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Market Risks and Derivative Hedge Contracts | 9 Months Ended
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Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Hedge Contracts | FAIR VALUE MEASUREMENTS Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” within an entity’s principal market, if any. The principal market is the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity, regardless of whether it is the market in which the entity will ultimately transact for a particular asset or liability or if a different market is potentially more advantageous. Accordingly, this exit price concept may result in a fair value that may differ from the transaction price or market price of the asset or liability. Under U.S. GAAP, the fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value. Fair value measurements should maximize the use of observable inputs and minimize the use of unobservable inputs, where possible. Observable inputs are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs may be needed to measure fair value in situations where there is little or no market activity for the asset or liability at the measurement date and are developed based on the best information available in the circumstances, which could include the reporting entity’s own judgments about the assumptions market participants would utilize in pricing the asset or liability. Financial Instruments CCLP Preferred Units The CCLP Preferred Units are valued using a lattice modeling technique that, among a number of lattice structures, includes significant unobservable items (a Level 3 fair value measurement). These unobservable items include (i) the volatility of the trading price of CCLP's common units compared to a volatility analysis of equity prices of CCLP's comparable peer companies, (ii) a yield analysis that utilizes market information related to the debt yields of comparable peer companies, and (iii) a future conversion price analysis. The fair valuation of the CCLP Preferred Units liability is increased by, among other factors, projected increases in CCLP's common unit price and by increases in the volatility and decreases in the debt yields of CCLP's comparable peer companies. Increases (or decreases) in the fair value of CCLP Preferred Units will increase (decrease) the associated liability and result in future adjustments to earnings for the associated valuation losses (gains). During the three and nine month periods ended September 30, 2018, the changes in the fair value of the CCLP Preferred Units resulted in $0.5 million and $1.3 million charged to earnings, respectively, in the consolidated statement of operations. Warrants The Warrants are valued either by using their traded market prices (a Level 1 fair value measurement) or, for periods when market prices are not available, by using the Black Scholes option valuation model that includes estimates of the volatility of the Warrants implied by their trading prices (a Level 3 fair value measurement). As of September 30, 2018 and December 31, 2017, the fair valuation methodology utilized for the Warrants was a Level 3 fair value measurement, as there were no available traded market prices to value the Warrants. The fair valuation of the Warrants liability is increased by, among other factors, increases in our common stock price, and by increases in the volatility of our common stock price. Increases (or decreases) in the fair value of the Warrants will increase (decrease) the associated liability and result in future adjustments to earnings for the associated valuation losses (gains). During the three and nine month periods ended September 30, 2018, the changes in the fair value of the Warrants liability resulted in $0.2 million being credited to earnings and $0.02 million being charged to earnings, respectively, in the consolidated statement of operations. Stock Appreciation Rights During the third quarter of 2017 and the first quarter of 2018, we issued stand-alone, cash-settled stock appreciation rights awards to an executive officer. These awards are valued by using the Black Scholes option valuation model (a Level 3 fair value measurement) and such fair value is recognized based on the portion of the requisite service period satisfied as of each valuation date. The fair valuation of the stock appreciation rights liability is increased by, among other factors, increases in our common stock price, and by increases in the volatility of our common stock price. These stock appreciation rights awards are reflected as an accrued liability in our consolidated balance sheet. Increases (or decreases) in the fair value of the stock appreciation rights awards will increase (decrease) the associated liability and result in future adjustments to earnings for the associated valuation losses (gains). During the nine months ended September 30, 2018, the fair value of the stock appreciation rights increased $0.3 million, which was charged to earnings in the consolidated statement of operations. SwiftWater Contingent Consideration As part of the purchase agreement of SwiftWater during the first quarter of 2018, the sellers have the right to receive contingent consideration payments, in an aggregate amount of up to $15.0 million, calculated on EBITDA and revenue of the combined water management business of SwiftWater and our pre-existing operations in the Permian Basin in respect of the period from January 1, 2018 through December 31, 2019. The contingent consideration may be paid in cash or shares of our common stock, at our election. The fair value of the contingent consideration 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). During the period from the closing date to September 30, 2018, the estimated fair value for the liabilities associated with the contingent purchase price consideration increased to $11.3 million, resulting in $(0.6) million and $3.7 million being (credited) charged to other (income) expense, net, during the three and nine month periods ended September 30, 2018, respectively. Derivative Contracts We are exposed to financial and market risks that affect our businesses. We have concentrations of credit risk as a result of trade receivables owed to us by companies in the energy industry. We have currency exchange rate risk exposure related to transactions denominated in foreign currencies as well as to investments in certain of our international operations. As a result of our variable rate bank credit facility, we face market risk exposure related to changes in applicable interest rates. Our financial risk management activities may at times involve, among other measures, the use of derivative financial instruments, such as swap and collar agreements, to hedge the impact of market price risk exposures. For these fair value measurements, we utilize the quoted value as determined by our counterparty financial institution (a Level 2 fair value measurement). We and CCLP each enter into 30-day 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, 2018, 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 |  | $ | 2,818 |  |  | 1.17 |  | 10/18/2018
Forward sale pounds sterling |  | 3,928 |  |  | 1.31 |  | 10/18/2018
Forward sale Canadian dollar |  | 5,419 |  |  | 1.29 |  | 10/18/2018
Forward purchase Mexican peso |  | 1,747 |  |  | 18.89 |  | 10/18/2018
Forward sale Norwegian krone |  | 679 |  |  | 8.11 |  | 10/18/2018
Forward sale Mexican peso |  | 6,352 |  |  | 18.89 |  | 10/18/2018
Derivative Contracts |  | British Pound Notional Amount |  | Traded Exchange Rate |  | Settlement Date
|  | (In Thousands) |  |  |  |
Forward purchase Euro |  | 982 |  |  | 0.89 |  | 10/18/2018
Derivative Contracts |  | Swedish Krona Notional Amount |  | Traded Exchange Rate |  | Settlement Date
|  | (In Thousands) |  |  |  |
Forward purchase Euro |  | 23,791 |  |  | 10.34 |  | 10/18/2018
Under this program, we and CCLP may enter into similar derivative contracts from time to time. Although contracts pursuant to this program will serve as an economic hedge of the cash flow of our currency exchange risk exposure, they are not formally designated as hedge contracts or qualify for hedge accounting treatment. Accordingly, any change in the fair value of these derivative instruments during a period will be included in the determination of earnings for that period. The fair values of foreign currency derivative instruments are based on quoted market values as reported to us by our counterparty (a Level 2 fair value measurement). The fair values of our and CCLP's foreign currency derivative instruments as of September 30, 2018 and December 31, 2017, are as follows:
Foreign currency derivative instruments | Balance Sheet Location |  | Fair Value at September 30, 2018 |  | Fair Value at December 31, 2017
|  |  |  | (In Thousands)
Forward purchase contracts |  | Current assets |  | $ | 12 |  |  | $ | 111 |
Forward sale contracts |  | Current assets |  | 14 |  |  | 130 |
Forward sale contracts |  | Current liabilities |  | (45 | ) |  | (255 | )
Forward purchase contracts |  | Current liabilities |  | (34 | ) |  | (113 | )
Net asset (liability) |  |  |  | $ | (53 | ) |  | $ | (127 | )
None of the foreign currency derivative contracts contain credit risk related contingent features that would require us to post assets or collateral for contracts that are classified as liabilities. During the three and nine month periods 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. During the three and nine month periods ended September 30, 2017, we recognized $0.1 million and $1.2 million of net gains (losses), respectively, reflected in other (income) expense, net, associated with our foreign currency derivative program. A summary of these recurring fair value measurements by valuation hierarchy as of September 30, 2018 and December 31, 2017, is as follows:
|  |  | Fair Value Measurements Using
| Total as of |  | Quoted Prices in Active Markets for Identical Assets or Liabilities |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs
Description | September 30, 2018 |  | (Level 1) |  | (Level 2) |  | (Level 3)
| (In Thousands)
CCLP Series A Preferred Units | $ | (36,944 | ) |  | $ | — |  |  | $ | — |  |  | $ | (36,944 | )
Warrants liability | (13,224 | ) |  | — |  |  | — |  |  | (13,224 | )
Cash-settled stock appreciation rights | (392 | ) |  | — |  |  | — |  |  | (392 | )
Asset for foreign currency derivative contracts | 26 |  |  | — |  |  | 26 |  |  | — |
Liability for foreign currency derivative contracts | (79 | ) |  | — |  |  | (79 | ) |  | — |
Acquisition contingent consideration liability | (11,300 | ) |  | — |  |  | — |  |  | (11,300 | )
Net liability | $ | (61,913 | ) |  |  |  |  |  |
|  |  | 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, 2017 |  | (Level 1) |  | (Level 2) |  | (Level 3)
| (In Thousands)
CCLP Series A Preferred Units | $ | (61,436 | ) |  | $ | — |  |  | $ | — |  |  | $ | (61,436 | )
Warrants liability | (13,202 | ) |  | — |  |  | — |  |  | (13,202 | )
Cash-settled stock appreciation rights | (97 | ) |  | — |  |  | — |  |  | (97 | )
Asset for foreign currency derivative contracts | 241 |  |  | — |  |  | 241 |  |  | — |
Liability for foreign currency derivative contracts | (378 | ) |  | — |  |  | (378 | ) |  | — |
Net liability | $ | (74,872 | ) |  |  |  |  |  |
The fair values of cash, restricted cash, accounts receivable, accounts payable, short-term borrowings and long-term debt pursuant to TETRA's ABL Credit Agreement and Term Credit Agreement, and the CCLP New Credit Agreement approximate their carrying amounts. The fair value of our long-term 11% Senior Note at December 31, 2017 was approximately $130.8 million, based on current interest rates on that date, which was different from the stated interest rate on the 11% Senior Note. This fair value compares to the face amount of the 11% Senior Note of $125.0 million at December 31, 2017. The fair values of the publicly traded CCLP 7.25% Senior Notes (as herein defined) at September 30, 2018 and December 31, 2017, were approximately $276.0 million and $279.7 million, respectively. Those fair values compare to the face amount of $295.9 million both at September 30, 2018 and December 31, 2017. The fair value of the publicly traded CCLP 7.50% Senior Secured Notes at September 30, 2018 was approximately $358.3 million. This fair value compares to aggregate principal amount of such notes at September 30, 2018 of $350.0 million. We calculated the fair values of our 11% Senior Note as of December 31, 2017 internally, using current market conditions and average cost of debt (a Level 2 fair value measurement). We based the fair values of the CCLP 7.25% Senior Notes and the CCLP 7.50% Senior Secured Notes as of September 30, 2018 on recent trades for these notes. See Note F - "Long-Term Debt and Other Borrowings," for a complete discussion of our debt.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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