SEC Info - Harsco Corp. - ‘10-Q’ for 6/30/21

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		Alternative Formats (Word, et al.) Condensed Consolidated Balance Sheets (Unaudited) Condensed Consolidated Statements of Cash Flows (Unaudited) Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Condensed Consolidated Statements of Equity (Unaudited) Condensed Consolidated Statements of Operations (Unaudited) Controls and Procedures Exhibits Financial Information Financial Statements Item 1 Item 1A Item 2 Item 3 Item 4 Item 6 Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Notes to Condensed Consolidated Financial Statements (Unaudited) Other Information Part I -- Financial Information Part Ii -- Other Information Quantitative and Qualitative Disclosures About Market Risk Risk Factors Signatures Table of Contents Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page – Filing Submission
"	Table of Contents
"	Part I -- Financial Information
"	Item 1
"	Financial Statements
"	Condensed Consolidated Balance Sheets (Unaudited)
"	Condensed Consolidated Statements of Operations (Unaudited)
"	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
"	Condensed Consolidated Statements of Cash Flows (Unaudited)
"	Condensed Consolidated Statements of Equity (Unaudited)
"	Notes to Condensed Consolidated Financial Statements (Unaudited)
"	Item 2
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Item 3
"	Quantitative and Qualitative Disclosures About Market Risk
"	Item 4
"	Controls and Procedures
"	Part Ii -- Other Information
"	Legal Proceedings
"	Item 1A
"	Risk Factors
"	Unregistered Sales of Equity Securities and Use of Proceeds
"	Item 6
"	Exhibits
"	Signatures

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


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

For the transition period from to

Commission File Number i 001-03970

i HARSCO CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code i 717- i 763-7064

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

i Common stock, par value $1.25 per share

i HSC

i 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. i Yes ☒ NO ☐

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

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

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 i ☐ NO ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.


Class						Outstanding at July 30, 2021
i Common stock, par value $1.25 per share						i 79,190,353

Glossary of Defined Terms

Unless the context requires otherwise, "Harsco," the "Company," "we," "our," or "us" refers to Harsco Corporation on a consolidated basis. The Company also uses several other terms in this Quarterly Report on Form 10-Q, which are further defined below:


Term						Description
AOCI						Accumulated Other Comprehensive Income (Loss)
AXC						The former Harsco Industrial Air-X-Changers business
CARES Act						Coronavirus Aid, Relief, and Economic Security Act
CCIRs						Cross-currency interest rate swaps
Clean Earth						CEHI Acquisition Corporation and Subsidiaries
COVID-19						The COVID-19 coronavirus pandemic
Credit Agreement						Credit Agreement governing the Senior Secured Credit Facilities
DEA						United States Drug Enforcement Agency
DTSC						California Department of Toxic Substances Control
EBITDA						Earnings before interest, tax, depreciation and amortization
ESOL						Stericycle Environmental Solutions business
FASB						Financial Accounting Standards Board
IBORs						Interbank offered rates
ICMS						Type of value-added tax in Brazil
IKG						The former Harsco Industrial IKG business
ISDA						International Swaps and Derivatives Association
LIBOR						London Interbank Offered Rates
New Term Loans						$500 million term loan raised in March 2021 under the Senior Secured Credit Facilities, maturing on March 10, 2028
Notes						5.75% Notes due July 31, 2027
OCI						Other Comprehensive Income (Loss)

PA DEP						Pennsylvania Department of Environmental Protection
PK						The former Harsco Industrial Patterson-Kelley business
Revolving Credit Facility						Multi-year revolving credit facility under the Senior Secured Credit Facility, with a facility limit of $700 million
ROU						Right of use
SBB						Federal railway system of Switzerland
SCE						Supreme Council for Environment in Bahrain
SEC						Securities and Exchange Commission
Senior Secured Credit Facilities						Primary source of borrowings comprised of the Revolving Credit Facility and the New Term Loan
SPRA						State Revenue Authorities from the State of São Paulo, Brazil
Term Loan A						$280 million term loan raised in March 2020 under the Senior Secured Credit Facilities, maturing on June 28, 2024, repaid on March 10, 2021
Term Loan B						Term loan issued under the Senior Secured Credit Facilities, maturing on December 8, 2024, repaid on March 10, 2021
TSDF						Treatment, storage, and disposal facility permits issued under the Resource Conservation and Recovery Act
U.S. GAAP						Accounting principles generally accepted in the U.S.

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three Months Ended

Six Months Ended

June 30

(In thousands, except per share amounts)

2021

2020

2021

2020

Revenues from continuing operations:

Service revenues

i 436,732

i 345,643

i 861,181

i 637,232

Product revenues

i 133,088

i 101,638

i 237,494

i 208,890

Total revenues

i 569,820

i 447,281

i 1,098,675

i 846,122

Costs and expenses from continuing operations:

Cost of services sold

i 348,509

i 285,941

i 683,015

i 522,549

Cost of products sold

i 105,862

i 78,201

i 192,438

i 158,061

Selling, general and administrative expenses

i 82,665

i 80,771

i 165,708

i 153,270

Research and development expenses

i 628

i 792

i 1,446

i 2,052

Other (income) expenses, net

( i 4,063)

( i 292)

( i 4,975)

i 5,441

Total costs and expenses

i 533,601

i 445,413

i 1,037,632

i 841,373

Operating income from continuing operations

i 36,219

i 1,868

i 61,043

i 4,749

Interest income

i 638

i 816

i 1,223

i 1,009

Interest expense

( i 15,986)

( i 14,953)

( i 32,850)

( i 27,602)

Unused debt commitment fees, amendment fees and loss on extinguishment of debt

( i 50)

( i 1,432)

( i 5,308)

( i 1,920)

Defined benefit pension income

i 3,974

i 1,723

i 7,927

i 3,312

Income (loss) from continuing operations before income taxes and equity income

i 24,795

( i 11,978)

i 32,035

( i 20,452)

Income tax benefit (expense) from continuing operations

( i 8,564)

i 2,304

( i 12,793)

i 2,986

Equity income (loss) of unconsolidated entities, net

( i 76)

i 71

( i 195)

i 167

Income (loss) from continuing operations

i 16,155

( i 9,603)

i 19,047

( i 17,299)

Discontinued operations:

Gain (loss) on sale of discontinued business

i —

( i 91)

i —

i 18,371

Income (loss) from discontinued businesses

( i 1,451)

i 524

( i 3,242)

i 299

Income tax benefit (expense) from discontinued businesses

i 376

( i 285)

i 840

( i 9,599)

Income (loss) from discontinued operations, net of tax

( i 1,075)

i 148

( i 2,402)

i 9,071

Net income (loss)

i 15,080

( i 9,455)

i 16,645

( i 8,228)

Less: Net income attributable to noncontrolling interests

( i 1,692)

( i 1,147)

( i 3,122)

( i 2,233)

Net income (loss) attributable to Harsco Corporation

i 13,388

( i 10,602)

i 13,523

( i 10,461)

Amounts attributable to Harsco Corporation common stockholders:

Income (loss) from continuing operations, net of tax

i 14,463

( i 10,750)

i 15,925

( i 19,532)

Income (loss) from discontinued operations, net of tax

( i 1,075)

i 148

( i 2,402)

i 9,071

Net income (loss) attributable to Harsco Corporation common stockholders

i 13,388

( i 10,602)

i 13,523

( i 10,461)

Weighted-average shares of common stock outstanding

i 79,265

i 78,987

i 79,177

i 78,874

Basic earnings (loss) per common share attributable to Harsco Corporation common stockholders:

Continuing operations

i 0.18

( i 0.14)

i 0.20

( i 0.25)

Discontinued operations

( i 0.01)

i —

( i 0.03)

i 0.12

Basic earnings (loss) per share attributable to Harsco Corporation common stockholders

i 0.17

( i 0.13)

(a)

i 0.17

( i 0.13)

Diluted weighted-average shares of common stock outstanding

i 80,774

i 78,987

i 80,397

i 78,874

Diluted earnings (loss) per common share attributable to Harsco Corporation common stockholders:

Continuing operations

i 0.18

( i 0.14)

i 0.20

( i 0.25)

Discontinued operations

( i 0.01)

i —

( i 0.03)

i 0.12

Diluted earnings (loss) per share attributable to Harsco Corporation common stockholders

i 0.17

( i 0.13)

(a)

i 0.17

( i 0.13)

(a) Does not total due to rounding.

See accompanying notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

Foreign currency translation adjustments, net of deferred income taxes of $ i 552 and $( i 659) in 2021 and 2020, respectively

Net income on cash flow hedging instruments, net of deferred income taxes of $( i 158) and $( i 251) in 2021 and 2020, respectively

Pension liability adjustments, net of deferred income taxes of $( i 358) and $( i 323) in 2021 and 2020, respectively

Unrealized gain (loss) on marketable securities, net of deferred income taxes of $( i 2) and $ i 4 in 2021 and 2020, respectively

Six Months Ended

June 30

(In thousands)

2021

2020

Net income (loss)

i 16,645

( i 8,228)

Other comprehensive income (loss):

Foreign currency translation adjustments, net of deferred income taxes of $ i 1,175 and $( i 4,741) in 2021 and 2020, respectively

i 12,150

( i 52,771)

Net income (loss) on cash flow hedging instruments, net of deferred income taxes of $( i 302) and $ i 266 in 2021 and 2020, respectively

i 923

( i 1,359)

Pension liability adjustments, net of deferred income taxes of $( i 696) and $( i 2,033) in 2021 and 2020, respectively

i 6,044

i 37,190

Unrealized gain (loss) on marketable securities, net of deferred income taxes of $( i 9) and $ i 12 in 2021 and 2020, respectively

i 25

( i 31)

Total other comprehensive income (loss)

i 19,142

( i 16,971)

Total comprehensive income (loss)

i 35,787

( i 25,199)

Less: Comprehensive income attributable to noncontrolling interests

( i 2,729)

( i 1,258)

Comprehensive income (loss) attributable to Harsco Corporation

i 33,058

( i 26,457)

See accompanying notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

Harsco Corporation Stockholders’ Equity

Common Stock

Additional Paid-in Capital

Retained
Earnings

Accumulated Other
Comprehensive
Loss

Noncontrolling
Interests

(In thousands, except share
amounts)

Issued

Treasury

Total

Balances, December 31, 2019

i 143,400

( i 838,893)

i 200,595

i 1,824,100

( i 587,622)

i 48,079

i 789,659

Net income

i 141

i 1,086

i 1,227

Total other comprehensive loss, net of deferred income taxes of $( i 5,267)

( i 28,854)

( i 1,148)

( i 30,002)

Vesting of restricted stock units and other stock grants, net i 104,840 shares

i 230

( i 889)

( i 230)

( i 889)

Vesting of performance share units, net i 265,151 shares

i 589

( i 3,205)

( i 589)

( i 3,205)

Amortization of unearned portion of stock-based compensation, net of forfeitures

i 2,080

Balances, March 31, 2020

i 144,219

( i 842,987)

i 201,856

i 1,824,241

( i 616,476)

i 48,017

i 758,870

Net income (loss)

( i 10,602)

i 1,147

( i 9,455)

Total other comprehensive income, net of deferred income taxes of $( i 1,229)

i 12,858

i 173

i 13,031

Stock appreciation rights exercised, net i 6,744 shares

i 8

( i 16)

( i 8)

( i 16)

Vesting of restricted stock units and other stock grants, net i 14,211 shares

i 18

i —

( i 18)

i —

Amortization of unearned portion of stock-based compensation, net of forfeitures

i 2,086

Balances, June 30, 2020

i 144,245

( i 843,003)

i 203,916

i 1,813,639

( i 603,618)

i 49,337

i 764,516

Harsco Corporation Stockholders’ Equity

(In thousands, except share amounts)

Common Stock

Additional Paid-in Capital

Retained
Earnings

Accumulated Other
Comprehensive
Loss

Noncontrolling
Interests

Issued

Treasury

Total

Balances, December 31, 2020

i 144,288

( i 843,230)

i 204,078

i 1,797,759

( i 645,741)

i 56,245

i 713,399

Net income

i 135

i 1,430

i 1,565

Total other comprehensive income (loss), net of deferred income taxes of $ i 134

i 2,295

( i 1,066)

i 1,229

Stock appreciation rights exercised, net i 3,842 shares

i 9

( i 70)

( i 9)

( i 70)

Vesting of restricted stock units and other stock grants, net i 144,967 shares

i 312

( i 1,850)

( i 312)

( i 1,850)

Vesting of performance share units, net i 69,127 shares

i 155

( i 1,032)

( i 155)

( i 1,032)

Amortization of unearned portion of stock-based compensation, net of forfeitures

i 3,342

Balances, March 31, 2021

i 144,764

( i 846,182)

i 206,944

i 1,797,894

( i 643,446)

i 56,609

i 716,583

Net income

i 13,388

—

i 1,692

i 15,080

Cash dividends declared:

Noncontrolling interests

( i 3,094)

Total other comprehensive income, net of deferred income taxes of $ i 34

i 17,240

i 673

i 17,913

Stock appreciation rights exercised, net i 13,061shares

i 28

( i 219)

( i 28)

( i 219)

Vesting of restricted stock units and other stock grants, net i 34,986 shares

i 44

( i 44)

i —

Amortization of unearned portion of stock-based compensation, net of forfeitures

i 3,120

Balances, June 30, 2021

i 144,836

( i 846,401)

i 209,992

i 1,811,282

( i 626,206)

i 55,880

i 749,383

See accompanying notes to unaudited condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. i i Basis of Presentation /

The Company has prepared these unaudited condensed consolidated financial statements in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the SEC. Accordingly, the unaudited condensed consolidated financial statements do not include all information and disclosure required by U.S. GAAP for annual financial statements. The December 31, 2020 Condensed Consolidated Balance Sheet information contained in this Quarterly Report on Form 10-Q was derived from the 2020 audited consolidated financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. In the opinion of management, all adjustments (all of which are of a normal recurring nature) that are necessary for a fair statement are reflected in the unaudited condensed consolidated financial statements.

The Company had restricted cash of $ i 4.4 million and $ i 3.2 million at June 30, 2021 and December 31, 2020, respectively, and the restrictions are primarily related to collateral provided for certain guarantees of the Company's performance.

Beginning in early 2020, overall global economic conditions were significantly impacted by COVID-19. The Company operated, since the onset of the pandemic, as a provider of certain essential services in the U.S. and other countries and overall business conditions have strengthened since the second quarter of 2020. And while COVID-19 continues to impact various lines of business within the Company and its operations in certain regions, the Company expects that business conditions will improve meaningfully in 2021 compared with 2020.

The Company did not record any long-lived asset impairments, indefinite-lived asset impairments, goodwill impairments, significant inventory write-downs or incremental accounts receivable reserves for current expected credit losses during the three or six months ended June 30, 2021. However, should economic conditions deteriorate, including as a result of COVID-19 such charges are possible in future periods, which could have an adverse effect on the Company's future results of operations, cash flows, or financial condition.

Certain reclassifications have been made to prior year amounts to conform with current year classifications.

2. i i Recently Adopted and Recently Issued Accounting Standards /

The following accounting standards have been adopted in 2021:

On January 1, 2021 the Company adopted changes issued by the FASB which are intended to reduce complexity and simplify the accounting for income taxes in accordance with U.S. GAAP by removing certain exceptions related to investments, intraperiod allocations and interim calculations and clarifying existing guidance to improve consistent application. These changes did not have a material impact on the Company's condensed consolidated financial statements.

The following accounting standards have been issued and become effective for the Company at a future date:

In March 2020 the FASB issued changes that provide companies with optional guidance to ease the potential accounting burden associated with transitioning from reference rates that are expected to be discontinued. In response to the concerns about risks of IBORs and, particularly, the risk of cessation of LIBOR, regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. The changes provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In January 2021, the FASB issued additional clarification changes. The changes can be adopted no later than December 31, 2022 with early adoption permitted. Management does not believe these changes will have a material impact on its condensed consolidated financial statements.

In August 2020, the FASB issued changes which simplified the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The changes can be adopted

no later than January 1, 2022, with early adoption permitted. Management has concluded that this standard will not have an impact on its condensed consolidated financial statements.

3. i Acquisitions and Dispositions

On April 6, 2020 the Company completed the acquisition of i 100% of ESOL, an established waste transportation, processing and services provider with a comprehensive portfolio of disposal solutions for customers primarily across the industrial, retail and healthcare markets from Stericycle, Inc. for $ i 429.0 million of cash consideration, inclusive of post-closing adjustments. In addition, as part of the acquisition, the Company entered into a non-compete agreement with Stericycle, Inc.

The fair value recorded for the assets acquired and liabilities assumed for ESOL is as follows:

Final

(In millions)

April 6
2020

Measurement Period Adjustments

June 30
2021

Cash and cash equivalents

i 0.4

i —

i 0.4

Trade accounts receivable

i 124.1

( i 1.5)

i 122.6

Inventory

i 5.0

i —

i 5.0

Other current assets

i 0.7

( i 0.7)

i —

Property, plant and equipment

i 105.3

( i 3.9)

i 101.4

Right-of-use assets

i 56.0

i —

i 56.0

Goodwill

i 152.0

i 1.3

i 153.3

Intangible assets

i 161.0

i —

i 161.0

Other assets

i 0.2

i —

i 0.2

Accounts payable

( i 48.6)

( i 1.5)

( i 50.1)

Accrued expenses

( i 17.5)

( i 1.8)

( i 19.3)

Current portion of operating lease liabilities

( i 16.6)

i —

( i 16.6)

Other current liabilities

( i 6.4)

( i 0.2)

( i 6.6)

Environmental liabilities

( i 24.4)

i —

( i 24.4)

Deferred income taxes

( i 15.5)

( i 1.5)

( i 17.0)

Operating lease liabilities

( i 39.4)

i —

( i 39.4)

Total identifiable net assets of ESOL

i 436.3

( i 9.8)

i 426.5

Non-compete agreement

i 2.5

—

i 2.5

Total identifiable net assets of ESOL, including non-compete agreement

i 438.8

( i 9.8)

i 429.0

The goodwill is primarily attributed to expected operational efficiencies and synergies from the expanded geographical scale of hazardous waste processing facilities resulting from combining the ESOL business with the existing Clean Earth business of the Company, as well as the value associated with the assembled workforce of ESOL. The Company expects $ i 36.8 million of goodwill to be deductible for income tax purposes through 2030.

The following table details the valuation of identifiable intangible assets and amortization periods for ESOL and the non-compete agreement entered into by the Company upon acquisition of ESOL:

Final

(Dollars in millions)

Weighted-Average Amortization Period

April 6
2020

Measurement Period Adjustments

June 30
2021

Permits and rights

i 22 years

i 138.0

i —

i 138.0

Customer relationships

i 10 years

i 23.0

i —

i 23.0

Total identifiable intangible assets of ESOL

i 161.0

i —

i 161.0

Non-compete agreement

i 4 years

i 2.5

—

i 2.5

Total identifiable intangible assets acquired

i 163.5

i —

i 163.5

The Company valued the identifiable intangible assets using methodologies under the income approach including the multi-period excess earnings method, the distributor method, and the with-and-without method.

The three and six months ended June 30, 2020 include ESOL direct acquisition and integration costs of $ i 17.2 million and $ i 30.3 million, respectively, which are included in the Selling, general and administrative expenses, within the Corporate function, in the Company's Condensed Consolidated Statements of Operations. In addition to the acquisition and integration costs reflected in the Company's Condensed Consolidated Statements of Operations, the debt issuance costs associated with the issuance of debt to fund the acquisition are reflected, net of amortization subsequent to the acquisition date, as Long-term debt on the Company's Condensed Consolidated Balance Sheets.

On June 28, 2019, the Company acquired i 100% of the outstanding stock of Clean Earth, one of the largest U.S. providers of specialty waste processing and beneficial reuse solutions for hazardous wastes, contaminated materials and dredged volumes, for an enterprise valuation of approximately $ i 625 million on a cash free, debt free basis, subject to normal working capital adjustments. The Company transferred approximately $ i 628 million of cash consideration and agreed to reimburse the sellers for any usage of assumed net operating losses in a post-closing period for up to five years.

Pro forma financial information

The pro forma information below gives effect to the ESOL acquisition as if it had been completed on January 1, 2019. The pro forma information is not necessarily indicative of the Company’s results of operations had the acquisition been completed on the above date, nor is it necessarily indicative of future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the acquisition and does not reflect the additional revenue opportunities following the acquisition. The pro forma information below includes the adjustments necessary to reflect additional depreciation and amortization expense based on the estimated fair value and useful lives of intangible assets and fixed assets acquired; includes additional interest expense of approximately $ i 4.7 million for the six months ended June 30, 2020 on the acquisition related borrowings used to finance the acquisition and excludes certain directly attributable acquisition and integration costs. In addition, the historical ESOL results include $ i 8.9 million for the six months ended June 30, 2020 of corporate expenses charged to ESOL from Stericycle.

Three Months Ended

Six Months Ended

June 30

(In millions)

2020

Pro forma revenues

i 447.3

i 976.8

Pro forma net income attributed to Harsco Corporation (including discontinued operations) (a)

i 2.0

i 2.7

(a) Pro forma net income includes the after tax gain on the sale of IKG of approximately $9 million for the six months ended June 30, 2020.

Harsco Industrial Segment

In January 2020 the Company sold IKG, and together with the 2019 sales of AXC and PK, this completed the divestiture of the former Harsco Industrial Segment originally announced in May 2019. The Harsco Industrial Segment has historically been a separate reportable segment with primary operations in North America and Latin America. In accordance with U.S. GAAP, the results of the former Harsco Industrial Segment are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for the three and six months ended June 30, 2020.

Certain key selected financial information included in net income (loss) from discontinued operations for the former Harsco Industrial Segment is as follows:

Three Months Ended

Six Months Ended

June 30

(In millions)

2021

2020

2021

2020

Amounts for the former Harsco Industrial Segment:

Total revenues

i —

i 10,203

Cost of products sold

i —

i 8,082

Income (loss) from discontinued business

( i 957)

( i 95)

( i 2,003)

i 123

Additional amounts allocated to the former Harsco Industrial Segment:

Selling, general and administrative expenses (b)

i 957

( i 77)

i 2,003

i 1,189

(b) The Company has allocated directly attributable transaction costs to discontinued operations. In addition, this caption includes costs directly attributable to retained contingent liabilities of the Harsco Industrial Segment.

4. i Accounts Receivable and Note Receivable

Accounts receivable consist of the following:

Other receivables (a)

(a) Other receivables include employee receivables, insurance receivable, tax claims and refunds and other miscellaneous items not included in Trade accounts receivable, net.

The provision for doubtful accounts related to trade accounts receivable was as follows:

At June 30, 2021 approximately $ i 11.5 million of the Company's trade accounts receivable were past due by twelve months or more. Approximately $ i 6.0 million of this amount is effectively reserved, and collection of the remaining balance is still ultimately expected.

In January 2020 the Company sold IKG for $ i 85.0 million including cash and a note receivable, subject to post-closing adjustments. The note receivable from the buyer has a face value of $ i 40.0 million, bearing interest at i 2.50%, that is paid in kind and matures on January 31, 2027. Any unpaid principal, along with any accrued but unpaid interest is payable at maturity. Prepayment is required in case of a change in control or a percentage of excess cash flow, as defined in the note receivable agreement. Because there are no scheduled payments under the terms of the note receivable, the balance is not classified as current as of June 30, 2021 and is included in the caption Other assets on the Condensed Consolidated Balance Sheet. The initial fair value of the note receivable was $ i 34.3 million which was calculated using an average of various discounted cash flow scenarios based on anticipated timing of repayments (Level 3) and was a non-cash transaction. The note receivable is subsequently measured at amortized cost. Key inputs into the valuation model include: projected timing and amount of cash flows, pro forma debt rating, option-adjusted spread and U.S. Treasury spot rate. During the three months ended June 30, 2021, the Company received a payment of $ i 6.4 million related to excess cash flow. At June 30, 2021 the amortized cost of the note receivable was $ i 30.2 million, compared with a fair value of $ i 31.5 million.

Inventories consist of the following:

(In thousands)

June 30
2021

December 31
2020

Finished goods

i 8,172

i 8,505

Work-in-process

i 25,029

i 29,005

Raw materials and purchased parts

i 91,122

i 105,306

Stores and supplies

i 33,293

i 30,197

Total inventories

i 157,616

i 173,013

6. i Property, Plant and Equipment

Property, plant and equipment consisted of the following:

In the third quarter of 2020, a customer of the Harsco Environmental Segment in China ceased steel making operations at its steel mill site in order to relocate the operations to a new site, as a result of a government mandate to improve environmental conditions of the area. The Company will continue to provide services to the same customer at the new site. The net book value of the idled equipment associated with the previous location is approximately $ i 19 million. The customer has entered into an agreement with the government where it will receive compensation for the losses the customer has incurred as a result of the forced shutdown. The Company has continued discussions with the customer regarding compensation, which are expected to be protracted. While the customer has initially indicated that they will not provide compensation, the Company disagrees with their interpretation and is evaluating its legal position in response. In addition, there may be other avenues of pursuing recovery, including seeking relief directly from the local government. At this point, considering the ongoing discussions with the customer, and other avenues, the Company believes it will recover the book value of the equipment and thus does not believe it has an asset impairment as of June 30, 2021. However, the Company will continue to evaluate changes in facts and circumstances and record any impairment charge when and if indicated.

The components of lease expense were as follows:

Three Months Ended

Six Months Ended

June 30

(In thousands)

2021

2020

2021

2020

Finance leases:

Amortization expense

i 474

i 367

i 949

i 738

Interest on lease liabilities

i 109

i 44

i 211

i 96

Operating leases

i 8,370

i 8,904

i 16,742

i 13,188

Variable and short-term lease expense

i 13,516

i 10,485

i 26,195

i 17,596

Sublease income

( i 2)

( i 48)

( i 51)

( i 98)

Total lease expense from continuing operations

i 22,467

i 19,752

i 44,046

i 31,520

Supplemental cash flow information related to leases was as follows:

Six Months Ended

June 30

(In thousands)

2021

2020

Cash paid for amounts included in the measurement of lease liabilities:

Cash flows from operating activities - Operating leases

i 16,363

i 12,384

Cash flows from financing activities - Finance leases

i 1,056

i 663

ROU assets obtained in exchange for lease obligations:

Operating leases

i 17,119

i 67,534

Finance leases

i 2,938

i 1,234

Supplemental balance sheet information related to leases was as follows:

(In thousands)

June 30
2021

December 31
2020

Operating Leases:

Operating lease ROU assets

i 94,276

i 96,849

Current portion of operating lease liabilities

i 24,056

i 24,862

Operating lease liabilities

i 68,484

i 69,860

Finance Leases:

Property, plant and equipment, net

i 10,065

i 8,434

Current maturities of long-term debt

i 2,037

i 1,683

Long-term debt

i 8,538

i 6,867

Supplemental additional information related to leases was as follows:

June 30
2021

December 31
2020

Other information:

Weighted average remaining lease term - Operating leases (in years)

i 7.62

i 8.00

Weighted average remaining lease term - Finance leases (in years)

i 7.22

i 8.20

Weighted average discount rate - Operating leases

i 5.9

i 6.1

Weighted average discount rate - Finance leases

i 4.9

i 5.1

Maturities of lease liabilities were as follows:

(In thousands)

Operating
Leases

Finance
Leases

Year Ending December 31:

2021 (excluding the six months ended June 30, 2021)

i 15,145

i 1,294

2022

i 25,899

i 2,368

2023

i 20,220

i 2,145

2024

i 14,110

i 1,963

2025

i 8,992

i 1,339

After 2025

i 34,607

i 3,618

Total lease payments

i 118,973

i 12,727

Less: Imputed interest

( i 26,433)

( i 2,152)

Total

i 92,540

i 10,575

The Company's leases, excluding short-term leases, have remaining terms of less than i one year to i 30 years, some of which include options to extend for up to i 10 years, and some of which include options to terminate within i one year. As of June 30, 2021, the Company had additional finance leases for property and equipment that had not yet commenced with estimated finance lease obligations of approximately $ i 2.0 million to recognize upon anticipated lease commencement in the third quarter of 2021. There are no material residual value guarantees or material restrictive covenants in any of the Company's leases.

8. i Goodwill and Other Intangible Assets

The following table reflects the changes in carrying amounts of goodwill by segment for the six months ended June 30, 2021:

(In thousands)

Harsco Environmental Segment

Harsco
Clean Earth Segment

Harsco Rail
Segment

Consolidated
Totals

Balance at December 31, 2020

i 406,401

i 482,647

i 13,026

i 902,074

Changes to goodwill (a)

i —

i 1,232

i —

i 1,232

Foreign currency translation

i 39

i —

i 39

Balance at June 30, 2021

i 406,440

i 483,879

i 13,026

i 903,345

(a) The changes to goodwill relate to the measurement period adjustments for the ESOL acquisition in the Harsco Clean Earth Segment. See Note 3, Acquisitions and Dispositions.

The Company tests for goodwill impairment annually, or more frequently if indicators of impairment exist, or if a decision is made to dispose of a business. The Company performs its annual goodwill impairment test as of October 1 and monitors for triggering events on an ongoing basis. The Company determined that, as of June 30, 2021, no interim goodwill impairment testing was necessary.

The Company has concluded that no triggering event occurred during the three months ended June 30, 2021. However, an economic downturn could impact the Company's future projected cash flows used to estimate fair value, and/or result in a sustained decrease in the Company's share price, which could indicate an impairment.

Intangible assets, net, on the Company's Condensed Consolidated Balance Sheets consist of the following:

Amortization expense for intangible assets was as follows:

The estimated amortization expense for the next five fiscal years based on current intangible assets is as follows:

Estimated amortization expense (b)

(b) These estimated amortization expense amounts do not reflect the potential effect of future foreign currency exchange fluctuations.

9. i Debt and Credit Agreements

On March 10, 2021, the Company amended its Senior Secured Credit Facilities to, among other things, extend the maturity date of the Revolving Credit Facility to March 10, 2026, and to modify aspects of its total net leverage ratio covenant. The interest rate applicable to the Revolving Credit Facility bears interest at a rate, depending on total net leverage, ranging from i 50 to i 150 basis points over base rate or i 150 to i 250 basis points over LIBOR, subject to a zero floor.

Under the amended agreement, the net debt to consolidated adjusted EBITDA ratio covenant is i 5.75 through the end of 2021 and then decreases quarterly until reaching i 4.0 in March 2023.

In addition, the Company issued New Term Loans, as an additional tranche, under the Senior Secured Credit Facilities in an aggregate principal amount of $ i 500 million. The New Term Loans bear interest at a rate per annum of i 1.25% over base rate, subject to a zero floor, or i 2.25% over LIBOR, subject to a i 0.50% floor. The New Term Loans are subject to quarterly amortization of principal of i 0.25%, beginning September 30, 2021. The proceeds of the New Term Loans were used to repay in full the outstanding Term Loan A and Term Loan B under the Senior Secured Credit Facilities, which were due on June 28, 2024 and December 8, 2024, respectively. The New Term Loans mature on March 10, 2028, or earlier, on the date that is 91 days prior to the maturity date of the Company’s i 5.75% Senior Notes due 2027 if such Senior Notes are outstanding or have not been refinanced at such time.

During the three and six months ended June 30, 2021, the Company recognized total expenses of $ i 0.1 million and $ i 5.3 million related to the amended Senior Secured Credit Facilities in the caption Unused debt commitment fees, amendment fees and loss on extinguishment of debt on the Condensed Consolidated Statements of Operations, including a write-off of $ i 2.7 million of previously recorded deferred financing costs. The Company has capitalized fees of $ i 7.8 million related to the amendment of the Senior Secured Credit Facilities, all of which were paid as of June 30, 2021.

Long-term debt consists of the following:

(In thousands)

June 30
2021

December 31
2020

Senior Secured Credit Facilities:

New Term Loan

i 500,000

i —

Term Loan A

i —

i 280,000

Term Loan B

i —

i 218,188

Revolving Credit Facility

i 333,000

i 281,000

5.75% Notes, due July 31, 2027

i 500,000

Other financing payable (including finance leases) in varying amounts

i 22,645

i 21,344

Total debt obligations

i 1,355,645

i 1,300,532

Less: deferred financing costs

( i 19,543)

( i 15,767)

Total debt obligations, net of deferred financing costs

i 1,336,102

i 1,284,765

Less: current maturities of long-term debt

( i 8,514)

( i 13,576)

Long-term debt

i 1,327,588

i 1,271,189

10. i Employee Benefit Plans

Six Months Ended

June 30

Defined Benefit Pension Plans Net Periodic Pension Cost (Benefit)

U.S. Plans

International Plans

(In thousands)

2021

2020

2021

2020

Service costs

i —

i 993

i 855

Interest costs

i 2,406

i 3,690

i 6,435

i 8,630

Expected return on plan assets

( i 6,100)

( i 5,684)

( i 22,878)

( i 20,023)

Recognized prior service costs

i —

i 256

i 213

Recognized loss

i 2,770

i 2,650

i 9,185

i 7,187

Defined benefit pension plans net periodic pension cost (benefit)

( i 924)

i 656

( i 6,009)

( i 3,138)

Three Months Ended

Six Months Ended

Company Contributions

June 30

(In thousands)

2021

2020

2021

2020

Defined benefit pension plans (U.S.)

i 451

i 460

i 3,317

i 2,487

Defined benefit pension plans (International)

i 4,301

i 1,493

i 16,923

i 11,553

Multiemployer pension plans

i 442

i 379

i 882

i 788

Defined contribution pension plans

i 3,120

i 1,897

i 6,533

i 5,066

The Company's estimate of expected contributions to be paid during the remainder of 2021 for the U.S. and international defined benefit pension plans is $ i 0.9 million and $ i 8.6 million, respectively.

Income tax expense from continuing operations for the three and six months ended June 30, 2021 was $ i 8.6 million and $ i 12.8 million, respectively. Income tax benefit related to continuing operations for the three and six months ended June 30, 2020 was $ i 2.3 million and $ i 3.0 million, respectively. The change in the income tax expense for the three and six months ended June 30, 2021 compared with the income tax benefit for the three and six months ended June 30, 2020 is the result of higher pre-tax income, primarily due to an improvement in operations and acquisition and integration costs in 2020 not recurring in 2021.

The reserve for uncertain tax positions at June 30, 2021 was $ i 4.2 million, including interest and penalties. Within the next twelve months, it is reasonably possible that $ i 0.3 million unrecognized income tax benefits will be recognized upon settlement of tax examinations and the expiration of various statutes of limitations.

12. i Commitments and Contingencies

The Company is involved in a number of environmental remediation investigations and cleanups and, along with other companies, has been identified as a “potentially responsible party” for certain byproduct disposal sites. While each of these matters is subject to various uncertainties, it is probable that the Company will agree to make payments toward funding certain of these activities, and it is possible that some of these matters will be decided unfavorably to the Company. The Company has evaluated its potential liability and its financial exposure is dependent upon such factors as the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the allocation of cost among potentially responsible parties, the years of remedial activity required and the remediation methods selected.

The Company evaluates its liability for future environmental remediation costs on a quarterly basis. Although actual costs to be incurred at identified sites in future periods may vary from the estimates (given inherent uncertainties in evaluating environmental exposures), the Company does not expect that any costs that are reasonably possible to be incurred by the Company in connection with environmental matters in excess of the amounts accrued would have a material adverse effect on the Company's financial condition, results of operations or cash flows.

The following table summarizes information related to the location and undiscounted amount of the Company's environmental liabilities:

(In thousands)

June 30
2021

December 31
2020

Current portion of environmental liabilities (a)

i 7,066

i 6,933

Long-term environmental liabilities

i 29,046

i 29,424

Total environmental liabilities

i 36,112

i 36,357

(a) The current portion of environmental liabilities is included in the caption Other current liabilities on the Company's Condensed Consolidated Balance Sheets.

Environmental liabilities relate primarily to the ESOL business which was acquired on April 6, 2020. As part of the ESOL acquisition, the Company assumed control of certain closed sites that were being monitored as part of ongoing environmental remediation plans. See Note 3, Acquisitions and Dispositions, for additional details.

In the ordinary course of business, the company is a defendant or party to various claims and lawsuits, including those discussed below.

On January 27, 2020, the U.S. EPA issued a Notice of Potential Liability to the Company, along with several other companies, concerning the Newtown Creek Superfund Site located in Kings and Queens Counties in New York. The Notice alleges certain facilities formerly owned or operated by subsidiaries of the Company may have resulted in the discharge of hazardous substances into Newtown Creek or its Dutch Kills tributary. The site has been subject to CERCLA response activities since approximately 2011. The U.S. EPA expects to propose a sitewide cleanup plan no sooner than 2024 and announced in July 2021 that it would defer its decision on a potential early action response for the lower two miles of the Creek until the sitewide studies are completed. The Company is one of approximately twenty ( i 20) Potentially Responsible Parties that have received notices, though it is believed other PRPs may exist. The Company vigorously contests the allegations of the Notice and currently does not believe that this matter will have a material effect on the Company’s financial position.

On June 25 and 26, 2018, the DTSC conducted a compliance enforcement inspection of ESOL’s facility in Rancho Cordova, California, which was then owned by Stericycle, Inc. On February 14, 2020, the DTSC filed an action in the Superior Court for the State of California, Sacramento Division, alleging violations of California’s Hazardous Waste Control Law and the facility’s hazardous waste permit arising from the inspection. On August 27, 2020 the DTSC issued a Notice of Denial of Hazardous Waste Facility Permit Application. On September 25, 2020, the Company filed an administrative appeal. The DTSC investigation was ongoing well before the Company's acquisition of the ESOL business, and the Company was aware of the investigation and many of the issues raised in the investigation at the time of the purchase. Accordingly, the Company is indemnified for certain fines and other costs and expenses associated with this matter by Stericycle, Inc. As a result, the administrative appeal will be led by Stericycle, Inc. The Company has not accrued any amounts in respect of these alleged violations and cannot estimate the reasonably possible loss or the range of reasonably possible losses that it may incur.

As previously disclosed, the Company has had ongoing meetings with the SCE over processing salt cakes, a processing byproduct, stored at the Al Hafeerah site. The Company’s Bahrain operations that produced the salt cakes has ceased operations. An Environmental Impact Assessment and Technical Feasibility Study for facilities to process the salt cakes was approved by the SCE during the first quarter of 2018. Commissioning of the facilities is currently in progress and should be completed during the third quarter of 2021, and full operations are expected subsequently during the second half of 2021. The Company has previously established a reserve of $ i 7.0 million, which represents the Company's best estimate of the ultimate costs to be incurred to resolve this matter. The Company continues to evaluate this reserve and any future change in estimated costs could be material to the Company’s results of operations in any one period.

On July 27, 2018 Brazil’s Federal and Rio de Janeiro State Public Prosecution Offices (MPF and MPE) filed a Civil Public Action against one of the Company's customers (CSN), the Company’s Brazilian subsidiary, the Municipality of Volta Redonda, Brazil, and the Instituto Estadual do Ambiente (local environmental protection agency) seeking the implementation of

various measures to limit and reduce the accumulation of customer-owned slag at the site in Brazil. On August 6, 2018 the 3rd Federal Court in Volta Redonda granted the MPF and MPE an injunction against the same parties requiring, among other things, CSN and the Company’s Brazilian subsidiary to limit the volume of slag sent to the site. Because the customer owns the site and the slag located on the site, the Company believes that complying with this injunction is the steel producer’s responsibility. On March 18, 2019 the Court issued an order fining the Company i 5,000 Brazilian reais per day (or approximately $ i 1 thousand per day) and CSN i 20,000 Brazilian reais per day (or approximately $ i 4 thousand per day) until the requirements of the injunction are met. On November 1, 2019 the Court issued an additional order increasing the fines assessed to the Company to i 25,000 Brazilian reais per day (or approximately $ i 5 thousand per day) and raising the fines assessed to CSN to i 100,000 Brazilian reais per day (or approximately $ i 20 thousand per day). The Court also assessed an additional fine of i 10,000,000 Brazilian reais (or approximately $ i 2 million) against CSN and the Company jointly. The Company is appealing the fines and the underlying injunction. Both the Company and CSN continue to have discussions with the governmental authorities on the injunction and the possible resolution of the underlying case. The Company does not believe that a loss relating to this matter is probable or estimable at this point.

On October 19, 2018 local environmental authorities issued an enforcement action against the Company concerning the Company’s operations at a customer site in Ijmuiden, Netherlands. The enforcement action alleges violations of the Company’s environmental permit at the site, which restricts the release of any visible dust emissions. The enforcement action ordered the Company to cease all violations of the permit by October 31, 2018. The authorities have issued i three additional enforcement actions since that time and have asserted fines of approximately $ i 0.7 million which the Company has recorded, with the possibility of additional fines for any future violations. The Company is vigorously contesting the enforcement action and fines and is also working with its customer to ensure the control of emissions. The Company has contractual indemnity rights from its customer, should it be required to pay the assessed fines.

Prior to the Company’s acquisition of ESOL, Stericycle, Inc, notified the Company that the DEA had served an administrative subpoena on Stericycle, Inc. and executed a search warrant at a facility in Rancho Cordova, California and an administrative inspection warrant at a facility in Indianapolis, Indiana. The Company has determined that the DEA and the DTSC have launched investigations involving, at least in part, the ESOL business of collecting, transporting, and destroying controlled substances from retail customers that transferred from Stericycle, Inc. to the Company. In connection with these investigations, the DEA also executed a search warrant on an ESOL facility in Austin Texas on July 2, 2020. The Company is cooperating with these inquiries, which relate primarily to the period before the Company owned the ESOL business. Since the acquisition of the ESOL business, the Company has performed a vigorous review of ESOL’s compliance program related to controlled substances and has made material changes to the manner in which controlled substances are transported from retail customers to DEA-registered facilities for destruction. The Company has not accrued any amounts in respect of these investigations and cannot estimate the reasonably possible loss or the range of reasonably possible losses that it may incur, if any. Investigations of this type are, by their nature, uncertain and unpredictable. While it is the Company’s position that it has recourse for some or all liabilities, if any, that arise from these matters under the ESOL purchase agreement and representations and warranties insurance policies purchased by the Company, there can be no assurances that the Company’s position will ultimately prevail.

Brazilian Tax Disputes

The Company is involved in a number of tax disputes with federal, state and municipal tax authorities in Brazil. These disputes are at various stages of the legal process, including the administrative review phase and the collection action phase, and include assessments of fixed amounts of principal and penalties, plus interest charges that increase at statutorily determined amounts per month and are assessed on the aggregate amount of the principal and penalties. In addition, the losing party, at the collection action or court of appeals phase, could be subject to a charge to cover statutorily mandated legal fees, which are generally calculated as a percentage of the total assessed amounts due, inclusive of penalty and interest. Many of the claims relate to ICMS, services and social security tax disputes. The largest proportion of the assessed amounts relate to ICMS claims filed by the SPRA, encompassing the period from January 2002 to May 2005.

In October 2009, the Company received notification of the SPRA’s final administrative decision regarding the levying of ICMS in the State of São Paulo in relation to services provided to a customer in the State between January 2004 and May 2005. As of June 30, 2021 the principal amount of the tax assessment from the SPRA with regard to this case is approximately $ i 1.2 million, with penalty, interest and fees assessed to date increasing such amount by an additional $ i 17.2 million. On June 4, 2018 the Appellate Court of the State of Sao Paulo ruled in favor of the SPRA but ruled that the assessed penalty should be reduced to approximately $ i 1.2 million. After calculating the interest accrued on the penalty, the Company estimates that this ruling reduces the current overall potential liability for this case to approximately $ i 7 million. All such amounts include the effect of foreign currency translation. The Company has appealed the ruling in favor of the SPRA to the Superior Court of Justice. Due to multiple court precedents in the Company’s favor, as well as the Company’s ability to appeal, the Company does not believe a loss is probable.

Another ICMS tax case involving the SPRA refers to the tax period from January 2002 to December 2003. In December 2018 the administrative tribunal hearing the case upheld the Company's liability. The Company has appealed to the judicial phase. The aggregate amount assessed by the tax authorities in August 2005 was $ i 5.1 million (the amounts with regard to this claim are valued as of the date of the assessment since it has not yet reached the collection phase), composed of a principal amount of $ i 1.2 million, with penalty and interest assessed through that date increasing such amount by an additional $ i 3.9 million. On December 6, 2018 the administrative tribunal reduced the applicable penalties to $ i 0.9 million. After calculating the interest accrued on the current penalty, the Company estimates that the current overall liability for this case to be approximately $ i 6.0 million. All such amounts include the effect of foreign currency translation. Due to multiple court precedents in the Company's favor, the Company does not believe a loss is probable.

The Company continues to believe that sufficient coverage for these claims exists as a result of the indemnification obligations of the Company's customer and such customer’s pledge of assets in connection with the October 2009 notice, as required by Brazilian law.

On December 30, 2020, the Company received an assessment from the municipal authority in Ipatinga, Brazil alleging approximately $ i 2.1 million in unpaid service taxes from the period 2015 to 2020. After calculating the interest and penalties accrued, the Company estimates that the current overall potential liability for this case to be approximately $ i 3.6 million. On January 18, 2021, the Company filed a challenge to the assessment. Due to the multiple defenses that are available, the Company does not believe a loss is probable.

The Company intends to continue its practice of vigorously defending itself against these tax claims under various alternatives, including judicial appeal. The Company will continue to evaluate its potential liability with regard to these claims on a quarterly basis; however, it is not possible to predict the ultimate outcome of these tax-related disputes in Brazil. No loss provision has been recorded in the Company's condensed consolidated financial statements for the disputes described above because the loss contingency is not deemed probable, and the Company does not expect that any costs that are reasonably possible to be incurred by the Company in connection with Brazilian tax disputes would have a material adverse effect on the Company's financial condition, results of operations or cash flows.

Brazilian Labor Disputes

The Company is subject to ongoing collective bargaining and individual labor claims in Brazil through the Harsco Environmental Segment which allege, among other things, the Company's failure to pay required amounts for overtime and vacation at certain sites. The Company is vigorously defending itself against these claims; however, litigation is inherently unpredictable, particularly in foreign jurisdictions. While the Company does not currently expect that the ultimate resolution of these claims will have a material adverse effect on the Company’s financial condition, results of operations or cash flows, it is not possible to predict the ultimate outcome of these labor-related disputes. As of June 30, 2021 and December 31, 2020 the Company has established reserves of $ i 4.1 million and $ i 4.3 million, respectively, on the Company's Condensed Consolidated Balance Sheets for amounts considered to be probable and estimable.

The Company is named as one of many defendants (approximately i 90 or more in most cases) in legal actions in the U.S. alleging personal injury from exposure to airborne asbestos over the past several decades. In their suits, the plaintiffs have named as defendants, among others, many manufacturers, distributors and installers of numerous types of equipment or products that allegedly contained asbestos.

The Company believes that the claims against it are without merit. The Company has never been a producer, manufacturer or processor of asbestos fibers. Any asbestos-containing part of a Company product used in the past was purchased from a supplier and the asbestos encapsulated in other materials such that airborne exposure, if it occurred, was not harmful and is not associated with the types of injuries alleged in the pending actions.

At June 30, 2021 there were approximately i 17,200 pending asbestos personal injury actions filed against the Company. Of those actions, approximately i 16,610 were filed in the New York Supreme Court (New York County), approximately i 120 were filed in other New York State Supreme Court Counties and approximately i 470 were filed in courts located in other states.

The complaints in most of those actions generally follow a form that contains a standard damages demand of $ i 20 million or $ i 25 million, regardless of the individual plaintiff’s alleged medical condition, and without identifying any specific Company product.

At June 30, 2021 approximately i 16,550 of the actions filed in New York Supreme Court (New York County) were on the Deferred/Inactive Docket created by the court in December 2002 for all pending and future asbestos actions filed by persons who cannot demonstrate that they have a malignant condition or discernible physical impairment. The remaining

approximately i 60 cases in New York County are pending on the Active or In Extremis Docket created for plaintiffs who can demonstrate a malignant condition or physical impairment.

The Company has liability insurance coverage under various primary and excess policies that the Company believes will be available, if necessary, to substantially cover any liability that might ultimately be incurred in the asbestos actions referred to above. The costs and expenses of the asbestos actions are being paid by the Company's insurers.

In view of the persistence of asbestos litigation in the U.S., the Company expects to continue to receive additional claims in the future. The Company intends to continue its practice of vigorously defending these claims and cases. At June 30, 2021 the Company has obtained dismissal in approximately i 28,330 cases by stipulation or summary judgment prior to trial.

It is not possible to predict the ultimate outcome of asbestos-related actions in the U.S. due to the unpredictable nature of this litigation, and no loss provision has been recorded in the Company's condensed consolidated financial statements because a loss contingency is not deemed probable or estimable. Despite this uncertainty, and although results of operations and cash flows for a given period could be adversely affected by asbestos-related actions, the Company does not expect that any costs that are reasonably possible to be incurred by the Company in connection with asbestos litigation would have a material adverse effect on the Company's financial condition, results of operations or cash flows.

The Company is subject to various other claims and legal proceedings covering a wide range of matters that arose in the ordinary course of business. In the opinion of management, all such matters are adequately covered by insurance or by established reserves, and, if not so covered, are without merit or are of such kind, or involve such amounts, as would not have a material adverse effect on the financial position, results of operations or cash flows of the Company.

Insurance liabilities are recorded when it is probable that a liability has been incurred for a particular event and the amount of loss associated with the event can be reasonably estimated. Insurance reserves have been estimated based primarily upon actuarial calculations and reflect the undiscounted estimated liabilities for ultimate losses, including claims incurred but not reported. Inherent in these estimates are assumptions that are based on the Company's history of claims and losses, a detailed analysis of existing claims with respect to potential value, and current legal and legislative trends. If actual claims differ from those projected by management, changes (either increases or decreases) to insurance reserves may be required and would be recorded through income in the period the change was determined. When a recognized liability is covered by third-party insurance, the Company records an insurance claim receivable to reflect the covered liability. Insurance claim receivables are included in Other receivables on the Company's Condensed Consolidated Balance Sheets. See Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for additional information on Accrued insurance and loss reserves.

13. i Reconciliation of Basic and Diluted Shares

The following average outstanding stock-based compensation units were not included in the computation of diluted earnings per share because the effect was either antidilutive or the market conditions for the performance share units were not met:

14. i Derivative Instruments, Hedging Activities and Fair Value

Derivative Instruments and Hedging Activities

The Company uses derivative instruments, including foreign currency exchange forward contracts, interest rate swaps and CCIRs, to manage certain foreign currency and interest rate exposures. Derivative instruments are viewed as risk management tools by the Company and are not used for trading or speculative purposes. All derivative instruments are recorded on the Company's Condensed Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

The Company primarily applies the market approach for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs, such as forward rates, interest rates, the Company’s credit risk and counterparties’ credit risks, and which minimize the use of unobservable inputs. The Company is able to classify fair value balances based on the ability to observe those inputs. Foreign currency exchange forward contracts, interest rate swaps and CCIRs are based upon pricing models using market-based inputs (Level 2). Model inputs can be verified and valuation techniques do not involve significant management judgment.

The fair value of outstanding derivative contracts recorded as assets and liabilities on the Company's Condensed Consolidated Balance Sheets was as follows:

All of the Company's derivatives are recorded on the Condensed Consolidated Balance Sheets at gross amounts and not offset. All of the Company's interest rate swaps, CCIRs and certain foreign currency exchange forward contracts are transacted under ISDA documentation. Each ISDA master agreement permits the net settlement of amounts owed in the event of default. The Company's derivative assets and liabilities subject to enforceable master netting arrangements, if offset, would have resulted in a $ i 1.5 million net liability at June 30, 2021 and at December 31, 2020 would not have resulted in a net asset or liability.

The effect of derivative instruments on the Company's Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income (Loss) was as follows:

Derivatives Designated as Hedging Instruments

Amount Recognized in
OCI on Derivatives

Location of Amount Reclassified from AOCI into Income

Amount Reclassified from
Accumulated OCI into Income - Effective Portion or Equity

Six Months Ended

June 30

(In thousands)

2021

2020

2021

2020

Foreign currency exchange forward contracts

( i 441)

i 2,078

Product revenues

( i 47)

( i 1,736)

Interest rate swaps

( i 14)

( i 3,740)

Interest expense

i 1,727

i 1,110

CCIRs (a)

i —

i 63

Interest expense

i —

i 600

( i 455)

( i 1,599)

i 1,680

( i 26)

(a) Amounts represent changes in foreign currency translation related to balances in AOCI.

The location and amount of gain (loss) recognized on the Company's Condensed Consolidated Statements of Operations was as follows:

Three Months Ended

June 30

2021

2020

(in thousands)

Product Revenues

Interest Expense

Product Revenues

Interest Expense

Total amounts of line items presented in the Condensed Consolidated Statement of Operations in which the effects of cash flow hedges are recorded

i 133,088

( i 15,986)

i 101,638

( i 14,953)

Interest rate swaps:

Gain or (loss) reclassified from AOCI into income

i —

( i 862)

i —

( i 732)

Foreign exchange contracts:

Gain or (loss) reclassified from AOCI into income

( i 3)

i —

i 332

i —

Amount excluded from effectiveness testing recognized in earnings based on changes in fair value

i 9

i —

i 13

i —

Amount excluded from the effectiveness testing recognized in earnings based on an amortization approach

( i 1)

—

i 21

—

CCIRs:

Loss reclassified from AOCI into income

i —

( i 295)

Six Months Ended

June 30

2021

2020

(in thousands)

Product Revenues

Interest Expense

Product Revenues

Interest Expense

Total amounts of line items presented in the Condensed Consolidated Statement of Operations in which the effects of cash flow hedges are recorded

i 237,494

( i 32,850)

i 208,890

( i 27,602)

Interest rate swaps:

Gain or (loss) reclassified from AOCI into income

—

( i 1,727)

—

( i 1,110)

Foreign exchange contracts:

Gain or (loss) reclassified from AOCI into income

i 47

—

i 1,736

—

Amount excluded from effectiveness testing recognized in earnings based on changes in fair value

i 38

—

i 196

—

Amount excluded from the effectiveness testing recognized in earnings based on an amortization approach

i —

—

i 21

—

CCIRs:

Loss reclassified from AOCI into income

—

i —

—

( i 600)

Derivatives Not Designated as Hedging Instruments

(b) These gains (losses) offset amounts recognized in cost of services and products sold principally as a result of intercompany or third party foreign currency

Foreign Currency Exchange Forward Contracts

The Company conducts business in multiple currencies and, accordingly, is subject to the inherent risks associated with foreign exchange rate movements. Foreign currency-denominated assets and liabilities are translated into U.S. dollars at the exchange rates existing at the respective consolidated balance sheet dates, and income and expense items are translated at the average exchange rates during the respective periods.

The Company uses derivative instruments to hedge cash flows related to foreign currency fluctuations. Foreign currency exchange forward contracts outstanding are part of a worldwide program to minimize foreign currency exchange operating income and balance sheet exposure by offsetting foreign currency exposures of certain future payments between the Company and various subsidiaries, suppliers or customers. The unsecured contracts are with major financial institutions. The Company may be exposed to credit loss in the event of non-performance by the contract counterparties. The Company evaluates the creditworthiness of the counterparties and does not expect default by them. Foreign currency exchange forward contracts are used to hedge commitments, such as foreign currency debt, firm purchase commitments and foreign currency cash flows for certain export sales transactions.

Changes in the fair value of derivatives used to hedge foreign currency denominated balance sheet items are reported directly in earnings, along with offsetting transaction gains and losses on the items being hedged. Derivatives used to hedge forecasted cash flows associated with foreign currency commitments may be accounted for as cash flow hedges, as deemed appropriate, if the criteria for hedge accounting are met. Gains and losses on derivatives designated as cash flow hedges are deferred in AOCI, a separate component of equity, and reclassified to earnings in a manner that matches the timing of the earnings impact of the hedged transactions. The ineffective portion of all hedges, if any, is recognized currently in earnings.

The recognized gains and losses offset amounts recognized in cost of services and products sold principally as a result of intercompany or third-party foreign currency exposures. At June 30, 2021 and December 31, 2020 the notional amounts of foreign currency exchange forward contracts were $ i 383.6 million and $ i 460.5 million, respectively. These contracts are primarily denominated in British Pound Sterling and Euros and mature through March 2023.

In addition to foreign currency exchange forward contracts, the Company designates certain loans as hedges of net investments in international subsidiaries. The Company recorded pre-tax net gains of $ i 0.3 million and $ i 3.6 million for the three and six months ended June 30, 2021, respectively and pre-tax net losses of $ i 2.4 million and $ i 12.1 million for the three and six months ended June 30, 2020, respectively, in AOCI.

The Company uses interest rate swaps in conjunction with certain variable rate debt issuances in order to secure a fixed interest rate. Changes in the fair value attributed to the effect of the swaps’ interest spread and changes in the credit worthiness of the counter-parties are recorded in AOCI.

At June 30, 2021, the Company has entered into a series of interest rate swaps that are in effect through 2022 and have the effect of converting $ i 200.0 million of the Term Loan Facility from floating-rate to fixed-rate. The fixed rates provided by the swaps replace the adjusted LIBOR rate in the interest calculation, ranging from i 2.71% for 2021 to i 3.12% for 2022.

Cross-Currency Interest Rate Swaps

The Company may use CCIRs in conjunction with certain debt issuances in order to secure a fixed local currency interest rate. Under these CCIRs, the Company receives interest based on a fixed or floating U.S. dollar rate and pays interest on a fixed local currency rate based on the contractual amounts in dollars and the local currency, respectively. At maturity, there is also the payment of principal amounts between currencies. Changes in the fair value attributed to the effect of the swaps' interest spread and changes in the credit worthiness of the counter-parties are recorded in AOCI. Changes in value attributed to the effect of foreign currency fluctuations are recorded on the Company's Condensed Consolidated Statements of Operations and offset currency fluctuation effects on the debt principal. The Company had no outstanding CCIRs at June 30, 2021.

Fair Value of Other Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term borrowings approximate fair value due to the short-term maturities of these assets and liabilities. At June 30, 2021 and December 31, 2020 the total fair value of long-term debt (excluding deferred financing costs), including current maturities, was $ i 1,373.8 million and $ i 1,324.9 million, respectively, compared with a carrying value of $ i 1,355.6 million and $ i 1,300.5 million, respectively. Fair values for debt are based on pricing models using market-based inputs (Level 2) for similar issues or on the current rates offered to the Company for debt of the same remaining maturities.

15. i Review of Operations by Segment

Revenues From Continuing Operations (a)


i Delaware			i 23-1483991
(State or other jurisdiction of incorporation or organization)			(I.R.S. employer identification number)
i 350 Poplar Church Road,	i Camp Hill,	i Pennsylvania	i 17011
(Address of principal executive offices)			(Zip Code)


	Three Months Ended						Six Months Ended
	June 30						June 30
(In millions, except percentages)	2021			2020			2021			2020
Revenues:
Harsco Environmental	$	272.5		$	204.0		$	530.5		$	445.6
Harsco Clean Earth	196.1			161.6			385.4			240.4

Harsco Rail	101.1			81.7			182.7			160.2

Total Revenues	$	569.8		$	447.3		$	1,098.7		$	846.1
Operating Income (Loss):
Harsco Environmental	$	30.2		$	13.6		$	56.2		$	24.1
Harsco Clean Earth	7.4			(0.2)			10.6			4.0

Harsco Rail	8.9			8.6			13.6			15.1
Corporate	(10.3)			(20.1)			(19.3)			(38.5)
Total Operating Income	$	36.2		$	1.9		$	61.0		$	4.7
Operating Margins:
Harsco Environmental	11.1		%	6.6		%	10.6		%	5.4		%
Harsco Clean Earth	3.8		%	(0.1)		%	2.7			1.7		%

Harsco Rail	8.8		%	10.6		%	7.4			9.4		%
Consolidated Operating Margin	6.4		%	0.4		%	5.6		%	0.6		%


	June 30, 2021
Significant Effects on Revenues (In millions)	Three Months Ended		Six Months Ended
Revenues — 2020	$	204.0	$	445.6
Net effects of price/volume changes, primarily attributable to volume changes	53.7		61.3
Impact of foreign currency translation	13.8		21.0
Net impact of new and lost contracts	0.1		1.4

Other	0.9		1.2
Revenues — 2021	$	272.5	$	530.5


	June 30, 2021
Significant Effects on Revenues (In millions)	Three Months Ended		Six Months Ended
Revenues—2020	$	161.6	$	240.4
Impact of ESOL acquisition (a)	—		134.2
Net effects of price/volume changes, primarily attributable to volume changes	33.4		9.9
Other	1.1		0.9
Revenues—2021	$	196.1	$	385.4


	June 30, 2021
Significant Effects on Revenues (In millions)	Three Months Ended		Six Months Ended
Revenues — 2020	$	81.7	$	160.2
Impact of foreign currency translation	2.5		4.5
Net effect of price/volume changes, primarily attributable to volume changes	16.9		18.0

Revenues — 2021	$	101.1	$	182.7

Harsco Corp. – ‘10-Q’ for 6/30/21

On: Tuesday, 8/3/21, at 11:04am ET · For: 6/30/21 · Accession #: 45876-21-123 · File #: 1-03970

Previous ‘10-Q’: ‘10-Q’ on 5/4/21 for 3/31/21 · Next: ‘10-Q’ on 11/2/21 for 9/30/21 · Latest: ‘10-Q’ on 11/2/23 for 9/30/23 · 1 Reference: To: Enviri Corp. – ‘10-Q’ on 8/5/20 for 6/30/20

Quarterly Report — Form 10-Q

Filing Table of Contents

‘10-Q’ — Quarterly Report

Document Table of Contents

This is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

1 Previous Filing that this Filing References


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


		Page
PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets (Unaudited)	4
	Condensed Consolidated Statements of Operations (Unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	7
	Condensed Consolidated Statements of Equity (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43

Item 4.	Controls and Procedures	43


PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	44

Item 1A.	Risk Factors	44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44







Item 6.	Exhibits	45


SIGNATURES		46


Summary of Senior Secured Credit Facilities and Notes: (In millions)	June 30 2021		December 31 2020
By type:
New Term Loan	$	500.0	$	—
Term Loan A	—		280.0
Term Loan B	—		218.2
Revolving Credit Facility	333.0		281.0
5.75% Notes	500.0		500.0
Total	$	1,333.0	$	1,279.2
By classification:
Current	$	5.0	$	10.5
Long-term	1,328.0		1,268.7
Total	$	1,333.0	$	1,279.2


	June 30, 2021
(In millions)	Facility Limit		Outstanding Balance		Outstanding Letters of Credit		Available Credit


Revolving credit facility (a U.S.-based program)	$	700.0	$	333.0	$	25.4	$	341.6


Exhibit Number						Description
10.1						Form of Restricted Stock Units Agreement (Non-Employee Director) (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2020, Commission File Number 001-03970).
31.1						Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chairman, President and Chief Executive Officer).
31.2						Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
32						Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chairman, President and Chief Executive Officer and Chief Financial Officer).
101.Def						Definition Linkbase Document
101.Pre						Presentation Linkbase Document
101.Lab						Labels Linkbase Document
101.Cal						Calculation Linkbase Document
101.Sch						Schema Document
101.Ins						Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.



DATE	August 3, 2021	/s/ *PETER F. MINAN*
		Peter F. Minan
		Senior Vice President and Chief Financial Officer
		(On behalf of the registrant and as Principal Financial Officer)

DATE	August 3, 2021	/s/ *SAMUEL C. FENICE*
		Samuel C. Fenice
		Vice President and Corporate Controller
		(Principal Accounting Officer)

This ‘10-Q’ Filing	Date	Other Filings

	3/10/28
	7/31/27
	1/31/27
	3/10/26
	6/30/25
	12/8/24
	6/30/24
	6/28/24
	6/30/23
	3/31/23
	12/31/22
	6/30/22	8-K
	1/1/22
	12/31/21	10-K, 11-K, SD
	9/30/21	10-Q
Filed on:	8/3/21	8-K, S-8
	7/30/21
For Period end:	6/30/21
	4/24/21
	3/31/21	10-Q
	3/10/21	4, 8-K, DEF 14A, DEFA14A
	1/18/21
	1/1/21
	12/31/20	10-K, 11-K, SD
	12/30/20
	9/25/20
	8/27/20
	7/2/20
	6/30/20	10-Q
	4/6/20
	3/31/20	10-Q, 8-K
	2/14/20
	1/27/20
	12/31/19	10-K, 11-K, SD
	11/1/19
	6/28/19	3, 8-K
	3/18/19
	1/1/19
	12/31/18	10-K, 11-K, SD
	12/6/18
	10/31/18	10-Q, 8-K
	10/19/18
	8/6/18
	7/27/18	8-K
	6/4/18	4
	5/2/18	10-Q, 4, 8-K
	12/31/16	10-K, 11-K, SD
		List all Filings


FORM			i 10-Q

Harsco Corp. – ‘10-Q’ for 6/30/21

On: Tuesday, 8/3/21, at 11:04am ET · For: 6/30/21 · Accession #: 45876-21-123 · File #: 1-03970

Previous ‘10-Q’: ‘10-Q’ on 5/4/21 for 3/31/21 · Next: ‘10-Q’ on 11/2/21 for 9/30/21 · Latest: ‘10-Q’ on 11/2/23 for 9/30/23 · 1 Reference: To: Enviri Corp. – ‘10-Q’ on 8/5/20 for 6/30/20

Quarterly Report — Form 10-QFiling Table of Contents

‘10-Q’ — Quarterly ReportDocument Table of Contents

This is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

1 Previous Filing that this Filing References

Quarterly Report — Form 10-Q

Filing Table of Contents

‘10-Q’ — Quarterly Report

Document Table of Contents