UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~SEPTEMBER~~September 30, ~~2019~~2020

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

For the transition period from to .

Commission File Number 1-13455

TETRA Technologies, Inc.

(Exact name of registrant as specified in its charter)



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

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

(~~281~~) (281) 367-1983

(Registrant’s Telephone Number, Including Area Code)

_______________________________________________________________________

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

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



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

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

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

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



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

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

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

As of November ~~6, 2019,~~2, 2020, there were ~~125,540,626~~125,976,728 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			7
Notes to Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2426
Item 3. Quantitative and Qualitative Disclosures about Market Risk			3942
Item 4. Controls and Procedures			4042

PART II—OTHER INFORMATION
Item 1. Legal Proceedings			4042
Item 1A. Risk Factors			4042
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4243
Item 3. Defaults Upon Senior Securities			4344
Item 4. Mine Safety Disclosures			4344
Item 5. Other Information			4344
Item 6. Exhibits			4445
SIGNATURES			4546

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues:
Product sales	$	68,810	$	93,377	$	252,016	$	320,508
Services	83,791		152,570		315,968		457,963
Total revenues	152,601		245,947		567,984		778,471
Cost of revenues:
Cost of product sales	50,541		71,957		184,512		254,798
Cost of services	52,441		98,356		201,056		298,911
Depreciation, amortization, and accretion	29,604		30,867		88,906		93,312
Impairments and other charges	97		849		14,445		3,306
Insurance recoveries	(52)		(1,042)		(643)		(1,392)
Total cost of revenues	132,631		200,987		488,276		648,935
Gross profit	19,970		44,960		79,708		129,536
General and administrative expense	25,256		34,926		89,807		105,498

Interest expense, net	17,631		18,146		53,073		55,054
Warrants fair value adjustment (income) expense	0		78		(327)		(1,035)
CCLP Series A Preferred Units fair value adjustment expense	0		0		0		1,309

Other (income) expense, net	(2,137)		(690)		2,141		(1,014)
Loss before taxes and discontinued operations	(20,780)		(7,500)		(64,986)		(30,276)
Provision for income taxes	645		1,579		3,800		5,678
Loss before discontinued operations	(21,425)		(9,079)		(68,786)		(35,954)
Discontinued operations:
Loss from discontinued operations, net of taxes	(173)		(9,130)		(155)		(9,901)
Net loss	(21,598)		(18,209)		(68,941)		(45,855)
Less: loss attributable to noncontrolling interest	8,296		2,378		32,833		12,273
Net loss attributable to TETRA stockholders	$	(13,302)	$	(15,831)	$	(36,108)	$	(33,582)
Basic net loss per common share:
Loss before discontinued operations attributable to TETRA stockholders	$	(0.10)	$	(0.06)	$	(0.29)	$	(0.19)
Loss from discontinued operations attributable to TETRA stockholders	0		(0.07)		0		(0.08)
Net loss attributable to TETRA stockholders	$	(0.10)	$	(0.13)	$	(0.29)	$	(0.27)
Average shares outstanding	125,893		125,568		125,789		125,620
Diluted net loss per common share:
Loss before discontinued operations attributable to TETRA stockholders	$	(0.10)	$	(0.06)	$	(0.29)	$	(0.19)
Loss from discontinued operations attributable to TETRA stockholders	0		(0.07)		0		(0.08)
Net loss attributable to TETRA stockholders	$	(0.10)	$	(0.13)	$	(0.29)	$	(0.27)
Average diluted shares outstanding	125,893		125,568		125,789		125,620

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
Revenues:

Product sales $ 93,377
$ 102,070
$ 320,508
$ 285,136
Services 152,570
154,781
457,963
431,168
Total revenues 245,947
256,851
778,471
716,304
Cost of revenues:

Cost of product sales 71,957
81,817
254,798
228,146
Cost of services 98,356
101,304
298,911
283,224
Depreciation, amortization, and accretion 30,867
29,460
93,312
84,880
Impairments and other charges 849
2,940
3,306
2,940
Insurance recoveries (1,042 ) —
(1,392 ) —
Total cost of revenues 200,987
215,521
648,935
599,190
Gross profit 44,960
41,330
129,536
117,114
General and administrative expense 34,926
34,446
105,498
98,866
Interest expense, net 18,146
18,894
55,054
52,246
Warrants fair value adjustment (income) expense 78
(179 ) (1,035 ) 22
CCLP Series A Preferred Units fair value adjustment (income) expense —
498
1,309
1,344
Other (income) expense, net (690 ) 619
(1,014 ) 7,203
Loss before taxes and discontinued operations (7,500 ) (12,948 ) (30,276 ) (42,567 )
Provision (benefit) for income taxes 1,579
(96 ) 5,678
3,474
Loss before discontinued operations (9,079 ) (12,852 ) (35,954 ) (46,041 )
Discontinued operations:
Income (loss) from discontinued operations (including 2018 loss on disposal of $33.8 million), net of taxes (9,130 ) 796
(9,901 ) (40,931 )
Net loss (18,209 ) (12,056 ) (45,855 ) (86,972 )
Less: loss attributable to noncontrolling interest 2,378
5,120
12,273
20,423
Net loss attributable to TETRA stockholders $ (15,831 ) $ (6,936 ) $ (33,582 ) $ (66,549 )
Basic net loss per common share:

Loss before discontinued operations attributable to TETRA stockholders $ (0.06 ) $ (0.06 ) $ (0.19 ) $ (0.21 )
Loss from discontinued operations attributable to TETRA stockholders $ (0.07 ) $ 0.00
$ (0.08 ) $ (0.33 )
Net loss attributable to TETRA stockholders $ (0.13 ) $ (0.06 ) $ (0.27 ) $ (0.54 )
Average shares outstanding 125,568
125,689
125,620
123,557
Diluted net loss per common share:

Loss before discontinued operations attributable to TETRA stockholders $ (0.06 ) $ (0.06 ) $ (0.19 ) $ (0.21 )
Loss from discontinued operations attributable to TETRA stockholders $ (0.07 ) $ 0.00
$ (0.08 ) $ (0.33 )
Net loss attributable to TETRA stockholders $ (0.13 ) $ (0.06 ) $ (0.27 ) $ (0.54 )
Average diluted shares outstanding 125,568
125,689
125,620
123,557

See Notes to Consolidated Financial Statements

Table of Contents

TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
	2019			2018			2019			2018				2020		2019		2020		2019
Net loss	$	(18,209	)	$	(12,056	)	$	(45,855	)	$	(86,972	)	Net loss	$	(21,598)	$	(18,209)	$	(68,941)	$	(45,855)
Foreign currency translation adjustment, net of taxes of $0 in 2019 and 2018	(3,742		)	(581		)	(3,300		)	(8,547		)
Foreign currency translation adjustment, net of taxes of $0 in 2020 and 2019													Foreign currency translation adjustment, net of taxes of $0 in 2020 and 2019	2,874		(3,742)		(2,498)		(3,300)
Comprehensive loss	(21,951		)	(12,637		)	(49,155		)	(95,519		)	Comprehensive loss	(18,724)		(21,951)		(71,439)		(49,155)
Less: Comprehensive loss attributable to noncontrolling interest	2,358			5,025			11,994			22,467			Less: Comprehensive loss attributable to noncontrolling interest	8,229		2,358		32,880		11,994
Comprehensive loss attributable to TETRA stockholders	$	(19,593	)	$	(7,612	)	$	(37,161	)	$	(73,052	)	Comprehensive loss attributable to TETRA stockholders	$	(10,495)	$	(19,593)	$	(38,559)	$	(37,161)

See Notes to Consolidated Financial Statements

Table of Contents

TETRA Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands)


	September 30, 2019			December 31, 2018				September 30, 2020		December 31, 2019
	(Unaudited)							(Unaudited)
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	35,918		$	40,038		Cash and cash equivalents	$	75,165	$	17,704
Restricted cash	61			64			Restricted cash	59		64
Trade accounts receivable, net of allowances of $4,466 in 2019 and $2,583 in 2018	170,168			187,592
Trade accounts receivable, net of allowances of $7,742 in 2020 and $5,262 in 2019							Trade accounts receivable, net of allowances of $7,742 in 2020 and $5,262 in 2019	108,222		175,918
Inventories	142,406			143,571			Inventories	113,020		136,510
Assets of discontinued operations	16			1,354
Notes receivable	—			7,544

Prepaid expenses and other current assets	22,563			20,528			Prepaid expenses and other current assets	21,176		21,158
Total current assets	371,132			400,691			Total current assets	317,642		351,354
Property, plant, and equipment:							Property, plant, and equipment:
Land and building	75,206			78,746			Land and building	39,534		60,586
Machinery and equipment	1,316,661			1,265,732			Machinery and equipment	1,341,905		1,335,157
Automobiles and trucks	33,163			35,568			Automobiles and trucks	26,581		31,681
Chemical plants	189,416			188,641			Chemical plants	60,195		57,692
Construction in progress	50,055			44,419			Construction in progress	10,819		34,393
Total property, plant, and equipment	1,664,501			1,613,106			Total property, plant, and equipment	1,479,034		1,519,509
Less accumulated depreciation	(803,109		)	(759,175		)	Less accumulated depreciation	(804,466)		(760,872)
Net property, plant, and equipment	861,392			853,931			Net property, plant, and equipment	674,568		758,637
Other assets:							Other assets:
Goodwill	25,784			25,859
Patents, trademarks and other intangible assets, net of accumulated amortization of $85,911 in 2019 and $80,401 in 2018	76,225			82,184

Patents, trademarks and other intangible assets, net of accumulated amortization of $93,976 in 2020 and $88,422 in 2019							Patents, trademarks and other intangible assets, net of accumulated amortization of $93,976 in 2020 and $88,422 in 2019	68,350		74,199
Deferred tax assets, net	19			13			Deferred tax assets, net	24		24

Operating lease right-of-use assets	57,848			—			Operating lease right-of-use assets	78,867		68,131
Other assets	23,300			22,849			Other assets	22,089		19,577
Total other assets	183,176			130,905			Total other assets	169,330		161,931
Total assets	$	1,415,700		$	1,385,527		Total assets	$	1,161,540	$	1,271,922

See Notes to Consolidated Financial Statements

Table of Contents

TETRA Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Share Amounts)


	September 30, 2019			December 31, 2018				September 30, 2020		December 31, 2019
	(Unaudited)							(Unaudited)
LIABILITIES AND EQUITY							LIABILITIES AND EQUITY
Current liabilities:							Current liabilities:
Trade accounts payable	$	97,142		$	80,279		Trade accounts payable	$	42,406	$	88,917
Unearned income	26,896			26,695			Unearned income	7,310		9,831
Accrued liabilities and other	87,127			89,232			Accrued liabilities and other	80,500		87,877
Liabilities of discontinued operations	1,907			4,145			Liabilities of discontinued operations	1,852		2,098

Total current liabilities	213,072			200,351			Total current liabilities	132,068		188,723
Long-term debt, net	858,272			815,560			Long-term debt, net	843,216		842,871
Deferred income taxes	3,729			3,242			Deferred income taxes	3,421		2,988
Asset retirement obligations	12,603			12,202			Asset retirement obligations	12,973		12,762
CCLP Series A Preferred Units	—			27,019
Warrants liability	1,038			2,073			Warrants liability	123		449
Operating lease liabilities	45,993			—			Operating lease liabilities	64,200		53,919
Other liabilities	7,465			12,331			Other liabilities	10,364		7,384
Total long-term liabilities	929,100			872,427			Total long-term liabilities	934,297		920,373
Commitments and contingencies							Commitments and contingencies
Equity:							Equity:
TETRA stockholders' equity:
Common stock, par value $0.01 per share; 250,000,000 shares authorized at September 30, 2019 and December 31, 2018; 128,363,817 shares issued at September 30, 2019 and 128,455,134 shares issued at December 31, 2018	1,284			1,285
TETRA stockholders’ equity:							TETRA stockholders’ equity:
Common stock, par value 0.01 per share; 250,000,000 shares authorized at September 30, 2020 and December 31, 2019; 128,930,704 shares issued at September 30, 2020 and 128,304,354 shares issued at December 31, 2019							Common stock, par value 0.01 per share; 250,000,000 shares authorized at September 30, 2020 and December 31, 2019; 128,930,704 shares issued at September 30, 2020 and 128,304,354 shares issued at December 31, 2019	1,289		1,283
Additional paid-in capital	465,615			460,680			Additional paid-in capital	471,146		466,959
Treasury stock, at cost; 2,823,191 shares held at September 30, 2019, and 2,717,569 shares held at December 31, 2018	(19,164		)	(18,950		)
Accumulated other comprehensive income (loss)	(55,242		)	(51,663		)
Treasury stock, at cost; 2,953,976 shares held at September 30, 2020, and 2,823,191 shares held at December 31, 2019							Treasury stock, at cost; 2,953,976 shares held at September 30, 2020, and 2,823,191 shares held at December 31, 2019	(19,484)		(19,164)
Accumulated other comprehensive (loss)							Accumulated other comprehensive (loss)	(54,634)		(52,183)
Retained deficit	(248,691		)	(217,952		)	Retained deficit	(398,630)		(362,522)
Total TETRA stockholders' equity	143,802			173,400
Total TETRA stockholders’ equity							Total TETRA stockholders’ equity	(313)		34,373
Noncontrolling interests	129,726			139,349			Noncontrolling interests	95,488		128,453
Total equity	273,528			312,749			Total equity	95,175		162,826
Total liabilities and equity	$	1,415,700		$	1,385,527		Total liabilities and equity	$	1,161,540	$	1,271,922

See Notes to Consolidated Financial Statements

Table of Contents

TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Equity

(In Thousands)

(Unaudited)


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

Balance at December 31, 2019	$	1,283	$	466,959	$	(19,164)	$	(52,183)	$	(362,522)	$	128,453	$	162,826
Net loss for first quarter 2020	—		—		—		—		(1,551)		(8,825)		(10,376)
Translation adjustment, net of taxes of $0	—		—		—		(6,238)		—		(229)		(6,467)
Comprehensive loss	—		—		—		—		—		—		(16,843)
Distributions to public unitholders	—		—		—		—		—		(309)		(309)
Equity award activity	4		0		—		—		—		—		4
Treasury stock activity, net	—		—		(89)		—		—		—		(89)
Equity compensation expense	—		1,145		—		—		—		228		1,373

Other	—		(16)		—		—		—		(15)		(31)
Balance at March 31, 2020	$	1,287	$	468,088	$	(19,253)	$	(58,421)	$	(364,073)	$	119,303	$	146,931
Net loss for second quarter 2020	—		—		—		—		(21,255)		(15,712)		(36,967)
Translation adjustment, net of taxes of $0	—		—		—		980		—		115		1,095
Comprehensive loss	—		—		—		—		—		—		(35,872)
Distributions to public unitholders	—		—		—		—		—		(311)		(311)
Equity award activity	1		0		—		—		—		—		1
Treasury stock activity, net	—		—		(181)		—		—		—		(181)
Equity compensation expense	—		1,685		—		—		—		449		2,134
Other	—		4		—		—		—		(20)		(16)
Balance at June 30, 2020	$	1,288	$	469,777	$	(19,434)	$	(57,441)	$	(385,328)	$	103,824	$	112,686
Net loss for third quarter 2020	—		—		—		—		(13,302)		(8,296)		(21,598)
Translation adjustment, net of taxes of $0	—		—		—		2,807		—		67		2,874
Comprehensive loss	—		—		—		—		—		—		(18,724)
Distributions to public unitholders	—		—		—		—		—		(312)		(312)
Equity award activity	1		0		—		—		—		—		1
Treasury stock activity, net	—		—		(50)		—		—		—		(50)
Equity compensation expense	—		1,363		—		—		—		232		1,595
Other	—		6		—		—		—		(27)		(21)
Balance at September 30, 2020	$	1,289	$	471,146	$	(19,484)	$	(54,634)	$	(398,630)	$	95,488	$	95,175

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
Net loss for second quarter 2019 —
—
—
—
(6,913 ) (1,633 ) (8,546 )
Translation adjustment, net of taxes of $0 —
—
—
765
—
83
848
Comprehensive loss —
—
—
—
—
—
(7,698 )
Distributions to public unitholders —
—
—
—
—
(308 ) (308 )
Treasury stock activity, net —
—
(11 ) —
—
—
(11 )
Equity compensation expense —
2,100
—
—
—
567
2,667
Other —
(36 ) —
—
—
(33 ) (69 )
Balance at June 30, 2019 $ 1,284
$ 464,305
$ (19,116 ) $ (51,480 ) $ (232,860 ) $ 132,558
$ 294,691
Net loss for third quarter 2019 —
—
—
—
(15,831 ) (2,378 ) (18,209 )
Translation adjustment, net of taxes of $0 —
—
—
(3,762 ) —
20
(3,742 )
Comprehensive loss —
—
—
—
—
—
(21,951 )
Distributions to public unitholders —
—
—
—
—
(309 ) (309 )
Treasury stock activity, net —
—
(48 ) —
—
—
(48 )
Equity compensation expense —
1,316
—
—
—
(211 ) 1,105
Other —
(6 ) —
—
—
46
40
Balance at September 30, 2019 $ 1,284
$ 465,615
$ (19,164 ) $ (55,242 ) $ (248,691 ) $ 129,726
$ 273,528

See Notes to Consolidated Financial Statements

Table of Contents

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 activity 20
—
—
—
—
—
20
Treasury stock activity, net —
—
(170 ) —
—
—
(170 )
Issuance of common stock for business combination 77
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
Net loss for second quarter 2018 —
—
—
—
(5,965 ) (6,188 ) (12,153 )
Translation adjustment, net of taxes of $0 —
—
—
(7,495 ) —
(1,754 ) (9,249 )
Comprehensive loss —
—
—
—
—
—
(21,402 )
Distributions to public unitholders —
—
—
—
—
(4,624 ) (4,624 )
Equity award activity 1
—
—
—
—
—
1
Treasury stock activity, net —
—
(44 ) —
—
—
(44 )
Equity compensation expense —
1,905
—
—
—
358
2,263
Conversions of CCLP Series A Preferred —
—
—
—
—
9,272
9,272
Other —
131
—
—
—
4
135
Balance at June 30, 2018 $ 1,283
$ 457,082
$ (18,865 ) $ (49,594 ) $ (215,948 ) $ 137,104
$ 311,062
Net loss for third quarter 2018 —
—
—
—
(6,936 ) (5,120 ) (12,056 )
Translation adjustment, net of taxes of $0 —
—
—
(676 ) —
95
(581 )
Comprehensive loss —
—
—
—
—
—
(12,637 )
Distributions to public unitholders —
—
—
—
—
(4,946 ) (4,946 )
Equity award activity 1
251

—
—
—
252
Treasury stock activity, net —
—
(71 ) —
—
—
(71 )
Equity compensation expense —
1,798
—
—
—
367
2,165
Conversions of CCLP Series A Preferred —
—
—
—
—
10,294
10,294
Other —
(8 ) —
—
—
78
70
Balance at September 30, 2018 $ 1,284
$ 459,123
$ (18,936 ) $ (50,270 ) $ (222,884 ) $ 137,872
$ 306,189
TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Equity

(In Thousands)

(Unaudited)


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

Balance at December 31, 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
Net loss for second quarter 2019	—		—		—		—		(6,913)		(1,633)		(8,546)
Translation adjustment, net of taxes of $0	—		—		—		765		—		83		848
Comprehensive loss	—		—		—		—		—		—		(7,698)
Distributions to public unitholders	—		—		—		—		—		(308)		(308)

Treasury stock activity, net	—		—		(11)		—		—		—		(11)
Equity compensation expense	—		2,100		—		—		—		567		2,667
Other	—		(36)		—		—		—		(33)		(69)
Balance at June 30, 2019	$	1,284	$	464,305	$	(19,116)	$	(51,480)	$	(232,860)	$	132,558	$	294,691
Net loss for third quarter 2019	—		—		—		—		(15,831)		(2,378)		(18,209)
Translation adjustment, net of taxes of $0	—		—		—		(3,762)		—		20		(3,742)
Comprehensive loss	—		—		—		—		—		—		(21,951)
Distributions to public unitholders	—		—		—		—		—		(309)		(309)
Equity award activity	0		—		—		—		—		—		0
Treasury stock activity, net	—		—		(48)		—		—		—		(48)
Equity compensation expense	—		1,316		—		—		—		(211)		1,105
Other	—		(6)		—		—		—		46		40
Balance at September 30, 2019	$	1,284	$	465,615	$	(19,164)	$	(55,242)	$	(248,691)	$	129,726	$	273,528

See Notes to Consolidated Financial Statements

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TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


	Nine Months Ended September 30,							Nine Months Ended September 30,
	2019			2018				2020		2019
Operating activities:							Operating activities:
Net loss	$	(45,855	)	$	(86,972	)	Net loss	$	(68,941)	$	(45,855)
Reconciliation of net loss to cash provided by operating activities:
Reconciliation of net loss to net cash provided by operating activities:							Reconciliation of net loss to net cash provided by operating activities:
Depreciation, amortization, and accretion	93,364			86,965			Depreciation, amortization, and accretion	88,906		93,364
Impairment and other charges	3,306			2,940			Impairment and other charges	14,445		3,306

Benefit for deferred income taxes	545			(837		)	Benefit for deferred income taxes	550		545
Equity-based compensation expense	6,260			5,692			Equity-based compensation expense	4,847		6,260
Provision for doubtful accounts	3,351			1,566			Provision for doubtful accounts	5,907		3,351
Non-cash loss on disposition of business	7,500			32,369
Amortization of deferred financing costs	2,890			3,188
Debt financing cost expense	—			398
CCLP Series A Preferred redemption premium	1,283			—
CCLP Series A Preferred accrued paid in kind distributions	982			3,933
CCLP Series A Preferred fair value adjustment	1,309			1,344
Loss on disposition of business							Loss on disposition of business	0		7,500
Amortization and expense of financing costs							Amortization and expense of financing costs	3,698		4,614
Insurance recoveries associated with damaged equipment							Insurance recoveries associated with damaged equipment	(643)		(1,392)
Equipment received in lieu of cash							Equipment received in lieu of cash	725		0
Debt exchange expenses							Debt exchange expenses	4,777		0
CCLP Series A Preferred Unit distributions and adjustments							CCLP Series A Preferred Unit distributions and adjustments	0		3,574
Warrants fair value adjustment	(1,035		)	22			Warrants fair value adjustment	(326)		(1,035)
Contingent consideration liability fair value adjustment	(800		)	3,700			Contingent consideration liability fair value adjustment	0		(800)
Expense for unamortized finance costs and other non-cash charges and credits	1,649			3,919
Acquisition and transaction financing fees	75			—

Gain on sale of assets	(1,583		)	(454		)	Gain on sale of assets	(4,340)		(1,583)
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Accounts receivable	13,309			(7,708		)	Accounts receivable	61,314		13,309
Inventories	(6,847		)	(35,920		)	Inventories	11,780		(6,847)
Prepaid expenses and other current assets	(1,831		)	(2,995		)	Prepaid expenses and other current assets	(916)		(1,831)
Trade accounts payable and accrued expenses	10,344			(6,776		)	Trade accounts payable and accrued expenses	(57,844)		10,344

Other	(3,234		)	(2,741		)	Other	888		(3,234)
Net cash provided by operating activities	84,982			1,633			Net cash provided by operating activities	64,827		83,590
Investing activities:							Investing activities:
Purchases of property, plant, and equipment, net	(89,192		)	(107,080		)	Purchases of property, plant, and equipment, net	(22,011)		(89,192)
Acquisition of businesses, net of cash acquired	(12,024		)	(42,002		)	Acquisition of businesses, net of cash acquired	0		(12,024)
Proceeds from disposal of business	—			3,121

Proceeds on sale of property, plant, and equipment	2,152			774			Proceeds on sale of property, plant, and equipment	24,704		2,152
Insurance recoveries associated with damaged equipment							Insurance recoveries associated with damaged equipment	643		1,392
Other investing activities	(890		)	(293		)	Other investing activities	(576)		(890)
Net cash used in investing activities	(99,954		)	(145,480		)
Net cash provided by (used in) investing activities							Net cash provided by (used in) investing activities	2,760		(98,562)
Financing activities:							Financing activities:
Proceeds from long-term debt	246,090			747,887			Proceeds from long-term debt	404,060		246,090
Principal payments on long-term debt	(204,718		)	(544,962		)	Principal payments on long-term debt	(408,666)		(204,718)
CCLP distributions	(924		)	(13,928		)	CCLP distributions	(932)		(924)
Proceeds from exercise of stock options	—			251

Redemptions of CCLP Series A Preferred	(28,049		)	—			Redemptions of CCLP Series A Preferred	0		(28,049)
Tax remittances on equity based compensation	(571		)	(708		)	Tax remittances on equity based compensation	(341)		(571)
Debt issuance costs and other financing activities	(373		)	(17,932		)	Debt issuance costs and other financing activities	(3,897)		(373)
Net cash provided by financing activities	11,455			170,608
Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	(9,776)		11,455
Effect of exchange rate changes on cash	(606		)	818			Effect of exchange rate changes on cash	(355)		(606)
Increase (decrease) in cash and cash equivalents	(4,123		)	27,579			Increase (decrease) in cash and cash equivalents	57,456		(4,123)
Cash and cash equivalents and restricted cash at beginning of period	40,102			26,389			Cash and cash equivalents and restricted cash at beginning of period	17,768		40,102
Cash and cash equivalents and restricted cash at end of period	$	35,979		$	53,968		Cash and cash equivalents and restricted cash at end of period	$	75,224	$	35,979


Supplemental cash flow information:							Supplemental cash flow information:
Interest paid	$	49,073		$	24,651		Interest paid	$	42,199	$	49,073
Income taxes paid	6,226			3,954			Income taxes paid	4,692		6,226

See Notes to Consolidated Financial Statements

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TETRA Technologies, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

NOTE A1 – 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. We are composed of 3 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 balances and transactions have been eliminated in consolidation. The information furnished reflects all normal recurring adjustments, which are, in the opinion of management, necessary to provide a fair statement of the results for the interim periods. Operating results for the period ended September 30, ~~2019~~2020 are not necessarily indicative of results that may be expected for the twelve months ended December 31, ~~2019.~~2020.

We consolidate the financial statements of our CSI Compressco LP ~~and its subsidiaries ("CCLP"~~subsidiary (“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~~TETRA’s capital structure and ~~CCLP's~~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"~~(“SEC”) and do not include all information and footnotes required by U.S. generally accepted accounting principles ("(“U.S. ~~GAAP"~~GAAP”) for complete financial statements. These financial statements should be read in conjunction with the financial statements for the year ended December 31, ~~2018~~2019 and notes thereto included in our Annual Report on Form 10-K, which we filed with the SEC on March ~~4, 2019.~~16, 2020.

Significant Accounting Policies

~~We have added~~Our significant accounting policies are described in the notes to our consolidated financial statements for the ~~recording of leases in conjunction with the adoption of the new lease standard discussed~~year ended December 31, 2019 included in our ~~"Leases" and "New Accounting Pronouncements" sections below. Other than the additional lease policies described herein, there~~Annual Report on Form 10-K. There have been no significant changes in our accounting policies or the application thereof during the third quarter of ~~these policies.~~2020.

Use of Estimates

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

Reclassifications

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

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Impairments and Other Charges

~~During~~Impairments of long-lived assets, including identified intangible assets, are determined periodically when indicators of impairment are present. If such indicators are present, the ~~second quarter~~determination of ~~2019,~~the amount of impairment is based on our ~~Compression Division recorded impairments~~judgment as to the future undiscounted operating cash flows to be generated from the relevant assets throughout theirremainingestimated useful lives. If these undiscounted cash flows are less than the carrying amount of ~~$2.3 million on certain units~~the related assets, an impairment is recognized for the excess of its low-horsepower compression fleet, reflecting the decision to dispose of these units upon management's determination that refurbishing this equipment was not economic given limited current and forecasted demand for such equipment. A recoverability analysis was performed on the remaining low-horsepower fleet and it was concluded that the remaining fleet was recoverable from estimated future cash flows. During the third quarter of 2019, we recorded a charge of $0.8 million for the carrying value over fair value. Fair value of intangible assets is generally determined using the discounted present value of future cash flows using discount rates commensurate with the risks inherent with the specific assets. Assets held for disposal are recorded at the lower of carrying value or estimated fair value less estimated selling costs. See Note 3 - “Impairments and Other Charges” for additional discussion of recorded impairments.

Revenue Recognition

Performance Obligations. Revenue is generally recognized when we transfer 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. We receive cash equal to the invoice price for most sales of product 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 such products or services is 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 ~~compressor unit that was written off due~~service contract arrangement, such revenue, if significant, is deferred and amortized over the estimated service period.

Product Sales. Product sales revenues are generally recognized when we ship products from our facility to ~~being destroyed by fire.~~

~~Goodwill~~

~~Our~~our customer. The product sales for our Completion Fluids & Products Division consist primarily of clear brine fluids (“CBFs”), additives, and associated manufactured products. Product sales for our Water & Flowback Services Division ~~consists~~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 ~~2 reporting units, Production Testing~~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 ~~Management. During~~& Flowback Services Division are for a period of 90 days or less.

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 ~~third quarter of 2019,~~cost for freight and shipping costs as part of cost of product sales when control over our ~~internal long-term outlook~~products (i.e. delivery) has transferred to the customer.

Use of Estimates. In recognizing revenue for ~~each~~variable consideration arrangements, the amount of ~~these reporting units,~~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 ~~updated~~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 ~~assessment~~estimate of the ~~Water Management reporting unit and determined~~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 CBFs, we may agree to issue credits

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for the repurchase of reclaimable used fluids from certain customers at an agreed price that is based on the ~~current decreased energy industry outlook was an indicator requiring further analysis for impairment of goodwill. As part~~condition of the ~~first step~~fluids.

Contract Assets and Liabilities.We consider contract assets to be trade accounts receivable when we have an unconditional right to consideration and only the passage of ~~goodwill impairment testing for~~time is required before payment is due. In certain instances, particularly those requiring customer specific documentation prior to invoicing, our ~~Water Management reporting unit, the only reporting unit with goodwill as of September 30, 2019, we updated our assessment~~invoicing of the ~~future cash flows, applying expected long-term growth rates, discount rates, and terminal values that~~customer is delayed until certain documentation requirements are met. In those cases, we consider reasonable for the reporting unit. We calculated a present value of the cash flows for the Water Management reporting unit to arrive at an estimate of fair value using a combination of the income approach and the market approach. Based on these assumptions, we determined that the fair value of the Water Management reporting unit exceeded its carrying value, which includes approximately $25.8 million of goodwill, by approximately 17%. Specific uncertainties affecting the estimated fair value of our Water Management reporting unit includes the impact of competition, prices of oil and natural gas, and future overall activity levels in the regions in which it operates, the activity levels of our significant customers, and other factors affecting the rate of future growth of this reporting unit. These factors will continue to be reviewed and assessed going forward. Negative developments with regard to these factors could have a further negative effect on the fair value of the Water Management reporting unit.

~~Leases~~

~~As 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~~contract asset onrather than a billed trade accounts receivable until we are able to invoice the ~~commencement date. The right-of-use asset represents our right to use an underlying asset and the lease liability represents our obligation to make lease payments to the lessor over the lease term.~~

~~Long-term operating leases~~customer. Contract assets, along with billed trade accounts receivable, are included in ~~operating lease right-of-use assets, accrued liabilities and other, and operating lease liabilities~~trade accounts receivable in our consolidated balance ~~sheet~~sheets.

We classify contract liabilities as ~~of September 30, 2019. Long-term finance leases are not material.~~unearned income in our consolidated balance sheets. Such deferred revenue typically results from advance payments received on orders for new compressor equipment prior to the time such equipment is completed and transferred to the customer in accordance with the customer contract. New equipment sales orders generally take less than twelve months to build and deliver.

Bill-and-Hold Arrangements. We ~~determine whether a contract is or contains a lease at inception~~design and fabricate compressor packages based on our customer’s specifications. In some cases, the customer will request us to hold the equipment, upon completion of the ~~contract. Where~~unit, until the job site is ready to receive the equipment. When this occurs, we along with the customer sign a bill-and-hold agreement, which outlines that the customer has title to the equipment, the equipment is ready for delivery, we cannot use the equipment or direct it to another customer, and we have a present right to payment. When those criteria have been met and the agreement is executed, we recognize the revenue on the equipment because control of the equipment has passed to our customer and our performance obligations are complete. Entering into these arrangements is something we have done as a ~~lessee~~courtesy for certain customers for many years. The equipment subject to the bill-and-hold agreements has generally been invoiced and paid for through progressive billings such that at the time the bill-and-hold agreement is executed, the majority of the contractual cash obligation of the customer has been received by us.

Operating Costs

Cost of product sales includes direct and indirect costs of manufacturing and producing our products, including raw materials, fuel, utilities, labor, overhead, repairs and maintenance, materials, services, transportation, warehousing, equipment rentals, insurance, and certain taxes. Cost of services includes operating expenses we incur in ~~a contract that includes an option to extend or terminate~~delivering our services, including labor, equipment rental, fuel, repair and maintenance, transportation, overhead, insurance, and certain taxes. We include in product sales revenues the ~~lease,~~reimbursements we ~~include the extension period or exclude the period covered by the termination option in our lease term, if it is reasonably certain that we would exercise the option.~~

As an accounting policy election, we do not include short-term leases on our balance sheet. Short-term leases include leases with a term of 12 months or less, inclusive of renewal options we are reasonably certain to exercise. The lease paymentsreceive from customers for ~~short-term leases~~shipping and handling costs. Shipping and handling costs are included ~~as operating lease costs on a straight-line basis over the lease term~~ in cost of ~~revenues or~~product sales. Amounts we incur for “out-of-pocket” expenses in the delivery of our services are recorded as cost of services. Reimbursements for “out-of-pocket” expenses we incur in the delivery of our services are recorded as service revenues. Depreciation, amortization, and accretion includes depreciation expense for all of our facilities, equipment and vehicles, amortization expense on our intangible assets, and accretion expense related to our decommissioning and other asset retirement obligations.

We include in general and administrative expense ~~based on the use of the underlying asset. We recognize lease~~all costs ~~for variable lease payments~~ not ~~included in the determination of a lease liability in the period in which an obligation is incurred.~~identifiable to our specific product or service operations, including divisional and general corporate overhead, professional services, corporate office costs, sales and marketing expenses, insurance, and certain taxes.

As 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 single 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 applicable to the combined component based on the predominant component, we determined the services nonlease component is predominant, resulting in the ongoing recognition of our compression services contracts following ASC 606.

Our operating and finance leases are recognized at the present value of lease 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 determine the present value of lease payments. Consistent with other long-lived assets or asset groups that are held and used, we test for impairment of our right-of-use assets when impairment indicators are present.

Foreign Currency Translation

We have designated the Euro, the British pound, the Norwegian krone, the Canadian dollar, theBrazilian real, and theMexican peso as the functional currencies for our operations in Finland and Sweden, the United Kingdom, Norway, Canada, Brazil,and certain of our operations in Mexico, respectively. The 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 ~~$(1.7)~~$(0.8) millionand ~~$(2.2)~~$(3.2) million during the three and nine months ended September 30, ~~2019,~~2020, respectively, and ~~$(0.1)~~$(1.7) million and ~~$(0.4)~~$(2.2) million during the three and nine months ended September 30, ~~2018,~~2019, respectively.

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Fair Value Measurements

We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements are utilized on a recurring basis in the determination of the carrying values of certain liabilities, including the liabilities for the warrants to purchase 11.2 million shares of our common stock (the “Warrants”) and our foreign currency derivative contracts. See Note 9 - “Fair Value Measurements” for further discussion.

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

New Accounting Pronouncements

Standards adopted in ~~2019~~2020

In ~~February 2016,~~August 2018, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ~~("ASU"~~(“ASU”) ~~2016-02, "Leases (Topic 842)" to increase comparability~~2018-15, “Intangibles—Goodwill and ~~transparency among different organizations. Organizations are required to recognize right-of-use lease assets~~Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” ASU 2018-15 clarifies the accounting for implementation costs in cloud computing arrangements. ASU 2018-15 is effective for interim and ~~lease liabilities in the balance sheet related to the right to use the underlying asset for the lease term. In addition, through improved disclosure requirements, ASC 842 will enable users~~annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The adoption of ~~financial statements to further understand the amount, timing, and uncertainty of cash flows arising from leases. We adopted the~~this standard ~~effective January 1, 2019. The standard had~~did not have 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 the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. This was 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.

Standards not yet adopted

In June 2016, the FASB issued ASU 2016-13, ~~"Financial~~“Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments."” ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses on financial instruments not accounted for at fair value through net income. The provisions require credit impairments to be measured over the contractual life of an asset and developed with consideration for past events, current conditions, and forecasts of future economic information. Credit impairment will be accounted for as an allowance for credit losses deducted from the amortized cost basis at each reporting date. We are continuing to work through our implementation plan which includes evaluating the impact on our

allowance for doubtful accounts methodology, identifying new reporting requirements, and implementing changes to business processes, systems, and controls to support adoption of the standard. Upon adoption, the allowance for doubtful accounts is expected to increase with an offsetting adjustment to retained earnings. Updates at each reporting date after initial adoption will be recorded through selling, general, and administrative expense. ASU 2016-13 has an effective date of the first quarter of fiscal ~~2020.~~2023. We continue to assess the potential effects of these changes to our consolidated financial statements.

In ~~January 2017,~~December 2019, the FASB issued ASU ~~2017-04, "Intangibles-Goodwill and Other~~2019-12, “Income Taxes (Topic ~~350)~~740): Simplifying the ~~Test~~Accounting for ~~Goodwill Impairment," which~~Income Taxes.” ASU 2019-12 simplifies ~~how an entity is required to test goodwill~~the accounting for ~~impairment~~income taxes by eliminating ~~Step 2 from~~certain exceptions related to intraperiod tax allocation, interim period income tax calculation methodology, and the ~~goodwill impairment test. The ASU is effective~~recognition of deferred tax liabilities for ~~annual periods beginning after December 15, 2019,~~outside basis differences. It also simplifies certain aspects of accounting for franchise taxes 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 August 2018, the FASB issued ASU 2018-15, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." ASU 2018-15 clarifies the accounting for ~~implementation costs~~transactions that results in ~~cloud computing arrangements.~~a step-up in the tax basis of goodwill. ASU ~~2018-15~~2019-12 is effective for ~~interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted.~~us the first quarter of fiscal 2021. We ~~are currently assessing~~continue to assess the potential effects of these changes to our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. Entities may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020. We are currently evaluating the impacts of the provisions of ASU 2020-04 on our consolidated financial statements.

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NOTE B2 – REVENUE FROM CONTRACTS WITH CUSTOMERS

As of September 30, 2020, we had $47.1 million of remaining contractual performance obligations for compression services. As a practical expedient, this amount does not reflect revenue for compression service contracts whose original expected duration is less than twelve months and does not consider the effects of the time value of money. Expected revenue to be recognized in the future as of September 30, 2020 for completion of performance obligations of compression service contracts are as follows:


	2020		2021		2022		2023		2024		Total
	(In Thousands)
Compression service contracts remaining performance obligations	$	13,939	$	26,608	$	5,785	$	703	$	56	$	47,091

For sales of CBFs where we have agreed to issue credits for the repurchase of reclaimable used fluids at an agreed price based on the condition of the fluid upon return, we adjust the revenue recognized in the period of shipment by an estimated amount, based on historical experience, of the credit expected to be issued. As of September 30, 2020, the amount of remaining credits expected to be issued for the repurchase of reclaimable used fluids was $1.1 million recorded in inventory (right of return asset) and either accounts payable or as a reduction to accounts receivable. There were no material differences between amounts recognized during the three and nine month period ended September 30, 2020, compared to estimates made in a prior period from these variable consideration arrangements.

Our contract asset balances, primarily associated with customer documentation requirements, were $17.2 million and $34.9 million as of September 30, 2020 and December 31, 2019, respectively. Contract assets, along with billed trade accounts receivable, are included in trade accounts receivable in our consolidated balance sheets.

Collections primarily associated with progressive billings to customers for the construction of compression equipment is included in unearned income in the consolidated balance sheets. The following table reflects the changes in unearned income in our consolidated balance sheets for the periods indicated:


	Nine Months Ended September 30,
	2020		2019
	(In Thousands)
Unearned Income, beginning of period	$	9,678	$	25,333
Additional unearned income	38,979		106,744
Revenue recognized	(41,624)		(105,486)
Unearned income, end of period	$	7,033	$	26,591

During the nine month period ended September 30, 2020, we recognized product sales revenue of $9.4 million from unearned income that was deferred as of December 31, 2019. During the nine months ended September 30, 2019, we recognized product sales revenue of $22.2 million from unearned income that was deferred as of December 31, 2018.

As of September 30, 2020, contract costs were immaterial.

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We disaggregate revenue from contracts with customers into Product Sales and Services within each segment, as noted in our three reportable segments in Note 12. In addition, we disaggregate revenue from contracts with customers by geography based on the following table below.


	Three months ended September 30,		Nine months ended September 30,
	2020	2019	2020		2019
	(In Thousands)
Completion Fluids & Products
U.S.	15,013	31,480	$	85,073	$	100,622
International	36,937	27,860	113,460		100,066
	51,950	59,340	198,533		200,688
Water & Flowback Services
U.S.	19,767	68,052	97,016		209,663
International	1,767	4,789	6,708		14,980
	21,534	72,841	103,724		224,643
Compression
U.S.	71,478	105,153	240,661		324,792
International	7,639	8,613	25,066		28,348
	79,117	113,766	265,727		353,140




Total Revenue
U.S.	106,258	204,685	422,750		635,077
International	46,343	41,262	145,234		143,394
	152,601	245,947	$	567,984	$	778,471

NOTE 3 –IMPAIRMENTS AND OTHER CHARGES

Impairments of Long-Lived Assets

During the first nine months of 2020, the COVID-19 pandemic and decline in oil and gas prices had a significant impact on our customers and industry. These events led to a significant reduction in the operations of our customers resulting in a decrease in demand in certain of our service lines.

During the first quarter of 2020, we started to see our customers revise their capital budgets downwards and adjust their operations accordingly, which led to a decline in orders for new compression equipment to be fabricated and sold to third parties. We concluded that these events were indicators of impairment for all our asset groups within our Compression Division and certain asset groups within our Completion Fluids & Products Division. We performed recoverability analyses on the relevant asset groups within these divisions. Based upon these recoverability analyses, we determined that the carrying values of our Midland manufacturing facility and related new unit sales inventory in our Compression Division exceeded their respective fair values. Therefore, we recorded impairments of approximately $5.4 million related to these assets. Fair value was estimated based on a market approach.

During the second quarter of 2020, primarily as a result of continued negative impacts on our compression fleet associated with the COVID-19 pandemic and declines in oil and gas prices, our Compression Division recorded impairments and other charges of approximately $9.0 million associated with non-core used compressor equipment that we have held for sale, the low-horsepower class of our compression fleet, and field inventory for compression and related services. During the third quarter of 2020, no further impairments were recorded. Impairment charges are reflected in impairment and other charges in our consolidated statements of operations. Fair value used to determine impairments was estimated based on a market approach. Given the dynamic nature of the events, we are not able to reasonably estimate how long our operations will be adversely impacted and the full impact these events will have on our operations. As a result, we could have indicators of impairment again in future periods resulting in additional asset impairments.

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NOTE 4 – INVENTORIES

Components of inventories as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 are as follows:


	September 30, 2020		December 31, 2019
	(In Thousands)
Finished goods	$	70,452	$	70,135
Raw materials	3,744		4,125
Parts and supplies	32,340		47,793
Work in progress	6,484		14,457
Total inventories	$	113,020	$	136,510

September 30, 2019 December 31, 2018
(In Thousands)
Finished goods $ 69,326
$ 69,762
Raw materials 3,043
3,503
Parts and supplies 46,815
47,386
Work in progress 23,222
22,920
Total inventories $ 142,406
$ 143,571

Finished goods inventories include newly manufactured clear brine fluids as well as used brines that are repurchased from certain customers for recycling. Work in progress inventory consists primarily of new compressor packages located ~~in the CCLP fabrication~~at our Compression Division manufacturing facility in Midland, ~~Texas.~~Texas as well as work in progress on certain compression services jobs.

NOTE C5 – ~~NET INCOME (LOSS) PER SHARE~~LEASES

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
September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
(In Thousands)
Number of weighted average common shares outstanding 125,568
125,689
125,620
123,557
Assumed exercise of equity awards and warrants —
—
—
—
Average diluted shares outstanding 125,568
125,689
125,620
123,557

We have operating leases for some of our transportation equipment, office space, warehouse space, operating locations, and machinery and equipment. We have finance leases for certain storage tanks and equipment rentals. These finance leases are not material to our financial statements. Our leases have remaining lease terms ranging 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. During the fourth quarter of 2019, CCLP entered into a lease agreement commitment for 14 compressor packages. The leases are for an initial term of seven years and commenced upon the completion of the equipment fabrication. During the first quarter, CCLP took delivery of eight compressor packages. During the second quarter, CCLP took delivery of the remaining six compressor packages. We have no other lease commitments 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.

~~For~~

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~~three~~ completion of the purchase and ~~nine month~~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 ~~ended~~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 September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(In Thousands)
Operating lease expense	$	5,822	$	5,075	$	17,839	$	15,106
Short-term lease expense	3,758		9,556		17,061		30,269
Total lease expense	$	9,580	$	14,631	$	34,900	$	45,375

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Supplemental cash flow information:


	Nine Months Ended September 30,
	2020		2019
	(In Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	17,861	$	14,868

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	24,201	$	7,631

Supplemental balance sheet information:


	September 30, 2020		December 31, 2019
	(In Thousands)
Operating leases:
Operating lease right-of-use assets	$	78,867	$	68,131

Accrued liabilities and other	$	16,362	$	15,850
Operating lease liabilities	64,200		53,919
Total operating lease liabilities	$	80,562	$	69,769

Additional operating lease information:


	September 30, 2020		December 31, 2019
Weighted average remaining lease term:
Operating leases	6.09 years		6.43 years


Weighted average discount rate:
Operating leases	9.33	%	9.46	%

Future minimum lease payments by year and in the aggregate, under non-cancellable operating leases with terms in excess of one year consist of the following at September 30, ~~2019 and~~2020:


		Operating Leases
	(In Thousands)

Remainder of 2020		$	5,809
2021		22,322
2022		18,896
2023		15,803
2024		12,067
Thereafter		32,611
Total lease payments		107,508
Less imputed interest		(26,946)
Total lease liabilities		$	80,562

At September 30, ~~2018, the average diluted shares outstanding excludes the impact~~2020, future minimum rental receipts under a non-cancellable sublease for office space in one 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~~our locations totaled $5.0 million. For the three and nine month periods ended September 30, 2019 and September 30, 2018, the calculation of diluted earnings per common share excludes the impact of the CSI Compressco LP Series A Convertible Preferred Units (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.

~~NOTE D – DISCONTINUED OPERATIONS~~

On 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. During the three months ended September 30, ~~2019, as a result~~2020, we recognized sublease income of ~~the bankruptcy filing of Epic Companies, LLC, we recorded a reserve for the full amount of certain other receivables of discontinued operations in the amount of $1.5~~$0.3 million and ~~for the full amount~~$0.9 million.

Table of a $7.5 million promissory note, including accrued interest, that we received as part of the consideration for the sale. See Note H - "Commitments and Contingencies" for further discussion. 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
September 30, 2019 Three Months Ended
September 30, 2018
Offshore Services Maritech Total Offshore Services Maritech Total
Major classes of line items constituting pretax loss from discontinued operations
Revenue $ —
$ —
$ —
$ —
$ —
$ —
Cost of revenues (273 ) —
(273 ) 125
—
125
Depreciation, amortization, and accretion 52
—
52
—
—
—
General and administrative expense 1,734
—
1,734
192
—
192
Other (income) expense, net 117
—
117
(1,113 ) —
(1,113 )
Pretax income (loss) from discontinued operations (1,630 ) —
(1,630 ) 796
—
796
Pretax loss on disposal of discontinued operations (7,500 ) —
Total pretax income (loss) from discontinued operations (9,130 ) 796
Income tax expense —
—
Total income (loss) from discontinued operations $ (9,130 ) $ 796

Nine Months Ended
September 30, Nine Months Ended
September 30,
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
Cost of revenues (251 ) —
(251 ) 11,013
139
11,152
Depreciation, amortization, and accretion 52
—
52
1,873
212
2,085
General and administrative expense 2,483
—
2,483
1,729
187
1,916
Other (income) expense, net 117
—
117
(1,035 ) —
(1,035 )
Pretax loss from discontinued operations (2,401 ) —
(2,401 ) (9,093 ) (351 ) (9,444 )
Pretax loss on disposal of discontinued operations (7,500 ) (33,813 )
Total pretax loss from discontinued operations (9,901 ) (43,257 )
Income tax benefit —
(2,326 )
Total loss from discontinued operations $ (9,901 ) $ (40,931 )

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

~~(in thousands)~~

September 30, 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 $ 16
$ —
$ 16
$ —
$ 1,340
$ 1,340
Other current assets —
—
—
14
—
14
Assets of discontinued operations $ 16
$ —
$ 16
$ 14
$ 1,340
$ 1,354

Carrying amounts of major classes of liabilities included as part of discontinued operations
Trade payables $ 901
$ —
$ 901
$ 740
$ —
$ 740
Accrued liabilities 885
121
1,006
1,330
2,075
3,405
Liabilities of discontinued operations $ 1,786
$ 121
$ 1,907
$ 2,070
$ 2,075
$ 4,145

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NOTE E6 – LONG-TERM DEBT AND OTHER BORROWINGS

We believe our capital structure, excluding CCLP, ~~("TETRA"~~(“TETRA”) and ~~CCLP's~~CCLP’s capital structure should be considered separately, as there are no cross default provisions ~~cross collateralization provisions,~~ or cross guarantees between ~~CCLP's~~CCLP’s debt and ~~TETRA's~~TETRA’s debt.

Consolidated long-term debt as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, consists of the following:


		September 30, 2020		December 31, 2019
		(In Thousands)
TETRA	Scheduled Maturity
Asset-based credit agreement (presented net of unamortized deferred financing costs of $0 million as of September 30, 2020 and $1.0 million as of December 31, 2019)	September 10, 2023	$	0	$	0
Term credit agreement (presented net of the unamortized discount of $5.7 million as of September 30, 2020 and $6.4 million as of December 31, 2019 and net of unamortized deferred financing costs of $8.5 million as of September 30, 2020 and $9.5 million as of December 31, 2019)	September 10, 2025	206,273		204,633


TETRA total long-term debt		$	206,273	$	204,633

CCLP
CCLP asset-based credit agreement (presented net of unamortized deferred financing costs of $0 million as of September 30, 2020 and $0.9 million of December 31, 2019)	June 29, 2023	0		2,622
CCLP 7.25% Senior Notes (presented net of the unamortized discount of $0.3 million as of September 30, 2020 and $1.7 million as of December 31, 2019 and net of unamortized deferred financing costs of $0.5 million as of September 30, 2020 and $2.8 million as of December 31, 2019)	August 15, 2022	79,893		291,444
CCLP 7.50% First Lien Notes (presented net of unamortized deferred financing costs of $5.4 million as of September 30, 2020 and $5.8 million as of December 31, 2019, net of the unamortized discount of $0.2 million as of September 30, 2020, and net of deferred restructuring gain of $5.3 million as of September 30, 2020)	April 1, 2025	399,640		344,172
CCLP 10.00%/10.75% Second Lien Notes (presented net of the unamortized discount of $0.8 million as of September 30, 2020, net of unamortized deferred financing costs of $1.2 million as of September 30, 2020, and net of deferred restructuring gain of $3.9 million as of September 30, 2020)	April 1, 2026	157,410		0


CCLP total long-term debt		$	636,943	$	638,238
Consolidated total long-term debt		$	843,216	$	842,871

September 30, 2019 December 31, 2018
(In Thousands)
TETRA Scheduled Maturity
Asset-based credit agreement (presented net of unamortized deferred financing costs of $1.4 million as of September 30, 2019) September 2023 $ 8,585
$ —
Term credit agreement (presented net of the unamortized discount of $6.6 million as of September 30, 2019 and $7.2 million as of December 31, 2018 and net of unamortized deferred financing costs of $9.8 million as of September 30, 2019 and $10.2 million as of December 31, 2018) September 2025 204,112
182,547
TETRA total debt 212,697
182,547
Less current portion —
—
TETRA total long-term debt $ 212,697
$ 182,547

CCLP
CCLP asset-based credit agreement (presented net of unamortized deferred financing costs of $0.9 million as of September 30, 2019) June 2023 10,559
—
CCLP 7.25% Senior Notes (presented net of the unamortized discount of $1.8 million as of September 30, 2019 and $2.2 million as of December 31, 2018 and net of unamortized deferred financing costs of $3.1 million as of September 30, 2019 and $3.9 million as of December 31, 2018) August 2022 291,028
289,797
CCLP 7.50% Senior Secured Notes (presented net of unamortized deferred financing costs of $6 million as of September 30, 2019 and $6.8 million as of December 31, 2018) April 2025 343,988
343,216
CCLP total debt 645,575
633,013
Less current portion —
—
CCLP total long-term debt $ 645,575
$ 633,013
Consolidated total long-term debt $ 858,272
$ 815,560

As of September 30, ~~2019,~~2020, TETRA had ~~a $10.0 million~~0 outstanding balance and $~~6.9~~6.4 million in letters of credit against its asset-based credit agreement ("(“ABL Credit ~~Agreement"~~Agreement”). Because there was no outstanding balance on this Credit Agreement, associated deferred financing costs of $1.1 million as of September 30, 2020, were classified as other long-term assets on the accompanying consolidated balance sheet. As of September 30, ~~2019,~~2020, subject to compliance with the covenants, borrowing base, and other provisions of the ~~agreement~~ABL Credit Agreement that may limit borrowings, TETRA had an availability of ~~$41.6~~$25.8 million under this agreement. ~~There was an $11.5 million~~

As of September 30, 2020, CCLP had 0 balance outstanding and $~~3.0~~2.5 million in letters of credit against ~~the CCLP~~its asset-based credit agreement ("(“CCLP Credit ~~Agreement"~~Agreement”) ~~as of September 30, 2019. On June 26, 2019, CCLP entered into an amendment of~~. Because there was no outstanding balance under the CCLP Credit Agreement, ~~that, among~~associated deferred financing costs of $0.7 million were classified as other ~~things, revised and increased~~long-term assets on the ~~borrowing base, including adding the value of certain CCLP inventory in the determination of the borrowing base.~~accompanying consolidated balance sheet. As of September 30, ~~2019,~~2020, and subject to compliance with the covenants, borrowing base, and other provisions of the ~~agreements~~CCLP Credit Agreement that may limit borrowings, ~~under the CCLP Credit Agreement,~~ CCLP had availability of ~~$7.8~~$14.5 million.

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TETRA and CCLP credit and senior note agreements contain certain affirmative and negative covenants, including covenants that restrict the ability to pay dividends or other restricted payments. TETRA and CCLP are both in compliance with all covenants of their respective credit and senior note agreements as of September 30, ~~2019.~~

~~NOTE F – CCLP SERIES A CONVERTIBLE PREFERRED UNITS~~

2020.

~~In January 2019, CCLP began redeeming CCLP Preferred Units for cash, resulting in 2,660,569 CCLP Preferred Units being redeemed during~~

Second Amendment to Credit Agreement

On June 11, 2020, CSI Compressco, LP and CSI Compressco Sub Inc (the “Borrowers”) entered into the ~~nine months ended September 30, 2019 for an aggregate of~~ ~~$28.0 million,~~Second Amendment to Loan and Security Agreement (the “Amendment”) amending the Loan and Security Agreement dated June 29, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) with Bank of America, N.A., in its capacity as administrative agent, issuing bank and swing line issuer (“Administrative Agent”), and the other lenders and loan parties party thereto. The Amendment provided for changes and modifications to the Credit Agreement which ~~includes approximately $1.3~~include, among other things, changes to certain terms of the Credit Agreement as follows: (i) resizing of the maximum credit commitment under the Credit Agreement from $50,000,000 to $35,000,000; (ii) the inclusion of a $5,000,000 reserve with respect to the Borrowing Base (as defined in the Credit Agreement) thereunder, which would result in reduced borrowing availability; (iii) the removal of the financial covenant compliance test with respect to the Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement); (iv) an increase in the applicable margin related to (x) LIBOR Rate Loans (as defined in the Credit Agreement) to a range between 3.00% and 3.50% and (y) Base Rate Loans (as defined in the Credit Agreement) to a range between 2.00% and 2.50%, in each case, which shall be determined according to average daily excess availability under the Credit Agreement; and (v) an increase in the rate used to calculate the commitment fee in respect of the unutilized commitments under the Credit Agreement to 0.50%. In connection to this amendment, $0.2 million of ~~redemption premium that was paid~~financing costs were incurred by CCLP and ~~charged to other (income) expense, net in~~deferred against the accompanying consolidated statements of operations. The last redemption of the remaining outstanding CCLP Preferred Units, along with a final cash payment made in lieu of paid-in-kind units, occurred on August 8, 2019, for an aggregate cash payment of $5.0 million, of which $0.6 million was paid to us.

~~NOTE G – FAIR VALUE MEASUREMENTS~~

~~Financial Instruments~~

~~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).~~

~~Contingent Consideration~~

~~The fair~~carrying value of the remaining 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 pre-existing operations in the Permian Basin (a Level 3 fair value measurement). At September 30, 2019, based on a forecast of SwiftWater 2019 revenues and EBITDA, the estimated fair value for the liability associated with the remaining contingent purchase price consideration wasamount outstanding, if any. Additionally, $0.2 million ~~resulting in $0.8 million being credited~~of financing fees were charged to other (income) expense, net during the nine ~~months~~month period ended September 30, ~~2019. During~~2020.

First Supplemental Indenture for the ~~nine months ended September 30, 2019, the sellers received a payment~~Old Notes

On June 11, 2020, CSI Compressco, LP and CSI Compressco Finance Inc. (the “Issuers”) announced that they had accepted for exchange $215,208,000, or approximately 72.7%, of ~~$10.0 million based~~their outstanding 7.25% Senior Notes due 2022 (the “Old Notes”) that were validly tendered (and not validly withdrawn) by 11:59 p.m., New York City time, on ~~SwiftWater's performance during 2018. In addition, as part~~June 10, 2020, for (i) $50,000,000 of the ~~purchase~~Issuers’ 7.50% Senior Secured First Lien Notes due 2025 (the “7.50% First Lien Notes”) and (ii) $155,529,000 aggregate principal amount of ~~JRGO Energy Services LLC ("JRGO") during December 2018,~~new 10.00%/10.75% Senior Secured Second Lien Notes due 2026 (the “10.00%/10.75% Second Lien Notes” and, together with the ~~sellers~~7.50% First Lien Notes, the “New Notes”), pursuant to its previously announced exchange offer and consent solicitation (the “Exchange Offer”), which commenced on April 17, 2020. In connection with the exchange offer, CCLP incurred financing fees of $4.6 million which were ~~paid contingent consideration of $1.4 million~~charged to other (income) expense, net during the nine month period ended September 30, ~~2019, based on JRGO's performance during the fourth quarter of 2018.~~2020.

~~Derivative Contracts~~

We and CCLP each enter into short 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 September 30, 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

(In Thousands)

Forward purchase Euro $ 9,472
1.12 12/19/2019
Forward purchase Euro 8,687
1.11 10/18/2019
Forward sale pounds sterling 1,867
1.24 10/18/2019
Forward purchase Mexican peso 774
19.38 10/18/2019
Forward purchase Norwegian krone 5,063
8.89 10/18/2019
Forward sale Mexican peso 8,844
19.56 10/18/2019

Derivative Contracts British Pound Notional Amount Traded Exchange Rate Settlement Date
(In Thousands)
Forward purchase Euro 2,316
0.89 10/18/2019

Derivative Contracts Swedish Krona Notional Amount Traded Exchange Rate Settlement Date
(In Thousands)
Forward purchase Euro 15,980
10.65 10/18/2019

On June 12, 2020, following receipt of the requisite consents of the holders of the Old Notes, the Issuers entered into the First Supplemental Indenture (the “First Supplemental Indenture”), by and among the Issuers, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee, to the Indenture, dated as of August 4, 2014 (the “Unsecured Indenture”), by and among the Issuers, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee.

~~Under this program, we~~ The First Supplemental Indenture eliminated substantially all of the restrictive covenants and ~~CCLP~~certain of the default provisions in the Unsecured Indenture and became operative upon the consummation by the Issuers of the Exchange Offer.

On June 12, 2020, the Issuers issued $50,000,000 in aggregate principal amount of New First Lien Notes to certain holders of the Old Notes pursuant to the terms of the Exchange Offer. In March 2018, the Issuers had issued $350,000,000 in aggregate principal amount of 7.50% Senior Secured Notes due 2025 (the “Existing First Lien Notes” and, together with the New First Lien Notes, the “7.50% First Lien Notes”) pursuant to the First Lien Base Indenture. The New First Lien Notes were issued as “additional notes” under the First Lien Base Indenture and will be treated as a single class with such notes but will not trade fungibly with the Existing First Lien Notes.

Second Lien Notes Indenture

On June 12, 2020, the Issuers issued $155,529,000 in aggregate principal amount of the 10.00%/10.75% Second Lien Notes to certain holders of the Old Notes pursuant to the terms of the Exchange Offer. The Issuers

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issued the 10.00%/10.75% Second Lien Notes pursuant to an indenture, dated June 12, 2020 (the “Second Lien Notes Indenture”),by and among the Issuers, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee (the “Second Lien Trustee”). In connection with the payment of PIK Interest (as defined below), if any, in respect of the 10.00%/10.75% Second Lien Notes, the Issuers will be entitled, without the consent of the Holders, to increase the outstanding aggregate principal amount of the 10.00%/10.75% Second Lien Notes or issue additional notes (“PIK notes”) under the Second Lien Notes Indenture on the same terms and conditions as the 10.00%/10.75% Second Lien Notes offered hereby (each such increase or issuance, a “PIK Payment”). The Issuers may ~~enter into similar derivative contracts~~issue additional 10.00%/10.75% Second Lien Notes under the Second Lien Notes Indenture from time to time. ~~Although contracts~~Any issuance of additional 10.00%/10.75% Second Lien Notes (including PIK notes) is subject to all of the covenants in the Second Lien Notes Indenture. The 10.00%/10.75% Second Lien Notes and any additional 10.00%/10.75% Second Lien Notes subsequently issued under the indenture, will be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. Subject to the making of PIK Payments, the Issuers will issue 10.00%/10.75% Second Lien Notes in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000; provided that PIK Payments may result in 10.00%/10.75% Second Lien Notes being issued in denominations of $1.00 and integral multiples of $1.00. The 10.00%/10.75% Second Lien Notes will mature on April 1, 2026. Interest on the 10.00%/10.75% Second Lien Notes will be payable semi-annually in arrears on April 1 and October 1, commencing on October 1, 2020. The Issuers will make each interest payment to the holders of record on March 15 and September 15 immediately preceding each interest payment date. Interest will accrue at (1) the annual rate of 7.250% payable in cash, plus (2) at the election of the Issuers (made by delivering a notice to the Second Lien Trustee not less than five business days prior to the record date), the annual rate of (i) 2.750% payable in cash (together with the annual rate set forth in clause (1), the “Cash Interest Rate”) or (ii) 3.500% payable by increasing the principal amount of the outstanding 10.00%/10.75% Second Lien Notes or by issuing additional PIK notes, in each case rounding up to the nearest $1.00 (such increased principal amount or additional PIK notes, the “PIK Interest”). In the absence of an interest payment election made by the Issuers as set forth above, interest on the notes will be payable as if the Issuers had elected to pay PIK Interest with respect to the portion of interest payable pursuant to ~~this program will serve as an economic hedge~~clause (2) above.

The 10.00%/10.75% Second Lien Notes are jointly and severally, and fully and unconditionally, guaranteed (the “Guarantees”) on a senior secured basis initially by each 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~~Partnership’s domestic restricted subsidiaries (other than Finance Corp, certain immaterial subsidiaries and certain other excluded domestic subsidiaries, the ~~fair value of these derivative contracts during a period~~“Guarantors”) and will be ~~included~~secured by a second-priority security interest in substantially all of the ~~determination of earnings for that period.~~

The fair values of foreign currency derivative contracts are based on quoted market values (a Level 2 fair value measurement). The fair values of our and CCLP's foreign currency derivative contracts as of September 30, 2019 and December 31, 2018, are as follows:

Foreign currency derivative contracts Balance Sheet Location Fair Value at September 30, 2019 Fair Value at December 31, 2018

(In Thousands)
Forward purchase contracts Current assets $ 12
$ 41
Forward sale contracts Current assets 122
76
Forward sale contracts Current liabilities —
(126 )
Forward purchase contracts Current liabilities (504 ) (168 )
Net asset (liability) $ (370 ) $ (177 )

None of our 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 and nine month periods ended September 30, 2019, we recognized $1.0 million and $1.8 millionof ~~net (gains) losses, respectively, reflected in other (income) expense, net, associated with our foreign currency derivative program. During the three and nine months ended September 30, 2018, we recognized$0.6 million and $(0.1) million of~~ ~~net (gains) losses, respectively, reflected in other (income) expense, net, associated with our foreign currency derivative program.~~

~~Recurring fair value measurements by valuation hierarchy as of September 30, 2019 and December 31, 2018, are as follows:~~

Fair Value Measurements Using
Total as of Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Other Observable Inputs Significant Unobservable Inputs
Description September 30, 2019 (Level 1) (Level 2) (Level 3)
(In Thousands)
Warrants liability $ (1,038 ) $ —
$ —
$ (1,038 )
Asset for foreign currency derivative contracts 134
—
134
—
Liability for foreign currency derivative contracts (504 ) —
(504 ) —
Acquisition contingent consideration liability (200 ) —
—
(200 )
Net liability $ (1,608 )

Fair Value Measurements Using
Total as of Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Other Observable Inputs Significant Unobservable Inputs
Description December 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 contracts 117
—
117
—
Liability for foreign currency derivative contracts (294 ) —
(294 ) —
Acquisition contingent consideration liability (12,452 ) —
—
(12,452 )
Net liability $ (41,721 )

The fair values of cash, restricted cash, accounts receivable, accounts payable, accrued liabilities, short-term borrowings and long-term debt pursuant to TETRA's ABL Credit Agreement and Term Credit Agreement,Issuers’ and the ~~CCLP Credit Agreement approximate~~Guarantors’ assets (other than certain excluded assets) (the “Collateral”) as collateral security for their ~~carrying amounts. The fair values~~obligations under the 10.00%/10.75% Second Lien Notes, subject to certain permitted encumbrances and exceptions. At any time prior to April 1, 2023, the Issuers may on any one or more occasions redeem up to 35% of the publicly traded CCLP 7.25% Senior Notes at September 30, 2019 and December 31, 2018, were approximately $269.2 million and $266.3 million, respectively. Those fair values compare to the face amount of $295.9 million both at September 30, 2019 and December 31, 2018. The fair values of the CCLP 7.50% Senior Secured Notes at September 30, 2019 and December 31, 2018 were approximately $344.8 million and $332.5 million, respectively. These fair values compare to aggregate principal amount of ~~such notes~~the 10.00%/10.75% Second Lien Notes issued under the Second Lien Notes Indenture at ~~both September 30, 2019 and December 31, 2018,~~a redemption price of ~~$350.0 million. We based the fair values~~110.000% of the ~~CCLP 7.25% Senior~~principal amount of the 10.00%/10.75% Second Lien Notes, plus accrued and unpaid interest to the redemption date, with an amount of cash equal to the net cash proceeds of certain equity offerings. On or after April 1, 2023, the Issuers may redeem all or part of the 10.00%/10.75% Second Lien Notes at redemption prices (expressed as percentages of the principal amount) equal to (i) 107.500% for the twelve month period beginning on April 1, 2023; (ii) 105.000% for the twelve-month period beginning on April 1, 2024 and (iii) 100.000% at any time thereafter, plus accrued and unpaid interest up to, but not including, the redemption date. In addition, at any time prior to April 1, 2023, the Company may redeem all or a part of the 10.00%/10.75% Second Lien Notes at a redemption price equal to 100% of the principal amount of the 10.00%/10.75% Second Lien Notes to be redeemed plus a make-whole premium, plus accrued and unpaid interest up to, but not including, the redemption date.

The Second Lien Notes Indenture contains customary covenants restricting the Partnership’s ability and the ~~CCLP 7.50% Senior Secured~~ability of its restricted subsidiaries to: (i) pay distributions on, purchase or redeem its common units or purchase or redeem its 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 the Partnership. These covenants are subject to a number of important limitations and exceptions, including certain provisions permitting the Partnership, subject to the satisfaction of certain conditions, to transfer assets to certain of its unrestricted subsidiaries. Moreover, if the 10.00%/10.75% Second Lien Notes asreceive an investment grade rating from at least two rating agencies and no default has occurred and is continuing under the 10.00%/10.75% Second Lien Notes Indenture, many of ~~September 30, 2019 on recent trades for these notes.~~the restrictive covenants in the Second Lien Notes Indenture will be terminated. The Second Lien Notes 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

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Second Lien Notes Indenture, the Second Lien Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding 10.00%/10.75% Second Lien Notes may declare all of the 10.00%/10.75% Second Lien Notes to be due and payable immediately.

NOTE H7 – DISCONTINUED OPERATIONS

Reconciliation of the Line Items Constituting Pretax Loss from Discontinued Operations to the After-Tax Loss from Discontinued Operations

(in thousands)


	Three Months Ended September 30, 2020						Three Months Ended September 30, 2019
	Offshore Services		Maritech		Total		Offshore Services		Maritech		Total
Major classes of line items constituting pretax loss from discontinued operations
Revenue	$	0	$	0	$	0	$	0	$	0	$	0
Cost of revenues	2		0		2		(273)		0		(273)
Depreciation, amortization, and accretion	0		0		0		52		0		52
General and administrative expense	171		0		171		1,734		0		1,734
Other expense, net	0		0		0		117		0		117
Pretax income (loss) from discontinued operations	(173)		0		(173)		(1,630)		0		(1,630)
Pretax (loss) on disposal of discontinued operations					0						(7,500)
Total pretax (loss) from discontinued operations					(173)						(9,130)
Income tax provision (benefit)					0						0
Total (loss) from discontinued operations					$	(173)					$	(9,130)


	Nine Months Ended September 30, 2020						Nine Months Ended September 30, 2019
	Offshore Services		Maritech		Total		Offshore Services		Maritech		Total
Major classes of line items constituting pretax loss from discontinued operations
Revenue	$	0	$	0	$	0	$	0	$	0	$	0
Cost of revenues	(332)		0		(332)		(251)		0		(251)
Depreciation, amortization, and accretion	0		0		0		52		0		52
General and administrative expense	487		0		487		2,483		0		2,483
Other expense, net	0		0		0		117		0		117
Pretax (loss) from discontinued operations	(155)		0		(155)		(2,401)		0		(2,401)
Pretax (loss) on disposal of discontinued operations					0						(7,500)
Total pretax (loss) from discontinued operations					(155)						(9,901)
Income tax provision (benefit)					0						0
Total (loss) from discontinued operations					$	(155)					$	(9,901)

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

(in thousands)


	September 30, 2020						December 31, 2019
	Offshore Services		Maritech		Total		Offshore Services		Maritech		Total
Carrying amounts of major classes of assets included as part of discontinued operations
Trade receivables	$	0	$	0	$	0	$	0	$	0	$	0

Other current assets	0		0		0		0		0		0
Assets of discontinued operations	$	0	$	0	$	0	$	0	$	0	$	0





Carrying amounts of major classes of liabilities included as part of discontinued operations
Trade payables	$	1,223	$	0	$	1,223	$	1,233	$	0	$	1,233
Accrued liabilities	401		228		629		745		120		865

Liabilities of discontinued operations	$	1,624	$	228	$	1,852	$	1,978	$	120	$	2,098

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Litigation

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

Contingencies of Discontinued Operations

In early 2018, we closed the Maritech Asset Purchase and Sale Agreement with Orinoco Natural Resources, LLC ~~("Orinoco"~~(“Orinoco”) that provided for the purchase by Orinoco of ~~Maritech's~~Maritech’s remaining oil and gas properties and related assets. ~~Also in early 2018,~~Shortly thereafter, we closed the Maritech Membership Interest Purchase and Sale Agreement with Orinoco that provided for the purchase by Orinoco of all of the outstanding membership interests in Maritech. As a result of these transactions, we have effectively exited the business of our former Maritech segment.

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

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

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

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

In early 2018, we also closed the sale of our Offshore Division to Epic Companies, LLC (“Epic Companies,” formerly known as Epic Offshore Specialty, LLC). Part of the consideration we received was a promissory note of Epic Companies in the original principal amount of ~~$7.5~~$7.5 million ~~(the~~(the “Epic Promissory Note”) payable to us in full, together with interest at a rate of 1.52% per annum, on December 31, 2019, along with a personal guaranty agreement from Thomas M. Clarke and Ana M. Clarke guaranteeing the payment obligations of Epic Companies pursuant to the Epic Promissory Note (the “Clarke Promissory Note Guaranty Agreement”). Additionally, pursuant to the Equity Interest Purchase Agreement (the “Offshore Services Purchase Agreement”) and other agreements with Epic Companies, certain other amounts relating to the Offshore Division totaling approximately ~~$1.5~~$1.5 million were payable to us. At the end of August 2019, Epic Companies filed for bankruptcy. ~~Although the Epic Promissory Note is not currently due and is guaranteed by the Clarke Promissory Note Guaranty Agreement, we~~We recorded a reserve of ~~$7.5~~$7.5 million for the full amount of the promissory note, including accrued interest, and the certain other receivables in the amount of ~~$1.5~~$1.5 million at during the quarter ended September 30, 2019. ~~We continue to monitor this matter~~The Epic Promissory Note became due on December 31, 2019 but neither Epic nor the Clarkes made the required payment. Upon the default by Epic and ~~seek to vigorously pursue our rights to collect all amounts payable to us, including~~the Clarkes, we filed a lawsuit against the Clarkes on January 15, 2020 in Montgomery County, Texas for breach of the Clarke Promissory Note Guaranty Agreement, seeking the amounts ~~owed~~due under the Epic Promissory Note ~~when due, including by enforcing~~and related interest, as well as attorneys’ fees and expenses. The Clarkes each filed an answer and counterclaims for fraud and negligent misrepresentation and seek monetary damages in excess of $1 million, punitive damages, and attorneys’ fees. After taking discovery from the Clarkes, on August 21, 2020, we filed a Motion for Summary Judgment to recover the principal amount of the note plus interest from the Clarkes and to dismiss their counterclaims. The Court granted the Motion for Summary Judgment and entered Final Judgment in our ~~rights under~~favor, thereby dismissing the ~~Clarke Promissory Note Guaranty Agreement.~~Clarkes’ counterclaims and awarding TETRA the full amount requested pursuant to an Order dated September 23, 2020. The Court awarded TETRA the full amount of $7,887,454, plus post-judgment interest at the rate of 3.52% per annum. On October 21, 2020, the Clarkes filed a Notice of Appeal. We will defend the Clarkes’ appeal and consider the options available to enforce the Court’s Order.

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NOTE I9 – FAIR VALUE MEASUREMENTS

Financial Instruments

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).

Derivative Contracts

We and CCLP each enter into short 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 September 30, 2020, 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

(In Thousands)

Forward sale Mexican peso

5,464

21.87

October 1, 2020

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 contracts during a period will be included in the determination of earnings for that period.

The fair values of foreign currency derivative contracts are based on quoted market values (a Level 2 fair value measurement). The fair values of our and CCLP’s foreign currency derivative contracts as of September 30, 2020 and December 31, 2019, are as follows:


Foreign currency derivative contracts	Balance Sheet Location	Fair Value at September 30, 2020		Fair Value at December 31, 2019
		(In Thousands)
Forward purchase contracts	Current assets	$	59	$	86

Forward sale contracts	Current liabilities	0		(53)
Forward purchase contracts	Current liabilities	0		(3)
Net asset		$	59	$	30

None of our 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 and nine months ended September 30, 2020, we recognized $0.2 million and $(0.7) million, respectively,of net (gains) losses associated with our foreign currency derivative program. During the three and nine months ended September 30, 2019, we recognized $1.0 million and$1.8 million, respectively, of net (gains) losses associated with our foreign currency derivative program. These amounts are reflected in other (income) expense, net, in the accompanying consolidated statement of operations.

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During the nine months ended September 30, 2020, we recorded impairments of approximately $9.0 million, reflecting the decreased fair value for certain assets. The fair values used in these impairment calculations were estimated based on a market approach, which is based on significant unobservable inputs (Level 3) in accordance with the fair value hierarchy. See Note 3 - “Impairments and Other Charges” for further discussion.

Recurring and nonrecurring fair value measurements by valuation hierarchy as of September 30, 2020 and December 31, 2019, are as follows:


			Fair Value Measurements Using
	Total as of		Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	September 30, 2020		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)


Warrants liability	$	(123)	$	0	$	0	$	(123)
Asset for foreign currency derivative contracts	59		0		59		0

Net asset	$	(64)


			Fair Value Measurements Using
	Total as of		Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	December 31, 2019		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Warrants liability	$	(449)	$	0	$	0	$	(449)
Asset for foreign currency derivative contracts	86		0		86		0
Liability for foreign currency derivative contracts	(56)		0		(56)		0
Net liability	$	(419)

The fair values of cash, restricted cash, accounts receivable, accounts payable, accrued liabilities, short-term borrowings and long-term debt pursuant to TETRA’s ABL Credit Agreement and Term Credit Agreement, and the CCLP Credit Agreement approximate their carrying amounts. The fair values of the publicly traded CCLP 7.25% Senior Notes at September 30, 2020 and December 31, 2019, were approximately $59.7 million and $266.0 million, respectively. Those fair values compare to the face amount of $80.7 million and $295.9 million at September 30, 2020 and December 31, 2019, respectively. The fair values of the CCLP 7.50% Senior Secured Notes at September 30, 2020 and December 31, 2019 were approximately $360.0 million and $344.8 million, respectively. These fair values compare to aggregate principal amount of such notes at September 30, 2020 and December 31, 2019, of $400.0 million and $350.0 million, respectively. The fair value of the CCLP 10.00%/10.75% Second Lien Notes at September 30, 2020 was approximately $115.5 million. This fair value compares to aggregate principal amount of such notes at September 30, 2020 of $155.5 million. We based the fair values of the CCLP 7.25% Senior Notes, the CCLP 7.50% Senior Secured Notes, and the CCLP 10.00%/10.75% Second Lien Notes as of September 30, 2020 on recent trades for these notes. See Note 6 - “Long-Term Debt and Other Borrowings” for further discussion.

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NOTE 10 – SALE OF ASSETS

In April 2020, we entered into a purchase and sale agreement for the sale of the Midland manufacturing facility within our Compression Division. During the nine months ended September 30, 2020, we recorded an impairment of $3.1 million to reduce this asset to its approximate fair market value based on a market approach and expected net proceeds. The impairment charges are reflected in impairment and other charges in our statement of operations.

On July 2, 2020, we completed the previously announced sale of our Midland manufacturing facility for a total sale price of $17.0 million. The Midland facility was used to design, fabricate and assemble new standard and customized compressor packages. The sale of the Midland facility resulted in a gain of $0.3 million during the three and nine months ended September 30, 2020, which is reflected in other (income) expense, net in our statement of operations.

Additionally, in the third quarter of 2020, we sold the remaining inventory and equipment related to the fabrication of new compressors within our Compression Division for a gain of $0.5 million, which is reflected in other (income) expense, net in our statement of operations for the three and nine months ended September 30, 2020. During the nine months ended September 30, 2020, we recorded an impairment of $2.3 million to reduce the carrying value of the new unit sales inventory to its approximate fair market value based on a market approach. The impairment charges are reflected in impairment and other charges in our statement of operations.

During the third quarter ended September 30, 2020, we completed the sale of 58 low-horsepower units to one of our customers for $2.6 million. During the nine months ended September 30, 2020, we recorded an impairment of $3.7 million to reduce these assets to their approximate fair market value based on a market approach and expected net proceeds. The impairment charges are reflected in impairment and other charges in our statement of operations.

NOTE 11 – NET INCOME (LOSS) PER SHARE


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020	2019	2020	2019
	(In Thousands)
Number of weighted average common shares outstanding	125,893	125,568	125,789	125,620
Assumed exercise of equity awards and warrants	0	0	0	0
Average diluted shares outstanding	125,893	125,568	125,789	125,620

For thethree and nine month periods ended September 30, 2020 and September 30, 2019, 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 nine month period ended September 30, 2019, the calculation of diluted earnings per common share excludes the impact of the CSI Compressco LP Series A Convertible Preferred Units (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.

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NOTE 12 – INDUSTRY SEGMENTS

We manage our operations through 3 Divisions: Completion Fluids & Products, Water & Flowback Services, and Compression.

Summarized financial information concerning the business segments is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(In Thousands)
Revenues from external customers
Product sales
Completion Fluids & Products Division	$	49,986	$	55,444	$	187,419	$	185,578
Water & Flowback Services Division	23		100		56		831
Compression Division	18,801		37,833		64,541		134,099
Consolidated	$	68,810	$	93,377	$	252,016	$	320,508

Services
Completion Fluids & Products Division	$	1,964	$	3,896	$	11,114	$	15,110
Water & Flowback Services Division	21,511		72,741		103,668		223,812
Compression Division	60,316		75,933		201,186		219,041
Consolidated	$	83,791	$	152,570	$	315,968	$	457,963








Total revenues
Completion Fluids & Products Division	$	51,950	$	59,340	$	198,533	$	200,688
Water & Flowback Services Division	21,534		72,841		103,724		224,643
Compression Division	79,117		113,766		265,727		353,140��
Interdivision eliminations	0		0		0		0
Consolidated	$	152,601	$	245,947	$	567,984	$	778,471

Income (loss) before taxes
Completion Fluids & Products Division	$	11,756	$	11,318	$	44,354	$	32,118
Water & Flowback Services Division	(7,746)		2,578		(18,408)		7,269
Compression Division	(11,321)		(3,464)		(47,117)		(14,748)
Interdivision eliminations	3		(1)		10		6
Corporate Overhead(1)	(13,472)		(17,931)		(43,825)		(54,921)
Consolidated	$	(20,780)	$	(7,500)	$	(64,986)	$	(30,276)

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
(In Thousands)
Revenues from external customers

Product sales

Completion Fluids & Products Division $ 55,444
$ 58,050
$ 185,578
$ 181,394
Water & Flowback Services Division 100
941
831
1,617
Compression Division 37,833
43,079
134,099
102,125
Consolidated $ 93,377
$ 102,070
$ 320,508
$ 285,136

Services

Completion Fluids & Products Division $ 3,896
$ 5,027
$ 15,110
$ 11,344
Water & Flowback Services Division 72,741
77,572
223,812
221,342
Compression Division 75,933
72,182
219,041
198,482
Consolidated $ 152,570
$ 154,781
$ 457,963
$ 431,168

Interdivision revenues

Completion Fluids & Products Division $ —
$ (4 ) $ —
$ (5 )
Water & Flowback Services Division —
55
—
330
Compression Division —
—
—
—
Interdivision eliminations —
(51 ) —
(325 )
Consolidated $ —
$ —
$ —
$ —

Total revenues

Completion Fluids & Products Division $ 59,340
$ 63,073
$ 200,688
$ 192,733
Water & Flowback Services Division 72,841
78,568
224,643
223,289
Compression Division 113,766
115,261
353,140
300,607
Interdivision eliminations —
(51 ) —
(325 )
Consolidated $ 245,947
$ 256,851
$ 778,471
$ 716,304

Income (loss) before taxes

Completion Fluids & Products Division $ 11,318
$ 8,713
$ 32,118
$ 21,143
Water & Flowback Services Division 2,578
5,809
7,269
20,668
Compression Division (3,464 ) (7,844 ) (14,748 ) (30,517 )
Interdivision eliminations (1 ) 5
6
9
Corporate Overhead⁽¹⁾
(17,931 ) (19,631 ) (54,921 ) (53,870 )
Consolidated $ (7,500 ) $ (12,948 ) $ (30,276 ) $ (42,567 )


~~(1)~~	~~Amounts reflected include the following general corporate expenses:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
(In Thousands)
General and administrative expense $ 12,573
$ 13,037
$ 39,012
$ 37,506
Depreciation and amortization 167
172
507
487
Interest expense 5,495
5,268
16,533
14,152
Warrants fair value adjustment (income) expense 78
(179 ) (1,035 ) 22
Other general corporate (income) expense, net (382 ) 1,333
(96 ) 1,703
Total $ 17,931
$ 19,631
$ 54,921
$ 53,870

(1)Amounts reflected include the following general corporate expenses:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(In Thousands)
General and administrative expense	$	8,959	$	12,573	$	28,650	$	39,012
Depreciation and amortization	270		167		643		507
Interest expense	4,706		5,495		14,909		16,533
Warrants fair value adjustment (income) expense	0		78		(327)		(1,035)
Other general corporate income, net	(463)		(382)		(50)		(96)
Total	$	13,472	$	17,931	$	43,825	$	54,921

NOTE J13 – ~~REVENUE FROM CONTRACTS WITH CUSTOMERS~~

SUBSEQUENT EVENTS

~~Performance Obligations.Revenue is generally recognized when~~

In connection with the Midland manufacturing facility sale discussed in Note 10, we ~~transfer control of our products or services~~entered into an agreement with the buyer to ~~our customers. Revenue is measured as the amount of consideration we expect~~continue to receive in exchange for transferring products or providing services to our customers. We receive cash equal to the invoice price for most sales of product 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 such products or services is 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~~operate a portion of the ~~consideration received because~~facility, which allowed us to close out remaining backlog for the New Unit Sale business and operate our aftermarket services business for an interim period. Following the shipment of the last unit in October, we ~~have to satisfy a future performance obligation. For example, consideration received from customers during the fabrication of~~are no longer fabricating new compressor packages ~~is typically deferred until control~~for sales to third parties or for our own service fleet. The operations associated with fabricating new compressor packages will be reported as a discontinued operation in the fourth quarter of 2020.

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In July 2020, we received a purchase order to sell $6.7 million of idle large horsepower compressor units to one of our significant customers. During the third quarter of 2020, we received proceeds and recognized $1.7 million relating to this order. In October 2020, we received the remaining $5.0 million of proceeds and started to deliver the compressor ~~package is transferred~~units 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.

~~Product Sales.~~ Product sales revenues are generally recognized 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~~customer. 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.

~~As of September 30, 2019, we had~~ ~~$69.9 million~~ ~~of remaining contractual performance obligations for compression services.~~ As a practical expedient, this amount does not reflect revenue for compression service contracts whose original expected duration is less than twelve months and does not consider the effects of the time value of money. Expected revenue to be recognized in the future for completion of performance obligations of compression service contracts are ~~as follows:~~

2019 2020 2021 2022 2023 Total
(In Thousands)
Compression service contracts remaining performance obligations $ 18,830
$ 37,710
$ 11,834
$ 1,551
$ —
$ 69,925

~~Sales taxes, value added taxes, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.~~ We have ~~elected~~and will continue 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.~~ In recognizing revenue for variable 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 forevaluate the sale of ~~CBF,~~other non-core assets, including our low-horsepower compression fleet. We can provide no assurance that 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 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 September 30, 2019, the amount of remaining credits expected to be issued for the repurchase of reclaimable used fluids was ~~$2.1 million that were recorded in inventory (right of return asset) and accounts payable. There were no material differences between amounts recognized during the three and nine month periods ended September 30, 2019, compared to estimates made in~~will consummate a ~~prior period from these variable consideration arrangements.~~

~~Contract Assets and Liabilities.~~ We consider contract assets to be trade accounts receivable when we have an unconditional right to consideration and only the passage of time is required before payment is due. In certain instances, particularly those requiring customer specific documentation prior to invoicing, our invoicing of the customer is delayed until certain documentation requirements are met. In those cases, we recognize a contract asset rather than a billed trade accounts receivable until we are able to invoice the customer. Our contract asset balances, primarily associated with these documentation requirements, were $33.0 million and $44.2 million as of ~~September 30, 2019 and~~ ~~December 31, 2018, respectively. Contract assets, along with billed trade accounts receivable, are included in trade accounts receivable in our consolidated balance sheets.~~

We classify contract liabilities as unearned income in our consolidated balance sheets. Such deferred revenue typically results from advance payments received on orders for new compressor equipment prior to the time such equipment is completed and transferred to the customer in accordance with the customer contract. ~~New equipment sales orders generally take less than twelve months to build and deliver.~~

~~The following table reflects the changes in our contract liabilities for the periods indicated:~~

Nine Months Ended
September 30,
2019 2018
(In Thousands)
Unearned Income, beginning of period $ 25,333
$ 17,050
Additional unearned income 106,744
101,887
Revenue recognized (105,486 ) (82,050 )
Unearned income, end of period $ 26,591
$ 36,887

During the nine month period ended September 30, 2019, we recognized in product sales revenue of $24.6 million from unearned income that was deferred as of December 31, 2018. During the nine months ended September 30, 2018, we recognized in product sales revenue of $16.2 million from unearned income that was deferred asfuture sale of our ~~adoption of ASC 606 on January 1, 2018.~~low-horsepower compression fleet or any other non-core asset.

~~Contract Costs.~~ ~~As of September 30, 2019, contract costs were immaterial.~~

~~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 September 30, Nine months ended September 30,
2019 2018 2019 2018
(In Thousands)
Completion Fluids & Products
U.S. 31,480
35,426
$ 100,622
$ 97,446
International 27,860
27,647
100,066
95,287
59,340
63,073
200,688
192,733
Water & Flowback Services
U.S. 68,052
71,579
209,663
189,457
International 4,789
6,989
14,980
33,832
72,841
78,568
224,643
223,289
Compression
U.S. 105,153
105,655
324,792
273,563
International 8,613
9,606
28,348
27,044
113,766
115,261
353,140
300,607
Interdivision eliminations
U.S. —
4
—
4
International —
(55 ) —
(329 )
—
(51 ) —
(325 )
Total Revenue
U.S. 204,685
212,664
635,077
560,470
International 41,262
44,187
143,394
155,834
245,947
256,851
$ 778,471
$ 716,304

~~NOTE K – LEASES~~

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.

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
(In Thousands)
Operating lease expense $ 5,075
$ 15,106
Short-term lease expense 9,556
30,269
Total lease expense $ 14,631
$ 45,375

~~Supplemental cash flow information:~~

Nine Months Ended September 30, 2019
(In Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases $ 14,868

Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 7,631

~~Supplemental balance sheet information:~~

September 30, 2019
(In Thousands)
Operating leases:
     Operating lease right-of-use assets $ 57,848

     Accrued liabilities and other $ 14,071
     Operating lease liabilities 45,993
     Total operating lease liabilities $ 60,064

~~Additional operating lease information:~~



	~~September 30, 2019~~
~~Weighted average remaining lease term:~~
~~Operating leases~~	~~6.60 Years~~

~~Weighted average discount rate:~~
~~Operating leases~~	~~9.39~~	%

~~Future minimum lease payments by year and in the aggregate, under non-cancelable operating leases with terms in excess of one year consist of the following at September 30, 2019:~~

Operating Leases
(In Thousands)

Remainder of 2019 $ 4,870
2020 17,721
2021 12,798
2022 9,591
2023 7,871
Thereafter 29,440
Total lease payments 82,291
Less imputed interest (22,227 )
Total lease liabilities $ 60,064

At September 30, 2019, future minimum rental receipts under a non-cancelable sublease for office space in one of our locations totaled $5.7 million. For the three and nine months ended September 30, 2019, we recognized sublease income of $0.2 million~~and$0.7 million, respectively.~~

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, ~~2018~~2019 filed with the SEC on March 4, 16, 2020 (“2019 ("~~2018~~ Annual Report"”). This discussion includes forward-looking statements that involve certain risks and uncertainties.

Business Overview

We are a geographically diversified oil and gas services company, focused on completion fluids and associated products and services, comprehensive water management, frac flowback, production well testing and offshore rig cooling services, and compression services and equipment. We operate through three reporting segments organized into three Divisions - Completion Fluids & Products, Water & Flowback Services, and Compression.

Demand for the products and services of our Completion Fluids & Products Division has remained ~~fairly consistent~~resilient despite the continued ~~volatility in pricing for~~significant downward pressure on oil prices and ongoing uncertainty in many of the markets ~~where~~in which we ~~operate, which affects~~operate. During the ~~plans~~third quarter of ~~many~~2020, lower domestic completion fluids product sales revenues as a result of ~~our~~hurricane activity in the Gulf of Mexico were offset by strong international sales mainly in the Middle East and Europe. However, continuing low prices for oil and gas ~~operations customers.~~ and further price erosion could adversely affect the demand for our products and services in the future.

Recent ~~oil price volatility~~macroeconomic uncertainty resulting from depressed commodity prices and the COVID-19 pandemic has particularly affected domestic onshore demand for our Water & Flowback Services ~~Division~~Division. We experienced decreased water management services ~~resulting in increased customer contract pricing pressure. The construction~~activity during the third quarter of ~~infrastructure~~2020 and without a meaningful recovery, we expect our water management services operations to ~~alleviate current takeaway capacity constraints that are limiting production and new drilling~~continue to be negatively impacted in the ~~Permian Basin has continued to contribute to increased demand for compressor equipment and services through our~~near future.

Our Compression ~~Division. This growth in demand continues to drive increases in our compression services revenues, through increased activity and customer contract pricing.~~

~~We are aggressively managing our working capital and capital expenditure needs in order to maximize our liquidity in the current environment. In addition, we continue to review our expectations of~~Division is significantly dependent upon the demand for, and production of, oil and the ~~products~~associated natural gas from unconventional oil and ~~services~~natural gas production in the domestic and international markets in which we ~~provide~~operate. During the third quarter of 2020, macroeconomic uncertainty in ~~each~~the oil and natural gas industry continued to drive steep declines in spending by the oil and gas operators but as oil prices stabilized around $40, the pace of horsepower being released slowed in comparison to the second quarter. In addition, the unprecedented drop in U.S. land oil and natural gas activity in the second quarter led to some of our customers temporarily shutting in wells and compression was placed on standby. Customers continued bringing production back online throughout the third quarter and we ended the third quarter with approximately 8% of our US domestic fleet on standby as compared to 15% in the second quarter.

During the first nine months of 2020, we saw our customers revise their capital budgets substantially downward and adjust their operations accordingly, which we believe will continue for an indefinite period. Given the decline in orders for new compression equipment to be fabricated and sold to third parties, in early April 2020, we announced our plan to shut down our Midland manufacturing facility. On July 2, 2020, we completed the previously announced sale of our Midland manufacturing facility for a total sale price of $17.0 million. We continued to operate the facility until the completion and sale of our remaining backlog, which was completed in October 2020. Following the completion of the ~~markets where~~backlog, we ~~operate.~~are no longer fabricating new compressor packages for sales to third parties or for our own service fleet.

During the first quarter of 2020, we concluded that the impact on our customers and industry from the COVID-19 pandemic and decline in oil prices were indicators of impairment for all asset groups within our Compression Division and certain asset groups in our Completion Fluids & Products Division. As a result, we performed a recoverability analysis on all our long-lived asset groups and we determined that the carrying values of our Midland manufacturing facility and related new unit sales inventory exceeded their respective fair values.

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Therefore, we recorded impairments of approximately $5.4 million during the first quarter of 2020 related to these assets. During the second quarter of 2020, as a result of continued negative impacts on our compression fleet associated with the COVID-19 pandemic and declines in oil and gas prices, we recorded impairments and other charges of approximately $9.0 million in our Compression Division associated with non-core used compressor equipment that we have held for sale, the low-horsepower class of our compression fleet, and field inventory for compression and related services. During the third quarter of 2020, no further impairments were recorded. Given the dynamic nature of the events, we are not able to reasonably estimate how long our operations will be impacted and the full impact these events will have on our operations. As a result, we could have indicators of impairment again in future periods resulting in additional asset impairments. We ~~intend~~have and will continue to ~~manage~~evaluate the sale of non-core assets, including our low-horsepower compression fleet. We can provide no assurance that we will consummate a future sale of our low-horsepower compression fleet or any other non-core asset.

We actively managed our flexible cost structure as a proactive response to ~~proactively respond to~~the changing market conditions throughout the second and ~~execute on~~third quarters while taking necessary actions ~~necessary~~ to manage through these conditions, some of which could result in impairments or restructuring charges in future periods. Temporary and permanent cost reductions we have implemented include reductions in 2020 capital expenditures, workforce reductions, salary reductions, the suspension of 401(k) matching contributions for our employees, targeted reduction in SG&A expenses, and negotiated reductions in expenditures with many of our suppliers. While we are not able to predict how long market disruptions resulting from the COVID-19 pandemic will continue, or what impact it will ultimately have on our business, we have seen activity levels stabilizing at the end of the third quarter. Despite challenging market conditions, we will continue to maintain our commitment to safety and service quality for our customers.

How we Evaluate Operations

We use U.S. GAAP financial measures such as revenues, gross profit, income (loss) before taxes, and net cash provided by operating activities, as well as certain non-GAAP financial measures, including Adjusted EBITDA, as performance measures for our business.

Adjusted EBITDA.We view Adjusted EBITDA as one of our primary management tools, and we trackiton a monthly basis, both in dollars and as a percentage of revenues(typically compared to the prior month,prior yearperiod,and to budget). We define Adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, impairments and certain other non-cash charges and non-recurring adjustments.

Adjusted EBITDA is used as a supplemental financial measure by our management to:

•evaluate the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis; and

•determine our ability to incur and service debt and fund capital expenditures.

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The following tablereconciles net income (loss) to Adjusted EBITDA for the periods indicated:


	Three Months Ended
	September 30, 2020
	Net Income (Loss), as reported		Tax Provision		Income (Loss) Before Tax, as Reported		Impairments & Special Charges		Adjusted Income (Loss) Before Tax		Interest Expense, Net		Adjusted Depreciation & Amortization		Adjusted Equity Comp. Expense		Adjusted EBITDA
	(In Thousands)
Completion Fluids & Products Division					$	11,756	$	729	$	12,485	$	(291)	$	1,710	$	—	$	13,904
Water & Flowback Services Division					(7,746)		274		(7,472)		(77)		7,584		—		35
Compression Division					(11,321)		879		(10,442)		13,293		19,948		143		22,942
Eliminations and other					3		—		3		—		(3)		—		—
Subtotal					(7,308)		1,882		(5,426)		12,925		29,239		143		36,881
Corporate and other					(13,472)		1,031		(12,441)		4,706		173		983		(6,579)
TETRA excluding Discontinued Operations	$	(21,425)	$	645	$	(20,780)	$	2,913	$	(17,867)	$	17,631	$	29,412	$	1,126	$	30,302



	Three Months Ended
	September 30, 2019
	Net Income (Loss), as reported		Tax Provision		Income (Loss) Before Tax, as Reported		Impairments & Special Charges		Adjusted Income (Loss) Before Tax		Interest Expense, Net		Depreciation & Amortization		Equity Comp. Expense		Adjusted EBITDA
	(In Thousands)
Completion Fluids & Products Division					$	11,318	$	(736)	$	10,582	$	(216)	$	3,676	$	—	$	14,042
Water & Flowback Services Division					2,578		76		2,654		(2)		8,568		—		11,220
Compression Division					(3,464)		3,597		133		12,869		18,459		(211)		31,250
Eliminations and other					(1)		—		(1)		—		(3)		—		(4)
Subtotal					10,431		2,937		13,368		12,651		30,700		(211)		56,508
Corporate and other					(17,931)		379		(17,552)		5,495		167		1,539		(10,351)
TETRA excluding Discontinued Operations	$	(9,079)	$	1,579	$	(7,500)	$	3,316	$	(4,184)	$	18,146	$	30,867	$	1,328	$	46,157

Adjusted EBITDA is a financial measure that is not in accordance with U.S. GAAP and should not be considered an alternative to net income, operating income, cash provided by operating activities,or any other measure of financial performance presented in accordance with U.S. GAAP. This measure may not be comparable to similarly titled financial metrics of other companies, as other companies may not calculate Adjusted EBITDA in the same manner aswe do. Management compensates for the limitations of Adjusted EBITDA as an analytical tool by reviewing the comparable U.S. GAAP measures, understanding the differences between the measures,and incorporating this knowledge into management’s decision-making processes.

Critical Accounting Policies and Estimates

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~~2019 Annual Report. In preparing our consolidated financial statements, we make assumptions, estimates, and judgments that affect the amounts reported. 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.

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Results of Operations

Three months ended September 30, ~~2019~~2020 compared with three months ended September 30, ~~2018~~.2019.

Consolidated Comparisons


	Three Months Ended September 30,						Period to Period Change						Three Months Ended September 30,						Period to Period Change
	2019			2018			2019 vs 2018			% Change			2020			2019			2020 vs 2019		% Change
	(In Thousands, Except Percentages)												(In Thousands, Except Percentages)
Revenues	$	245,947		$	256,851		$	(10,904	)	(4.2	)%	Revenues	$	152,601		$	245,947		$	(93,346)	(38.0)	%
Gross profit	44,960			41,330			3,630			8.8	%	Gross profit	19,970			44,960			(24,990)		(55.6)	%
Gross profit as a percentage of revenue	18.3		%	16.1		%						Gross profit as a percentage of revenue	13.1		%	18.3		%
General and administrative expense	34,926			34,446			480			1.4	%	General and administrative expense	25,256			34,926			(9,670)		(27.7)	%
General and administrative expense as a percentage of revenue	14.2		%	13.4		%						General and administrative expense as a percentage of revenue	16.6		%	14.2		%

Interest expense, net	18,146			18,894			(748		)	(4.0	)%	Interest expense, net	17,631			18,146			(515)		(2.8)	%
Warrants fair value adjustment (income) expense	78			(179		)	257
CCLP Series A Preferred Units fair value adjustment (income) expense	—			498			(498		)
Other (income) expense, net	(690		)	619			(1,309		)
Warrants fair value adjustment expense												Warrants fair value adjustment expense	—			78			(78)		100.0	%

Other income, net												Other income, net	(2,137)			(690)			(1,447)		209.7	%
Loss before taxes and discontinued operations	(7,500		)	(12,948		)	5,448			42.1	%	Loss before taxes and discontinued operations	(20,780)			(7,500)			(13,280)		(177.1)	%
Loss before taxes and discontinued operations as a percentage of revenue	(3.0		)%	(5.0		)%						Loss before taxes and discontinued operations as a percentage of revenue	(13.6)		%	(3.0)		%
Provision (benefit) for income taxes	1,579			(96		)	1,675
Provision for income taxes												Provision for income taxes	645			1,579			(934)		(59.2)	%
Loss before discontinued operations	(9,079		)	(12,852		)	3,773					Loss before discontinued operations	(21,425)			(9,079)			(12,346)		136.0	%
Discontinued operations:												Discontinued operations:
Income (loss) from discontinued operations, net of taxes	(9,130		)	796			(9,926		)
Loss from discontinued operations, net of taxes												Loss from discontinued operations, net of taxes	(173)			(9,130)			8,957		(98.1)	%
Net loss	(18,209		)	(12,056		)	(6,153		)			Net loss	(21,598)			(18,209)			(3,389)		18.6	%
Loss attributable to noncontrolling interest	2,378			5,120			(2,742		)			Loss attributable to noncontrolling interest	8,296			2,378			5,918		248.9	%
Net income (loss) attributable to TETRA stockholders	$	(15,831	)	$	(6,936	)	$	(8,895	)
Net loss attributable to TETRA stockholders												Net loss attributable to TETRA stockholders	$	(13,302)		$	(15,831)		$	2,529	(16.0)	%

Consolidated revenues during the current year quarter decreased compared to the prior year quarter due to the ongoing COVID-19 pandemic and associated decline in oil and gas prices resulting in decreases in ~~product sales~~demand and activity. See Divisional Comparisons section below for additional discussion.

Consolidated gross profit during the current year quarter ~~increased~~decreased compared to the prior year quarter primarily due to ~~increased~~decreased gross profit from ~~our Completion Fluids & Products and Compression Divisions. This increase was partially offset, however, by the lower gross profit of~~ our Water & Flowback Services ~~Division. Despite efforts to reduce operating costs whenever possible, the impact of pricing pressures hampered profitability in certain markets.~~and Compression Divisions.

Consolidated general and administrative expenses increased during the current year quarter compared to the prior year quarter primarily due to increased provision for bad debt of $1.3 million, offset by decreased salary and employee expenses of $0.6 million, decreased professional services fees of $0.1 million, and decreased insurance and other general expenses of $0.2 million.

~~Consolidated interest expense, net,~~ decreased during the current year quarter compared to the prior year quarter primarily due to decreased ~~Compression Division interest~~salary and employee expenses of $5.9 million, decreased provision for bad debt expense ~~partially offset by increased Corporate interest expense. Compression Division interest expense decreased due to the completion~~ of the redemption of CCLP Preferred Units outstanding on August 8, 2019. Corporate interest expense increased due to additional borrowings under the TETRA Term Credit Agreement and ABL Credit Agreement during the current year period. Interest expense during the current and prior year quarters includes $1.0$2.0 million, and ~~$1.1 million, respectively,~~decreased professional services fees of ~~finance cost amortization.~~$1.3 million.

Consolidated other ~~(income) expense,~~income, net, was ~~$0.7~~$2.1 million of other income during the current year quarter compared to ~~$0.6~~$0.7 million of other ~~expense~~income during the prior year ~~quarter~~quarter. The increase in other income was primarily due to ~~$0.9~~an increase of $1.5 million ~~of decreased loan fees associated with new TETRA credit agreements~~in gains in the ~~prior~~current year ~~quarter~~period mainly from the sale of the Midland facility and ~~$1.3 million~~a decrease of ~~decreased foreign currency losses, offset by increased~~ expense of ~~$0.4~~$0.5 million associated with a redemption premium incurred in connection with the redemption of CCLP Preferred Units for cash in the prior year quarter. These increases in income were partially offset by an increase in foreign currency losses of $1.8 million in the current year quarter compared to the prior year quarter.

Our consolidated provision for income taxes during the three month period ended September 30, ~~2019~~2020 is attributable to taxes in certain foreign jurisdictions and Texas gross margin taxes. Our consolidated effective tax rate for the three month period ended September 30, ~~2019~~2020 of negative ~~21.1%~~3.1% 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

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carryforwards and tax credits that are available to offset future income tax liabilities in the U.S. as well as in certain foreign jurisdictions.

Divisional Comparisons

Completion Fluids & Products Division


	Three Months Ended September 30,						Period to Period Change
	2020			2019			2020 vs 2019		% Change
	(In Thousands, Except Percentages)
Revenues	$	51,950		$	59,340		$	(7,390)	(12.5)	%
Gross profit	16,196			16,181			15		0.1	%
Gross profit as a percentage of revenue	31.2		%	27.3		%
General and administrative expense	4,619			4,865			(246)		(5.1)	%
General and administrative expense as a percentage of revenue	8.9		%	8.2		%
Interest income, net	(291)			(216)			(75)		34.7	%

Other expense, net	112			214			(102)		(47.7)	%
Income before taxes	$	11,756		$	11,318		$	438	3.9	%
Income before taxes as a percentage of revenue	22.6		%	19.1		%

The decrease in Completion Fluids & Products Division revenues during the current year quarter compared to the prior year quarter was primarily due to decreased revenues in the Gulf of Mexico because of project delays associated with hurricanes and storms in the Gulf of Mexico.

Completion Fluids & Products Division gross profit during the current year quarter remained relatively flat compared to the prior year quarter. Completion Fluids & Products Division profitability in future periods will continue to be affected by the mix of its products and services, market demand for our products and services, drilling and completions activity and commodity prices.

Water & Flowback Services Division


	Three Months Ended September 30,						Period to Period Change
	2020			2019			2020 vs 2019		% Change
	(In Thousands, Except Percentages)
Revenues	$	21,534		$	72,841		$	(51,307)	(70.4)	%
Gross profit (loss)	(5,714)			8,236			(13,950)		(169.4)	%
Gross profit (loss) as a percentage of revenue	(26.5)		%	11.3		%
General and administrative expense	2,545			5,957			(3,412)		(57.3)	%
General and administrative expense as a percentage of revenue	11.8		%	8.2		%

Interest income, net	(77)			(2)			(75)		3,750.0	%
Other income, net	(436)			(297)			(139)		46.8	%
Income (loss) before taxes	$	(7,746)		$	2,578		$	(10,324)	(400.5)	%
Income (loss) before taxes as a percentage of revenue	(36.0)		%	3.5		%

Water & Flowback Services Division revenues decreased significantly during the current year quarter primarily due to decreased customer drilling and completions activity as a result of lower oil and gas prices caused by the ongoing COVID-19 pandemic.

The Water & Flowback Services Division reported a gross loss during the current year quarter compared to the prior year quarter gross profit primarily due to lower revenues resulting from the decreased activity levels described above.

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The Water & Flowback Services Division reported a pretax loss compared to a pretax income in the prior year period primarily due to the substantial reduction in gross profit described above. General and administrative expense levels decreased compared to the prior year quarter primarily due to decreased wage and benefit related expenses of $2.7 million and a decrease in bad debt expense of $0.5 million.

Compression Division


	Three Months Ended September 30,						Period to Period Change
	2020			2019			2020 vs 2019		% Change
	(In Thousands, Except Percentages)
Revenues	$	79,117		$	113,766		$	(34,649)	(30.5)	%
Gross profit	9,755			20,710			(10,955)		(52.9)	%
Gross profit as a percentage of revenue	12.3		%	18.2		%
General and administrative expense	9,133			11,530			(2,397)		(20.8)	%
General and administrative expense as a percentage of revenue	11.5		%	10.1		%

Interest expense, net	13,293			12,869			424		3.3	%

Other income, net	(1,350)			(225)			(1,125)		500.0	%
Loss before taxes	$	(11,321)		$	(3,464)		$	(7,857)	(226.8)	%
Loss before taxes as a percentage of revenue	(14.3)		%	(3.0)		%

Compression Division revenues decreased during the current year quarter compared to the prior year quarter primarily due to the ongoing COVID-19 pandemic’s impact on demand for oil and natural gas and the resulting decline in oil prices that led to a significant reduction in our customer’s activity. Product sales revenues decreased$19.0 million, as we continued to close out remaining backlog and prepared to shut down our Midland manufacturing facility and exit the new equipment sales business. Service revenues decreased $15.6 million due to returned compressors, compressors placed on standby rates, and some pricing concessions.

Compression Division gross profit decreased during the current year quarter compared to the prior year due to the lower revenues discussed above.

The Compression Division recorded an increased pretax loss during the current year quarter compared to the prior year quarter due to the decreased gross profit discussed above. General and administrative expense levels decreased compared to the prior year quarter, primarily due to decreased bad debt expense of $1.5 million and decreased employee expenses of $0.7 million. Other income, net, reflected gains in the current year period primarily from the sale of the Midland facility

Corporate Overhead


	Three Months Ended September 30,				Period to Period Change
	2020		2019		2020 vs 2019		% Change
	(In Thousands, Except Percentages)
Depreciation and amortization	$	270	$	167	$	103	(61.7)	%
General and administrative expense	8,959		12,573		(3,614)		(28.7)	%
Interest expense, net	4,706		5,495		(789)		(14.4)	%
Warrants fair value adjustment (income) expense			78		(78)		100.0	%
Other income, net	(463)		(382)		(81)		21.2	%
Loss before taxes	$	(13,472)	$	(17,931)	$	4,459	24.9	%

Corporate Overhead pretax loss decreased during the current year quarter compared to the prior year quarter, primarily due to decreased general and administrative expense and decreased interest expense. Corporate general and administrative expense decreased primarily due to decreased salary and employee expenses of $2.6 million, decreased professional fees of $0.5 million and decreased general expenses of $0.5 million. Interest expense decreased resulting from decreased borrowing under the ABL Credit Agreement.

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Results of Operations

Nine months ended September 30, 2020 compared with nine months ended September 30, 2019.

Consolidated Comparisons


	Nine Months Ended September 30,						Period to Period Change
	2020			2019			2020 vs 2019		% Change
	(In Thousands, Except Percentages)
Revenues	$	567,984		$	778,471		$	(210,487)	(27.0)	%
Gross profit	79,708			129,536			(49,828)		(38.5)	%
Gross profit as a percentage of revenue	14.0		%	16.6		%
General and administrative expense	89,807			105,498			(15,691)		(14.9)	%
General and administrative expense as a percentage of revenue	15.8		%	13.6		%

Interest expense, net	53,073			55,054			(1,981)		(3.6)	%
Warrants fair value adjustment income	(327)			(1,035)			708		(68.4)	%
CCLP Series A Preferred Units fair value adjustment expense	—			1,309			(1,309)		(100.0)	%

Other (income) expense, net	2,141			(1,014)			3,155		(311.1)	%
Loss before taxes and discontinued operations	(64,986)			(30,276)			(34,710)		114.6	%
Loss before taxes and discontinued operations as a percentage of revenue	(11.4)		%	(3.9)		%
Provision for income taxes	3,800			5,678			(1,878)		(33.1)	%
Loss before discontinued operations	(68,786)			(35,954)			(32,832)		91.3	%
Discontinued operations:
Loss from discontinued operations, net of taxes	(155)			(9,901)			9,746		(98.4)	%
Net loss	(68,941)			(45,855)			(23,086)		50.3	%
Loss attributable to noncontrolling interest	32,833			12,273			20,560		167.5	%
Net loss attributable to TETRA stockholders	$	(36,108)		$	(33,582)		$	(2,526)	7.5	%

Consolidated revenuesfor the current year period decreased compared to the prior year period primarily due to decreased revenues in our Water & Flowback Services and Compression Divisions, which decreased by $120.9 millionand$87.4 million, respectively, primarily due to the ongoing COVID-19 pandemic and associated decline in oil prices. The decrease in revenues for the Water & Flowback Services Division was primarily due to decreased water management services activity. The decreased revenues of the Compression Division were primarily due to lower new unit sales as we progress the shut down of our Midland manufacturing facility. See Divisional Comparisons section below for additional discussion.

Consolidated gross profit decreased during the current year period compared to the prior year period primarily due to the decreased profitability of our Water & Flowback Services and Compression Divisions. This decreased gross profit was partially offset by increased gross profit of our Completion Fluids & Products Division. While offshore activity levels for our Completion Fluids & Products Division increased from the prior year period, onshore activity levels decreased, particularly during the second and third quarters. The impact of pricing pressures in addition to reduced levels of onshore activity continues to challenge profitability in the current markets. Operating expenses reflect the decrease in consolidated revenues, as well as aggressive management of operating costs and headcount.

Consolidated general and administrative expenses decreased during the current year periodcompared to the prior year period primarily due to decreased salary related expenses of $15.2 million, decreased general expenses of $1.6 million and decreased professional services fees of $1.3 million. These decreases were partly offset by increased bad debt expense of $2.8 million. Decreased general and administrative expenses were driven primarily by our Corporate Division. Most of the decrease of our general and administrative expenses stemmed from our restructuring efforts and headcount reductions in response to the decline in activity levels, particularly in our U.S. onshore operations. General and administrative expense as a percentage of revenues increased compared to the prior year period.

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Consolidated interest expense, net, decreased in the current year period primarily due to a decrease in Corporate and Compression Division interest expense. Corporate interest expense decreased due to lower borrowings under the ABL Credit Agreement. Compression Division interest expense decreased due to interest associated with the expense of CCLP Series A Preferred units that was incurred in the prior year period. Interest expense during the current year period and the prior year period includes $3.1 million and $1.9 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 were eligible to be settled using a variable number of CCLP common units, and therefore the fair value of the CCLP Preferred Units was classified as a long-term liability on our consolidated balance sheets in accordance with ASC 480. Because the CCLP Preferred Units were convertible into CCLP common units at the option of the holder, the fair value of the CCLP Preferred Units generally increased or decreased with the trading price of the CCLP common units, and this increase (decrease) in CCLP Preferred Unit fair value was charged (credited) to earnings, as appropriate. The last remaining outstanding CCLP Preferred Units were redeemed for cash on August 8, 2019.

Consolidated other (income) expense, net, was $2.1 million of expense during the current year period compared to $1.0 million of income during the prior year period. The increase in expense is primarily due to $4.8 million of fees associated with the CCLP unsecured debt exchange transaction and $3.0 million of increased foreign currency losses due to the devaluation of the Mexican peso. These increases in expense were partially offset by gains associated with the sale of the Midland facility and lower expenses related to the redemption of CCLP Preferred Units for cash in the prior year quarter.

Our consolidated provision for income taxes for the current year period is primarily attributable to taxes in certain foreign jurisdictions and Texas gross margin taxes. Our consolidated effective tax rate for the nine month period ended September 30, 2020 of negative 5.8% 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.

Divisional Comparisons

Completion Fluids & Products Division

Three Months Ended
September 30, Period to Period Change
2019 2018 2019 vs 2018 % Change
(In Thousands, Except Percentages)
Revenues $ 59,340
$ 63,073
$ (3,733 ) (5.9 )%
Gross profit 16,181
13,129
3,052
23.2 %
Gross profit as a percentage of revenue 27.3 % 20.8 %

General and administrative expense 4,865
4,909
(44 ) (0.9 )%
General and administrative expense as a percentage of revenue 8.2 % 7.8 %

Interest (income) expense, net (216 ) (70 ) (146 )
Other (income) expense, net 214
(423 ) 637

Income before taxes $ 11,318
$ 8,713
$ 2,605
29.9 %
Income before taxes as a percentage of revenue 19.1 % 13.8 %

The decrease in Completion Fluids & Products Division revenues during the current year quarter compared to the prior year quarter was primarily due to $2.6 million of decreased product sales revenue due to decreased CBF product and manufactured product sales. Additionally, service revenues decreased $1.1 million~~due to reduced activity in engineering and filtration services compared to the prior year quarter.~~

Completion Fluids & Products Division gross profit during the current year quarter increased compared to the prior year quarter despite decreased revenues primarily due to higher margins on sales of manufactured products as well as increased profitability associated with higher margin CBF products during the current year quarter when compared to the prior year quarter. 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^(R)~~completion fluid projects.~~


	Nine Months Ended September 30,						Period to Period Change
	2020			2019			2020 vs 2019		% Change
	(In Thousands, Except Percentages)
Revenues	$	198,533		$	200,688		$	(2,155)	(1.1)	%
Gross profit	62,979			46,653			16,326		35.0	%
Gross profit as a percentage of revenue	31.7		%	23.2		%
General and administrative expense	18,995			14,792			4,203		28.4	%
General and administrative expense as a percentage of revenue	9.6		%	7.4		%
Interest income, net	(588)			(553)			(35)		6.3	%
Other expense, net	218			296			(78)		(26.4)	%
Income before taxes	$	44,354		$	32,118		$	12,236	38.1	%
Income before taxes as a percentage of revenue	22.3		%	16.0		%

The Completion Fluids & Products Division reported an increase in pretax earnings during the current year quarter compared to the prior year quarter primarily due to increased gross profit discussed above. Completion Fluids & Products Division general and administrative expense levels remained flat compared to prior year quarter. Other expense increased primarily due to increased foreign currency losses.

~~Water & Flowback Services Division~~

Three Months Ended
September 30, Period to Period Change
2019 2018 2019 vs 2018 % Change
(In Thousands, Except Percentages)
Revenues $ 72,841
$ 78,568
$ (5,727 ) (7.3 )%
Gross profit 8,236
11,522
(3,286 ) (28.5 )%
Gross profit as a percentage of revenue 11.3 % 14.7 %

General and administrative expense 5,957
5,919
38
0.6 %
General and administrative expense as a percentage of revenue 8.2 % 7.5 %

Interest (income) expense, net (2 ) 5
(7 ) (140.0 )%
Other (income) expense, net (297 ) (211 ) (86 ) 40.8 %
Income before taxes $ 2,578
$ 5,809
$ (3,231 ) (55.6 )%
Income before taxes as a percentage of revenue 3.5 % 7.4 %

Water & Flowback Services Division revenues decreased during the current year quarter primarily due to a reduction in commodity prices driving our customers' capital spending decisions and resulting in decreased activity and pricing levels when compared to prior year quarter.

The Water & Flowback Services Division reflected decreased gross profit during the current year quarter compared to the prior year quarter primarily due to the decreased revenues resulting from the decreased activity and pricing levels described above. In addition, our cost structure, specifically labor expense, does not always decrease ~~proportionately with revenues due to a tight labor market for the services we provide.~~

The Water & Flowback Services Division reported decreased pretax income during the current year quarter compared to the prior year quarter primarily due to the reduction in gross profit described above. General and administrative expense levels remained flat compared to the prior year quarter. Other income increased as compared to prior year quarter due to increased foreign currency gains of $0.5 million and increased gains on the disposal of assets of $0.2 million, offset by decreased income of $0.6 million associated with the remeasurement of the contingent purchase price consideration for SwiftWater in the prior year.

~~Compression Division~~

Three Months Ended
September 30, Period to Period Change
2019 2018 2019 vs 2018 % Change
(In Thousands, Except Percentages)
Revenues $ 113,766
$ 115,261
$ (1,495 ) (1.3 )%
Gross profit 20,710
16,847
3,863
22.9 %
Gross profit as a percentage of revenue 18.2 % 14.6 %

General and administrative expense 11,530
10,580
950
9.0 %
General and administrative expense as a percentage of revenue 10.1 % 9.2 %

Interest expense, net 12,869
13,690
(821 ) (6.0 )%
CCLP Series A Preferred fair value adjustment (income) expense —
498
(498 ) (100.0 )%
Other (income) expense, net (225 ) (77 ) (148 ) 192.2 %
Loss before taxes $ (3,464 ) $ (7,844 ) $ 4,380
55.8 %
Loss before taxes as a percentage of revenue (3.0 )% (6.8 )%

Compression Division revenues decreased during the current year quarter compared to the prior year quarter primarily due to a $5.2 million decrease in product sales revenues, due to the timing of when customer projects were completed, partially offset with a $3.8 million increase in service revenues. This increase in service revenues was primarily due to increasing demand for compression services, which is also reflected by increased compression fleet utilization rates.

Compression Division gross profit increased during the current year quarter compared to the prior year quarter due to improved customer contract pricing, labor efficiencies, reduced maintenance costs, and improved inventory management.

The Compression Division recorded a decreased pretax loss during the current year quarter compared to the prior year quarter due to increased gross profit discussed above. Interest expense decreased compared to the prior year quarter, primarily due to the conversion and redemption of CCLP Preferred Units outstanding. General and administrative expense levels increased compared to the prior year quarter, primarily due to increased bad debt expense of $1.5 million mainly associated with the bankruptcy of a single customer, partially offset by decreased employee expenses of $0.9 million. The CCLP Preferred Units fair value adjustment resulted in a $0.5 million charge to earnings in the prior year period with no corresponding impact in the current year quarter, as the last remaining outstanding Preferred Units were redeemed for cash on August 8, 2019. Other (income) expense, net, reflected increased income primarily due to increased foreign currency gains of $0.5 million offset by $0.4 million of redemption premium incurred in connection with the redemption of the CCLP Preferred Units for cash.

~~Corporate Overhead~~

Three Months Ended
September 30, Period to Period Change
2019 2018 2019 vs 2018 % Change
(In Thousands, Except Percentages)
Depreciation and amortization $ 167
$ 172
$ (5 ) 2.9 %
General and administrative expense 12,573
13,037
(464 ) (3.6 )%
Interest (income) expense, net 5,495
5,268
227

Warrants fair value adjustment (income) expense 78
(179 ) 257

Other (income) expense, net (382 ) 1,333
(1,715 ) (128.7 )%
Loss before taxes $ (17,931 ) $ (19,631 ) $ 1,700
8.7 %

Corporate Overhead pretax loss decreased during the current year quarter compared to the prior year quarter, primarily due to decreased other expense and decreased general and administrative expense. Other expense, net, decreased primarily due to a $0.9 million decrease of debt issuance fees related to the ABL Credit Agreement and the new Term Credit Agreement that were entered into during the prior year quarter and decreased foreign currency losses of $0.7 million in the current year quarter compared to the prior year quarter. Corporate general and administrative expense decreased primarily due to decreased professional service fees of $0.6 million in the current year quarter compared to the prior year quarter. The fair value of the outstanding Warrants liability resulted in a $0.1 million charge to earnings during the current year quarter compared to a $0.2 million credit to earnings in the prior year quarter. Interest expense increased resulting from increased borrowings.

~~Results of Operations~~

~~Nine months ended September 30, 2019 compared with nine months ended September 30, 2018.~~

~~Consolidated Comparisons~~

Nine Months Ended September 30, Period to Period Change
2019 2018 2019 vs 2018 % Change
(In Thousands, Except Percentages)
Revenues $ 778,471
$ 716,304
$ 62,167
8.7 %
Gross profit 129,536
117,114
12,422
10.6 %
Gross profit as a percentage of revenue 16.6 % 16.3 %

General and administrative expense 105,498
98,866
6,632
6.7 %
General and administrative expense as a percentage of revenue 13.6 % 13.8 %

Interest expense, net 55,054
52,246
2,808
5.4 %
Warrants fair value adjustment (income) expense (1,035 ) 22
(1,057 )
CCLP Series A Preferred Units fair value adjustment (income) expense 1,309
1,344
(35 )
Other (income) expense, net (1,014 ) 7,203
(8,217 )
Loss before taxes and discontinued operations (30,276 ) (42,567 ) 12,291
28.9 %
Loss before taxes and discontinued operations as a percentage of revenue (3.9 )% (5.9 )%

Provision (benefit) for income taxes 5,678
3,474
2,204

Loss before discontinued operations (35,954 ) (46,041 ) 10,087

Discontinued operations:
Income (loss) from discontinued operations (including 2018 loss on disposal of $33.8 million), net of taxes (9,901 ) (40,931 ) 31,030

Net loss (45,855 ) (86,972 ) 41,117

Loss attributable to noncontrolling interest 12,273
20,423
(8,150 )
Net loss attributable to TETRA stockholders $ (33,582 ) $ (66,549 ) $ 32,967

~~Consolidated revenues~~for the current year period increased compared to the prior year period primarily due to increased Compression Division and Completion Fluids & Products Division revenues, which increased by $52.5 millionand $8.0 million, respectively. The increased revenues of the Compression Division were primarily due to increased new compressor equipment sales activity. The increase in revenues for the Completion Fluids & Products Division was primarily due to increased international product sales. 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 profitability 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 challenging customer pricing in competitive markets compared to the prior year period. Despite the improvement in activity levels of certain of our businesses, onshore and offshore U.S. Gulf of Mexico activity levels remain flat and 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 period~~compared to the prior year period primarily due to increased salary related expenses of $6.0 million, inclusive of executive transition costs of $1.8 million, and increased bad debt expense of $1.9 million, offset by decreased consulting and other expenses of $0.8 million and decreased professional services fees of $0.4 million. Increased general and administrative expenses were driven primarily by our Compression and Corporate 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 Corporate and Compression Division interest expense. Corporate interest expense increased due to additional borrowings under the TETRA Term Credit Agreement and ABL Credit Agreement in the current period. Compression Division interest expense increased due to higher CCLP outstanding debt balances and higher interest rates compared to the prior year period. Interest expense during the current year period and the prior year period includes $2.9 million and $3.2 million, respectively, of finance cost amortization.

Consolidated other (income) expense, net, was $1.0 million of income during the current year period compared to $7.2 million of expense during the prior year period. The decrease in expense is primarily due to $4.5 million of decreased expense associated with the remeasurement of the contingent purchase price consideration for the SwiftWater acquisition, $3.5 million decreased expense related to the unamortized deferred financing costs charged to earnings during the prior year period as a result of the termination of the CCLP Bank Credit Facility, and $1.0 million of decreased loan fees associated with new TETRA credit agreements that were issued in the prior year. These decreases were offset by increased expense of $1.5 million associated with a redemption premium incurred in connection with the redemption of CCLP Preferred Units for cash and increased foreign currency losses.

Our consolidated provision for income taxes for the current year period is primarily attributable to taxes in certain foreign jurisdictions and Texas gross margin taxes. Our consolidated effective tax rate for the nine month period ended September 30, 2019 of negative 18.8% 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.

~~Divisional Comparisons~~

~~Completion Fluids & Products Division~~

Nine Months Ended September 30, Period to Period Change
2019 2018 2019 vs 2018 % Change
(In Thousands, Except Percentages)
Revenues $ 200,688
$ 192,733
$ 7,955
4.1 %
Gross profit 46,653
34,211
12,442
36.4 %
Gross profit as a percentage of revenue 23.2 % 17.8 %

General and administrative expense 14,792
14,011
781
5.6 %
General and administrative expense as a percentage of revenue 7.4 % 7.3 %

Interest (income) expense, net (553 ) (434 ) (119 )
Other (income) expense, net 296
(509 ) 805

Income before taxes $ 32,118
$ 21,143
$ 10,975
51.9 %
Income before taxes as a percentage of revenue 16.0 % 11.0 %

~~The increase~~ in Completion Fluids & Products Division revenues during the current year period compared to the prior year period was primarily due to ~~$4.2 million of increased product sales revenue primarily due to increased international CBF product sales~~decline in oil and ~~domestic manufactured products sales, partially offset by reduced CBF product sales revenues in the U.S. Gulf of Mexico. Additionally, service revenues increased$3.8 million, primarily due to increased international completion services activity. Offshore U.S. Gulf of Mexico activity levels remain challenged,~~gas prices and the ~~impact~~COVID-19 pandemic.

Table of ~~pricing pressures continues to hamper profitability.~~Contents

Completion Fluids & Products Division gross profit during the current year period increased ~~significantly~~ compared to the prior year period primarily due to ~~the~~ profitability associated with ~~the~~ increased manufactured products and international CBF sales revenues. Completion Fluids & Products Division profitability in future periods will 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~~an increase in pretax earnings during the current year period compared to the prior year period due to the increase in gross profit discussed above. Completion Fluids & Products Division general and administrative ~~cost levels~~expenses increased compared to the prior year period asprimarily due to increased ~~legal and professional fees~~bad debt expense of ~~$0.7~~$2.9 million and increased ~~general~~salary and employee-related expenses of ~~$0.5 million were partially offset by decreased bad debt and other sales and marketing expenses of $0.4~~$1.8 million.

Water & Flowback Services Division

Nine Months Ended September 30, Period to Period Change
2019 2018 2019 vs 2018 % Change
(In Thousands, Except Percentages)
Revenues $ 224,643
$ 223,289
$ 1,354
0.6 %
Gross profit 24,577
41,556
(16,979 ) (40.9 )%
Gross profit as a percentage of revenue 10.9 % 18.6 %

General and administrative expense 18,528
17,641
887
5.0 %
General and administrative expense as a percentage of revenue 8.2 % 7.9 %

Interest (income) expense, net (6 ) (10 ) 4
(40.0 )%
Other (income) expense, net (1,214 ) 3,257
(4,471 ) (137.3 )%
Income before taxes $ 7,269
$ 20,668
$ (13,399 ) 64.8 %
Income before taxes as a percentage of revenue 3.2 % 9.3 %


	Nine Months Ended September 30,						Period to Period Change
	2020			2019			2020 vs 2019		% Change
	(In Thousands, Except Percentages)
Revenues	$	103,724		$	224,643		$	(120,919)	(53.8)	%
Gross profit (loss)	(7,283)			24,577			(31,860)		(129.6)	%
Gross profit as a percentage of revenue	(7.0)		%	10.9		%
General and administrative expense	12,688			18,528			(5,840)		(31.5)	%
General and administrative expense as a percentage of revenue	12.2		%	8.2		%

Interest income, net	(88)			(6)			(82)		1,366.7	%
Other income, net	(1,475)			(1,214)			(261)		21.5	%
Income (loss) before taxes	$	(18,408)		$	7,269		$	(25,677)	353.2	%
Income (loss) before taxes as a percentage of revenue	(17.7)		%	3.2		%

Water & Flowback Services Division service and product revenues ~~increased slightly~~decreased$120.9 million during the current year period compared to the prior year period due to ~~increased~~decreased water management services ~~activity. Water management~~activity associated with significantly lower customer drilling and flowback services revenues increased $2.1 million during the current year period compared to the prior year period primarily resulting from the impact of a full nine months of revenues from SwiftWater, which was acquired on February 28, 2018, and the impact of the December 2018 acquisition of JRGO. Product sales revenue decreased by $0.8 million, due to decreased international equipment salescompletion activity.

The Water & Flowback Services Division reflected ~~decreased~~a gross ~~profit~~loss during the current year period compared to a gross profit during the prior year period ~~despite increased revenues,~~partly 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 same period had a meaningful impact on profitability. In addition, we reflected decreasedlower revenues and ~~profit from~~partly due to certain high-margin projects performed during the prior year period. We also experienced high maintenance costs on our flowback service equipment following the significant activity experienced in the fourth quarter of 2018, which was our highest flowback service revenue quarter in over three years.year.

The Water & Flowback Services Division reported ~~decreased~~a pretax loss compared to a pretax income ~~compared to~~in the prior year period, primarily due to the ~~decrease in~~ gross ~~profit~~loss described above. General and administrative expenses ~~increased~~decreased primarily due to ~~increased bad debt expense of $0.5 million, increased~~decreased wage and benefit related expenses of ~~$0.4~~$5.8 million and ~~increased~~decreased general expenses of ~~$0.2~~$1.1 million, partially offset by ~~decreased professional fees~~increased bad debt expense of ~~$0.3~~$1.0 million. The Water & Flowback Services Division reported other income, net, during the current year period compared to other expense during the prior year period primarily due to $0.8 million of current year period income associated with the remeasurement of the contingent purchase price consideration for SwiftWater compared to a corresponding $3.7 million expense during the prior year period.

Compression Division


	Nine Months Ended September 30,						Period to Period Change						Nine Months Ended September 30,						Period to Period Change
	2019			2018			2019 vs 2018			% Change			2020			2019			2020 vs 2019		% Change
	(In Thousands, Except Percentages)												(In Thousands, Except Percentages)
Revenues	$	353,140		$	300,607		$	52,533		17.5	%	Revenues	$	265,727		$	353,140		$	(87,413)	(24.8)	%
Gross profit	58,804			41,820			16,984			40.6	%	Gross profit	24,645			58,804			(34,159)		(58.1)	%
Gross profit as a percentage of revenue	16.7		%	13.9		%						Gross profit as a percentage of revenue	9.3		%	16.7		%
General and administrative expense	33,166			29,708			3,458			11.6	%	General and administrative expense	29,474			33,166			(3,692)		(11.1)	%
General and administrative expense as a percentage of revenue	9.4		%	9.9		%						General and administrative expense as a percentage of revenue	11.1		%	9.4		%

Interest expense, net	39,079			38,538			541			1.4	%	Interest expense, net	38,839			39,079			(240)		(0.6)	%
CCLP Series A Preferred fair value adjustment (income) expense	1,309			1,344			(35		)	(2.6	)%	CCLP Series A Preferred fair value adjustment (income) expense	—			1,309			(1,309)		(100.0)	%
Other (income) expense, net	(2		)	2,747			(2,749		)	(100.1	)%	Other (income) expense, net	3,449			(2)			3,451		(172,550.0)	%
Loss before taxes	$	(14,748	)	$	(30,517	)	$	15,769		51.7	%	Loss before taxes	$	(47,117)		$	(14,748)		$	(32,369)	219.5	%
Loss before taxes as a percentage of revenue	(4.2		)%	(10.2		)%						Loss before taxes as a percentage of revenue	(17.7)		%	(4.2)		%

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Compression Division revenues ~~increased~~decreased during the current year period compared to the prior year period due to a $32.0 million increase in product sales revenues and a $20.6 million increase in service revenues from compression and aftermarket services operations. Demand for new compressor equipment remains strong, although the current equipment sales backlog has decreased compared to the prior year period, due to significant sales orders recorded in the prior year period. Changes in our new equipment sales backlog are a function of additional customer orders less completed orders that result in equipment sales revenues. The increase in service revenues was primarily due to increasing demand for compression services, as reflected by increased compression fleet utilization rates. Overall utilization of the Compression Division's compression fleet has improved sequentially for the past two year period, 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. This increase was despite a $3.3 million charge for the impairment and other charges on certain low-horsepower compressor equipment and associated inventory and damage caused by fire to a certain compressor package during the current year period. The increased compression fleet utilization rates have led to increases in customer contract pricing.

~~The Compression Division recorded less pretax loss in~~ the current year period compared to the prior year period primarily due to the ~~increased~~COVID-19 pandemic’s impact on demand for oil and natural gas and the resulting decline in oil prices that led to a significant decrease in customer activity. Product sales revenues decreased$69.6 million due to a decrease in deliveries of new compressors compared to the prior year due to the shut down of our Midland manufacturing facility and exit of the new equipment sales business. Service revenues decreased $17.9 million from compression and aftermarket services operations. The decrease in service revenues was primarily due to reduction in customer activity resulting in a decrease in demand for compression services. In addition, returned compressors, compressors placed on standby rates, and pricing concessions also resulted in decreased revenues.

Compression Division gross profit decreased during the current year period compared to the prior year due to decreased revenues discussed ~~above. Interest expense~~above and the impairments and other charges of $14.3 million primarily on our Midland manufacturing facility and related assets, non-core used compressor equipment that we have held for sale, the low-horsepower class of our compression fleet, and field inventory for compression and related services.

The Compression Division recorded increased pretax loss in the current year period compared to the prior year period due to ~~higher 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.~~decreased gross profit discussed above. General and administrative expense levels ~~increased~~decreased compared to the prior year period due to ~~increased bad debt expense of $1.5 million andincreased~~decreased salary and employee-related expenses, including the impact of ~~increased~~decreased headcount, incentives and equity compensation of ~~$1.3~~$2.2 million and decreased bad debt expense of $1.1 million. Other (income) expense, net increased ~~professional services of $0.9 million. These increases were offset by decreased general expenses of $0.2 million. In addition, other~~to $3.4 million expense ~~decreased $2.7 million~~in the current year period compared to the prior year period. ~~This decrease~~The increase in expense is primarily due to ~~$3.5~~$4.7 million of ~~unamortized deferred financing costs charged to other expense as a result~~fees associated with the exchange of ~~the termination~~debt and $1.5 million of ~~the previous credit agreement in the prior year period and decreased~~increased foreign currency losses due to the devaluation of ~~$0.6 million.~~the Mexican peso. These ~~decreases~~increases in expense were offset by ~~increased~~decreased expense of ~~$1.5~~$1.6 million ofprimarily associated with the redemption premium incurred during the prior year period in connection with the redemption of ~~CCLP~~ Preferred Units for ~~cash.~~cash and an increase of $1.2 million in gains in the current year period primarily from the sale of the Midland facility and the remaining inventory and equipment related to the fabrication of new compressors. The last remaining outstanding CCLP Preferred Units were redeemed for cash on August 8, 2019.

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Corporate Overhead


	Nine Months Ended September 30,				Period to Period Change
	2020		2019		2020 vs 2019		% Change
	(In Thousands, Except Percentages)
Depreciation and amortization	$	643	$	507	$	136	26.8	%
General and administrative expense	28,650		39,012		(10,362)		(26.6)	%
Interest expense, net	14,909		16,533		(1,624)		(9.8)	%
Warrants fair value adjustment income	(327)		(1,035)		708		(68.4)	%
Other income, net	(50)		(96)		46		(47.9)	%
Loss before taxes	$	(43,825)	$	(54,921)	$	11,096	(20.2)	%

Nine Months Ended September 30, Period to Period Change
2019 2018 2019 vs 2018 % Change
(In Thousands, Except Percentages)
Depreciation and amortization $ 507
$ 487
$ 20
(4.1 )%
General and administrative expense 39,012
37,506
1,506
4.0 %
Interest expense, net 16,533
14,152
2,381
17.7 %
Warrants fair value adjustment (income) expense (1,035 ) 22
(1,057 )
Other (income) expense, net (96 ) 1,703
(1,799 )
Loss before taxes $ (54,921 ) $ (53,870 ) $ (1,051 ) (2.0 )%

Corporate Overhead pretax loss ~~increased~~decreased during the current year period compared to the prior year period primarily due to ~~increased interest expense resulting from increased borrowings.~~decreased general and administrative expenses. Corporate general and administrative expense ~~increased~~decreased primarily due to ~~increased~~decreased salary related expense of ~~$4.4~~$8.9 million, ~~which included $1.8 million of executive transition costs. This increase was offset by $1.7 million of decreased professional fees, $0.5~~$0.9 million of decreased general expenses and ~~$0.6~~$0.5 million of decreased ~~consulting~~professional fees. Interest expense decreased due to lower borrowings under the ABL Credit Agreement. The fair value of the outstanding Warrants liability resulted in a ~~$1.0~~$0.3 million credit to earnings in the current year period compared to ~~an $22,000 charge~~a $1.0 million credit to earnings during the prior year period. In addition, other income of $0.1 million was recorded during the current year period, compared to $1.7 million of expense during the prior year period primarily associated with debt issuance fees related to the new ABL Credit Agreement and the new Term Credit Agreement entered into in the prior year period and foreign currency losses.

Liquidity and Capital Resources

We believe that ~~the~~our and CCLP’s separate capital ~~structure steps we have taken during the past three years continue to support our ability~~structures allow us to meet our respective financial obligations, ~~and fund future growth as needed,~~ despite current uncertain operating conditions and financial markets. As of September 30, ~~2019,~~2020, we and CCLP are in compliance with all covenants of our respective debt agreements. Information about the terms and covenants of our debt agreements can be found in our ~~2018~~2019 Annual Report. and in Note 6 Long Term Debt and Other Borrowings.

~~Because of the level of consolidated debt, we~~We believe it is important to consider our capital structure and ~~CCLP's capital structure~~that of CCLP separately asbecause there are no cross default provisions ~~cross collateralization provisions,~~ or cross guarantees between ~~CCLP's~~CCLP’s debt and ~~TETRA's~~TETRA’s debt. Our consolidated debt outstanding has a carrying value of approximately ~~$858.3~~$843.2 million as of September 30, ~~2019.~~2020. However, approximately ~~$645.6~~$636.9 million of this consolidated debt balance is owed by CCLP and is serviced from the ~~existing~~ cash balances and cash flows of CCLP, and ~~$354.5~~$557.1 million of which is secured by certain of ~~CCLP's~~CCLP’s assets. Through our common unit ownership interest in CCLP, which was approximately 34% as of September 30, ~~2019,~~2020, and ownership of an approximate 1.4% general partner interest, we receive our share of the distributable cash flows of CCLP through its quarterly cash distributions. Approximately ~~$15.3~~$16.7 million of the ~~$35.9~~$75.2 million of the cash balance reflected on our consolidated balance sheet is owned by CCLP and is not accessible by us. The following table provides condensed consolidating balance sheet information reflecting ~~TETRA's~~TETRA’s net assets and ~~CCLP's~~CCLP’s net assets that service and secure ~~TETRA's~~TETRA’s and ~~CCLP's~~CCLP’s respective capital structures.

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	September 30, 2019										September 30, 2020
Condensed Consolidating Balance Sheet	TETRA		CCLP		Eliminations			Consolidated		Condensed Consolidating Balance Sheet	TETRA		CCLP		Eliminations		Consolidated
	(In Thousands)										(In Thousands)
Cash, excluding restricted cash	$	20,642	$	15,276	$	—		$	35,918	Cash, excluding restricted cash	$	58,466	$	16,699	$	—	$	75,165
Affiliate receivables	11,659		—		(11,659		)	—		Affiliate receivables	9,428		—		(9,428)		—
Other current assets	197,790		137,424		—			335,214		Other current assets	145,672		96,805		—		242,477
Property, plant and equipment, net	206,600		654,792		—			861,392		Property, plant and equipment, net	102,068		572,500		—		674,568
Long-term affiliate receivables	13,270		—		(13,270		)	—		Long-term affiliate receivables	11,858		—		(11,858)		—
Other assets, including investment in CCLP	62,037		42,437		78,702			183,176		Other assets, including investment in CCLP	6,617		64,801		97,912		169,330
Total assets	$	511,998	$	849,929	$	53,773		$	1,415,700	Total assets	$	334,109	$	750,805	$	76,626	$	1,161,540

Affiliate payables	$	—	$	11,659	$	(11,659	)	$	—	Affiliate payables	$	—	$	9,428	$	(9,428)	$	—
Other current liabilities	91,720		121,352		—			213,072		Other current liabilities	64,601		67,467		—		132,068
Long-term debt, net	212,697		645,575		—			858,272		Long-term debt, net	206,273		636,943		—		843,216
CCLP Series A Preferred Units	—		—		—			—

Warrants liability	1,038		—		—			1,038		Warrants liability	123		—		—		123
Long-term affiliate payable	—		13,270		(13,270		)	—		Long-term affiliate payable	—		11,858		(11,858)		—
Other non-current liabilities	62,741		7,049		—			69,790		Other non-current liabilities	63,425		27,533		—		90,958
Total equity	143,802		51,024		78,702			273,528		Total equity	(313)		(2,424)		97,912		95,175
Total liabilities and equity	$	511,998	$	849,929	$	53,773		$	1,415,700	Total liabilities and equity	$	334,109	$	750,805	$	76,626	$	1,161,540

As of September 30, ~~2019,~~2020, subject to compliance with the covenants, borrowing base requirements, and other provisions of the agreement that may limit borrowings, we had ~~$41.6~~$25.8 million of availability under the ABL Credit Agreement. The amounts we may borrow under the ABL Credit Agreement are derived from our accounts receivable and certain inventory. Decreases in the amount of our accounts receivable and the value of our inventory would result in reduced borrowing availability under the ABL Credit Agreement. As of September 30, ~~2019,~~2020, and subject to compliance with the covenants, borrowing base requirements, and other provisions of the agreement that may limit borrowings under the CCLP Credit Agreement, CCLP had availability of ~~$7.8~~$14.5 million. See CCLP Financing Activities below for further discussion.

Our consolidated sources (uses) of cash during the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 are as follows:


	Nine months ended September 30,
	2020		2019
	(In Thousands)
Operating activities	$	64,827	$	83,590
Investing activities	2,760		(98,562)
Financing activities	(9,776)		11,455

Nine months ended September 30,
2019 2018
(In Thousands)
Operating activities $ 84,982
$ 1,633
Investing activities (99,954 ) (145,480 )
Financing activities 11,455
170,608

Operating Activities

Consolidated cash flows provided by operating activities ~~increased~~decreased by ~~$83.3 million.~~$18.8 million compared to the first nine months of 2019. CCLP generated ~~$67.8~~$13.7 million of our consolidated cash flows provided by operating activities during the nine months ended September 30, ~~2019~~2020 compared to ~~$6.5~~$67.5 million during the corresponding prior year period. Operating cash flows ~~increased~~decreased primarily due ~~to improved operating profitability~~a decrease in revenue and ~~due to~~the effect of working capital ~~management,~~movements, particularly related to ~~the~~collections of accounts receivable, management of inventory levels ~~collections of accounts receivable,~~ and ~~the~~ timing of payments of accounts payable. During the period, TETRA increased cash generation which offset CCLP’s decreased cash generation. We continue to monitor customer credit risk in the current environment and focus on serving larger capitalized oil and gas operators and national oil companies.

Investing Activities

Total cash capital expenditures during the first nine months of ~~2019~~2020 were ~~$89.2 million.~~$22.0 million, which is net of $7.2 million cost of compressors sold, as we adjusted to current market conditions. Our Completion Fluids & Products Division spent ~~$5.2~~$2.7 million on capital expenditures, the majority of which related to plant and facility additions. Our Water & Flowback Services Division spent ~~$22.4~~$7.8 million on capital expenditures, primarily to ~~add to~~maintain, automate and

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upgrade its water management and flowback equipment fleet. Our Compression Division spent ~~$61.3~~$10.8 million primarily ~~for growth capital expenditure projects~~ to ~~increase~~maintain its compression fleet.

~~Generally,~~Historically, a significant 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~~such expenditures have recently 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 expand our operations in the future. Excluding our Compression Division, we expect to spend approximately ~~$25.0~~$12.0 million to ~~$30.0~~$15.0 million during ~~2019~~2020 on capital expenditures, primarily to expand and maintain our Water & Flowback Services Division equipment fleet.

Our Compression Division ~~expects~~has adjusted its expected capital spend downward to ~~spend~~ approximately ~~$80.0~~$31.0 million to ~~$85.0~~$34.0 million ~~on capital expenditures~~ during ~~2019~~2020 primarily to ~~expand~~maintain its compression fleet in response to increased demand for compression services. Our Compression Division, through the separate capital structure of CCLP, expects to fund 2019 growth capital expenditures for new compression services equipment through CCLP available cash, operating cash flows, and up to $15.0 million of new compression services equipment that is being purchased by us, and leased to CCLP. Approximately $14.6 million of the $15.0 million has been funded as of September 30, 2019.fleet.

If the forecasted demand for our products and services increases or decreases, the amount of planned expenditures on growth and expansion may be adjusted.

Financing Activities

During the first nine months of ~~2019,~~2020, the total amount of consolidated cash ~~provided by~~used in financing activities was ~~$11.5~~$9.8 million ~~consisting~~ primarily ~~of borrowings~~due to repayments under our ABL Credit Agreement and ~~our Term Credit Agreement.~~cash fees paid for the exchange of debt. We and CCLP may supplement our existing cash balances and cash flow from operating activities with short-term borrowings, long-term borrowings, issuances of equity and debt securities, and other sources of capital. CCLP expects to meet its growth capital expenditure requirements during the remainder of 2019 without having to access additional available borrowings under its credit agreement (the "CCLP Credit Agreement") and without having to access the current debt and equity markets. CCLP may also seek to expand its compression fleet through finance or operating leases with third parties. We and CCLP are aggressively managing our working capital and capital expenditure needs in order to maximize our liquidity in the current environment.

TETRA Long-Term Debt

Asset-Based Credit Agreement. The ABL Credit Agreement provides for a senior secured revolving credit facility of up to $100 million, subject to a borrowing base to be determined by reference to the value of ~~TETRA’s and any other borrowers’~~ inventory and accounts receivable, and ~~contains within the facility~~includes a ~~letter of credit~~ sublimit of $20.0 million for letters of credit and a swingline loan sublimit of $10.0 million. The amounts we may borrow under the ABL Credit Agreement are derived from our accounts receivable and certain inventory. Changes in demand for our products and services have an impact on our eligible accounts receivable, which could result in significant changes to our borrowing base and therefore our availability under our ABL Credit Agreement. With the current depressed oil and gas market conditions, we believe our availability under our ABL Credit facility will be adversely impacted by the expected decline in our customers’ activity levels. The ABL Credit Agreement is scheduled to mature on September 10, 2023. As of November ~~6, 2019,~~2, 2020, we have ~~$27.0~~$0.1 million outstanding under our ABL Credit Agreement and ~~$6.8~~$6.6 million letters of credit, resulting in ~~$30.0~~$22.8 million of availability.

Term Credit Agreement. The Term Credit Agreement provides for an initial loan in the amount of $200 million and the availability of additional loans, subject to the terms of the Term Credit Agreement, up to an aggregate amount of $75 million. The Term Credit Agreement is scheduled to mature on September 10, 2025. As of November ~~6, 2019,~~2, 2020, $220.5 million in aggregate principal amount of our Term Credit Agreement is outstanding.

CCLP Financing Activities

CCLP Series A Preferred Units. In January 2019, CCLP began redeeming ~~the remaining CCLP~~its Series A Preferred Units for cash, resulting in 2,660,569 Series A Preferred Units being redeemed during the nine months ended September 30, 2019 for an aggregate of $31.9 million, which includes approximately $1.5 million of redemption ~~premium~~premiums that ~~was~~were paid. The last redemption of the remaining ~~outstanding CCLP~~Series A Preferred Units, along with a final cash payment made in lieu of paid-in-kind ~~Preferred Units~~units, occurred on August 8, 2019.

CCLP Bank Credit ~~Facilities~~Facility. ~~The CCLP~~CCLP’s revolving credit facility ( the “CCLP Credit ~~Agreement, as amended, includes~~Agreement”) provides for a maximum credit commitment of ~~$50.0 million available for loans, letters of credit (with~~$35,000,000 and includes a ~~sublimit of $25.0 million) and swingline loans (with a sublimit of $5.0 million), subject~~$5,000,000 reserve with respect to athe borrowing base which would result in reduced borrowing availability. During the nine month period ended September 30, 2020 CCLP charged $0.2 million of financing fees to ~~be determined by reference to the value~~other (income) expense, net in our consolidated statement of CCLP’s and any other borrowers’ accounts receivable and the value of certain CCLP inventory. Such maximum credit commitment may be increased by $25.0 million in accordance with the terms and conditions of the CCLP Credit Agreement.operations. As of September 30, ~~2019,~~ 2020, subject to compliance with the covenants, borrowing base, and other provisions of the agreements that may limit borrowings under the Credit Agreement,CCLP had ~~$11.5 million~~no outstanding balance, ~~and had $3.0~~$2.5 million in letters of credit against the CCLP Credit ~~Agreement. The CCLP Credit~~ Agreement ~~is scheduled~~and $14.5 million available to ~~mature on June 29, 2023.~~borrow. As

Table of ~~November 5, 2019,~~Contents

of October 30, 2020, CCLP has ~~$5.5~~$0.0 million balance outstanding under the CCLP Credit Agreement and

~~$3.1~~ $3.4 million in letters of credit, resulting in ~~$14.4~~$16.4 million of ~~availability, reflecting recent increases to the borrowing base.~~

availability.

CCLP 7.25% Senior ~~Secured~~ Notes. due 2022. As of ~~November 5, 2019, $350.0~~September 30, 2020, CCLP’s 7.25% Senior Notes due 2022 had $79.9 million ~~in aggregate principal was outstanding.~~outstanding net of unamortized discounts and unamortized deferred financing costs. Interest on these notes is payable on February 15 and August 15 of each year. The 2022 Senior Notes are unsecured obligations, and are guaranteed on a unsecured basis by the Partnership’s subsidiaries that guarantee the CCLP Credit Agreement.

CCLP 7.50% Senior Secured Notes ~~accrue interest at a rate~~due 2025. As of September 30, 2020, CCLP’s 7.50% ~~per annum~~Senior Secured Notes due 2025 (the “First Lien Notes”) had $399.6 million outstanding net of unamortized discounts and ~~are scheduled to mature~~unamortized deferred financing costs. Interest on these notes is payable on April 1 ~~2025.~~and October 1 of each year. The First Lien Notes are secured by a first-priority security interest in substantially all of CCLP’s and its subsidiaries assets, subject to certain permitted encumbrances and exceptions, and are guaranteed on a senior secured basis by each of CCLP’s domestic restricted subsidiaries, with limited exceptions.

CCLP ~~Senior~~10.00%/10.75% Second Lien Notes. due 2026. As of ~~November 5, 2019, $295.9~~September 30, 2020, CCLP’s 10.00%/10.75% Second Lien Notes due 2026 (the “Second Lien Notes”) had $157.4 million outstanding, net of unamortized discounts and unamortized deferred financing costs. Interest on the Second Lien Notes is payable on April 1 and October 1 of each year. The Second Lien Notes are secured by a second-priority security interest in substantially all of CCLP’s and its subsidiaries assets, subject to certain permitted encumbrances and exceptions, and are guaranteed on a senior secured basis by each of CCLP’s domestic restricted subsidiaries, with limited exceptions.In connection with the payment of PIK Interest (as defined below), if any, in respect of the Second Lien Notes, CCLP will be entitled, to increase the outstanding aggregate principal amount ~~was outstanding. The CCLP Senior~~of the Second Lien Notes or issue additional notes (“PIK notes”) under the Second Lien Notes indenture on the same terms and conditions as the already outstanding Second Lien Notes. Interest will accrue ~~interest~~ at a(1) the annual rate of ~~7.25% per annum and are scheduled~~7.250% payable in cash, plus (2) at the election of the Issuers (made by delivering a notice to ~~mature on August 15, 2022.~~the Second Lien Trustee not less than five business days prior to the record date), the annual rate of (i) 2.750% payable in cash (together with the annual rate set forth in clause (1), the “Cash Interest Rate”) or (ii) 3.500% payable by increasing the principal amount of the outstanding 10.00%/10.75% Second Lien Notes or by issuing additional PIK notes, in each case rounding up to the nearest $1.00 (such increased principal amount or additional PIK notes, the “PIK Interest”).

Other Sources and Uses

In addition to the ~~various~~ aforementioned credit facilities, ~~and senior notes,~~ we and CCLP fund our respective short-term liquidity requirements ~~primarily~~ from cash generated by our respective operations and from short-term vendor financing. Should additional capital be required, the ability to raise such capital through the issuance of additional debt or equity securities may currently be limited. Instability or volatility in the capital markets at the times we need to access capital may ~~also~~ affect the cost of capital and the ability to raise capital for an indeterminable length of time. If it is necessary to issue additional equity to fund our capital needs, additional dilution toof our common stockholders will occur.

~~On April 11, 2019, we filed a universal shelf Registration Statement on Form S-3 with~~ We periodically evaluate engaging in strategic transactions and may consider divesting non-core assets where our evaluation suggests such transaction is in the SEC. On 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 $464.1 million, inclusive of $64.1 millionbest interest of our ~~common stock issuable upon conversion~~business. In challenging economic environments, we may experience increased delays and failures by customers to pay our invoices. Given the nature and significance of the pandemic and disruption in the oil and gas industry, we could experience delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies. If our customers delay paying or fail to pay us a significant amount 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~~receivables, it could have an adverse effect on our ~~financial condition may require.~~liquidity.An increase of unpaid receivable would also negatively affect our borrowing availability under the ABL Credit Agreement.

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 nine months ended September 30, ~~2019,~~2020, CCLP distributed $1.4 million in cash, including $0.9 million to its public ~~unitholders, reflecting the reduction in~~unitholders. The amount of quarterly distributions ~~announced previously by CCLP in December 2018.~~is determined based on a variety of factors, including estimates of CCLP’s cash needs to fund its future operating, investing, and debt service requirements. There can be no assurance that quarterly distributions from CCLP will increase from this amount per unit going forward.

Off Balance Sheet Arrangements

As of September 30, ~~2019,~~2020, 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~~Table 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.Contents

Commitments and Contingencies

Litigation

Contingencies of Discontinued Operations

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the amount of ~~$1.5~~$1.5 million at during the quarter ended September 30, 2019. ~~We continue to monitor this matter~~The Epic Promissory Note became due on December 31, 2019 but neither Epic nor the Clarkes made the required payment. Upon the default by Epic and ~~seek to vigorously pursue our rights to collect all amounts payable to us, including~~the Clarkes, we filed a lawsuit against the Clarkes on January 15, 2020 in Montgomery County, Texas for breach of the Clarke Promissory Note Guaranty Agreement, seeking the amounts ~~owed~~due under the Epic Promissory Note ~~when due, including by enforcing~~and related interest, as well as attorneys’ fees and expenses. The Clarkes each filed an answer and counterclaims for fraud and negligent misrepresentation and seek monetary damages in excess of $1 million, punitive damages, and attorneys’ fees. After taking discovery from the Clarkes, on August 21, 2020, we filed a Motion for Summary Judgment to recover the principal amount of the note plus interest from the Clarkes and to dismiss their counterclaims. The Court granted the Motion for Summary Judgment and entered Final Judgment in our ~~rights under~~favor, thereby dismissing the ~~Clarke Promissory Note Guaranty Agreement.~~Clarkes’ counterclaims and awarding TETRA the full amount requested pursuant to an Order dated September 23, 2020. The Court awarded TETRA the full amount of $7,887,454, plus post-judgment interest at the rate of 3.52% per annum. On October 21, 2020, the Clarkes filed a Notice of Appeal. We will defend the Clarkes’ appeal and consider the options available to enforce the Court’s Order.

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 September 30, ~~2019:~~2020:


	Payments Due
	Total		2020		2021		2022		2023		2024		Thereafter
	(In Thousands)
Long-term debt - TETRA	$	220,500	$	—	$	—	$	—	$	—	$	—	$	220,500
Long-term debt - CCLP	636,249		—		—		80,720		—		—		555,529
Interest on debt - TETRA	79,931		3,997		15,986		15,986		15,986		15,986		11,990
Interest on debt - CCLP	241,409		22,503		51,405		49,454		45,553		45,553		26,941
Purchase obligations	87,806		2,381		9,525		9,525		9,525		9,525		47,325
Asset retirement obligations(1)	12,973		—		—		—		—		—		12,973
Operating leases	107,508		5,809		22,322		18,896		15,803		12,067		32,611
Total contractual cash obligations(2)	$	1,386,376	$	34,690	$	99,238	$	174,581	$	86,867	$	83,131	$	907,869

(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 September 30, 2020.

(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$0.4 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 settlements.

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Payments Due
Total 2019 2020 2021 2022 2023 Thereafter
(In Thousands)
Long-term debt - TETRA $ 230,500
$ —
$ —
$ —
$ —
$ 10,000
$ 220,500
Long-term debt - CCLP 657,430
—
—
—
295,930
11,500
350,000
Interest on debt - TETRA 107,766
4,522
18,088
18,088
18,088
17,993
30,987
Interest on debt - CCLP 209,158
12,066
48,264
48,264
41,156
26,595
32,813
Purchase obligations 96,875
2,375
9,500
9,500
9,500
9,500
56,500
Asset retirement obligations⁽¹⁾
12,603
—
—
—
—
—
12,603
Operating leases 82,291
4,870
17,721
12,798
9,591
7,871
29,440
Total contractual cash obligations⁽²⁾
$ 1,396,623
$ 23,833
$ 93,573
$ 88,650
$ 374,265
$ 83,459
$ 732,843


⁽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 September 30, 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$0.8 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 settlements.~~

For additional information about our contractual obligations as of December 31, ~~2018,~~2019, see ~~"Management's~~“Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations"~~Operations” in our ~~2018~~2019 Annual Report on Form 10-K.

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"~~“anticipates”, ~~"assumes"~~“assumes”, “believes,” ~~"budgets"~~“budgets”, “could,” “estimates,” ~~"expects"~~“expects”, ~~"forecasts"~~“forecasts”, ~~"goal"~~“goal”, ~~"intends"~~“intends”, ~~"may"~~“may”, ~~"might"~~“might”, ~~"plans"~~“plans”, ~~"predicts"~~“predicts”, ~~"projects"~~“projects”, ~~"schedules"~~“schedules”, ~~"seeks"~~“seeks”, ~~"should"~~“should”, ~~"targets"~~“targets”, ~~"will"~~“will”, and ~~"would"~~“would”.

~~Such~~ Management believes that these forward-looking statements ~~reflect our current views with respect~~are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events ~~and financial performance and are based on assumptions that we believe to be reasonable, but such~~or otherwise, except as required by law. In addition, 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 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;~~

~~restrictions under our debt agreements and the consequences of any failure to comply with debt covenants;~~

~~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~~ ~~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~~certain risks and uncertainties that could cause ~~our~~ actual results to differ materially from ~~those indicated by the forward-looking statements. If any of these risks~~our historical experience and our present expectations 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~~projections. These risks and ~~uncertainties. You should~~uncertainties include, but are not ~~place undue reliance~~limited to, those described in Part II, “Item 1A. Risk Factors” and elsewhere in this report and in our Annual Report on ~~forward-looking statements. Each forward-looking statement speaks only as of~~Form 10-K for the ~~date of~~year ended December 31, 2019, and those described from time to time in our future reports filed with 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.~~SEC.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not Applicable.

~~Market risk is the risk of loss arising from adverse changes in market rates and prices. Fora discussion of our indirect exposure to fluctuatingcommodityprices, please read “Risk Factors —CertainBusinessRisks” in our~~ ~~2018 Annual Report~~.~~We depend on U.S. and international demand for and production ofoil andnatural 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 revenuesand operating cash flows to decreasein thefuture.We do notcurrently hedge, and do notintend to hedge,our indirect exposure to fluctuating commodity prices.~~

~~Interest Rate Risk~~

~~As of September 30, 2019, we had balances outstanding under the Term Credit Agreement, ABL Credit Agreement, and CCLP Credit Agreement that bear interest at variable rates.~~

Expected Maturity Date Fair Market
Value
($ amounts in thousands) 2019 2020 2021 2022 2023 Thereafter Total
September 30, 2019
U.S. dollar variable rate - TETRA $ —
$ —
$ —
$ —
$ 10,000
$ 220,500
$ 230,500
$ 230,500
Weighted average interest rate (variable) — % — % — % — % 3.81 % 8.29 %
U.S. dollar variable rate - CCLP $ —
$ —
$ —
$ —
$ 11,500
$ —
$ 11,500
$ 11,500
Weighted average interest rate (variable) — % — % — % — % 6.00 % — %
U.S. dollar fixed rate - CCLP $ —
$ —
$ —
$ 295,930
$ —
$ 350,000
$ 645,930
$ 614,000
Weighted average interest rate (fixed) — % — % — % 7.25 % — % 7.50 %

~~Exchange Rate Risk~~

~~As of September 30, 2019, there have been no material changes pertaining to our exchange rate exposures as disclosed in our~~ ~~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 September 30, ~~2019,~~2020, the end of the period covered by this quarterly report.

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, ~~2019,~~2020, 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.

Item 1A. Risk Factors.

The statements in this section describe the known material risks to our business and should be considered carefully. We have described in the ~~2018~~2019 Annual Report significant risk factors and periodically update those risks for material developments. Provided below is an update to our risk factors as previously disclosed in the ~~2018~~2019 Annual Report.

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The COVID-19 pandemic has had, or may in the future have, ~~continuing exposure to decommissioning liabilities associated with~~certain negative impacts on our business, and such impacts have had, or may in the future have, an adverse effect on our business, our financial condition, results of operations, or liquidity.

The COVID-19 pandemic and the resulting economic impact have had a significant negative impact on the oil and gas ~~properties previously owned~~industry. The deterioration in demand for oil caused by ~~Maritech.~~the pandemic, coupled with oil oversupply, has had, and is reasonably likely to continue to have, an adverse impact on the demand for our products and services. The public health crisis caused by the COVID-19 pandemic, and the measures that have been taken or that may be taken in the future by governments, various regulatory agencies, our customers and our suppliers, have had, or may in the future have, certain negative impacts on our financial condition, results of operations, and liquidity, including, without limitation, the following:

~~From 2001~~•demand for our products and services is declining as our customers continue to ~~2012, Maritech sold various~~adjust their operations in response to lower oil and gas ~~producing properties in numerous transactions~~prices;

•actions undertaken by national, state and local governments and health officials to ~~different buyers.~~contain COVID-19 or treat its effects. In connection with those sales, the buyers generally assumed the decommissioning liabilities associated with the properties sold (the "Legacy Liabilities") and generally became the successor operator. In some cases, Maritech retained certain liabilities and we provided guaranties of Maritech’s retained liabilities. Some buyers of these Maritech properties subsequently sold certain of these propertiesresponse to other buyers, who also assumed the financial responsibilities associated with the properties' operations, including decommissioning liabilities, and these buyers also typically became the successor operator of the properties. To the extent that a buyer of these properties fails to perform the decommissioning work required, a previous owner, including Maritech, may be required to perform operations to satisfy the decommissioning liabilities. As a result of the third-party indemnity agreements and corporate guarantiesvarious governmental directives, at points we have ~~previously provided~~required most office-based employees, including most employees based at our headquarters in The Woodlands, Texas, to ~~the US Department of the Interior~~work remotely. We may experience reductions in productivity and to other private third-parties as the former parent company of Maritech, we may be responsible for satisfying these decommissioning obligations if they are not satisfied by the current owners and operators of the properties or by Maritech. Significant decommissioning liabilities that were assumed by the buyers of the Maritech properties in these previous sales remain unperformed. If oil and natural gas pricing levels continue to be depressed or further deteriorate, one or more of these buyers may be unable to perform the decommissioning work required on a property previously owned by Maritech. If these buyers, or any successor owners of the Maritech properties, are unable to satisfy and extinguish their decommissioning liabilities due to bankruptcy or other liquidity issues, the US Department of the Interior may seek to impose those decommissioning obligations on Maritech and on us duedisruptions to our ~~third party~~

indemnity agreements, and contractual commitments and guaranties issued from time to time by us to the US Department of the Interior and various third parties. The amount of cash necessary to satisfy these obligations could be significant and could adversely affect our business ~~results of operations, financial condition, and cash flows.~~

In March 2018, pursuant to a series of transactions, Maritech sold the remaining offshore leases held by Maritech to Orinoco Natural Resources, LLC ("Orinoco") and, immediately thereafter, we sold all equity interest in Maritech to Orinoco. The assignments for six of the offshore leases conveyed to Orinoco have not been approved by the US Department of the Interior and Maritech remains an owner of record for these leases. Maritech also remains a recognized operator of a portion of four other offshore properties. Under the Maritech Asset Purchase Agreement, Orinoco assumed all of Maritech's decommissioning liabilities related to the leases conveyed to Orinoco (the “Orinoco Lease Liabilities”) and, under the Maritech Membership Interest Purchase Agreement, Orinoco assumed all other liabilities of Maritech, including the Legacy Liabilities, subject to limited exceptions unrelated to the decommissioning liabilities. Pursuant to a Bonding Agreement executed in connection with such purchase agreements, Orinoco provided non-revocable bonds in the aggregate amount of approximately $46.8 million to secure the performance of certain of Maritech’s decommissioning obligations related to the Orinoco Lease Liabilities and certain of Maritech’s remaining current decommissioning obligations (not including the Legacy Liabilities). Orinoco was required to replace, within 90 days and then 180 following the closing, the initial bonds delivered at closing with other non-revocable performance bonds, meeting certain additional requirements, in the aggregate sum of $47.0 million or make cash escrow payments. Among the other requirements of the final replacement bonds was that they must provide coverage for all of the asset retirement obligations of Maritech instead of only relating to specific properties. The payment obligations of Orinoco under the Bonding Agreement are guaranteed by Thomas M. Clarke and Ana M. Clarke pursuant to a separate guaranty agreement (the “Clarke Bonding Guaranty Agreement”). Orinoco has not delivered such replacement bonds and neither it nor the Clarkes has made any of the escrow payments required pursuant to the terms of the Bonding Agreement. We filed a lawsuit against Orinoco and the Clarkes to enforce the terms of the Bonding Agreement and the Clarke Bonding Guaranty Agreement. A summary judgment was granted in favor of Orinoco and the Clarkes which has the effect of dismissing our present claims for the replacement bonds and the escrow payments provided for in the Bonding Agreement. We believe this judgment should not have been granted and we have begun the process of appealing it. The non-revocable performance bonds delivered at the closingroutines while work-from-home arrangements remain in ~~effect.~~place;

If•We could encounter logistical complications and increased costs adapting our disclosure controls and procedures and our internal control over financial reporting in a changing environment that includes work-from-home arrangements and furloughs. In the future we ~~become liable for decommissioning liabilities associated with any property covered by either an initial bond~~may encounter operational challenges or ~~stage 1 permanent bond,~~disruptions stemming from the ~~Bonding Agreement provides~~pandemic that ~~if we call any~~require us to implement new or enhanced internal controls to mitigate the risks of ~~the initial bonds~~operating in a remote environment or ~~the stage 1 permanent bonds to satisfy such liability and the amount~~increased risks of the bond payment is not sufficient to pay for such liability, Orinoco will pay us for the additional amount required. To the extent Orinoco is unable to cover any such deficiency or we become liable for a significant portion of the Legacy Liabilities, our financial condition and results of operations may be negatively affected.

Possible changes in the US Department of Interior's supplemental bonding and financial assurance requirements may increase our risks associated with the decommissioning obligations pertaining to oil and gas properties previously owned by Maritech.

~~Recent and additional anticipated~~material misstatements resulting from changes to the ~~supplemental bonding~~business and ~~financial assurance program managed by the US Department of the Interior could require all oil~~other uncertainties;

•restrictions on importing and ~~gas owners~~exporting products;

•impacts related to late customer payments and ~~operators~~contractual defaults associated with ~~infrastructure~~customer and supplier bankruptcies;

•potentially higher borrowing costs in the ~~Gulf of Mexico~~future;

•cybersecurity issues, as our network may become more vulnerable to ~~provide additional supplemental bonds or other acceptable financial assurance for decommissioning liabilities. These changes have the potential~~cyberattacks due to adversely impact the financial condition of lease owners and operators in the Gulf of Mexico and increase the number of such owners and operators seeking bankruptcy protection, given current oil and gas prices. In July 2016, the US Department of the Interior issued a Noticeincreased remote access associated with work-from-home arrangements;

•our ability to Lessees and Operators (“2016 NTL”) that strengthened requirements for the posting of additional financial assurance by offshore lease owners and operators to assure that sufficient security is available to satisfy and extinguish decommissioning obligations with respect to offshore wells, platforms, pipelines and other facilities. The 2016 NTL, which became effective in September 2016, eliminated the past practice of waiving supplemental bonding requirements where lease owners or operators, or their guarantors, could demonstrate a certain level of financial strength. Instead, under the 2016 NTL, the US Department of the Interior will allow lease owners and operators to "self-insure," but only up to 10% of their "tangibleuse our net worth," which is defined as the difference between a company’s total assets and the value of all liabilities and intangible assets. It is unclear how this self-insurance allowance relates to lease owners or operators with a guarantor presently in place. In addition, the 2016 NTL is being held in abeyance by the US Department of the Interior, which creates additional and significant uncertainty for Gulf of Mexico lease owners and operators and for us through the third party indemnity agreements

~~we have provided for Maritech liabilities to the US Department of the Interior and/or to third parties through our private guarantees.~~

The US Department of the Interior also recently increased its estimates for decommissioning liabilities in the Gulf of Mexico, causing the potential need for additional supplemental bonding and/or other financial assurances to be dramatically increased. When coupled with the volatile and currently low prices of oil and gas, it is difficult to predict the impact of the rule and regulatory changes already promulgated and asoperating loss carryforwards may be ~~forthcoming by the US Department of the Interior relating~~limited;

•increased costs associated with possible facility closures to financial assurance for decommissioning liabilities. The US Department of the Interior's revisions to its supplemental bonding process could result in demands for the posting of increased financial assurances by ownersmeet expected customer activity levels; and operators in the Gulf of Mexico, including Maritech, Orinoco and the other entities to whom Maritech divested its Gulf of Mexico assets, but such demands cannot be directly placed on us due to the fact that we are only a former parent company of Maritech and are only a guarantor as opposed to an actual lease owner or operator. This may force lease owners and operators of leases and other infrastructure in the Gulf of Mexico to obtain surety bonds or other forms of financial assurance, the costs of which could be significant. Moreover, recent and anticipated changes to the bonding and financial assurance program for the Gulf of Mexico are likely to result in the loss of supplemental bonding waivers for a large number of lease owners and operators of infrastructure in the Gulf of Mexico, which will in turn force these owners and operators to seek additional surety bonds which could exceed the surety bond market’s ability to provide such additional financial assurance. Lease owners and operators who have already leveraged their assets could face difficulty obtaining surety bonds because of concerns the surety may have about the priority of their liens on their collateral as well as the creditworthiness of such lease owners and operators. Consequently, anticipated changes to the bonding and financial assurance program could result in additional lease owners and operators in the Gulf of Mexico initiating bankruptcy proceedings, which in turn could result in the US Department of the Interior seeking to impose decommissioning costs on predecessors in interest and providers of third party indemnity agreements in the event that the current lease owners and/or operators cannot meet their decommissioning obligations. As a result, this could increase the risk that

•we may be required to ~~step in and satisfy remaining decommissioning liabilities of Maritech and any buyer~~record significant impairment charges with respect to assets, whose fair values may be negatively affected by the effects of the ~~Maritech properties,~~COVID-19 pandemic on our operations. Also, we may be required to write off obsolete inventory, and such charges may be significant.

The resumption of our normal business operations after the disruptions caused by the COVID-19 pandemic may be delayed or constrained by its lingering effects on the oil and gas industry. Any of the negative impacts of the COVID-19 pandemic, including ~~Orinoco, through~~those described above, alone or in combination with others, may have a significant adverse effect on our ~~third party indemnity agreements and private guarantees, which obligations could be significant and could adversely affect our business,~~financial condition, results of operations, or liquidity. Any of these negative impacts, alone or in combination with others, could exacerbate many of the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019. The full extent to which the COVID-19 pandemic will negatively affect our financial condition, results of operations, or liquidity will depend on future developments that are highly uncertain and ~~cash flows.~~

~~We are exposed to significant credit risks.~~

~~We face credit risk associated with~~cannot be predicted, including the ~~significant amounts~~scope and duration of ~~accounts receivable we have with our customers in~~ the ~~energy industry. Many of our customers, particularly those associated with our onshore operations, are small- to medium-sized~~pandemic and the resulting impact on the oil and gas operators that may be more susceptible to declines in oil and gas commodity prices or generally increased operating expenses than larger companies. Our ability to collect from our customers is impacted byindustry. Given the ~~current volatile oil and natural gas price environment.~~

As discussed in the preceding risk factors, we face the risk of having to satisfy decommissioning liabilities on properties presently or formerly owned by Maritech. Continued decreased oil and natural gas prices have resulted in reduced revenues and cash flows for oil and gas lease owners and operators, including companies that have purchased Maritech properties or are joint-owners in properties presently and formerly owned by Maritech and from whom Maritech is entitled to receive payments upon satisfaction of certain decommissioning obligations. Consequently, we face credit risk associated with the abilitydynamic nature of these ~~companies to satisfy their decommissioning liabilities. If these companies are unable to satisfy their obligations, it~~events, we cannot reasonably estimate the period of time that the COVID-19 pandemic and related market conditions will ~~increase~~persist, the ~~possibility that we~~full extent of the impact they will ~~become liable for such decommissioning obligations in~~have on our financial condition, results of operations, or liquidity or the ~~future.~~pace or extent of any subsequent recovery. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) None.

(b) None.

Table of Contents


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)
July 1 – July 31, 2020	27,403	(2)	$	0.40	—	$	14,327,000
August 1 – August 31, 2020	18,356	(2)	0.61		—	14,327,000
September 1 – September 30, 2020	—		—		—	14,327,000
Total	45,759				—	$	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.

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⁾
July 1 – July 31, 2019 2,169
(2) $ 1.50
—
$ 14,327,000
August 1 – August 31, 2019 29,126
(2) 1.51
—
14,327,000
September 1 – September 30, 2019 154
(2) 2.01
—
14,327,000
Total 31,449

—
$ 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.

Table of Contents

Item 6. Exhibits.

Exhibits:



~~10.1~~10.1*			~~Amended and Restated Change of Control~~Transition Agreement ~~dated October 24, 2019 by and~~dates July 27, 2020 between TETRA Technologies, Inc. and ~~Brady M. Murphy.~~Bass C. Wallace, Jr.
31.110.2			Form of Cash Retention Award Agreement under the TETRA Technologies, Inc. 2018 Equity Incentive Plan.
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.SCH+			XBRL Taxonomy Extension Schema Document.
101.CAL+			XBRL Taxonomy Extension Calculation Linkbase Document.
~~101.LAB+~~101.DEF+			XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB+			XBRL Taxonomy Extension Label Linkbase Document.
101.PRE+			XBRL Taxonomy Extension Presentation Linkbase Document.
~~101.DEF+~~104*			Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL ~~Taxonomy Extension Definition Linkbase Document.~~tags are embedded within the Inline XBRL documents


*	~~Filed with this report.~~


**	~~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 nine~~ ~~month periods ended~~ ~~September 30, 2019~~ ~~and~~ ~~2018; (ii) Consolidated Statements of Comprehensive Income for the~~ ~~three and nine~~ ~~month periods ended~~ ~~September 30, 2019~~ ~~and~~ ~~2018; (iii) Consolidated Balance Sheets as of~~ ~~September 30, 2019~~ ~~and~~ ~~December 31, 2018; (iv) Consolidated Statements of Cash Flows for the~~ ~~nine~~ ~~month periods ended~~ ~~September 30, 2019~~ ~~and~~ ~~2018; and (v) Notes to Consolidated Financial Statements for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2019~~.

* Filed with this report.

** 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 nine month periods ended September 30, 2020 and 2019; (ii) Consolidated Statements of Comprehensive Income for the three and nine month periods ended September 30, 2020 and 2019; (iii) Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019; (iv) Consolidated Statements of Equity for the nine month periods ended September 30, 2020 and 2019 ; (v) Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2020 and 2019; and (vi) Notes to Consolidated Financial Statements for the nine months ended September 30, 2020.

Table of Contents

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:	November ~~7, 2019~~3, 2020	By:	/s/Brady M. Murphy
			Brady M. Murphy
			President
			Chief Executive Officer

Date:	November ~~7, 2019~~3, 2020	By:	/s/Elijio V. Serrano
			Elijio V. Serrano
			Senior Vice President
			Chief Financial Officer

Date:	November ~~7, 2019~~3, 2020	By:	/s/Richard D. ~~O'Brien~~O’Brien
			Richard D. ~~O'Brien~~O’Brien
			Vice President – Finance and Global Controller
			Principal Accounting Officer

4546



	September 30, 2019		December 31, 2018
	(In Thousands)
Finished goods	$	69,326	$	69,762
Raw materials	3,043		3,503
Parts and supplies	46,815		47,386
Work in progress	23,222		22,920
Total inventories	$	142,406	$	143,571



	Three Months Ended September 30, 2019								Three Months Ended September 30, 2018
	Offshore Services			Maritech		Total			Offshore Services			Maritech		Total
Major classes of line items constituting pretax loss from discontinued operations
Revenue	$	—		$	—	$	—		$	—		$	—	$	—
Cost of revenues	(273		)	—		(273		)	125			—		125
Depreciation, amortization, and accretion	52			—		52			—			—		—
General and administrative expense	1,734			—		1,734			192			—		192
Other (income) expense, net	117			—		117			(1,113		)	—		(1,113		)
Pretax income (loss) from discontinued operations	(1,630		)	—		(1,630		)	796			—		796
Pretax loss on disposal of discontinued operations						(7,500		)						—
Total pretax income (loss) from discontinued operations						(9,130		)						796
Income tax expense						—								—
Total income (loss) from discontinued operations						$	(9,130	)						$	796



Derivative Contracts	British Pound Notional Amount	Traded Exchange Rate	Settlement Date
	(In Thousands)
Forward purchase Euro	2,316	0.89	10/18/2019



Derivative Contracts	Swedish Krona Notional Amount	Traded Exchange Rate	Settlement Date
	(In Thousands)
Forward purchase Euro	15,980	10.65	10/18/2019



Foreign currency derivative contracts	Balance Sheet Location	Fair Value at September 30, 2019			Fair Value at December 31, 2018
		(In Thousands)
Forward purchase contracts	Current assets	$	12		$	41
Forward sale contracts	Current assets	122			76
Forward sale contracts	Current liabilities	—			(126		)
Forward purchase contracts	Current liabilities	(504		)	(168		)
Net asset (liability)		$	(370	)	$	(177	)



	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
	(In Thousands)
Operating lease expense	$	5,075	$	15,106
Short-term lease expense	9,556		30,269
Total lease expense	$	14,631	$	45,375



		Operating Leases
	(In Thousands)

Remainder of 2019		$	4,870
2020		17,721
2021		12,798
2022		9,591
2023		7,871
Thereafter		29,440
Total lease payments		82,291
Less imputed interest		(22,227		)
Total lease liabilities		$	60,064



	Expected Maturity Date																				Fair Market Value
($ amounts in thousands)	2019			2020			2021			2022			2023			Thereafter			Total		Fair Market Value
September 30, 2019
U.S. dollar variable rate - TETRA	$	—		$	—		$	—		$	—		$	10,000		$	220,500		$	230,500	$	230,500
Weighted average interest rate (variable)	—		%	—		%	—		%	—		%	3.81		%	8.29		%
U.S. dollar variable rate - CCLP	$	—		$	—		$	—		$	—		$	11,500		$	—		$	11,500	$	11,500
Weighted average interest rate (variable)	—		%	—		%	—		%	—		%	6.00		%	—		%
U.S. dollar fixed rate - CCLP	$	—		$	—		$	—		$	295,930		$	—		$	350,000		$	645,930	$	614,000
Weighted average interest rate (fixed)	—		%	—		%	—		%	7.25		%	—		%	7.50		%