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Enviri Corporation
NVRI
#5056
Rank
A$2.35 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
A$28.88
Share price
5.52%
Change (1 day)
171.05%
Change (1 year)
โ™ป๏ธ Waste & Recycling
Categories
  1. Enviri Corporation
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2022 Q2

Enviri Corporation - 10-Q quarterly report FY2022 Q2


Text size:
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended June 30, 2022
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to          
Commission File Number 001-03970
hsc-20220630_g1.jpg
HARSCO CORPORATION
(Exact name of registrant as specified in its charter) 
Delaware23-1483991
(State or other jurisdiction of incorporation or organization)(I.R.S. employer identification number)
350 Poplar Church Road,Camp Hill,Pennsylvania17011
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code  717-763-7064 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $1.25 per shareHSCNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   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.
Large accelerated filer
 ☒
Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES ☐  NO ☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class 
Outstanding at July 29, 2022
Common stock, par value $1.25 per share 79,431,694

HARSCO CORPORATION
FORM 10-Q
INDEX
 
  Page
 
   
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
   
32
   
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2
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:

TermDescription
AOCIAccumulated Other Comprehensive Income (Loss)
CERCLAComprehensive Environmental Response, Compensation, and Liability Act of 1980
COVID-19The COVID-19 coronavirus pandemic
Credit AgreementCredit Agreement governing the Senior Secured Credit Facilities
DEAUnited States Drug Enforcement Agency
Deutsche BahnNational railway company in Germany
DTSCCalifornia Department of Toxic Substances Control
EBITDAEarnings before interest, tax, depreciation and amortization
ESOLStericycle Environmental Solutions business
FASBFinancial Accounting Standards Board
IBORsInterbank offered rates
ICMSType of value-added tax in Brazil
IKGThe former Harsco Industrial IKG business
ISDAInternational Swaps and Derivatives Association
LIBORLondon Interbank Offered Rates
Network RailInfrastructure manager for most of the railway in the U.K.
New Term Loan$500 million term loan raised in March 2021 under the Senior Secured Credit Facilities, maturing on March 10, 2028
OCIOther Comprehensive Income (Loss)
PA DEPPennsylvania Department of Environmental Protection
Revolving Credit FacilityMulti-year revolving credit facility under the Senior Secured Credit Facility, with a facility limit of $700 million
ROURight of use
SBBFederal railway system of Switzerland
SCESupreme Council for Environment in Bahrain
SECSecurities and Exchange Commission
Senior Notes5.75% Notes due July 31, 2027
Senior Secured Credit FacilitiesPrimary source of borrowings comprised of the Revolving Credit Facility and the New Term Loan
SPRAState Revenue Authorities from the State of São Paulo, Brazil
TSDFTreatment, storage, and disposal facility permits issued under the Resource Conservation and Recovery Act
U.S. GAAPAccounting principles generally accepted in the U.S.
3
PART I — FINANCIAL INFORMATION
ITEM 1.      FINANCIAL STATEMENTS

HARSCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)June 30
2022		December 31
2021
ASSETS  
Current assets:  
Cash and cash equivalents$96,782 $82,908 
Restricted cash4,025 4,220 
Trade accounts receivable, net267,747 377,881 
Other receivables28,174 33,059 
Inventories80,999 70,493 
Prepaid expenses21,906 31,065 
Current portion of assets held-for-sale263,913 265,413 
Other current assets26,508 9,934 
Total current assets790,054 874,973 
Property, plant and equipment, net637,480 653,913 
Right-of-use assets, net104,212 101,576 
Goodwill759,439 883,109 
Intangible assets, net382,741 402,801 
Deferred income tax assets16,551 17,883 
Assets held-for-sale65,079 71,234 
Other assets43,403 48,419 
Total assets$2,798,959 $3,053,908 
LIABILITIES  
Current liabilities:  
Short-term borrowings$2,196 $7,748 
Current maturities of long-term debt17,952 10,226 
Accounts payable213,037 186,126 
Accrued compensation40,744 48,165 
Current portion of operating lease liabilities26,073 25,590 
Current portion of liabilities of assets held-for-sale151,369 161,999 
Other current liabilities147,022 161,537 
Total current liabilities598,393 601,391 
Long-term debt1,302,857 1,359,446 
Retirement plan liabilities60,424 93,693 
Operating lease liabilities77,104 74,571 
Liabilities of assets held-for-sale7,827 8,492 
Environmental liabilities26,669 28,435 
Deferred tax liabilities27,372 33,826 
Other liabilities46,610 48,284 
Total liabilities2,147,256 2,248,138 
COMMITMENTS AND CONTINGENCIES
HARSCO CORPORATION STOCKHOLDERS’ EQUITY  
Common stock145,319 144,883 
Additional paid-in capital221,117 215,528 
Accumulated other comprehensive loss(573,872)(560,139)
Retained earnings1,649,080 1,794,510 
Treasury stock(848,320)(846,622)
Total Harsco Corporation stockholders’ equity593,324 748,160 
Noncontrolling interests58,379 57,610 
Total equity651,703 805,770 
Total liabilities and equity$2,798,959 $3,053,908 
See accompanying notes to unaudited condensed consolidated financial statements.
4
HARSCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months EndedSix Months Ended
June 30June 30
(In thousands, except per share amounts)2022202120222021
Revenues from continuing operations:  
Service revenues$439,618 $429,651 $858,053 $843,990 
Product revenues41,434 39,023 75,796 71,949 
Total revenues481,052 468,674 933,849 915,939 
Costs and expenses from continuing operations:  
Cost of services sold368,994 344,982 715,351 674,835 
Cost of products sold34,205 30,466 64,867 57,980 
Selling, general and administrative expenses67,935 70,805 137,088 142,419 
Research and development expenses296 323 352 480 
Goodwill impairment charge104,580 — 104,580 — 
Other (income) expenses, net2,045 (4,167)866 (5,158)
Total costs and expenses578,055 442,409 1,023,104 870,556 
Operating income (loss) from continuing operations(97,003)26,265 (89,255)45,383 
Interest income693 577 1,337 1,124 
Interest expense(16,692)(15,643)(31,784)(31,899)
Facility fees and debt-related income (expense)2,149 (50)1,617 (5,308)
Defined benefit pension income2,247 3,956 4,657 7,890 
Income (loss) from continuing operations before income taxes and equity income(108,606)15,105 (113,428)17,190 
Income tax benefit (expense) from continuing operations3,115 (4,797)1,894 (6,898)
Equity income (loss) of unconsolidated entities, net(114)(76)(245)(195)
Income (loss) from continuing operations(105,605)10,232 (111,779)10,097 
Discontinued operations:  
Income (loss) from discontinued businesses1,879 8,239 (37,218)11,603 
Income tax benefit (expense) from discontinued businesses(770)(3,391)5,821 (5,055)
Income (loss) from discontinued operations, net of tax1,109 4,848 (31,397)6,548 
Net income (loss)(104,496)15,080 (143,176)16,645 
Less: Net (income) loss attributable to noncontrolling interests(1,095)(1,692)(2,254)(3,122)
Net income (loss) attributable to Harsco Corporation$(105,591)$13,388 $(145,430)$13,523 
Amounts attributable to Harsco Corporation common stockholders:
Income (loss) from continuing operations, net of tax$(106,700)$8,540 $(114,033)$6,975 
Income (loss) from discontinued operations, net of tax1,109 4,848 (31,397)6,548 
Net income (loss) attributable to Harsco Corporation common stockholders$(105,591)$13,388 $(145,430)$13,523 
Weighted-average shares of common stock outstanding79,509 79,265 79,437 79,177 
Basic earnings (loss) per common share attributable to Harsco Corporation common stockholders:
Continuing operations$(1.34)$0.11 $(1.44)$0.09 
Discontinued operations0.01 0.06 (0.40)0.08 
Basic earnings (loss) per share attributable to Harsco Corporation common stockholders$(1.33)$0.17 $(1.83)(a)$0.17 
Diluted weighted-average shares of common stock outstanding79,509 80,774 79,437 80,397 
Diluted earnings (loss) per common share attributable to Harsco Corporation common stockholders:
Continuing operations$(1.34)$0.11 $(1.44)$0.09 
Discontinued operations0.01 0.06 (0.40)0.08 
Diluted earnings (loss) per share attributable to Harsco Corporation common stockholders$(1.33)$0.17 $(1.83)(a)$0.17 
(a) Does not total due to rounding
See accompanying notes to unaudited condensed consolidated financial statements.
5
HARSCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
Three Months Ended
 June 30
(In thousands)20222021
Net income (loss)$(104,496)$15,080 
Other comprehensive income (loss):  
Foreign currency translation adjustments, net of deferred income taxes of $(4,616) and $552 in 2022 and 2021, respectively
(58,646)15,446 
Net gain (loss) on cash flow hedging instruments, net of deferred income taxes of $(301) and $(158) in 2022 and 2021, respectively
720 234 
Pension liability adjustments, net of deferred income taxes of $(312) and $(358) in 2022 and 2021, respectively
28,810 2,225 
Unrealized gain on marketable securities, net of deferred income taxes of $4 and $(2) in 2022 and 2021, respectively
(10)8 
Total other comprehensive income (loss)(29,126)17,913 
Total comprehensive income (loss)(133,622)32,993 
Comprehensive income attributable to noncontrolling interests1,808 (2,365)
Comprehensive income (loss) attributable to Harsco Corporation$(131,814)$30,628 
Six Months Ended
 June 30
(In thousands)20222021
Net income (loss)$(143,176)$16,645 
Other comprehensive income (loss):  
Foreign currency translation adjustments, net of deferred income taxes of $(6,454) and $1,175 in 2022 and 2021, respectively
(61,493)12,150 
Net gain (loss) on cash flow hedging instruments, net of deferred income taxes of $(631) and $(302) in 2022 and 2021, respectively
1,860 923 
Pension liability adjustments, net of deferred income taxes of $(664) and $(696) in 2022 and 2021, respectively
42,528 6,044 
Unrealized gain (loss) on marketable securities, net of deferred income taxes of $4 and $(9) in 2022 and 2021, respectively
(13)25 
Total other comprehensive income (loss)(17,118)19,142 
Total comprehensive income (loss)(160,294)35,787 
Less: Comprehensive income attributable to noncontrolling interests1,131 (2,729)
Comprehensive income (loss) attributable to Harsco Corporation$(159,163)$33,058 

See accompanying notes to unaudited condensed consolidated financial statements.
6
HARSCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
 Six Months Ended June 30
(In thousands)20222021
Cash flows from operating activities:  
Net income (loss)$(143,176)$16,645 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:  
Depreciation66,067 64,904 
Amortization17,067 17,783 
Deferred income tax (benefit) expense(10,396)(6,407)
Equity (income) loss of unconsolidated entities, net245 195 
Dividends from unconsolidated entities526 — 
(Gain) loss on early extinguishment of debt(2,254)2,668 
Goodwill impairment charge104,580 — 
Other, net1,020 (2,149)
Changes in assets and liabilities, net of acquisitions and dispositions of businesses:  
Accounts receivable87,607 (23,484)
Income tax refunds receivable, reimbursable to seller7,687 — 
Inventories(8,435)15,456 
Contract assets7,836 (37,866)
Right-of-use assets14,383 13,897 
Accounts payable18,847 (13,491)
Accrued interest payable(740)(137)
Accrued compensation(5,884)4,701 
Advances on contracts(13,626)(13,351)
Operating lease liabilities(14,095)(13,506)
Retirement plan liabilities, net(21,587)(27,858)
Other assets and liabilities12,067 15,530 
Net cash provided by operating activities117,739 13,530 
Cash flows from investing activities:  
Purchases of property, plant and equipment(61,791)(68,646)
Proceeds from sales of assets6,591 10,042 
Expenditures for intangible assets(100)(132)
Proceeds from notes receivable8,605 6,400 
Net proceeds (payments) from settlement of foreign currency forward exchange contracts4,999 (978)
Payments for settlements of interest rate swaps(2,123)— 
Other investing activities, net153 133 
Net cash used by investing activities(43,666)(53,181)
Cash flows from financing activities:  
Short-term borrowings, net(31)4,444 
Current maturities and long-term debt:  
Additions104,961 465,518 
Reductions(152,861)(413,481)
Dividends paid to noncontrolling interests— (3,094)
Sale of noncontrolling interests1,901 — 
Stock-based compensation - Employee taxes paid(1,698)(3,172)
Payment of contingent consideration (6,915)— 
Deferred financing costs— (7,828)
Other financing activities, net— (601)
Net cash (used) provided by financing activities(54,643)41,786 
Effect of exchange rate changes on cash and cash equivalents, including restricted cash(5,751)483 
Net increase in cash and cash equivalents, including restricted cash13,679 2,618 
Cash and cash equivalents, including restricted cash, at beginning of period87,128 79,669 
Cash and cash equivalents, including restricted cash, at end of period$100,807 $82,287 
Supplementary cash flow information:
Change in accrual for purchases of property, plant and equipment included in accounts payable$6,836 $2,158 
See accompanying notes to unaudited condensed consolidated financial statements.
7
HARSCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)
 Harsco Corporation Stockholders’ Equity  
Common StockAdditional Paid-in CapitalRetained
Earnings		Accumulated Other
Comprehensive
Loss		Noncontrolling
Interests		 
(In thousands, except share 
amounts)		IssuedTreasuryTotal
Balances, December 31, 2020
$144,288 $(843,230)$204,078 $1,797,759 $(645,741)$56,245 $713,399 
Net income   135  1,430 1,565 
Total other comprehensive income (loss), net of deferred income taxes of $134
2,295 (1,066)1,229 
Stock appreciation rights exercised, net 3,842 shares
9 (70)(9)(70)
Vesting of restricted stock units and other stock grants, net 144,967 shares
312 (1,850)(312)   (1,850)
Vesting of performance share units, net 69,127 shares
155 (1,032)(155)(1,032)
Amortization of unearned portion of stock-based compensation, net of forfeitures  3,342    3,342 
Balances, March 31, 2021
144,764 (846,182)206,944 1,797,894 (643,446)56,609 716,583 
Net income13,388 1,692 15,080 
Cash dividends declared:
   Noncontrolling interests(3,094)(3,094)
Total other comprehensive income, net of deferred income taxes of $34
17,240 673 17,913 
Stock appreciation rights exercised, net 13,061 shares
28 (219)(28)(219)
Vesting of restricted stock units and other stock grants, net 34,986 shares
44 (44)— 
Amortization of unearned portion of stock-based compensation, net of forfeitures  3,120    3,120 
Balances, June 30, 2021
$144,836 $(846,401)$209,992 $1,811,282 $(626,206)$55,880 $749,383 



8
 Harsco Corporation Stockholders’ Equity  
(In thousands, except share amounts)Common StockAdditional Paid-in CapitalRetained
Earnings		Accumulated Other
Comprehensive
Loss		Noncontrolling
Interests		 
IssuedTreasuryTotal
Balances, December 31, 2021
$144,883 $(846,622)$215,528 $1,794,510 $(560,139)$57,610 $805,770 
Net income   (39,839) 1,159 (38,680)
Total other comprehensive income (loss), net of deferred income taxes of $(2,520)
12,490 (482)12,008 
Vesting of restricted stock units and other stock grants, net 176,253 shares
378 (1,632)(378)   (1,632)
Amortization of unearned portion of stock-based compensation, net of forfeitures  3,629   3,629 
Balances, March 31, 2022
145,261 (848,254)218,779 1,754,671 (547,649)58,287 781,095 
Net income(105,591)1,095 (104,496)
Total other comprehensive income, net of deferred income taxes of $(5,225)
(26,223)(2,903)(29,126)
Contributions from noncontrolling interests1,900 1,900 
Stock appreciation rights exercised, net 16,671 shares
29 (66)(29)(66)
Vesting of restricted stock units and other stock grants, net 23,224 shares
29 (29)— 
Amortization of unearned portion of stock-based compensation, net of forfeitures2,396 2,396 
Balances, June 30, 2022
$145,319 $(848,320)$221,117 $1,649,080 $(573,872)$58,379 $651,703 

See accompanying notes to unaudited condensed consolidated financial statements.
9
HARSCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.     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, 2021 Condensed Consolidated Balance Sheet information contained in this Quarterly Report on Form 10-Q was derived from the 2021 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, 2021. 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 components of the Condensed Consolidated Statements of Operations caption Facility fees and debt-related income (expense) were as follows:

Three Months EndedSix Months Ended
June 30June 30
(in thousands)2022202120222021
Gain (loss) on extinguishment of debt$2,254 $— $2,254 $(2,668)
Unused debt commitment and amendment fees(6)(50)(538)(2,640)
Securitization and factoring fees(99)— (99)— 
Facility fees and debt-related income (expense)$2,149 $(50)$1,617 $(5,308)

Liquidity
The Company’s cash flow forecasts, combined with existing cash and cash equivalents, indicate sufficient liquidity to fund the Company’s operations for at least the next twelve months. As such, the Company’s consolidated financial statements have been prepared on the basis that it will continue as a going concern for a period extending beyond twelve months from the date the consolidated financial statements are issued. This assessment includes the expected ability to meet required financial covenants and the continued ability to draw down on the Senior Secured Credit Facilities (see Note 9).

Reclassifications

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

During the second quarter of 2022, the Company recognized $2.6 million in service revenues as an out-of-period adjustment in the Harsco Clean Earth Segment. The adjustment was not considered material to the interim or annual consolidated financial statements for the interim periods ended June 30, 2022 or the financial statements of any previously filed interim or annual periods.

2.     Recently Adopted and Recently Issued Accounting Standards

The following accounting standards have been adopted in 2022:

On January 1, 2022, the Company adopted changes issued by the FASB 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 adoption of these changes did not have a material impact on the Company's condensed consolidated financial statements.

On January 1, 2022, the Company adopted changes issued by the FASB which improve the transparency of government assistance received by entities. Other than expanded annual disclosures, the adoption of these changes did not have a material impact on the Company's consolidated financial statements.
The following accounting standard has been issued and becomes effective for the Company at a future date:
10
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 the Company's consolidated financial statements.

3. Dispositions

Harsco Rail Segment
In November 2021, the Company announced its intention to sell its Rail business. The sales process was ongoing during the second quarter of 2022. The former Harsco Rail Segment has historically been a separate reportable segment with primary operations in the United States, Europe and Asia Pacific.

The former Harsco Rail Segment's balance sheet positions as of June 30, 2022 and December 31, 2021 are presented as Assets held-for-sale and Liabilities of assets held-for-sale in the Condensed Consolidated Balance Sheets and are summarized as follows:
(in thousands)June 30
2022		December 31
2021
Trade accounts receivable, net$44,953 $33,689 
Other receivables4,102 4,740 
Inventories97,916 103,560 
Current portion of contract assets89,867 94,597 
Other current assets26,463 25,442 
Property, plant and equipment, net39,993 39,524 
Right-of-use assets, net2,308 3,108 
Goodwill13,026 13,026 
Intangible assets, net2,883 3,081 
Deferred income tax assets5,690 6,064 
Other assets1,179 6,432 
Total Rail assets included in Assets held-for-sale$328,380 $333,263 
Accounts payable$38,906 $46,076 
Accrued compensation1,995 2,171 
Current portion of operating lease liabilities1,229 1,619 
Current portion of advances on contracts44,817 62,401 
Other current liabilities64,422 49,732 
Operating lease liabilities1,246 1,775 
Deferred tax liabilities5,699 5,736 
Other liabilities882 981 
Total Rail liabilities included in Liabilities of assets held-for-sale$159,196 $170,491 
11
The results of the former Harsco Rail 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, 2022, and 2021. Certain key selected financial information included in Income (loss) from discontinued operations, net of tax for the former Harsco Rail Segment is as follows:
Three Months EndedSix Months Ended
June 30June 30
(In thousands)2022202120222021
Amounts directly attributable to the former Harsco Rail Segment:
Service revenues$7,488 $7,081 $14,198 $17,190 
Product revenues (a)
64,396 94,065 109,392 165,546 
Cost of services sold4,589 3,527 9,264 8,180 
Cost of products sold53,260 75,396 126,421 134,458 
Income (loss) from discontinued businesses5,163 9,690 (30,732)14,845 
Additional amounts allocated to the former Harsco Rail Segment:
  Selling, general and administrative expenses (b)
$1,862 $— $3,511 $— 
(a) The decrease in product revenues for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 is due to liquidated damages and penalties on certain long-term contracts, as discussed below.
(b) The Company has allocated directly attributable transaction costs to discontinued operations.

The Company has retained corporate overhead expenses previously allocated to the former Harsco Rail Segment of $1.1 million and $2.1 million for each of the three and six months ended June 30, 2022, and 2021, respectively, as part of Selling, general and administrative expenses on the Condensed Consolidated Statements of Operations.

The Company's former Harsco Rail Segment is currently manufacturing highly-engineered equipment under large long-term fixed-price contracts with SBB, Network Rail, and Deutsche Bahn. As disclosed previously, in the fourth quarter of 2021, the Company recognized an estimated forward loss provision of $33.4 million related to these contracts. In the first quarter of 2022, the Company encountered continued supply chain related delays and additional costs in the build of the machines.

For the Network Rail contracts, the Company encountered additional supply chain delays in the build of the initial machine, and there were further changes to the production schedule based on the manufacturing experience gained from assembling the first unit during the quarter which had a cascading effect on the delivery schedule of remaining machines. During the three and six months ended June 30, 2022, the Company recorded forward loss provisions of $0.3 million and $24.5 million, respectively, principally for additional estimated contractual liquidated damages. The Company continues to negotiate with Network Rail regarding a reduction to these liquidated damages, which could result in additional favorable or unfavorable adjustments in future periods.

For the Deutsche Bahn contract, on March 8, 2022 a European-based supplier of critical components to the project indicated it would be significantly late on the delivery of these components to the project, which has the impact of delaying the overall delivery schedule for the project. As a result, the Company recorded an additional $7.4 million estimated forward loss provision during the first quarter of 2022 due principally to the estimated contractual penalties that would be triggered by this delay. Additionally, this supplier filed for bankruptcy during the second quarter of 2022, although it continues to operate. Should this supplier cease operations, the Company many incur further losses if there are additional costs to change suppliers, an inability to recover the value of prepayments made to the supplier, as well as additional penalties and damages under the contract with Deutsche Bahn in the event of further production delays.

For the second SBB contract, the Company recorded an additional $3.5 million forward estimated loss provision during the first quarter of 2022 due to additional supply chain delays and cost overruns.

The estimated forward loss provisions represent the Company's best estimate based on currently available information. It is possible that the Company's overall estimate of liquidated damages, penalties and costs to complete these contracts may change, which would result in an additional estimated forward loss provision at such time.

The first contract with SBB is complete, and the second contract is 81% complete as of June 30, 2022. The contracts with Network Rail and Deutsche Bahn are 48% and 26% complete, respectively, as of June 30, 2022.

12
The following is selected financial information included on the Condensed Consolidated Statements of Cash Flows attributable to the former Harsco Rail Segment:
Six Months Ended June 30
(In thousands)20222021
Non-cash operating items
Depreciation and amortization$— $2,588 
Cash flows from investing activities
Purchases of property, plant and equipment1,031 800 


4.    Accounts Receivable and Note Receivable
Accounts receivable consist of the following:
June 30
2022		December 31
2021
Trade accounts receivable (a)$275,946 $389,535 
Less: Allowance for expected credit losses (a)(8,199)(11,654)
Trade accounts receivable, net$267,747 $377,881 
Other receivables (b)
$28,174 $33,059 
(a) The December 31, 2021 amounts for trade accounts receivable and allowance for expected credit losses have been corrected from their previous presentation. These corrections did not impact the amount of the allowance for expected credit losses recorded in the June 30, 2022 Condensed Consolidated Balance Sheets or the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2022.
(b) 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 expected credit losses related to trade accounts receivable was as follows:

 Three Months EndedSix Months Ended
June 30June 30
(In thousands)2022202120222021
Provision for expected credit losses and doubtful accounts related to trade accounts receivable$(268)$74 $57 $728 

At June 30, 2022, $5.6 million of the Company's trade accounts receivable were past due by twelve months or more, with $2.9 million of this amount reserved. Collection of the remaining balance is still ultimately expected.

Accounts Receivable Securitization Facility
On June 24, 2022, the Company entered into a trade receivables securitization facility (“AR Facility”) to accelerate cash flows from trade accounts receivable. Under the AR Facility, the Company and its subsidiaries continuously sell their trade receivables as they are originated to a wholly-owned special purpose entity (“SPE”). The SPE transfers ownership and control of qualifying receivables to PNC Bank, National Association (“PNC”) and other unaffiliated purchasers in exchange for cash. None of the assets or credit of the SPE is available to satisfy the debts and obligations owed to the creditors of the Company or any other person until the obligations of the SPE under the facility have been satisfied. The Company controls and consolidates the SPE in its condensed consolidated financial statements. The AR Facility has a term of three years.

As cash is collected on the trade receivables, the SPE has the ability to continuously transfer ownership and control of new qualifying receivables to PNC and the other unaffiliated purchasers such that the total outstanding balance of trade receivables sold can be up to $150 million at any point in time, which is the maximum purchase commitment of PNC and the other unaffiliated purchasers. The future outstanding balance of trade receivables that are sold is expected to vary based on the level of activity and other factors and could be less than the maximum purchase commitment of $150 million. The Company accounts for receivables sold under the AR Facility as a sale of financial assets and derecognizes these trade receivables from the Company’s Condensed Consolidated Balance Sheets. The total outstanding balance of trade receivables that have been sold and derecognized by the SPE is $120 million as of June 30, 2022. The SPE owned $92.0 million of trade receivables as of June 30, 2022, and these amounts are included in the caption Trade accounts receivable, net on the Condensed Consolidated Balance Sheets. The Company continues to be involved with the trade receivables after they are sold to PNC by acting as servicer.

13
The fees incurred for the AR Facility are included in Facility fees and debt-related income (expense) on the Condensed Consolidated Statements of Operations. See Note 1, Basis of Presentation, for additional details. The Company capitalized fees of $1.8 million related to the securitization facility, which will be amortized over the term of the agreement.

Upon execution of the AR Facility during the second quarter of 2022, the Company received proceeds of $120.0 million, which is presented as a cash flow from operating activities in the Condensed Consolidated Statements of Cash Flows.

Factoring Arrangement
The Company maintains a factoring arrangement with a financial institution to sell certain accounts receivable that are also accounted for as a sale of financial assets. At June 30, 2022 and December 31, 2021, the amounts outstanding under the arrangement was $12.6 million and $12.9 million, respectively, under a program capacity of $18.8 million and $16.5 million, respectively.

Note Receivable
In January 2020 the Company sold IKG for $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 $40.0 million, bearing interest at 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, 2022 and is included in the caption Other assets on the Condensed Consolidated Balance Sheet. The initial fair value of the note receivable was $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 and six months ended June 30, 2022, the Company received a payment of $8.6 million related to excess cash flow. At June 30, 2022 the amortized cost of the note receivable was $23.2 million, compared with a fair value of $23.3 million.
(In thousands)June 30
2022		December 31
2021
Note receivable$23,205 $31,025 


5.    Inventories
Inventories consist of the following:
(In thousands)June 30
2022		December 31
2021
Finished goods$8,821 $8,323 
Work-in-process4,894 5,393 
Raw materials and purchased parts27,866 21,188 
Stores and supplies39,418 35,589 
Total inventories$80,999 $70,493 


6.     Property, Plant and Equipment
Property, plant and equipment consist of the following:
(In thousands)June 30
2022		December 31
2021
Land$72,678 $73,067 
Land improvements16,706 16,970 
Buildings and improvements218,950 221,236 
Machinery and equipment1,490,695 1,507,214 
Uncompleted construction61,594 63,816 
Gross property, plant and equipment1,860,623 1,882,303 
Less: Accumulated depreciation(1,223,143)(1,228,390)
Property, plant and equipment, net$637,480 $653,913 
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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 continues 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 $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 and the customer continue to discuss and the Company is evaluating its legal position. In addition, there may be other avenues of pursuing recovery, including seeking relief directly from the local government. Considering the ongoing discussions with the customer, and other available 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, 2022. The Company continues to evaluate changes in facts and circumstances and will record any impairment charge, when and if indicated.


7. Leases
The components of lease expense were as follows:
Three Months EndedSix Months Ended
June 30June 30
(In thousands)2022202120222021
Finance leases:
Amortization expense$979 $474 $1,957 $949 
Interest on lease liabilities182 109 365 211 
Operating leases8,432 7,933 16,501 15,829 
Variable and short-term lease expense11,986 13,024 25,329 25,126 
Sublease income(1)(2)(3)(51)
Total lease expense from continuing operations$21,578 $21,538 $44,149 $42,064 

As of June 30, 2022, the Company had additional operating leases for equipment that had not yet commenced with estimated operating lease obligations of approximately $19 million to be recognized upon anticipated lease commencement in the third and fourth quarters of 2022.

8.     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, 2022:
(In thousands)Harsco Environmental
Segment		Harsco
Clean Earth
Segment		Consolidated
Totals
Balance at December 31, 2021$399,230 $483,879 $883,109 
Goodwill impairment— (104,580)(104,580)
Foreign currency translation(19,090)— (19,090)
Balance at June 30, 2022$380,140 $379,299 $759,439 

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.
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As of June 30, 2022, the Company determined that an interim test of goodwill was required. The triggering event was principally due to lower near-term earnings expectations due to the impacts of inflation. The Company used a discounted cash flow model (“DCF model”) to estimate the current fair value of the Clean Earth reporting unit (Level 3), which is defined as the Clean Earth Segment. A number of significant assumptions and estimates are involved in the preparation of DCF models including future revenues and operating margin growth, the weighted-average cost of capital (“WACC”), tax rates, capital spending, pension funding, the impact of business initiatives and working capital projections. The DCF model is based on approved forecasts for the early years and historical relationships and projections for later years. The WACC rate is derived from internal and external factors including, but not limited to, the average market price of the Company's stock, shares outstanding, book value of the Company's debt, the long-term risk-free interest rate, and both market and size-specific risk premiums. As a result of this testing, the Company recorded a goodwill impairment charge of $104.6 million for the Clean Earth Segment in the second quarter of 2022. This charge had no impact on the Company's cash flows or compliance with debt covenants.    
For the Harsco Environmental Segment and the Rail business, the Company determined that, as of June 30, 2022, no interim goodwill impairment testing was necessary.  However, a continued economic downturn, including continued cost inflation and labor shortages could impact the Company's future projected cash flows used to estimate fair value, which could result in an impairment charge to any of the Company's segments in a future period.
Other Intangibles
Because of lower-than-expected results for the Altek Group of the Harsco Environmental Segment for 2021 due to the timing of customer orders, the Company tested Altek's asset group's recoverability in the fourth quarter of 2021 and no impairment was recorded. The long-lived assets (other than goodwill) of the Altek Group within the Harsco Environmental Segment primarily consist of intangible assets which have a carrying value of approximately $33 million at June 30, 2022. The Company has not identified any triggering events for the Altek asset group in the second quarter of 2022. However, if actual results prove inconsistent with the Company’s assumptions and judgments of the projected cash flows, it could result in impairment of the Altek intangible assets in future periods.

9. Debt and Credit Agreements

On February 22, 2022, the Company amended its Senior Secured Credit Facilities to reset the levels of its net debt to consolidated adjusted EBITDA ratio covenant. As a result of this amendment, the total net debt to consolidated adjusted EBITDA ratio covenant was set at 5.50 for the quarter ending June 30, 2022, and decreases quarterly by 0.25 until reaching 4.00 for the quarter ending December 31, 2023 and thereafter. In addition, upon closing on the divestiture of the former Harsco Rail Segment, the total net debt to consolidated adjusted EBITDA ratio covenant will decrease by an additional 0.25, provided, however, it will not go below 4.00 and a minimum consolidated adjusted EBITDA to consolidated interest charges ratio covenant, which is not to be less than 3.0. At June 30, 2022 the Company was in compliance with these covenants, as the total net debt to consolidated adjusted EBITDA ratio (as defined in the Credit Agreement) was 4.98 and total interest coverage ratio was 3.8.

The Company believes it will continue to maintain compliance with these covenants based on its current outlook. However, the Company’s estimates of compliance with these covenants could change in the future with a continued deterioration in economic conditions or an inability to successfully execute its plans to realize increased pricing and to implement cost reduction initiatives that substantially mitigate the impacts of inflation and other factors adversely impacting its realized operating margins.

In connection with entering into the AR Facility on June 24, 2022, the Company amended its Senior Secured Credit Facilities to increase the permitted maximum outstanding amount of a securitization facility to $150 million and certain other covenants and definitions were modified to facilitate the AR Facility.

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In June 2022, the Company repurchased $25.0 million of its 5.75% Senior Notes on the open market at a discount for $22.4 million. The Company recognized a gain on the extinguishment of debt of $2.3 million, net of the write-off of $0.3 million of previously recorded deferred financing costs, in the caption Facility fees and debt-related income (expense) on the Condensed Consolidated Statement of Operations.
Long-term debt consists of the following:
(In thousands)June 30
2022		December 31
2021
Senior Secured Credit Facilities:
New Term Loan$495,000 $497,500 
Revolving Credit Facility 341,000 362,000 
5.75% Senior Notes475,000 500,000 
Other financing payable (including finance leases) in varying amounts26,392 28,389 
Total debt obligations1,337,392 1,387,889 
Less: deferred financing costs(16,583)(18,217)
Total debt obligations, net of deferred financing costs1,320,809 1,369,672 
Less: current maturities of long-term debt(17,952)(10,226)
Long-term debt$1,302,857 $1,359,446 


10.  Employee Benefit Plans
 Three Months Ended
June 30
Defined Benefit Pension Plan Net Periodic Pension Cost (Benefit)U.S. PlansInternational Plans
(In thousands)2022202120222021
Service costs$— $— $417 $467 
Interest costs1,429 1,203 4,128 3,205 
Expected return on plan assets(2,698)(3,050)(9,720)(11,392)
Recognized prior service costs— — 113 128 
Recognized actuarial losses1,183 1,385 3,313 4,586 
Defined benefit pension plan net periodic pension cost (benefit)$(86)$(462)$(1,749)$(3,006)
 Six Months Ended
June 30
Defined Benefit Pension Plans Net Periodic Pension Cost (Benefit)U.S. PlansInternational Plans
(In thousands)2022202120222021
Service costs$— $— $849 $929 
Interest costs2,858 2,406 8,522 6,382 
Expected return on plan assets(5,397)(6,100)(20,104)(22,723)
Recognized prior service costs— — 233 255 
Recognized actuarial losses2,366 2,770 6,857 9,149 
Defined benefit pension plans net periodic pension cost (benefit)$(173)$(924)$(3,643)$(6,008)

Three Months EndedSix Months Ended
Company ContributionsJune 30June 30
(In thousands)2022202120222021
Defined benefit pension plans (U.S.)$441 $451 $887 $3,317 
Defined benefit pension plans (International)4,230 4,301 15,587 16,923 
Multiemployer pension plans478 421 935 861 
Defined contribution pension plans3,135 3,051 6,929 6,430 
The Company's estimate of expected cash contributions to be paid during the remainder of 2022 for the U.S. and international defined benefit pension plans is $0.9 million and $6.6 million, respectively.


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11.     Income Taxes 

Income tax benefit related to continuing operations for the three and six months ended June 30, 2022 was $3.1 million and $1.9 million, respectively. Income tax expense related to continuing operations for the three and six months ended June 30, 2021 was $4.8 million and $6.9 million, respectively. The change in the income tax benefit for the three and six months ended June 30, 2022 compared with the income tax expense for the three months and six months ended June 30, 2021 is the result of lower taxable income, primarily resulting from decreased operating income as a result of cost increases due to inflation and labor shortages, as well as the tax benefit on a portion of the Harsco Clean Earth Segment goodwill impairment.

The reserve for uncertain tax positions at June 30, 2022 was $4.9 million, including interest and penalties.  Within the next twelve months, it is reasonably possible that $0.4 million unrecognized income tax benefits will be recognized upon settlement of tax examinations and the expiration of various statutes of limitations.


12.   Commitments and Contingencies

Environmental        
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
2022		December 31
2021
Current portion of environmental liabilities (a)
$8,900 $7,338 
Long-term environmental liabilities26,669 28,435 
Total environmental liabilities$35,569 $35,773 
(a)    The current portion of environmental liabilities is included in the caption Other current liabilities on the Condensed Consolidated Balance Sheets.

Legal Proceedings

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

On March 28, 2018, the United States Environmental Protection Agency (the “EPA”) conducted an inspection of ESOL’s off-site waste management facility in Detroit, MI. On November 23, 2021, the EPA proposed a civil penalty of $390,092 as part of a proposed Administrative Consent Order for alleged improper air emissions at the site. The allegations in the proposed Administrative Consent Order and civil penalty relate exclusively to the period prior the Company’s purchase of the ESOL business. The Company is vigorously contesting the allegations. While it is the Company's position that any loss related to this issue will be recoverable under indemnity rights under the ESOL purchase agreement and representations and warranties insurance policies purchased by the Company, there can be no assurance that the Company's position will ultimately prevail.

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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 (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 or results from operations.

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, denying the renewal of the facility's hazardous waste permit. On April 8, 2022, the DTSC denied the Company's appeal of the Notice of Denial. On June 3, 2022, the Company's Motion for Temporary Restraining Order to stop the closure pending its appeal of the DTSC action was denied. The Company has the ability to appeal the Denial of Hazardous Waste Facility Permit Application, and is currently reviewing the decision and its options. The Company continues to utilize the site for non-hazardous waste and is evaluating potential alternate uses for the site. The DTSC investigation and compliance issues leading to the compliance tier assignment were 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 and public hearing process is 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 was completed during the third quarter of 2021 and the processing of the salt cakes has commenced. The current reserve of $6.7 million continues to represent 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 which 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 5,000 Brazilian reais per day (or approximately $1 thousand per day) and CSN 20,000 Brazilian reais per day (or approximately $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 25,000 Brazilian reais per day (or approximately $5 thousand per day) and raising the fines assessed to CSN to 100,000 Brazilian reais per day (or approximately $19 thousand per day). The Court also assessed an additional fine of 10,000,000 Brazilian reais (or approximately $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 Prosecution Offices and governmental authorities on the injunction and the possible resolution of the underlying case. Beginning on March 25, 2022, the Courts entered a series of orders suspending the litigation proceedings as well as the accrual of interest and penalties while the parties discuss a possible resolution of the matter. The Company does not believe that a loss relating to this matter is probable or estimable at this point.

19
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 alleged violations of the Company’s environmental permit at the site, which restricts the release of any visible dust emissions. On January 12, 2022, the Administrative Supreme Court upheld the Company’s challenge of these enforcement actions as they relate to the slag tipping area of the site. As a result, all fines asserted against the Company to date have been invalidated and all fines paid to date have been reimbursed. This order is not appealable. On or about October 14, 2021, the Company received a subpoena and two indictments on this matter before the Amsterdam District Court in the Netherlands. The Amsterdam Public Prosecutor’s Office issued the two indictments against the Company, alleging violations in connection with dust releases and/or events alleged to have occurred in 2018 through May 2020 at the site. The action cites provisions which permit fines for the alleged infractions and seeks €100,000 in fines with a smaller amount held in abeyance. On February 25, 2022, the Amsterdam District Court ruled that the Company was liable for only one alleged violation and that this alleged violation was unintentional. The court issued a fine of €5,000, to be held in abeyance. Both the Company and the Public Prosecutor’s Office have appealed this ruling. On February 2, 2022, the prosecutor announced that they would further investigate residents’ claims related to this matter. The Company is vigorously contesting all allegations against it and is also working with its customer to ensure the control of emissions. The Company has contractual indemnity rights from its customer that it believes will substantially cover any fines or penalties.

On March 22, 2022, the U.S. EPA issued a Notice of Intent to File an Administrative Complaint (NOI) alleging violations of the federal Emergency Planning and Community Right-to-Know Act at the Company’s facilities in Tacoma, WA and Kent, WA. The NOI relates exclusively or almost exclusively to the period when Stericycle owned and operated the sites. The NOI proposes a penalty of $3,000,000. The Company is currently reviewing the veracity of the allegations and the corresponding proposed penalty amount. While it is the Company’s position that it has recourse for some or all liabilities, if any, that arise from this matter 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.

On March 21, 2022, the Company received a draft penalty matrix from the PA DEP concerning alleged reporting, monitoring and related issues at the Company’s Hatfield, PA site prior to the time the Company acquired the site from Stericycle. The draft penalty matrix proposes a penalty of $1,000,000 . On June 29, 2022, the PA DEP issued a draft Consent Assessment of Civil Penalty ("CACP") related to the alleged issues at the site, although the draft CACP does not propose a specific penalty. The Company is currently reviewing the veracity of the allegations. While it is the Company’s position that it has recourse for some or all liabilities, if any, that arise from this matter 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.

On November 5, 2020, a worker suffered a fatal injury at a site owned by the Company’s customer, Gerdau Ameristeel US, Inc., in Midlothian, TX. Although the Company was not directly involved in the accident, the worker was employed by a sub-contractor of a sub-contractor of the Company. The worker’s family filed suit in the 125th Judicial District Court of Harris County, TX against multiple parties including the Company. The Company is vigorously defending the lawsuit and has insurance coverage subject to a $5 million deductible. The Company has recorded a liability for its insurance deductible and an indemnification receivable from its customer for the recovery of certain losses based upon the contractual indemnity rights. However, there can be no assurances that the Company's position will ultimately prevail.

DEA Investigation
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.


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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, 2022 the principal amount of the tax assessment from the SPRA with regard to this case is approximately $1.2 million, with penalty, interest and fees assessed to date increasing such amount by an additional $16.8 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 $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 $7.1 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 $4.9 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 $1.2 million, with penalty and interest assessed through that date increasing such amount by an additional $3.7 million.  On December 6, 2018 the administrative tribunal reduced the applicable penalties to $0.8 million. After calculating the interest accrued on the current penalty, the Company estimates that the current overall liability for this case to be approximately $5.4 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 $2.0 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 $3.4 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, 2022 and December 31, 2021, the Company has established reserves of $3.0 million and $3.2 million, respectively, on the Company's Condensed Consolidated Balance Sheets for amounts considered to be probable and estimable.

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Other
The Company is named as one of many defendants (approximately 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, 2022, there were approximately 17,210 pending asbestos personal injury actions filed against the Company.  Of those actions, approximately 16,590 were filed in the New York Supreme Court (New York County), approximately 115 were filed in other New York State Supreme Court Counties and approximately 505 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 $20 million or $25 million, regardless of the individual plaintiff’s alleged medical condition, and without identifying any specific Company product.
At June 30, 2022, approximately 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 40 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, 2022, the Company has obtained dismissal in approximately 28,400 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 has been determined to be 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, 2021 for additional information on Accrued insurance and loss reserves.


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13.  Reconciliation of Basic and Diluted Shares
Three Months EndedSix Months Ended
June 30June 30
(In thousands, except per share amounts)2022202120222021
Income (loss) from continuing operations attributable to Harsco Corporation common stockholders$(106,700)$8,540 $(114,033)$6,975 
Weighted-average shares outstanding:
  Weighted-average shares outstanding - basic79,509 79,265 79,437 79,177 
  Dilutive effect of stock-based compensation— 1,509 — 1,220 
  Weighted-average shares outstanding - diluted79,509 80,774 79,437 80,397 
Earnings (loss) from continuing operations per common share, attributable to Harsco Corporation common stockholders:
Basic$(1.34)$0.11 $(1.44)$0.09 
Diluted$(1.34)$0.11 $(1.44)$0.09 

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:
Three Months EndedSix Months Ended
June 30June 30
(In thousands)2022202120222021
Restricted stock units797 — 811 — 
Stock appreciation rights2,193 467 2,422 656 
Performance share units1,128 690 1,177 851 


14.   Derivative Instruments, Hedging Activities and Fair Value

Derivative Instruments and Hedging Activities
The Company uses derivative instruments, including foreign currency exchange forward contracts and interest rate swaps 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 and interest rate swaps 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:
23
(In thousands)Balance Sheet LocationFair Value of Derivatives Designated as Hedging InstrumentsFair Value of Derivatives Not Designated as Hedging InstrumentsTotal Fair Value
June 30, 2022    
Asset derivatives (Level 2):
Foreign currency exchange forward contractsOther current assets$1,710 $16,075 $17,785 
Total $1,710 $16,075 $17,785 
Liability derivatives (Level 2):
Foreign currency exchange forward contractsOther current liabilities$465 $502 $967 
Interest rate swapsOther current liabilities423 — 423 
Total$888 $502 $1,390 
December 31, 2021    
Asset derivatives (Level 2):
Foreign currency exchange forward contractsOther current assets$719 $1,405 $2,124 
Total $719 $1,405 $2,124 
Liability derivatives (Level 2):
Foreign currency exchange forward contractsOther current liabilities$560 $2,905 $3,465 
Interest rate swapsOther current liabilities4,157 — 4,157 
Total$4,717 $2,905 $7,622 

All of the Company's derivatives are recorded on the Condensed Consolidated Balance Sheets at gross amounts and do not offset. All of the Company's interest rate swaps 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 net asset of $2.2 million and $0.9 million at June 30, 2022 and December 31, 2021, respectively.
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
AOCI into Income - Effective Portion or Equity
Three Months EndedThree Months Ended
June 30June 30
(In thousands)2022202120222021
Foreign currency exchange forward contracts$957 $(440)Income (loss) from discontinued businesses$(998)$3 
Interest rate swaps— (33)Interest expense1,061 862 
 $957 $(473) $63 $865 
Amount Recognized in
OCI on Derivatives		Location of Amount Reclassified from AOCI into Income Amount Reclassified from
AOCI into Income - Effective Portion or Equity
Six Months EndedSix Months Ended
June 30June 30
(In thousands)2022202120222021
Foreign currency exchange forward contracts$1,966 $(441)Income (loss) from discontinued businesses$(1,586)$(47)
Interest rate swaps— (14)Interest expense2,111 1,727 
 $1,966 $(455) $525 $1,680 

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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
20222021
(in thousands)Interest ExpenseIncome (loss) from Discontinued BusinessesInterest ExpenseIncome (loss) from Discontinued Businesses
Total amounts in the Condensed Consolidated Statement of Operations in which the effects of derivatives designated as hedging instruments are recorded$(16,692)$1,109 $(15,643)$4,848 
Interest rate swaps:
Gain or (loss) reclassified from AOCI into income(1,061)— (862)— 
Amount recognized in earnings due to ineffectiveness720 — — — 
Foreign exchange contracts:
Gain or (loss) reclassified from AOCI into income998 — (3)
Amount excluded from effectiveness testing recognized in earnings based on changes in fair value(23)— 9 
Amount excluded from the effectiveness testing recognized in earnings based on an amortization approach(3)— 1 

Six Months Ended
June 30
20222021
(in thousands)Interest ExpenseLoss from Discontinued BusinessesInterest ExpenseIncome From Discontinued Operations
Total amounts in the Condensed Consolidated Statement of Operations in which the effects of cash flow hedges are recorded$(31,784)$(31,397)$(31,899)$6,548 
Interest rate swaps:
Gain or (loss) reclassified from AOCI into income(2,111)— (1,727)— 
Amount recognized in earnings due to ineffectiveness1,611 — — — 
Foreign exchange contracts:
Gain or (loss) reclassified from AOCI into income— 1,586 — 47 
Amount excluded from effectiveness testing recognized in earnings based on changes in fair value— (64)— 38 
Amount excluded from the effectiveness testing recognized in earnings based on an amortization approach— (5)— — 

Derivatives Not Designated as Hedging Instruments
 Location of Gain (Loss) Recognized in Income on DerivativesAmount of Gain (Loss) Recognized in Income on Derivatives (a)
Three Months EndedSix Months Ended
June 30June 30
(In thousands)2022202120222021
Foreign currency exchange forward contractsCost of services and products sold$18,234 $(740)$22,072 $4,004 
(a)      These gains (losses) offset amounts recognized in cost of services and products sold principally as a result of intercompany or third party foreign currency         
exposures.

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. 

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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, 2022 and December 31, 2021 the notional amounts of foreign currency exchange forward contracts were $450.9 million and $425.8 million, respectively. These contracts are primarily denominated in British Pound Sterling and Euros and mature through September 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 losses of $0.6 million and $1.2 million for the three and six months ended June 30, 2022, respectively, and pre-tax net gains of $0.3 million and $3.6 million for the three and six months ended June 30, 2021, respectively, in AOCI.

Interest Rate Swaps
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 and are reclassified into income as interest payments are made.

At June 30, 2022, the Company had a series of interest rate swaps that are in effect through 2022 and have the effect of converting $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 to 3.12% for 2022. In the fourth quarter of 2021, the interest rate swaps were deemed ineffective and, thus, the subsequent changes in fair value continue to be recorded in earnings in the current period. The amounts previously recorded in AOCI will continue to be amortized into earnings over the remaining maturity of the interest rate swap.

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, 2022 and December 31, 2021, the total fair value of long-term debt and current maturities (excluding deferred financing costs) was $1,202.8 million and $1,394.2 million, respectively, compared with a carrying value of $1,337.4 million and $1,387.9 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.



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15. Review of Operations by Segment 
 Three Months EndedSix Months Ended
June 30June 30
(In thousands)2022202120222021
Revenues From Continuing Operations  
Harsco Environmental$277,599 $272,546 $539,650 $530,532 
Harsco Clean Earth203,453 196,128 394,199 385,407 
Total Revenues From Continuing Operations$481,052 $468,674 $933,849 $915,939 
Operating Income (Loss) From Continuing Operations
Harsco Environmental$23,547 $30,223 $41,814 $56,158 
Harsco Clean Earth(111,668)7,386 (112,965)10,564 
Corporate(8,882)(11,344)(18,104)(21,339)
Total Operating Income From Continuing Operations$(97,003)$26,265 $(89,255)$45,383 
Depreciation
Harsco Environmental$27,467 $25,550 $55,539 $51,267 
Harsco Clean Earth4,536 4,905 9,637 10,242 
Corporate460 494 891 977 
Total Depreciation$32,463 $30,949 $66,067 $62,486 
Amortization
Harsco Environmental$1,714 $2,035 $3,542 $4,083 
Harsco Clean Earth6,131 6,063 12,206 12,146 
Corporate (a)
636 633 1,319 1,384 
Total Amortization$8,481 $8,731 $17,067 $17,613 
Capital Expenditures
Harsco Environmental$23,585 $35,993 $48,375 $60,412 
Harsco Clean Earth3,550 4,725 10,246 7,255 
Corporate1,172 111 2,138 179 
Total Capital Expenditures$28,307 $40,829 $60,759 $67,846 
(a)     Amortization expense on Corporate relates to the amortization of deferred financing costs.

Reconciliation of Segment Operating Income to Income (Loss) From Continuing Operations Before Income Taxes and Equity Income
 Three Months EndedSix Months Ended
June 30June 30
(In thousands)2022202120222021
Segment operating income $(88,121)$37,609 $(71,151)$66,722 
General Corporate expense(8,882)(11,344)(18,104)(21,339)
Operating income (loss) from continuing operations(97,003)26,265 (89,255)45,383 
Interest income693 577 1,337 1,124 
Interest expense(16,692)(15,643)(31,784)(31,899)
Facility fees and debt-related income (expense)2,149 (50)1,617 (5,308)
Defined benefit pension income2,247 3,956 4,657 7,890 
Income (loss) from continuing operations before income taxes and equity income$(108,606)$15,105 $(113,428)$17,190 


16. Revenue Recognition

The Company recognizes revenues to depict the transfer of promised services and products to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services or products. Service revenues include the Harsco Clean Earth Segment revenue and the service components of the Harsco Environmental Segment. Product revenues include portions of the Harsco Environmental Segment.

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A summary of the Company's revenues by primary geographical markets as well as by key product and service groups is as follows:
Three Months Ended
June 30, 2022
(In thousands)Harsco Environmental SegmentHarsco
Clean Earth
Segment		Consolidated Totals
Primary Geographical Markets (a):
North America$80,709 $203,453 $284,162 
Western Europe99,591 — 99,591 
Latin America (b)
39,202 — 39,202 
Asia-Pacific31,950 — 31,950 
Middle East and Africa20,762 — 20,762 
Eastern Europe 5,385 — 5,385 
Total Revenues$277,599 $203,453 $481,052 
Key Product and Service Groups:
Environmental services related to resource recovery for metals manufacturing and related logistical services$236,165 $— $236,165 
Ecoproducts38,083 — 38,083 
Environmental systems for aluminum dross and scrap processing3,351 — 3,351 
Waste processing, recycling, reuse and transportation solutions— 203,453 203,453 
Total Revenues$277,599 $203,453 $481,052 

Three Months Ended
June 30, 2021
(In thousands)Harsco Environmental SegmentHarsco
Clean Earth
Segment		Consolidated Totals
Primary Geographical Markets (a):
North America$69,735 $196,128 $265,863 
Western Europe116,981 — 116,981 
Latin America (b)
33,799 — 33,799 
Asia-Pacific26,922 — 26,922 
Middle East and Africa19,873 — 19,873 
Eastern Europe 5,236 — 5,236 
Total Revenues $272,546 $196,128 $468,674 
Key Product and Service Groups:
Environmental services related to resource recovery for metals manufacturing and related logistical services$233,523 $— $233,523 
Ecoproducts34,830 — 34,830 
Environmental systems for aluminum dross and scrap processing4,193 — 4,193 
Waste processing, recycling, reuse and transportation solutions— 196,128 196,128 
Total Revenues$272,546 $196,128 $468,674 
Six Months Ended
June 30, 2022
(In thousands)Harsco Environmental SegmentHarsco
Clean Earth
Segment		Consolidated Totals
Primary Geographical Markets (a):
North America$151,788 $394,199 $545,987 
Western Europe201,670 — 201,670 
Latin America (b)
75,007 — 75,007 
Asia-Pacific60,018 — 60,018 
Middle East and Africa40,648 — 40,648 
Eastern Europe 10,519 — 10,519 
Total Revenues $539,650 $394,199 $933,849 
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Six Months Ended
June 30, 2022
Key Product and Service Groups:
Environmental services related to resource recovery for metals manufacturing and related logistical services$463,854 $— $463,854 
Ecoproducts70,048 — 70,048 
Environmental systems for aluminum dross and scrap processing5,748 — 5,748 
Waste processing, recycling, reuse and transportation solutions— 394,199 394,199 
Total Revenues$539,650 $394,199 $933,849 
Six Months Ended
June 30, 2021
(In thousands)Harsco Environmental SegmentHarsco
Clean Earth
Segment		Consolidated Totals
Primary Geographical Markets (a):
North America$136,916 $385,407 $522,323 
Western Europe229,152 — 229,152 
Latin America (b)
64,452 — 64,452 
Asia-Pacific50,292 — 50,292 
Middle East and Africa39,994 — 39,994 
Eastern Europe 9,726 — 9,726 
Total Revenues$530,532 $385,407 $915,939 
Key Product and Service Groups:
Environmental services related to resource recovery for metals manufacturing and related logistical services$458,583 $— $458,583 
Ecoproducts64,615 — 64,615 
Environmental systems for aluminum dross and scrap processing7,334 — 7,334 
Waste processing, recycling, reuse and transportation solutions— 385,407 385,407 
Total Revenues$530,532 $385,407 $915,939 
(a)     Revenues are attributed to individual countries based on the location of the facility generating the revenue.
(b)     Includes Mexico.

The Company may receive payments in advance of earning revenue (advances on contracts), which is included in Other current liabilities and Other liabilities on the Condensed Consolidated Balance Sheets. The Company may recognize revenue in advance of being able to contractually invoice the customer (contract assets), which is included in Other current assets on the Condensed Consolidated Balance Sheets. Contract assets are transferred to Trade accounts receivable, net, when the right to payment becomes unconditional. Contract assets and advances on contracts are reported as a net position, on a contract-by-contract basis, at the end of each reporting period.

The Company had contract assets totaling $3.9 million and $3.1 million at June 30, 2022 and December 31, 2021, respectively. The increase is due principally to additional contract assets recognized in excess of the transfer of contract assets to accounts receivable. The Company had advances on contracts totaling $4.2 million and $4.1 million at June 30, 2022 and December 31, 2021, respectively. During the three and six months ended June 30, 2022, the Company recognized approximately $7 million and $10 million, respectively, of revenue related to amounts previously included in advances on contracts. During the three and six months ended June 30, 2021, the Company recognized approximately $4 million and $6 million, respectively, of revenue related to amounts previously included in advances on contracts.
At June 30, 2022 the Harsco Environmental Segment had remaining, fixed, unsatisfied performance obligations where the expected contract duration exceeds one year totaling $69.2 million. Of this amount, $19.2 million is expected to be fulfilled by June 30, 2023, $17.6 million by June 30, 2024, $17.1 million by June 30, 2025, $9.0 million by June 30, 2026 and the remainder thereafter. These amounts exclude any variable fees, fixed fees subject to indexation and any performance obligations expected to be satisfied within one year.
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17.   Other (Income) Expenses, Net

The major components of this Condensed Consolidated Statements of Operations caption were as follows:
 Three Months EndedSix Months Ended
June 30June 30
(In thousands)2022202120222021
Employee termination benefit costs$605 $656 $297 $1,166 
Other costs to exit activities477 400 1,058 638 
Impaired asset write-downs296 140 355 162 
Net gains(92)(5,354)(1,904)(7,047)
Other759 (9)1,060 (77)
Other (income) expenses, net$2,045 $(4,167)$866 $(5,158)



18. Components of Accumulated Other Comprehensive Loss
AOCI is included on the Condensed Consolidated Statements of Stockholders' Equity. The components of AOCI, net of the effect of income taxes, and activity for the six months ended June 30, 2021 and 2022 was as follows:
Components of AOCI, Net of Tax
(In thousands)Cumulative Foreign Exchange Translation AdjustmentsEffective Portion of Derivatives Designated as Hedging InstrumentsCumulative Unrecognized Actuarial Losses on Pension ObligationsUnrealized Gain (Loss) on Marketable SecuritiesTotal
Balance at December 31, 2020
$(125,392)$(5,840)$(514,500)$(9)$(645,741)
OCI before reclassifications12,150 (a)(259)(b)(5,451)(a)25 6,465 
Amounts reclassified from AOCI, net of tax— 1,182 11,495 — 12,677 
Total OCI12,150 923 6,044 25 19,142 
Less: OCI attributable to noncontrolling interests(393)— — — (393)
OCI attributable to Harsco Corporation12,543 923 6,044 25 19,535 
Balance at June 30, 2021
$(112,849)$(4,917)$(508,456)$16 $(626,206)

Components of AOCI, Net of Tax
(In thousands)Cumulative Foreign Exchange Translation AdjustmentsEffective Portion of Derivatives Designated as Hedging InstrumentsCumulative Unrecognized Actuarial Losses on Pension ObligationsUnrealized Gain (Loss) on Marketable SecuritiesTotal
Balance at December 31, 2021$(134,889)$(3,024)$(422,248)$22 $(560,139)
OCI before reclassifications(61,493)(a)1,692 (b)33,697 (a)(13)(26,117)
Amounts reclassified from AOCI, net of tax— 168 8,831 — 8,999 
Total OCI (61,493)1,860 42,528 (13)(17,118)
Less: OCI attributable to noncontrolling interests(3,385)— — — (3,385)
OCI attributable to Harsco Corporation(58,108)1,860 42,528 (13)(13,733)
Balance at June 30, 2022$(192,997)$(1,164)$(379,720)$9 $(573,872)
(a)    Principally foreign currency fluctuation.
(b)     Net change from periodic revaluations.


30
Amounts reclassified from AOCI were as follows:
(In thousands)Three Months EndedSix Months EndedLocation on the Condensed Consolidated Statements of Operations
June 30June 30
2022202120222021
Amortization of cash flow hedging instruments:
Foreign currency exchange forward contracts $(998)$3 $(1,586)$(47)Income (loss) from discontinued operations
Interest rate swaps1,061 862 2,111 1,727 Interest expense
Total before taxes63 865 525 1,680 
Income taxes(233)(253)(357)(498)
Total reclassification of cash flow hedging instruments, net of tax$(170)$612 $168 $1,182 
Amortization of defined benefit pension items (c):
Actuarial losses$4,496 $6,007 $9,223 $11,955 Defined benefit pension income
Prior service costs113 129 233 256 Defined benefit pension income
Total before taxes4,609 6,136 9,456 12,211 
Income taxes(312)(358)(625)(716)
Total reclassification of defined benefit pension items, net of tax$4,297 $5,778 $8,831 $11,495 
(c)    These AOCI components are included in the computation of net periodic pension costs. See Note 10, Employee Benefit Plans, for additional details.


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ITEM 2.                 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements as well as the audited consolidated financial statements of the Company, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 which includes additional information about the Company’s critical accounting policies, contractual obligations, practices and the transactions that support the financial results, and provides a more comprehensive summary of the Company’s outlook, trends and strategies for 2022 and beyond.
Certain amounts included in Item 2 of this Quarterly Report on Form 10-Q are rounded in millions and all percentages are calculated based on actual amounts.  As a result, minor differences may exist due to rounding.
Forward-Looking Statements
The nature of the Company's business, together with the number of countries in which it operates, subject it to changing economic, competitive, regulatory and technological conditions, risks and uncertainties. In accordance with the "safe harbor" provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, the Company provides the following cautionary remarks regarding important factors that, among others, could cause future results to differ materially from the results contemplated by forward-looking statements, including the expectations and assumptions expressed or implied herein. Forward-looking statements contained herein could include, among other things, statements about management's confidence in and strategies for performance; expectations for new and existing products, technologies and opportunities and expectations regarding growth, sales, cash flows, and earnings. Forward-looking statements can be identified by the use of such terms as "may," "could," "expect," "anticipate," "intend," "believe," "likely," "estimate," "outlook," "plan" or other comparable terms.
Factors that could cause actual results to differ, perhaps materially, from those implied by forward-looking statements include, but are not limited to: (1) changes in the worldwide business environment in which the Company operates, including changes in general economic conditions or changes due to COVID-19 and governmental and market reactions to COVID-19; (2) changes in currency exchange rates, interest rates, commodity and fuel costs and capital costs; (3) changes in the performance of equity and bond markets that could affect, among other things, the valuation of the assets in the Company's pension plans and the accounting for pension assets, liabilities and expenses; (4) changes in governmental laws and regulations, including environmental, occupational health and safety, tax and import tariff standards and amounts; (5) market and competitive changes, including pricing pressures, market demand and acceptance for new products, services and technologies; (6) the Company's inability or failure to protect its intellectual property rights from infringement in one or more of the many countries in which the Company operates; (7) failure to effectively prevent, detect or recover from breaches in the Company's cybersecurity infrastructure; (8) unforeseen business disruptions in one or more of the many countries in which the Company operates due to political instability, civil disobedience, armed hostilities, public health issues or other calamities; (9) disruptions associated with labor disputes and increased operating costs associated with union organization; (10) the seasonal nature of the Company's business; (11) the Company's ability to successfully enter into new contracts and complete new acquisitions or strategic ventures in the time-frame contemplated, or at all; (12) the Company's ability to negotiate, complete, and integrate strategic transactions; (13) failure to complete a process for the divestiture of the Rail division, as announced on November 2, 2021 on satisfactory terms, or at all; (14) potential severe volatility in the capital or commodity markets; (15) failure to retain key management and employees; (16) the outcome of any disputes with customers, contractors and subcontractors; (17) the financial condition of the Company's customers, including the ability of customers (especially those that may be highly leveraged, have inadequate liquidity or whose business is significantly impacted by COVID-19) to maintain their credit availability; (18) implementation of environmental remediation matters; (19) risk and uncertainty associated with intangible assets; (20) the risk that the Company may be unable to implement fully and successfully the expected incremental actions at the Harsco Clean Earth Segment due to market conditions or otherwise and may fail to deliver the expected resulting benefits; and (21) other risk factors listed from time to time in the Company's SEC reports. A further discussion of these, along with other potential risk factors, can be found in Part II, Item 1A, "Risk Factors," below, as well as Part I, Item 1A, "Risk Factors," of the Company's Annual Report on Form 10-K for the year ended December 31, 2021. The Company cautions that these factors may not be exhaustive and that many of these factors are beyond the Company's ability to control or predict. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. The Company undertakes no duty to update forward-looking statements except as may be required by law.
32
Executive Overview

The Company is a market-leading, global provider of environmental solutions for industrial, retail and medical waste streams. The Company's operations consist of two reportable segments: Harsco Environmental and Harsco Clean Earth. The Harsco Environmental Segment operates primarily under long-term contracts, providing critical environmental services and material processing to the global steel and metals industries, including zero waste solutions for manufacturing byproducts within the metals industry. The Harsco Clean Earth Segment provides waste management services including transportation, specialty waste processing, recycling and beneficial reuse solutions for hazardous waste and soil and dredged materials. The Company has locations in approximately 30 countries, including the U.S. The Company was incorporated in 1956.

The Company maintains a positive long-term outlook across all businesses supported by favorable underlying growth characteristics in its businesses and investments by the Company to further supplement growth. Please refer to Part I, Item 1A, "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for additional information related to the potential impacts of COVID-19 on the Company.

•Harsco Environmental's 2022 results are expected to be modestly below prior-year performance primarily due to the impacts of foreign exchange translation. Higher environmental services demand and growth in ecoproducts, as well as benefit from new service contracts, are expected to be fully offset by the impacts of foreign exchange translation, inflation, and exited contracts. The global steel market is in the process of rebalancing because of the Russia-Ukraine conflict, however the impacts on the Company are currently anticipated to be limited. Harsco Environmental is anticipated to realize improved year-over-year performance in the second-half of 2022, and over the longer-term, the Company expects that the Harsco Environmental Segment's growth will be driven by economic growth that supports higher global steel consumption as well as investments and innovation that support the environmental solutions needs of customers.
•Harsco Clean Earth results in 2022 are anticipated to be below prior-year levels due to unprecedented inflation in certain operating costs, including transportation, containers and disposal, and challenges related to labor availability. These impacts will be partially offset by commercial initiatives and cost-reduction actions. Clean Earth recently implemented a number of actions to improve profitability in the second half of 2022. These actions include price increases and additional cost and efficiency initiatives focused on mitigating the impact of these inflationary costs. Clean Earth is not expecting to fully offset this underlying inflation until early 2023. As a result of lower earnings expectations and higher discount, the Company recognized a goodwill impairment charge of $104.6 million in the second quarter of 2022. Long term, the Company expects this segment to benefit from positive underlying market trends and further growth opportunities, as well as from the less cyclical and recurring nature of this business.


Results of Operations

Segment Results
Three Months EndedSix Months Ended
June 30June 30
(In millions, except percentages)2022202120222021
Revenues:
     Harsco Environmental$277.6 $272.5 $539.7 $530.5 
     Harsco Clean Earth 203.5 196.1 394.2 385.4 
Total Revenues$481.1 $468.7 $933.8 $915.9 
Operating Income (Loss):
     Harsco Environmental$23.5 $30.2 $41.8 $56.2 
     Harsco Clean Earth(111.7)7.4 (113.0)10.6 
     Corporate(8.9)(11.3)(18.1)(21.3)
Total Operating Income$(97.0)$26.3 $(89.3)$45.4 
Operating Margins:
     Harsco Environmental8.5 %11.1 %7.7 %10.6 %
     Harsco Clean Earth(54.9)%3.8 %(28.7)%2.7 %
Consolidated Operating Margin(20.2)%5.6 %(9.6)%5.0 %

33
Harsco Environmental Segment:
June 30, 2022
Significant Effects on Revenues (In millions)
Three Months EndedSix Months Ended
Revenues — 2021$272.5 $530.5 
Net effects of price/volume changes, primarily attributable to volume changes25.6 44.3 
Impact of foreign currency translation(19.6)(26.8)
Net impact of new and lost contracts(0.4)(7.2)
Other(0.5)(1.1)
Revenues — 2022$277.6 $539.7 

The following factors contributed to the changes in operating income during the three and six months ended June 30, 2022.

Factors Positively Affecting Operating Income:
•Operating income was positively affected by increased revenue under environmental services contracts due, in part, to improved overall steel production by customers for the three and six months ended June 30, 2022.
•Operating income was positively affected by higher contributions from certain ecoproducts of $2.5 million and $1.1 million for the three and six months ended June 30, 2022.

Factors Negatively Impacting Operating Income:
•Lower asset sale gains of $5.3 million and $6.0 million during the three and six months ended June 30,2022, respectively, as compared to the three and six months ended June 30, 2021.
•Lower recovery of Brazil non-income tax expense of $1.4 million and $2.4 million during the three and six months ended June 30, 2022, respectively, as compared to the three and six months ended June 30, 2021.
•Foreign currency translation reduced operating income by $2.7 million and $2.9 million during the three and six months ended June 30, 2022, respectively.
•Impact of cost increases relating to raw materials, labor, maintenance, and freight due to inflation, including the impact of increased fuel costs on existing contracts of $5.4 million and $8.9 million for the three and six months ended June 30, 2022, respectively.


Harsco Clean Earth Segment:

June 30, 2022
Significant Effects on Revenues (In millions)
Three Months EndedSix Months Ended
Revenues—2021$196.1 $385.4 
Net effects of price/volume changes7.5 9.0 
Other(0.1)(0.2)
Revenues — 2022$203.5 $394.2 

The following factors contributed to the changes in operating income (loss) during the three and six months ended June 30, 2022.

Factors Positively Affecting Operating Income:
•Lower selling, general and administrative expense ("SG&A") of $2.1 million due principally to a reduction in professional fees for the six months ended June 30, 2022, when compared to the six months ended June 30, 2021.

Factors Negatively Impacting Operating Income:
•Goodwill impairment charge of $104.6 million recorded during the three and six months ended June 30, 2022.
•Impact of cost inflation on transportation, disposal, container and fuel costs, partially offset by favorable volume and price in the hazardous waste business decreased operating income by $10.5 million and $17.1 million for the three and six months ended June 30, 2022, respectively.

34

Consolidated Results
June 30
 Three Months EndedSix Months Ended
(In millions, except per share amounts)2022202120222021
Total revenues$481.1 $468.7 $933.8 $915.9 
Cost of services and products sold403.2 375.4 780.2 732.8 
Selling, general and administrative expenses67.9 70.8 137.1 142.4 
Research and development expenses0.3 0.3 0.4 0.5 
Goodwill impairment charge104.6 — 104.6 — 
Other (income) expenses, net2.0 (4.2)0.9 (5.2)
Operating income (loss) from continuing operations(97.0)26.3 (89.3)45.4 
Interest income0.7 0.6 1.3 1.1 
Interest expense(16.7)(15.6)(31.8)(31.9)
Facility fees and debt-related income (expense)2.1 (0.1)1.6 (5.3)
Defined benefit pension income2.2 4.0 4.7 7.9 
Income tax benefit (expense) from continuing operations3.1 (4.8)1.9 (6.9)
Equity income (loss) of unconsolidated entities, net(0.1)(0.1)(0.2)(0.2)
Income (loss) from continuing operations(105.6)10.2 (111.8)10.1 
Income (loss) from discontinued businesses1.9 8.2 (37.2)11.6 
Income tax benefit (expense) related to discontinued operations(0.8)(3.4)5.8 (5.1)
Income (loss) from discontinued operations, net of tax1.1 4.8 (31.4)6.5 
Net income (loss)(104.5)15.1 (143.2)16.6 
Total other comprehensive income (loss)(29.1)17.9 (17.1)19.1 
Total comprehensive income (loss)(133.6)33.0 (160.3)35.8 
Diluted earnings (loss) per common share from continuing operations attributable to Harsco Corporation common stockholders(1.34)0.11 (1.44)0.09 
Effective income tax rate for continuing operations2.9 %31.8 %1.7 %40.1 %

Comparative Analysis of Consolidated Results

Revenues
Revenues for the second quarter of 2022 increased $12.4 million, or 2.6%, from the second quarter of 2021. Revenues for the six months ended June 30, 2022 increased $17.9 million, or 2.0%, from the six months ended June 30, 2021. Foreign currency translation decreased revenues by $19.6 million and $26.8 million for the second quarter and six months ended June 30, 2022, respectively, compared with the same period in the prior year. Refer to the discussion of segment results above for information pertaining to factors positively affecting and negatively impacting revenues.

35
Cost of Services and Products Sold
Cost of services and products sold for the second quarter of 2022 increased $27.8 million, or 7.4%, from the second quarter of 2021. Costs of services and products sold for the six months ended June 30, 2022 increased $47.4 million, or 6.5%, from the six months ended June 30, 2021. The changes in cost of services and products sold were attributable to the following significant items:
June 30, 2022
(In millions)Three Months EndedSix Months Ended
Change in costs due to changes in revenues volume $23.3 $32.4 
Changes in costs due to change in prices, including materials, labor, fuel, transportation and maintenance17.6 31.6 
Impact of foreign currency translation(16.4)(23.0)
Other3.3 6.4 
Total change in cost of services and products sold — 2022 vs. 2021$27.8 $47.4 

Selling, General and Administrative Expenses
SG&A for the second quarter of 2022 decreased $2.9 million, or 4.1%, from the second quarter of 2021. SG&A for the six months ended June 30, 2022 decreased $5.3 million, or 3.7%, from the six months ended June 30, 2021. The decreases during the three and six months ended June 30, 2022 are due principally to a reduction of professional fees of $1.5 million and $4.4 million, respectively, in the Clean Earth and Corporate segments.

Goodwill Impairment Charge
In the second quarter of 2022, the Company recorded a goodwill impairment charge of $104.6 million in the Harsco Clean Earth Segment. See Note 8, Goodwill and Other Intangible Assets, in Part I, Item 1, Financial Statements for further discussion regarding the goodwill impairment charge.

Other (Income) Expenses, Net
The major components of this Condensed Consolidated Statements of Operations caption are as follows:
 Three Months EndedSix Months Ended
June 30June 30
(In thousands)2022202120222021
Employee termination benefit costs$605 $656 $297 $1,166 
Other costs to exit activities477 400 1,058 638 
Impaired asset write-downs296 140 355 162 
Net gains(92)(5,354)(1,904)(7,047)
Other759 (9)1,060 (77)
Other (income) expenses, net$2,045 $(4,167)$866 $(5,158)

Interest Expense
Interest expense during the second quarter of 2022 increased by $1.0 million, compared to the second quarter of 2021. Interest expense during the six months ended June 30, 2022 decreased by $0.1 million, compared with the six months ended June 30, 2021. The increase in the second quarter of 2022 primarily relates to higher weighted average interest rates, in addition to higher borrowings, related to the amended Senior Secured Credit Facilities.
Facility Fees and Debt-Related Income (Expense)
During the three and six months ended June 30, 2022, the Company recognized income of $2.1 million and $1.6 million, respectively, related to a $2.3 million gain on the repurchase of $25.0 million of Senior Notes recognized in the second quarter of 2022, partially offset by fees to amend the Senior Secured Credit Facilities. See Note 1, Basis of Presentation, in Part I, Item 1, Financial Statements.

During the three and six months ended June 30, 2021, the Company recognized $0.1 million and $5.3 million, respectively, of fees and other costs primarily related to the amended Senior Secured Credit Facilities.

36
Defined Benefit Pension Income
Defined benefit pension income for the second quarter of 2022 was $2.2 million, compared with defined benefit pension income of $4.0 million during the second quarter of 2021. Defined benefit pension income for the six months ended June 30, 2022 was $4.7 million, compared with defined benefit pension income of $7.9 million for the six months ended June 30, 2021. The decrease is primarily the result of a lower assumed rate of return on plan assets at December 31, 2021.

Income Tax Benefit (Expense)
Income tax benefit from continuing operations for the three and six months ended of 2022 was $3.1 million and $1.9 million, respectively. Income tax expense from continuing operations for the three and six months ended June 30, 2021 was $4.8 million and $6.9 million, respectively. This change is the result of lower taxable income, primarily resulting from decreased operating income as a result of cost increases due to inflation and labor shortages, and the tax benefit on a portion of the Harsco Clean Earth Segment goodwill impairment.

Income (Loss) from Continuing Operations
Loss from continuing operations was $105.6 million and $111.8 million for the three and six months ended June 30, 2022, respectively, compared to income from continuing operations of $10.2 million and $10.1 million for the three and six months ended June 30, 2021, respectively. The primary drivers for these increases are noted above.

Income (Loss) from Discontinued Operations
The operating results of the former Harsco Rail Segment and costs directly attributable to the sale of the business, have been reflected as discontinued operations in the Company's Condensed Consolidated Statement of Operations for all periods presented. In addition, this caption includes costs directly attributable to retained contingent liabilities of other previously disposed businesses. The decrease in income during the three and six months ended June 30, 2022 was related primarily to the recognition of additional forward estimated loss provisions of $0.3 million and $35.4 million, respectively, for certain contracts in the Rail business as well lower business performance due to reduced revenue for railway track maintenance equipment, when compared to the three and six months ended June 30, 2021. It is possible that the Company's overall estimate of liquidated damages, penalties and costs to complete these contracts may increase, which would result in an additional estimated forward loss provision at such time. See Note 3, Dispositions, in Part I, Item 1, Financial Statements.

Total Other Comprehensive Income (Loss)
Total other comprehensive loss was $29.1 million and $17.1 million in the three and six months ended June 30, 2022, respectively, compared with total other comprehensive income of $17.9 million and $19.1 million in the three and six months ended of June 30, 2021, respectively. The primary driver of these changes is the fluctuation of the U.S. dollar against certain currencies inclusive of the impact of foreign currency translation of cumulative unrecognized actuarial losses on the Company’s pension obligations, reflective of the strengthening of the U.S dollar in the first six months of 2022.



Liquidity and Capital Resources
Cash Flow Summary
The Company currently expects to have sufficient financial liquidity and borrowing capacity to support the strategies within each of its businesses. The Company currently expects operational and business needs to be met by cash provided by operations supplemented with borrowings from time to time, principally under the Senior Secured Credit Facilities. The Company supplements the cash provided by operations with borrowings from time to time due to historical patterns of seasonal cash flow and the funding of various projects. The Company regularly assesses capital needs in the context of operational trends and strategic initiatives.

37
The Company’s cash flows from operating, investing and financing activities, as reflected on the Condensed Consolidated Statements of Cash Flows, are summarized in the following table:
 Six Months Ended
June 30
(In millions)20222021
Net cash provided (used) by:  
Operating activities$117.7 $13.5 
Investing activities(43.7)(53.2)
Financing activities(54.6)41.8 
Effect of exchange rate changes on cash and cash equivalents, including restricted cash(5.8)0.5 
Net change in cash and cash equivalents, including restricted cash$13.7 $2.6 
Net cash provided by operating activities — Net cash used by operating activities in the first six months of 2022 was $117.7 million, an increase in cash flows of $104.2 million from the first six months of 2021. The primary drivers of this increase is due to the sale of $120 million of its accounts receivable through its AR Facility with PNC and favorable changes in working capital partially offset by lower cash net income. The primary drivers of the favorable change in working capital included a decrease in contract assets in the Rail business and the timing of accounts payable in all segments, including the Rail business and Corporate, partially offset by an unfavorable change in accounts receivable not sold to PNC and the timing of inventory.

Net cash used by investing activities — Net cash used by investing activities in the first six months of 2022 was $43.7 million, an increase in cash flows of $9.5 million from the cash used in the first six months of 2021. The increase is primarily due to decreased capital expenditure purchases and higher net proceeds received from the settlement of foreign currency forward exchange contracts, partially offset by a decrease in the proceeds from sales of assets in the Harsco Environmental Segment and payments made for settlements of interest rate swaps.

Net cash (used) provided by financing activities — Net cash used by financing activities in the first six months of 2022 was $54.6 million, a decrease of $96.4 million from the first six months of 2021. The decrease was primarily due to lower net cash borrowings of $104.4 million in the first six months of 2022 resulting from the use of the AR Facility proceeds to reduce long-term debt.

Sources and Uses of Cash
The Company’s principal sources of liquidity are cash provided by operations on an annual basis and borrowings under the Senior Secured Credit Facilities, augmented by cash proceeds from asset sales. In addition, the Company has other bank credit facilities available throughout the world.  The Company expects to continue to utilize all of these sources to meet future cash requirements for operations and growth initiatives.

AR Facility
The Company maintains a trade receivables securitization facility to accelerate cash flows from trade accounts receivable. Under the AR Facility, the Company and its designated subsidiaries continuously sell their trade receivables as they are originated to the wholly-owned bankruptcy-remote SPE. During the six months ended June 30, 2022, the Company received proceeds of $120.0 million related to the facility.

Summary of Senior Secured Credit Facilities and Notes:
(In millions)
June 30
2022		December 31
2021
By type:
     New Term Loan$495.0 $497.5 
     Revolving Credit Facility341.0 362.0 
5.75% Senior Notes475.0 500.0 
     Total$1,311.0 $1,359.5 
By classification:
Current$5.0 $5.0 
Long-term1,306.0 1,354.5 
Total$1,311.0 $1,359.5 

38
 June 30, 2022
(In millions)Facility LimitOutstanding
Balance		Outstanding Letters of CreditAvailable
Credit
Revolving credit facility (a U.S.-based program)$700.0 $341.0 $29.8 $329.2 

Debt Covenants
The Senior Secured Credit Facilities contain a consolidated net debt to consolidated adjusted EBITDA ratio covenant, which is not to exceed 5.50 for the quarter ending June 30, 2022 and then decreasing quarterly until reaching 4.00 on December 31, 2023, and a minimum consolidated adjusted EBITDA to consolidated interest charges ratio covenant, which is not to be less than 3.0.  At June 30, 2022 the Company was in compliance with these covenants, as the total net debt to adjusted EBITDA ratio (as defined in the Credit Agreement) was 4.98 and total interest coverage ratio was 3.8. Based on balances and covenants in effect at June 30, 2022 the Company could increase net debt by $131.0 million and remain in compliance with these debt covenants. Alternatively, adjusted EBITDA could decrease by $23.8 million, and the Company would remain in compliance with these covenants. The Company believes it will continue to maintain compliance with these covenants based on its current outlook.  However, the Company’s estimates of compliance with these covenants could change in the future with a continued deterioration in economic conditions or an inability to successfully execute its plans to realize increased pricing and to implement cost reduction initiatives that substantially mitigate the impacts of inflation and other factors adversely impacting its realized operating margins.

Cash Management
The Company has various cash management systems throughout the world that centralize cash in various bank accounts where it is economically justifiable and legally permissible to do so. These centralized cash balances are then redeployed to other operations to reduce short-term borrowings and to finance working capital needs or capital expenditures. Due to the transitory nature of cash balances, they are normally invested in bank deposits that can be withdrawn at will or in very liquid short-term bank time deposits and government obligations. The Company's policy is to use the largest banks in the various countries in which the Company operates. The Company monitors the creditworthiness of banks and, when appropriate, will adjust banking operations to reduce or eliminate exposure to less creditworthy banks.

At June 30, 2022, the Company's consolidated cash and cash equivalents included $94.8 million held by non-U.S. subsidiaries. At June 30, 2022, approximately 13.7% of the Company's consolidated cash and cash equivalents had regulatory restrictions that would preclude the transfer of funds with and among subsidiaries. Non-U.S. subsidiaries also held $34.2 million of cash and cash equivalents in consolidated strategic ventures. The strategic venture agreements may require strategic venture partner approval to transfer funds with and among subsidiaries. While the Company's remaining non-U.S. cash and cash equivalents can be transferred with and among subsidiaries, the majority of these non-U.S. cash balances will be used to support the ongoing working capital needs and continued growth of the Company's non-U.S. operations.


Recently Adopted and Recently Issued Accounting Standards
 
Information on recently adopted and recently issued accounting standards is included in Note 2, Recently Adopted and Recently Issued Accounting Standards, in Part I, Item 1, Financial Statements.


ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Market risks have not changed significantly from those disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.


39
ITEM 4.        CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of June 30, 2022, an evaluation was performed, under the supervision and with the participation of the Company’s management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a – 15 under the Securities and Exchange Act of 1934, as amended. Based upon that evaluation, such officers concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities and Exchange Act of 1934, as amended (1) is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and (2) is accumulated and communicated to the Company's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal control over financial reporting during the Company's most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.


PART II — OTHER INFORMATION 


ITEM 1.        LEGAL PROCEEDINGS
Information on legal proceedings is included in Note 12, Commitments and Contingencies, in Part I, Item 1, Financial Statements.

ITEM 1A.     RISK FACTORS
The Company's risk factors as of June 30, 2022 have not changed materially from those described in Part 1, Item 1A, "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

ITEM 2.        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.

40
Table of Contents
ITEM 6.        EXHIBITS

The following exhibits are included as part of this report by reference:
Exhibit
Number		 Description
10.1
10.2
10.3
10.4
31.1 
31.2
32 
101.DefDefinition Linkbase Document
101.PrePresentation Linkbase Document
101.LabLabels Linkbase Document
101.CalCalculation Linkbase Document
101.SchSchema 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.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
41
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
   HARSCO CORPORATION
   (Registrant)
    
    
DATEAugust 5, 2022 /s/ ANSHOOMAN AGA
   Anshooman Aga
   Senior Vice President and Chief Financial Officer
   (On behalf of the registrant and as Principal Financial Officer)
DATEAugust 5, 2022 /s/ SAMUEL C. FENICE
   Samuel C. Fenice
   Vice President and Corporate Controller
   (Principal Accounting Officer)
42

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