Six months ended June 30,
 2018 2017
 (In Thousands)
Operating activities$(12,127) $(561)
Investing activities(106,347) (16,028)
Financing activities165,494
 9,508

Because of the level of consolidated debt, we believe it is important to consider our capital structure and CCLP's capital structure separately, as there are no cross default provisions, cross collateralization provisions, or cross guarantees between CCLP's debt and TETRA's debt. (See Financing Activities section below for a discussion of the terms of our and CCLP's respective debt arrangements.) Our consolidated debt outstanding has a carrying value of approximately $810.7$845.8 million as of June 30, 2018.March 31, 2019. However, approximately $632.5$633.7 million of this consolidated debt balance is owed by CCLP and is serviced from the existing cash balances and cash flows of CCLP, $343.5 million of whichand is secured by certain of CCLP's assets. Through our common unit ownership interest in CCLP, which was approximately 37%34% as of June 30, 2018,March 31, 2019, and ownership of an approximately 1.6%1% general partner interest, we receive our share of the distributable cash flows of CCLP through its quarterly cash distributions. Approximately $51.4$16.9 million of the $70.2$36.9 million of the cash balance reflected on our consolidated balance sheet is owned by CCLP and is not accessible by us. As of June 30, 2018,March 31, 2019, subject to compliance with the covenants, borrowing base, and other provisions of the agreement that may limit borrowings, we had $27.3 million availability under the ABL Credit Agreement. As of March 31, 2019, and subject to compliance with the covenants, borrowing base, and other provisions of the agreementsagreement that may limit borrowings under ourthe CCLP Credit Agreement, weCCLP had availability of $132.2 million under our Credit Agreement. Following$18.4 million.
Our consolidated sources and uses of cash during the issuance of the CCLP Senior Secured Notes, CCLP used a portion of the proceeds to repay the borrowings outstanding under CCLP's bank revolving credit facility, which was then terminated. In Junethree months ended March 31, 2019 and 2018 CCLP entered into the CCLP New Credit Agreement. See CCLP Financing Activities below for further discussion.are as follows:
 Three months ended March 31,
 2019 2018
 (In Thousands)
Operating activities$7,412
 $(31,261)
Investing activities(31,726) (67,551)
Financing activities21,312
 185,610

Operating Activities
 
Consolidated cash flows usedincreased by $38.7 million. CCLP generated $31.6 million of our consolidated cash flows provided by operating activitiestotaled $12.1 millionduring the first sixthree months of 2018ended March 31, 2019 compared to $0.6$0.4 million during the corresponding prior year period, an increaseof $11.6 million.period. Operating cash flows decreased despiteincreased due to improved operating profitability and due to minimizing the use of cash for working capital changes, particularly related to the timing of payments of accounts payable. We have taken steps to aggressively manage working capital, including increased collection efforts. We continue to monitor customer credit risk in the current environment and have historically focused on serving larger capitalized oil and gas operators and national oil companies.

Demand for the vast majority of our products and services is driven by oil and gas industry activity, which is impacted by oil and natural gas commodity prices. With the increase in crude oil prices in early 2018, operating plans and capital expenditure levels of many of our oil and natural gas customers have increased, benefiting certain of our operating segments with improved revenues and cash flows. The acquisition of SwiftWater during the six months ended June 30, 2018 is providing additional revenues and operating cash flows and is expected to continue to do so going forward. Domestic onshore rig counts have improved compared to early 2017, and this has resulted in improved cash provided by operating activities of our Water & Flowback Services Division. However, offshore and international rig count levels remain relatively unchanged. The increased capital expenditure activity of our Compression Division customers has resulted in increased demand for compression services and equipment, and increased revenues of our Compression Division. However, oil and natural gas prices are expected to continue to be volatile in the future, and if oil and gas industry activity levels decrease in the future, we expect that our levels of operating cash flows will be negatively affected. During early 2018, and despite increasing activity levels, our goal has been to minimize growth to our operating and administrative headcount and continue to maintain a low cost structure for our businesses.



As part of the sale of our Offshore Division in March 2018, Orinoco assumed all liabilities and obligations currently associated with our former Maritech subsidiary, including but not limited to all currently identified and any future identified Maritech decommissioning obligations.

Investing Activities
 
During the first six months of 2018, the total amount of our net cash utilized for investing activities was $106.3 million. The acquisition of SwiftWater included initial cash purchase consideration of $42.0 million, plus $1.0 million which was subsequently paid in August 2018 as a working capital adjustment. Total cash capital expenditures during the first sixthree months of 20182019 were $67.4$32.4 million. Our Completion Fluids & Products Division spent $1.8$1.5 million on capital expenditures during the first sixthree months of 20182019, the majority of which related to plant and facility additions. Our Water & Flowback Services Division spent $16.0$7.6 million

on capital expenditures, primarily to add to its water management equipment fleet. Our Compression Division spent $47.4$23.3 million, primarily for growth capital expenditure projects to increase its compression fleet.

Generally, a majority of our planned capital expenditures has been related to identified opportunities to grow and expand certain of our existing businesses. However, certain of these planned expenditures have been, and may continue to be, postponed or canceled as we are reviewing all capital expenditure plans carefully in an effort to conserve cash. We currently have no long-term capital expenditure commitments. The deferral of capital projects could affect our ability to competeexpand our operations in the future. Excluding our Compression Division, we expect to spend approximately $45$25.0 million to $55$35.0 million during 20182019 on capital expenditures, primarily to expand our water management servicesWater & Flowback Services Division equipment fleet. Our Compression Division expects to spend approximately $110$75.0 million to $120$80.0 million on capital expenditures during 20182019 to expand its compressor fleet in response to increased demand for compression services. The level of future growth capital expenditures depends on forecasted demand for our products and services. If the forecasted demand for our products and services during 20182019 increases or decreases, the amount of planned expenditures on growth and expansion may be adjusted.
 
Financing Activities 
 
During the first sixthree months of 2018,2019, the total amount of consolidated cash provided by financing activities was $165.5$21.3 million, consisting primarily consisting of the proceeds from the issuanceuse of the CCLP Senior Secured Notes, a portion of which was used to repay the CCLP Credit Agreement and provide additional funding for future capital expenditures, and borrowingsavailable funds provided under our ABL Credit Agreement that were primarily used to fund the purchase of SwiftWater. To fund future capitalAgreement. We and working capital requirements, weCCLP may supplement our existing cash balances and cash flow from operating activities with short-term borrowings, long-term borrowings, leases, issuances of equity issuances,and debt securities, and other sources of capital. We and CCLP are in compliance with all covenants of our respective credit and debt agreements as of June 30, 2018.

See CCLP Financing Activities below for discussion of the CCLP Preferred Units and CCLP's long-term debt.

OurTETRA Long-Term Debt

Our BankAsset-Based Credit FacilityAgreement. As of August 9, 2018, TETRA (excluding CCLP) had an outstanding balance on itsThe ABL Credit Agreement provides for a senior secured revolving credit facility (as amended,of up to $100 million, subject to a borrowing base to be determined by reference to the "Credit Agreement"),value of $90.1 million,TETRA’s andhad $6.8 million in letters any other borrowers’ inventory and accounts receivable, and contains within the facility a letter of credit against therevolving credit facility, leavingsublimit of $20.0 million and a net availability, subject to compliance with our covenants and other provisionsswingline loan sublimit of the$10.0 million. The ABL Credit Agreement that limit borrowings under the Credit Facility, of $103.1 million. The Credit Agreement, as amended, maturesis scheduled to mature on September 30,10, 2023. As of May 9, 2019, and limits aggregate lender commitments to $200 million. Borrowings generally bear interest at the British Bankers Association LIBOR rate plus 2.50% to 4.25%, depending on one ofwe have $26.9 million outstanding under our financial ratios. We pay a commitment fee ranging from 0.35% to 1.00% on unused portions of the facility. All obligations under theABL Credit Agreement and the guarantees$8.9 million letters of such obligations are secured by first-lien security interests in substantially all of our assets and the assets of our subsidiaries other than CCLP and its subsidiaries (limited, in the case of foreign subsidiaries, to 66% of the voting stock or equity interests of first-tier foreign subsidiaries). Such security interests are for the benefit of the lenders under the Credit Agreement as well as the holder of our 11% Senior Note on a pari passu basis. In addition, the Credit Agreement includes limitations on aggregate asset sales, individual acquisitions, and aggregate annual acquisitions, dispositions, and capital expenditures.credit.
    


OurTerm Credit Agreement contains customary covenants and other restrictions, including certain financial ratio covenants based on our levels of debt and interest cost compared to a defined measure of our operating cash flows over a twelve month period..    The Term Credit Agreement requires usprovides for an initial loan in the amount of $200 million and the availability of additional loans, subject to maintain (i) a fixed charge coverage ratio that may not be less than 1.25 to 1 asthe terms of the end of any fiscal quarter; and (ii) a consolidated leverage ratio that may not exceed (a) 5.00 to 1 at the end of fiscal quarters ending during the period from and including March 31, 2017 through and including December 31, 2017, (b) 4.75 to 1 at the end of fiscal quarters ending March 31, 2018 and June 30, 2018, (c) 4.50 to 1 at the end of fiscal quarters ending September 30, 2018 and December 31, 2018, and (d) 4.00 to 1 at the end of each of the fiscal quarters thereafter. At June 30, 2018, our consolidated leverage ratio was 2.18 to 1 (compared to a 4.75 to 1 maximum allowed under the Credit Agreement). At June 30, 2018, our fixed charge coverage ratio was 2.87 to 1 (compared to a 1.25 to 1 minimum required under the Credit Agreement). Deterioration of these financial ratios could result in a default by us under theTerm Credit Agreement, that, if not remedied, could result in terminationup to an aggregate amount of the$75 million. The Term Credit Agreement and accelerationis scheduled to mature on September 10, 2025. As of any outstanding balances. Any such default could also resultMay 9, 2019, $220.5 million in a cross-default under our 11% Senior Note.

CCLP is an unrestricted subsidiary and is not a borrower or a guarantor under our Credit Agreement. Our Credit Agreement includes cross-default provisions relating to any other indebtedness (excluding indebtedness of CCLP) greater than a defined amount. Our Credit Agreement also contains a covenant that restricts us from paying dividends in the event of a default or if such payment would result in an event of default.

Our Senior Notes

Our Senior Note. Our 11% Senior Note is governed by the Note Purchase Agreement dated November 2015, as amended (the "Amended and Restated 11% Senior Note Agreement"), whereby we issued and sold $125.0 million inaggregate principal amount of our 11% Senior Note (the "11% Senior Note"). As of August 9, 2018, the aggregate principal amount outstanding of the 11% Senior Note is $125.0 million.

The 11% Senior Note bears interest at a fixed rate of 11.0% and matures on November 5, 2022. Interest on the 11% Senior Note is due quarterly on March 15, June 15, September 15, and December 15 of each year. We may prepay the 11% Senior Note, in whole or in part at a prepayment price equal to (i) prior to November 20, 2018, 100% of the principal amount so prepaid, plus accrued and unpaid interest and a “make-whole” prepayment amount, (ii) during the period commencing on November 20, 2018, and ending on November 19, 2019, 104% of the principal amount so prepaid, plus accrued and unpaid interest, (iii) during the period commencing on November 20, 2019 and ending on November 19, 2020, 102% of the principal amount so prepaid, plus accrued and unpaid interest, (iv) during the period commencing on November 20, 2020, and ending on November 19, 2021, 101% of the principal amount so prepaid, plus accrued and unpaid interest, and (v) on or after November 20, 2021, 100% of the principal amount so prepaid, plus accrued and unpaid interest.

The 11% Senior Note is guaranteed by substantially all of our wholly owned U.S. subsidiaries. The Amended and Restated 11% Senior Note Agreement contains customary covenants that limit our ability and the ability of certain of our restricted subsidiaries to, among other things: incur or guarantee additional indebtedness; incur or create liens; merge or consolidate or sell substantially all of our assets; engage in a different business; enter into transactions with affiliates; and make certain payments. In addition, the Amended and Restated 11% Senior Note Agreement requires us to maintain certain financial ratios, including a maximum leverage ratio (ratio of debt and letters of credit outstanding to a defined measure of earnings). The maximum leverage ratio is further defined in the Amended and Restated 11% Senior Note Agreement. Consolidated net earnings under the Amended and Restated 11% Senior NoteTerm Credit Agreement is the aggregate of our net income (or loss) of our consolidated restricted subsidiaries, including cash dividends and distributions (not the return of capital) received from persons other than our consolidated restricted subsidiaries (such as CCLP) and after allowances for taxes for such period determined on a consolidated basis in accordance with U.S. generally accepted accounting principles ("GAAP"), excluding certain items more specifically described therein. CCLP and its subsidiaries are unrestricted subsidiaries and are not borrowers or guarantors under the Amended and Restated 11% Senior Note Agreement.outstanding.



The Amended and Restated 11% Senior Note Agreement includes customary default provisions, as well as cross-default provisions relating to other indebtedness (excluding indebtedness of CCLP) greater than a defined amount. In addition, the Amended and Restated 11% Senior Note Agreement requires a minimum fixed charge coverage ratio at the end of any fiscal quarter of 1.25 to 1 and allows a maximum ratio of consolidated funded indebtedness at the end of any fiscal quarter of a defined measure of earnings ("EBITDA") of (a) 5.00 to 1 as of the end of any fiscal quarter ending during the period commencing March 31, 2017 and ending December 31, 2017, (b) 4.75 to 1 as of the end of any fiscal quarter ending March 31, 2018 and June 30, 2018 and (c) 4.50 to 1 as of the end of any fiscal quarter ending September 30, 2018 and December 31, 2018, and (d) 4.00 to 1 at the end of fiscal quarters ending thereafter. Pursuant to the Amended and Restated 11% Senior Note Agreement, the 11% Senior Note is secured by first-lien security interests in substantially all of our assets and the assets of our subsidiaries other than CCLP and its subsidiaries on a pari passu basis with the lenders under the Credit Agreement. See the above discussion of our Credit Agreement for a description of these security interests. The 11% Senior Note is pari passu in right of payment with all borrowings under the Credit Agreement and ranks at least pari passu in right of payment with all other outstanding indebtedness. We are in compliance with all covenants of the Amended and Restated 11% Senior Note Purchase Agreement as of June 30, 2018. At June 30, 2018, our ratio of consolidated funded indebtedness to EBITDA was 2.18 to 1 (compared to 4.75 to 1 maximum allowed under the Amended and Restated 11% Senior Note Agreement) and our fixed charge coverage ratio was 2.87 to 1 (compared to a 1.25 to 1 minimum required under the Amended and Restated 11% Senior Note Purchase Agreement). CCLP and its subsidiaries are unrestricted subsidiaries and are not borrowers or guarantors under our Amended and Restated 11% Senior Note Purchase Agreement.

CCLP Financing Activities

In March 2018, CCLP issued an aggregate $350.0 million of its CCLP Senior Secured Notes, and the net proceeds of $343.8 million were partially used to repay the remaining outstanding balance of $258.0 million under the CCLP Credit Agreement, which was then terminated. See below for a further discussion of the CCLP Senior Secured Notes. The remaining proceeds are being used to fund CCLP capital expenditures, including the increasing capital expenditures mentioned above that are needed in order to grow and maintain the capacity of CCLP's compressor and equipment fleet, as well as for general partnership needs.

CCLP Preferred Units. On August 8, 2016 and September 20, 2016, CCLP entered into Series A Preferred Unit Purchase Agreements (the “Unit Purchase Agreements”) with certain purchasers with regard to its issuance and sale in two private placements (the "Initial Private Placement" and "Subsequent Private Placement," respectively) of an aggregate of 6,999,126 of CSI Compressco LP Series A Convertible Preferred Units representing limited partner interests in CCLP (the “CCLP Preferred Units”) for a cash purchase price of $11.43 per CCLP Preferred Unit (the “Issue Price”), resulting in total 2016 net proceeds, after deducting certain offering expenses, of approximately $77.3 million. We purchased 874,891 of the CCLP Preferred Units at the aggregate Issue Price of $10.0 million.

In connection with the closing of the Initial Private Placement, CSI Compressco GP Inc (our wholly owned subsidiary) executed the Second Amended and Restated CCLP Partnership Agreement to, among other things, authorize and establish the rights and preferences of the CCLP Preferred Units. The CCLP Preferred Units are a new class of equity security that rank senior to all classes or series of equity securities of CCLP with respect to distribution rights and rights upon liquidation. We and the other holders of CCLP Preferred Units (each, a “CCLP Preferred Unitholder”) receive quarterly distributions, which are paid in kind in additional CCLP Preferred Units, equal to an annual rate of 11.00% of the Issue Price ($1.2573 per unit annualized) of the outstanding CCLP Preferred Units, subject to certain adjustments. The rights of the CCLP Preferred Units include certain anti-dilution adjustments, including adjustments for economic dilution resulting from the issuance of common units in the future below a set price.

AUnless otherwise redeemed for cash, a ratable portion of the CCLP Preferred Units has been, and will continue to be, converted into CCLP common units on the eighth day of each month over a period of thirty months that began in March 2017 and will end in August 2019 (each, a “Conversion Date”), subject to certain provisions of. Beginning with the Second Amended and Restated CCLP Partnership Agreement that may delay or accelerate all or a portion of such monthly conversions. On eachJanuary 2019 Conversion Date, a portion ofCCLP elected to redeem the remaining CCLP Preferred Units will convert into CCLP common units representing limited partner interestsfor cash, resulting in CCLP in an amount equal to, with respect to each CCLP Preferred Unitholder, the number of CCLP783,046 Preferred Units held by such CCLP Preferred Unitholder divided bybeing redeemed during the numberthree months ended March 31, 2019 for $9.4 million, which includes approximately $0.4 million of Conversion Dates remaining, subject to adjustment described in the Second Amended and Restated CCLP Partnership Agreement, with the conversion


price (the "Conversion Price") determined by the trading prices of the common units over the prior month, among other factors, and as otherwise impacted by the existence of certain conditions related to the CCLP common units. The maximum aggregate number of CCLP common unitsredemption premium that could be required to be issued pursuant to the conversion provisions of the CCLP Preferred Units is potentially unlimited; however, CCLP may, at its option, pay cash, or a combination of cash and CCLP common units, to the CCLP Preferred Unitholders instead of issuing CCLP common units on any Conversion Date, subject to certain restrictions as described in the Second Amended and Restated CCLP Partnership Agreement and the CCLP New Credit Agreement (defined below).was paid. Including the impact of paid in kind distributions of CCLP Preferred Units and conversions of CCLP Preferred Units into CCLP common units, and the redemption of CCLP Preferred Units for cash, the total number of CCLP Preferred Units outstanding as of June 30, 2018March 31, 2019 was 4,458,803,1,779,417, of which we held 559,975.

Because the CCLP Preferred Units may be settled using a variable number of CCLP common units, the fair value of the CCLP Preferred Units is classified as a long-term liability on our consolidated balance sheet in accordance with ASC 480 "Distinguishing Liabilities and Equity." The fair value of the CCLP Preferred Units as of June 30, 2018 was $45.6 million. Changes in the fair value during each quarterly period, if any, are charged or credited to earnings in the accompanying consolidated statements of operations. Charges or credits to earnings for changes in the fair value of the CCLP Preferred Units, along with the interest expense for the accrual and payment of paid-in-kind distributions associated with the CCLP Preferred Units, are non-cash charges and credits associated with the CCLP Preferred Units.

In addition, the CCLP Unit Purchase Agreements include certain provisions regarding change of control, transfer of CCLP Preferred Units, indemnities, and other matters. The CCLP Unit Purchase Agreements contain customary representations, warranties and covenants of CCLP and the purchasers.223,474.

CCLP Bank Credit Facilities. On June 29, 2018, CCLP and two of its wholly owned subsidiaries (collectively the "CCLP Borrowers"), and certain of its wholly owned subsidiaries named therein as guarantors (the "CCLP New Credit Agreement Guarantors"), entered into a Loan and Security Agreement (the "CCLP New Credit Agreement") with the lenders thereto (the "Lenders"), and Bank of America, N.A., in its capacity as administrative agent, collateral agent, letter of credit issuer, and swing line lender. All of the CCLP Borrowers' obligations under the CCLP New Credit Agreement are guaranteed by certain of their existing and future domestic subsidiaries. The CCLP New Credit Agreement includes a maximum credit commitment of $50.0 million available for loans, letters of credit (with a sublimit of $25.0 million) and swingline loans (with a sublimit of $5.0 million)., subject to a borrowing base to be determined by reference to the value of CCLP’s and any other borrowers’ accounts receivable. Such maximum credit commitment may be increased by $25.0 million in accordance with the terms and conditions of the CCLP New Credit Agreement. As of March 31, 2019, CCLP had no

The CCLP Borrowers may borrow funds underoutstanding balance and had $3.5 million in letters of credit against the CCLP New Credit Agreement to pay fees and expenses related to theAgreement. The CCLP New Credit Agreement and for the Borrower's ongoing working capital needs and for general partnership purposes. The revolving loans under the CCLP New Credit Agreement may be voluntarily prepaid, in whole or in part, without premium or penalty, subject to breakage or similar costs. The maturity date of the CCLP New Credit Agreement is scheduled to mature on June 29, 2023. As of June 30, 2018, no balance was outstanding under the CCLP New Credit Agreement. As of AugustMay 8, 2018,2019, CCLP has no balance outstanding under the CCLP New Credit Agreement and $5.7$5.3 million in letters of credit, leaving availability under the CCLP New Credit Agreement of $44.3 million.

Borrowings under the CCLP New Credit Agreement will bear interest at a rate per annum equal to, at the option of the CCLP Borrowers, either (i) London InterBank Offered Rate (“LIBOR”) (adjusted to reflect any required bank reserves) for an interest period equal to 30, 60, 90, 180 or 360 days (as selected by the CCLP Borrowers, subject to availability and with the consent of the Lenders for 360 days) plus a margin based on average daily excess availability or (ii) a base rate plus a margin based on average daily excess availability; such base rate shall be determined by reference to the highest of (a) the prime rate of interest announced from time to time by Bank of America, N.A., (b) the Federal Funds Rate (as defined in the CCLP New Credit Agreement) rate plus 0.5% per annum and (c) LIBOR (adjusted to reflect any required bank reserves) for a 30-day interest period on such day plus 1.0% per annum. Initially, from June 29, 2018 until the delivery of the financial statements for the fiscal quarter ending December 31, 2018, LIBOR-based loans will have an applicable margin of 2.00% per annum and base-rate loans will have an applicable margin of 1.00% per annum; thereafter, the applicable margin will range between 1.75% and 2.25% per annum for LIBOR-based loans and 0.75% and 1.25% per annum for base-rate loans, according to average daily excess availability when financial statements are delivered. In addition to paying interest on outstanding principal under the CCLP New Credit Agreement, the CCLP Borrowers are required to pay a commitment fee in respect of the unutilized commitments thereunder, initially at the rate of 0.375% per annum until the delivery of the financial statements for the fiscal quarter ending September 30, 2018 and thereafter at the applicable rate ranging from 0.250% to 0.375% per annum, paid quarterly in arrears based on utilization of the


commitments under the CCLP New Credit Agreement. The CCLP Borrowers are also required to pay a customary letter of credit fee equal to the applicable margin on revolving credit LIBOR loans and fronting fees.

The CCLP New Credit Agreement contains certain affirmative and negative covenants, including covenants that restrict the ability of the CCLP Borrowers, the CCLP New Credit Agreement Guarantors, and certain of their subsidiaries to take certain actions including, among other things and subject to certain significant exceptions, the incurrence of debt, the granting of liens, the making of investments, entering into transactions with affiliates, the payment of dividends, and the sale of assets. The CCLP New Credit Agreement also contains a requirement that the CCLP Borrowers comply, during certain periods, with a fixed charge coverage ratio of 1.0 to 1.0.

All obligations under the CCLP New Credit Agreement and the guarantees of those obligations are secured, subject to certain exceptions, by a first priority security interest for the benefit of the Lenders in the CCLP Borrowers’ and the CCLP New Credit Agreement Guarantors’ present and future accounts receivable, inventory and related assets, and proceeds of the foregoing (the “CCLP ABL Collateral”).credit.

CCLP Senior Secured Notes. On March 8, 2018, CCLP entered into the Purchase Agreement (the “Purchase Agreement”) with Merrill Lynch, Pierce, Fenner & Smith Incorporated as representative of the initial purchasers listed in Schedule A thereto (collectively, the “Initial Purchasers”), pursuant to which the CCLP Issuers agreed to issue and sell to the Initial Purchasers $350.0 million aggregate principal amount of the CCLP Issuers’ 7.50% Senior Secured First Lien Notes due 2025 (the "CCLP Senior Secured Notes") (the "CCLP Offering") pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"). As of AugustMay 8, 2018,2019, $350.0 million in aggregate principal amount of our 7.50% Senior Secured Notes arewas outstanding.

The CCLP Issuers closed the Offering on March 22, 2018. The CCLP Senior Secured Notes were issued at par for net proceeds of approximately $343.8 million, after deducting certain financing costs. CCLP used a portion of the net proceeds to repay in full and terminate CCLP's existing bank Credit Agreement and plans to use the remainder for general partnership purposes, including the expansion of its compression fleet. The CCLP Senior Secured Notes are jointly and severally, and fully and unconditionally, guaranteed (the "Guarantees" and, together with the CCLP Senior Secured Notes, the "CCLP Senior Secured Note Securities") on a senior secured basis initially by each of CCLP's domestic restricted subsidiaries (other than CSI Compressco Finance Inc., certain immaterial subsidiaries and certain other excluded domestic subsidiaries) and are secured by a first-priority security interest in substantially all of the CCLP Issuers' and the Guarantors' assets (other than certain excluded assets, including the CCLP ABL Collateral) (the "Collateral") as collateral security for their obligations under the CCLP Senior Secured Notes, subject to certain permitted encumbrances and exceptions. On the closing date, we entered into an indenture (the "Indenture") by and among the Obligors and U.S. Bank National Association, as trustee with respect to the CCLP Senior Secured Note Securities. The CCLP Senior Secured Notes accrue interest at a rate of 7.50% per annum. Interest on the CCLP Senior Secured Notes are payable semi-annually in arrears on April 1annum and October 1 of each year, beginning October 1, 2018. The CCLP Senior Secured Notes are scheduled to mature on April 1, 2025. In connection with the CCLP Offering, CCLP incurred total financing costs of $6.7 million related to the CCLP Senior Secured Notes. These costs are deferred, netting against the carrying value of the amount outstanding.

On and after April 1, 2021, CCLP may redeem all or a part of the CCLP Senior Secured Notes, from time to time, at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest thereon to, but not including, the applicable redemption date, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the 12-month period beginning on April 1 of the years indicated below:

   
Date Price
2021 105.625%
2022 103.750%
2023 101.875%
2024 100.000%



In addition, at any time and from time to time before April 1, 2021, CCLP may, at its option, redeem all or a portion of the CCLP Senior Secured Notes at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined in the Indenture) with respect to the CCLP Senior Secured Notes plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date, subject to the rights of holders of the CCLP Senior Secured Notes on the relevant record date to receive interest due on the relevant interest payment date.

Prior to April 1, 2021, CCLP may on one or more occasions redeem up to 35% of the principal amount of the CCLP Senior Secured Notes with an amount of cash not greater than the amount of the net cash proceeds from one or more equity offerings at a redemption price equal to 107.500% of the principal amount of the CCLP Senior Secured Notes to be redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date, provided that (a) at least 65% of the aggregate principal amount of the CCLP Senior Secured Notes originally issued on the issue date (excluding notes held by CCLP and its subsidiaries) remains outstanding after each such redemption; and (b) the redemption occurs within 180 days after the date of the closing of the equity offering.
If CCLP experiences certain kinds of changes of control, each holder of CCLP Senior Secured Notes will be entitled to require us to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess of $2,000) of that holder’s CCLP Senior Secured Notes pursuant to an offer on the terms set forth in the Indenture. CCLP will offer to make a cash payment equal to 101% of the aggregate principal amount of the CCLP Senior Secured Notes repurchased plus accrued and unpaid interest, if any, on the CCLP Senior Secured Notes repurchased to the date of repurchase, subject to the rights of holders of the CCLP Senior Secured Notes on the relevant record date to receive interest due on the relevant interest payment date.

The Indenture contains customary covenants restricting CCLP ability and the ability of CCLP restricted subsidiaries to: (i) pay distributions on, purchase or redeem CCLP common units or purchase or redeem any CCLP subordinated debt; (ii) incur or guarantee additional indebtedness or issue certain kinds of preferred equity securities; (iii) create or incur certain liens securing indebtedness; (iv) sell assets, including dispositions of the Collateral; (v) consolidate, merge or transfer all or substantially all of its assets; (vi) enter into transactions with affiliates; and (vii) enter into agreements that restrict distributions or other payments from its restricted subsidiaries to CCLP. These covenants are subject to a number of important limitations and exceptions, including certain provisions permitting CCLP, subject to the satisfaction of certain conditions, to transfer assets to certain of CCLP unrestricted subsidiaries. Moreover, if the CCLP Senior Secured Notes receive an investment grade rating from at least two rating agencies and no default has occurred and is continuing under the Indenture, many of the restrictive covenants in the Indenture will be terminated. The Indenture also contains customary events of default and acceleration provisions relating to such events of default, which provide that upon an event of default under the Indenture, the Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding CCLP Senior Secured Notes may declare all of the CCLP Senior Secured Notes to be due and payable immediately.

On March 22, 2018, CCLP, the grantors named therein, the Trustee and U.S. Bank National Association, as the collateral trustee (the “Collateral Trustee”), entered into a collateral trust agreement (the “Collateral Trust Agreement”) pursuant to which the Collateral Trustee will receive, hold, administer, maintain, enforce and distribute the proceeds of all of its liens upon the collateral for the benefit of the current and future holders of the CCLP Senior Secured Notes and any future priority lien obligations, if any.

CCLP Senior Notes. The obligations under the CCLP 7.25% Senior Notes (the "CCLP Senior Notes") are jointly and severally and fully and unconditionally, guaranteed on a senior unsecured basis by each of CCLP’s domestic restricted subsidiaries (other than CSI Compressco Finance) that guarantee CCLP’s other indebtedness (the "Guarantors" and together with the Issuers, the "Obligors"). The CCLP Senior Notes and the subsidiary guarantees thereof (together, the "CCLP Senior Note Securities") were issued pursuant to an indenture described below. As of AugustMay 8, 2018,2019, $295.9 million in aggregate principal amount of the CCLP Senior Notes arewas outstanding.

The Obligors issued the CCLP Senior Note Securities pursuant to the Indenture dated as of August 4, 2014 (the "CCLP Senior Note Indenture") by and among the Obligors and U.S. Bank National Association, as trustee (the "Trustee"). The CCLP Senior Notes accrue interest at a rate of 7.25% per annum. Interest on the CCLP Senior Notes is payable semi-annually in arrears on February 15annum and August 15 of each year. The CCLP Senior Notes are scheduled to mature on August 15, 2022.



The CCLP Senior Note Indenture contains customary covenants restricting CCLP’s ability and the ability of its restricted subsidiaries to: (i) pay dividends and make certain distributions, investments and other restricted payments; (ii) incur additional indebtedness or issue certain preferred shares; (iii) create certain liens; (iv) sell assets; (v) merge, consolidate, sell or otherwise dispose of all or substantially all of its assets; (vi) enter into transactions with affiliates; and (vii) designate its subsidiaries as unrestricted subsidiaries under the CCLP Senior Note Indenture. The CCLP Senior Note Indenture also contains customary events of default and acceleration provisions relating to such events of default, which provide that upon an event of default under the CCLP Senior Note Indenture, the Trustee or the holders of at least 25% in aggregate principal amount of the CCLP Senior Notes then outstanding may declare all amounts owing under the CCLP Senior Notes to be due and payable. CCLP is in compliance with all covenants of the CCLP Senior Note Purchase Agreement as of June 30, 2018.

Other Sources and Uses

In addition to the various aforementioned revolving credit facility,facilities and senior notes, we and CCLP fund our respective short-term liquidity requirements from cash generated by our respective operations, leases, and from short-term vendor financing. Should additional capital be required, we believe that we have the ability to raise such capital through the issuance of additional debt or equity securities. However, instability or volatility in the capital markets at the times we need to access capital may affect the cost of capital and the ability to raise capital for an indeterminable length of time.
TETRA's Credit Agreement, as amended, matures in September 2019, TETRA's 11% Senior Note matures in November 2022, the CCLP Senior Notes mature in August 2022, the CCLP Senior Secured Notes mature in March 2025, and the CCLP New Credit Agreement matures in June 2023. The replacement of these capital sources at similar or more favorable terms is not certain. If it is necessary to issue additional equity to fund our capital needs, additional dilution to our common stockholders will occur.

Although near-term growth plans pursuant to our long-term growth strategy have resumed, they are being reviewed carefully and are subject to our continuing efforts to conserve cash. CCLP has also increased its growth capital expenditure activity in response to increased demand for compression services. CCLP's long-term growth objectives are funded from its available cash, other borrowings, and cash generated from the issuance of common or preferred units.

On March 23, 2016,April 11, 2019, we filed a universal shelf Registration Statement on Form S-3 with the Securities and Exchange Commission ("SEC").SEC. On April 13, 2016,May 1, 2019, the Registration Statement on Form S-3 was declared effective by the SEC. Pursuant to this registration statement, we have the ability to sell debt or equity securities in one or more public offerings up to an aggregate public offering price of $164.4 million.$464.1 million, inclusive of $64.1 million of our common stock issuable upon conversion of our currently outstanding warrants. This shelf registration statement currently provides us additional flexibility with regard to potential financings that we may undertake when market conditions permit or our financial condition may require.

As part of long-term strategic growth plans, we and CCLP evaluate opportunities to acquire businesses and assets that may require the payment of cash. Such acquisitions may be funded with existing cash balances, funds under credit facilities, or cash generated from the issuance of equity or debt securities.
The Second Amended and Restated Partnership Agreement of CCLP requires that within 45 days after the end of each quarter, CCLP distribute all of its available cash, as defined in the Second Amended and Restated Partnership Agreement, to its common unitholders of record on the applicable record date. During the sixthree months ended June 30, 2018,March 31, 2019, CCLP distributed $14.9$0.5 million in cash, including $9.0$0.3 million to its public unitholders. The amount ofunitholders, reflecting the reduction in quarterly distributions is determined based on a variety of factors, including estimates of CCLP's cash needs to fund its future operating, investing, and debt services requirements.announced previously by CCLP in December 2018. There can be no assurance that quarterly distributions from CCLP will increase from this amount per unit or that there will not be future decreases in the amount of distributions going forward.
 
Off Balance Sheet Arrangements
 
As of June 30, 2018,March 31, 2019, we had no “off balance sheet arrangements” that may have a current or future material effect on our consolidated financial condition or results of operations.

Recently Adopted Accounting Guidance

We adopted the new lease accounting standard on January 1, 2019. The new lease standard had a material impact to our consolidated financial statements, resulting from the inclusion of operating lease right-of-use assets and operating lease liabilities in our consolidated balance sheet. Refer to Part I, Item 1. Financial Statements- Note A - "Organization, Basis of Presentation and Significant Accounting Policies" and Note K - “Leases” for further discussion.
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.

On March 18, 2011, we filed a lawsuit in the Circuit CourtContingencies of Union County, Arkansas, asserting claims of professional negligence, breach of contract and other claims against the engineering firm we hired for engineering design, equipment, procurement, advisory, testing and startup services for our El Dorado, Arkansas chemical production facility. The engineering firm disputed our claims and promptly filed a motion to compel the matter to arbitration. After a lengthy procedural dispute in Arkansas state court, arbitration proceedings were initiated on November 15, 2013. Ultimately, on December 16, 2016, the arbitration panel ruled in our favor, declared us as the prevailing party, and awarded us a total net amount of $12.8 million. We received full payment of the $12.8 million final award on January 5, 2017.Discontinued Operations
Other Contingencies

During 2011, in connection with the sale of a significant majority of Maritech's oil and gas producing properties, the buyers of the properties assumed the associated decommissioning liabilities pursuant to the purchase and sale agreements. To the extent that a buyer of these properties fails to perform the abandonment and decommissioning work required, a previous owner, including Maritech, may be required to perform the abandonment and decommissioning obligation. As the former parent company of Maritech, we also may be responsible for performing these abandonment and decommissioning obligations. In March 2018, we closed the Maritech Asset Purchase Agreement with Orinoco that provided for the purchase by Orinoco of the Maritech Properties. Also in March 2018, we finalized the Maritech Equity Purchase Agreement with Orinoco that provided for the purchase by Orinoco of the Maritech Equity Interests. As a result of these transactions, we have effectively exited the businesses of our Offshore Services and Maritech segmentssegment and Orinoco assumed all of Maritech's remaining abandonment and decommissioning obligations.

Contractual Obligations

Our contractual obligations and commitments principally include obligations associated with our outstanding
indebtedness and obligations under operating leases. The table below summarizes our consolidated contractual cash obligations as of March 31, 2019:
 Payments Due Payments Due
 Total 2018 2019 2020 2021 2022 Thereafter Total 2019 2020 2021 2022 2023 Thereafter
 (In Thousands) (In Thousands)
Long-term debt - TETRA $185,950
 $—
 $60,950
 $—
 $—
 $125,000
 $—
 $230,701
 $—
 $—
 $—
 $—
 $—
 $230,701
Long-term debt - CCLP 645,930
 —
 —
 —
 —
 295,930
 350,000
 645,930
 —
 —
 —
 295,930
 —
 350,000
Interest on debt - TETRA 62,437
 8,056
 15,423
 13,357
 13,357
 12,244
 —
 114,270
 13,553
 18,071
 18,071
 18,071
 17,672
 28,832
Interest on debt - CCLP 265,821
 23,761
 47,522
 47,522
 47,522
 40,431
 59,063
 230,286
 35,665
 47,553
 47,553
 40,452
 26,250
 32,813
Purchase obligations 108,689
 4,739
 9,450
 9,450
 9,450
 9,450
 66,150
 101,625
 7,125
 9,500
 9,500
 9,500
 9,500
 56,500
Decommissioning and other asset retirement obligations 12,073
 —
 —
 —
 —
 —
 12,073
Operating and capital leases 82,642
 8,404
 12,022
 10,548
 8,517
 6,358
 36,793
Asset retirement obligations(1)
 12,331
 —
 —
 —
 —
 —
 12,331
Operating and finance leases 86,702
 13,498
 15,569
 11,505
 9,009
 7,770
 29,351
Total contractual cash obligations(1)(2)
 $1,363,542
 $44,960
 $145,367
 $80,877
 $78,846
 $489,413
 $524,079
 $1,421,845
 $69,841
 $90,693
 $86,629
 $372,962
 $61,192
 $740,528
(1)
We have estimated the timing of these paymentsfor asset retirement obligation liabilities based upon our plans. The amounts shown represent the discounted obligation as of March 31, 2019.
(2) 
Amounts exclude other long-term liabilities reflected in our Consolidated Balance Sheet that do not have known payment streams. These excluded amounts include approximately $1.20.8 million of liabilities under FASB Codification Topic 740, “Accounting for Uncertainty in Income Taxes,” as we are unable to reasonably estimate the ultimate amount or timing of tax settlements. These excluded amounts also include approximately$45.6 $18.3 million of liabilities related to the CCLP Series A Convertible Preferred Units. The preferred unitsCCLP Preferred Units are expected to be serviced and satisfied with non-cash paid-in-kind distributions, and may be satisfied either through conversions to CCLP common units. See "Note Eunits or redemptions for cash, at CCLP's election. Refer to Part I, Item 1. Financial Statements- Note F – CCLP"CCLP Series A Convertible Preferred Units," in the Notes to Consolidated Financial Statements for further discussion.

For additional information about our contractual obligations as of December 31, 2017,2018, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2018 Annual Report on Form 10-K for the year ended December 31, 2017..



Cautionary Statement for Purposes of Forward-Looking Statements
 
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements in this Quarterly Report are identifiable by the use of the following words, the negative of such words, and other similar words: “anticipates", "assumes", “believes,” "budgets", “could,” “estimates,” "expects", "forecasts", "goal", "intends", "may", "might", "plans", "predicts", "projects", "schedules", "seeks", "should", "targets", "will", and "would".

Such forward-looking statements reflect our current views with respect to future events and financial performance and are based on assumptions that we believe to be reasonable, but such forward-looking statements are subject to numerous risks, and uncertainties, including, but not limited to:
economic and operating conditions that are outside of our control, including the supply, demand, and prices of crude oil and natural gas;

the availability of adequate sources of capital to us;
the levels of competition we encounter;
the activity levels of our customers;
our operational performance;
the availability of raw materials and labor at reasonable prices;
risks related to acquisitions and our growth strategy;
our ability to comply with the financial covenants inrestrictions under our debt agreements and the consequences of any failure to comply with such financialdebt covenants;
the availability of adequate sources of capital to us;
the effect and results of litigation, regulatory matters, settlements, audits, assessments, and contingencies;
risks related to our foreign operations;
information technology risks including the risk from cyberattack, and
other risks and uncertainties under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, those set forth in Item 1A "Risk Factors" in Part II of this Quarterly Report on Form 10-Q, and as included in our other filings with the U.S. Securities and Exchange Commission (“SEC”)
•
other risks and uncertainties under “Item 1A. Risk Factors” in our 2018 Annual Report, and as included in our other filings with the SEC, which are available free of charge on the SEC website at www.sec.gov.

The risks and uncertainties referred to above are generally beyond our ability to control and we cannot predict all the risks and uncertainties that could cause our actual results to differ from those indicated by the forward-looking statements. If any of these risks or uncertainties materialize, or if any of the underlying assumptions prove incorrect, actual results may vary from those indicated by the forward-looking statements, and such variances may be material.

All subsequent written and oral forward-looking statements made by or attributable to us or to persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to update or revise any forward-looking statements we may make, except as may be required by law.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Market risk is the risk of loss arising from adverse changes in market rates and prices. For a discussion of our indirect exposure to fluctuating commodity prices, please read “Risk Factors — Certain Business Risks” in our 2018 Annual Report on Form 10-K filed with the SEC on March 5, 2018.. We depend on U.S. and international demand for and production of oil and natural gas, and a reduction in this demand or production could adversely affect the demand or the prices we charge for our services, which could cause our revenues and operating cash flows to decrease in the future. We do not currently hedge, and do not intend to hedge, our indirect exposure to fluctuating commodity prices.



Interest Rate Risk

As of June 30, 2018,March 31, 2019, due to borrowings made during the period then ended, we had a balance outstanding under ourthe Term Credit Agreement and ABL Credit Agreement, and such borrowings bear interest at variable rates of interest (currently 4.52%).

interest.
  Expected Maturity Date   Fair Market
Value
($ amounts in thousands) 2018 2019 2020 2021 2022 Thereafter Total 
June 30, 2018                
Variable rate                
Long-term debt: $—
 $60,950
 $—
 $—
 $—
 $—
 $60,950
 $60,950
U.S. dollar fixed rate - TETRA $—
 $—
 $—
 $—
 $125,000 $—
 $125,000
 $128,200
U.S. dollar fixed rate - CCLP $—
 $—
 $—
 $—
 $295,930 $350,000
 $645,930
 $623,300
Weighted average interest rate (fixed) —
 —
 —
 —
 8.36% 7.50% —
  
  Expected Maturity Date   Fair Market
Value
($ amounts in thousands) 2019 2020 2021 2022 2023 Thereafter Total 
March 31, 2019                
U.S. dollar variable rate - TETRA $—
 $—
 $—
 $—
 $—
 $230,701
 $230,701
 $230,701
Weighted average interest rate (variable) —% —% —% —% —% 8.08%    
U.S. dollar fixed rate - CCLP $—
 $—
 $—
 $295,930
 $— $350,000
 $645,930
 $600,900
Weighted average interest rate (fixed) —% —% —% 7.25% —% 7.50%    


Exchange Rate Risk

As of June 30, 2018,March 31, 2019, there have been no material changes pertaining to our exchange rate exposures as disclosed in our Form 10-K for the year ended December 31, 2017.

2018 Annual Report.
Item 4. Controls and Procedures.
 
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2018,March 31, 2019, the end of the period covered by this quarterly report.

As discussed above in this Quarterly Report on Form 10-Q, onin February 28, 2018, we completed the acquisition of SwiftWater, and in December 2018, we purchased JRGO. SwiftWater and JRGO were both excluded from our assessment of the effectiveness of internal control over financial reporting as of December 31, 2018, as disclosed in our 2018 Annual Report in accordance with SEC Staff guidance permitting the exclusion for the year in which an acquisition is completed. During the quarter ended March 31, 2019, we completed our integration of SwiftWater and the oversight, policies, procedures, and monitoring that support our internal control over financial reporting has been extended to include SwiftWater. We are currently integrating SwiftWatercontinuing to integrate JRGO into our internal control over financial reporting processes. In executing this integration, we are analyzing, evaluating, and, where necessary, making changes in controls and procedures related to the SwiftWaterJRGO business, which we expect to be completed in fiscal year 2019. We expect to excludewill include both SwiftWater fromand JRGO in our annual assessment of internal control over financial reporting as offor our fiscal year ending December 31, 2018. Total assets of SwiftWater represented approximately 6% of our consolidated total assets as of June 30, 2018, and SwiftWater's revenues following the February 28, 2018 acquisition date represented approximately 11%and 8% of our consolidated revenues for the three and six month period ended June 30, 2018, respectively.2019.

Other thanIn connection with the changes described above, thereadoption of the new lease accounting standard on January 1, 2019, we evaluated and updated certain internal controls to facilitate the proper capture and assessment of contractual information required to support proper preparation of financial information upon adoption.
There were no other changes in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2018,March 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
 
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 amounts accrued has been incurred that is expected to have a material adverse impact on our financial condition, results of operations, or liquidity.
 


Environmental Proceedings
 
One of our subsidiaries, TETRA Micronutrients, Inc. ("TMI"), previously owned and operated a production facility located in Fairbury, Nebraska. TMI is subject to an Administrative Order on Consent issued to American Microtrace, Inc. (n/k/a/ TETRA Micronutrients, Inc.) in the proceeding styled In the Matter of American Microtrace Corporation, EPA I.D. No. NED00610550, Respondent, Docket No. VII-98-H-0016, dated September 25, 1998 (the "Consent Order"), with regard to the Fairbury facility. TMI is liable for ongoing environmental monitoring at the Fairbury facility under the Consent Order; however, the current owner of the Fairbury facility is responsible for costs associated with the closure of that facility.While the outcome cannot be predicted with certainty, management does not consider it reasonably possible that a loss in excess of any amounts accrued has been incurred or is expected to have a material adverse impact on our financial condition, results of operations, or liquidity.
 
Item 1A. Risk Factors.

There have been no material changes in the information pertaining to our Risk Factors as disclosed in our Form 10-K for the year ended December 31, 2017.2018 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
(a) None.
 
(b) None.
 
(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
Period 
Total Number
of Shares Purchased
 
Average
Price
Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)
 
Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Publicly Announced Plans or Programs(1)
April 1 – April 30, 2018 421
(2)$3.75
—
 $14,327,000
May 1 – May 31, 2018 13,545
(2)4.19
—
 14,327,000
June 1 – June 30, 2018 464
(2)4.51
—
 14,327,000
Total 14,430
  
—
 $14,327,000
Period 
Total Number
of Shares Purchased
 
Average
Price
Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)
 
Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Publicly Announced Plans or Programs(1)
January 1 – January 31, 2019 —
 $—
—
 $14,327,000
February 1 – February 28, 2019 68,412
(2)2.49
—
 14,327,000
March 1 – March 31, 2019 —
 —
—
 14,327,000
Total 68,412
  
—
 $14,327,000
(1)
In January 2004, our Board of Directors authorized the repurchase of up to $20 million of our common stock. Purchases will be made from time to time in open market transactions at prevailing market prices. The repurchase program may continue until the authorized limit is reached, at which time the Board of Directors may review the option of increasing the authorized limit.
(2)Shares we received in connection with the exercise of certain employee stock options or the vesting of certain shares of employee restricted stock. These shares were not acquired pursuant to the stock repurchase program.

Item 3. Defaults Upon Senior Securities.
 
None.

Item 4. Mine Safety Disclosures.
 
None.
Item 5. Other Information.
 
None.



Item 6. Exhibits.
 
Exhibits:
10.1
TETRA Technologies, Inc. 2018 Equity Incentive Plan (incorporated by reference to Exhibit 4.5 to the Company’s registration statement on Form S-8 filed on May 4, 2018 (SEC File No. 333-224679).
10.210.1*
Form of TETRA Technologies, Inc. 2018  Equity Incentive PlanEmployee Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 4.6 to the Company’s registration statement on Form S-8 filed on May 4, 2018 (SEC File No. 333-224679).
10.310.2*
Form of TETRA Technologies, Inc. 2018 Equity Incentive Plan IncentiveDirector Restricted Stock OptionUnit Award Agreement (incorporated by reference to Exhibit 4.7 to the Company’s registration statement on Form S-8 filed on May 4, 2018 (SEC File No. 333224679).
10.410.3*
Form of TETRA Technologies, Inc. 2018 Equity Incentive Plan Nonqualified Stock OptionCash Award Agreement (incorporated by reference to Exhibit 4.8 to the Company’s registration statement on Form S-8 filed on May 4, 2018 (SEC File No. 333-224679).
10.510.4*
TETRA Technologies, Inc. 2018 Non-Employee Director Equity Incentive Plan (incorporated by referencePurchase and Lease Consent and Amendment to Exhibit 4.5 to the Company’s registration statement on Form S-8 filed on MayCredit Agreement, date February 4, 2018 (SEC File No. 333-224678).
10.6
Form of TETRA Technologies, Inc. 2018  Non-Employee Director Equity Incentive Plan Restricted Stock Award Agreement (incorporated by reference to Exhibit 4.6 to the Company’s registration statement on Form S-8 filed on May 4, 2018 (SEC File No. 333-224678).2019
31.1*
Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1***
Certification Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2***
Certification Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS+XBRL Instance Document.
101.SCH+XBRL Taxonomy Extension Schema Document.
101.CAL+XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB+XBRL Taxonomy Extension Label Linkbase Document.
101.PRE+XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF+XBRL Taxonomy Extension Definition Linkbase Document.
*Filed with this report.
**Filed with this report. The schedules and exhibits to this agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish supplementary any omitted schedules and exhibits to the Securities Exchange Commission upon request.
***Furnished with this report.
+
Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Operations for the three and six month periods ended June 30, 2018March 31, 2019 and 20172018; (ii) Consolidated Statements of Comprehensive Income for the three and six month periods ended June 30, 2018March 31, 2019 and 20172018; (iii) Consolidated Balance Sheets as of June 30, 2018March 31, 2019 and December 31, 20172018; (iv) Consolidated Statements of Cash Flows for the sixthree month periods ended June 30, 2018March 31, 2019 and 20172018; and (v) Notes to Consolidated Financial Statements for the sixthree months ended June 30, 2018March 31, 2019.
 
A statement of computation of per share earnings is included in Note A of the Notes to Consolidated Financial Statements included in this report and is incorporated by reference into Part II of this report.


SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 

 
TETRA Technologies, Inc.
 
    
Date:AugustMay 9, 20182019By:/s/StuartBrady M. BrightmanMurphy
   StuartBrady M. BrightmanMurphy
President
   Chief Executive Officer
    
Date:AugustMay 9, 20182019By:/s/Elijio V. Serrano
   Elijio V. Serrano
   Senior Vice President
   Chief Financial Officer
    
Date:AugustMay 9, 20182019By:/s/Ben C. ChambersRichard D. O'Brien
   Ben C. ChambersRichard D. O'Brien
   Vice President – AccountingFinance and Global Controller
   Principal Accounting Officer

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