enviri(NVRI) - 2021 Q3 - Quarterly Report

Cover Page and Company Information Form 10-Q Filing Details This report is Harsco Corporation's quarterly report as of September 30, 2021, with all required filings submitted, classified as a large accelerated filer, and 79,203,660 shares of common stock outstanding - Harsco Corporation (Registration No. 001-03970) filed its quarterly report (Form 10-Q) for the period ended September 30, 2021[2] - The company has filed all required reports in the past 12 months and is subject to these filing requirements, having electronically submitted all interactive data files[2] Company Classification | Classification | Status | | :--- | :--- | | Large Accelerated Filer | ☒ | | Accelerated Filer | ☐ | | Non-Accelerated Filer | ☐ | | Smaller Reporting Company | ☐ | | Emerging Growth Company | ☐ | Common Stock Outstanding (as of October 29, 2021) | Category | Quantity | | :--- | :--- | | Common Stock, $1.25 par value per share | 79,203,660 | Table of Contents Index of Form 10-Q This report's table of contents lists items for Part I (Financial Information) and Part II (Other Information), including financial statements, MD&A, market risk, controls, legal proceedings, risk factors, and exhibits - Part I includes financial statements, management's discussion and analysis, quantitative and qualitative disclosures about market risk, and controls and procedures[7] - Part II covers legal proceedings, risk factors, unregistered sales of equity securities and use of proceeds, other information, and exhibits[8] Glossary of Defined Terms Key Definitions This section provides key terms and their descriptions used in the report, covering accounting, business segments, regulations, and financial instruments for clear understanding - The glossary defines financial and accounting terms such as AOCI (Accumulated Other Comprehensive Income (Loss)), EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), and LIBOR (London Interbank Offered Rate)[10] - It also includes business-related entities like AXC (former Harsco Industrial Air-X-Changers business), Clean Earth (CEHI Acquisition Corporation and its subsidiaries), and ESOL (Stericycle Environmental Solutions business)[10] - Additionally, terms related to debt and credit are defined, such as Credit Agreement (Senior Secured Credit Agreement), New Term Loans ($500 million term loans raised in March 2021), and Revolving Credit Facility ($700 million revolving credit facility)[10] PART I — FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents the company's unaudited condensed consolidated financial statements as of September 30, 2021, including balance sheets, income statements, comprehensive income statements, cash flow statements, and equity statements, with detailed notes Condensed Consolidated Balance Sheets (Unaudited) As of September 30, 2021, total assets increased to $3.038 billion, total liabilities to $2.285 billion, and shareholders' equity to $753 million, reflecting overall growth in assets and liabilities, and improved equity Condensed Consolidated Balance Sheets Key Data (as of September 30, in thousands of dollars) | Indicator | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and Cash Equivalents | $75,578 | $76,454 | | Trade Accounts Receivable, Net | $425,897 | $407,390 | | Inventories | $163,072 | $173,013 | | Total Current Assets | $887,582 | $815,823 | | Property, Plant and Equipment, Net | $678,325 | $668,209 | | Goodwill | $896,728 | $902,074 | | Intangible Assets, Net | $413,538 | $438,565 | | Total Assets | $3,038,173 | $2,993,287 | | Liabilities | | | | Short-Term Borrowings | $13,892 | $7,450 | | Current Portion of Long-Term Debt | $9,181 | $13,576 | | Accounts Payable | $229,244 | $218,039 | | Total Current Liabilities | $578,282 | $537,955 | | Long-Term Debt | $1,333,574 | $1,271,189 | | Pension Plan Liabilities | $175,362 | $231,335 | | Total Liabilities | $2,284,946 | $2,279,888 | | Equity | | | | Equity Attributable to Harsco Corporation Shareholders | $695,536 | $657,154 | | Noncontrolling Interests | $57,691 | $56,245 | | Total Equity | $753,227 | $713,399 | | Total Liabilities and Equity | $3,038,173 | $2,993,287 | Condensed Consolidated Statements of Operations (Unaudited) The company's income from continuing operations and operating income significantly grew in Q3 and the first nine months of 2021, with net income turning profitable and diluted EPS showing positive growth, driven by increased business volume and cost control Condensed Consolidated Statements of Operations Key Data (in thousands of dollars, except per share amounts) | Indicator | 3 Months Ended September 30, 2021 | 3 Months Ended September 30, 2020 | 9 Months Ended September 30, 2021 | 9 Months Ended September 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenues from Continuing Operations | | | | | | Services Revenue | $438,624 | $384,506 | $1,299,805 | $1,021,738 | | Product Revenue | $105,677 | $124,892 | $343,171 | $333,782 | | Total Revenues | $544,301 | $509,398 | $1,642,976 | $1,355,520 | | Costs and Expenses from Continuing Operations | | | | | | Cost of Services Sold | $348,243 | $313,330 | $1,031,258 | $835,879 | | Cost of Products Sold | $86,119 | $98,849 | $278,557 | $256,910 | | Selling, General and Administrative Expenses | $82,090 | $87,954 | $247,798 | $241,224 | | Total Costs and Expenses | $514,381 | $504,334 | $1,552,013 | $1,345,707 | | Operating Income from Continuing Operations | $29,920 | $5,064 | $90,963 | $9,813 | | Income (Loss) from Continuing Operations Before Income Taxes and Equity in Earnings | $18,242 | ($8,267) | $50,277 | ($28,719) | | Income (Loss) from Continuing Operations | $10,960 | ($6,604) | $30,007 | ($23,903) | | Net Income (Loss) | $9,828 | ($8,339) | $26,473 | ($16,567) | | Net Income (Loss) Attributable to Harsco Corporation | $7,564 | ($9,578) | $21,087 | ($20,039) | | Diluted Earnings (Loss) Per Share | $0.09 | ($0.12) | $0.26 | ($0.25) | Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) The company reported a comprehensive loss of $989,000 in Q3 2021 but a comprehensive income of $36.618 million for the first nine months, primarily influenced by foreign currency translation adjustments, pension liability adjustments, and net gains on cash flow hedges Condensed Consolidated Statements of Comprehensive Income (Loss) Key Data (in thousands of dollars) | Indicator | 3 Months Ended September 30, 2021 | 3 Months Ended September 30, 2020 | 9 Months Ended September 30, 2021 | 9 Months Ended September 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $9,828 | ($8,339) | $26,473 | ($16,567) | | Other Comprehensive Income (Loss): | | | | | | Foreign Currency Translation Adjustments | ($27,587) | $17,527 | ($15,437) | ($35,244) | | Net Gain (Loss) on Cash Flow Hedges | $822 | ($263) | $1,745 | ($1,622) | | Pension Liability Adjustments | $17,768 | ($9,153) | $23,812 | $28,037 | | Total Other Comprehensive Income (Loss) | ($8,997) | $8,120 | $10,145 | ($8,851) | | Total Comprehensive Income (Loss) | $831 | ($219) | $36,618 | ($25,418) | | Comprehensive Income (Loss) Attributable to Harsco Corporation | ($989) | ($3,014) | $32,069 | ($29,471) | Condensed Consolidated Statements of Cash Flows (Unaudited) For the first nine months ended September 30, 2021, net cash from operating activities increased to $46.75 million, cash outflow from investing activities significantly decreased, and net cash from financing activities also declined, resulting in a much lower net increase in cash and cash equivalents compared to the prior year Condensed Consolidated Statements of Cash Flows Key Data (9 Months Ended September 30, in thousands of dollars) | Indicator | 2021 | 2020 | | :--- | :--- | :--- | | Net Income (Loss) | $26,473 | ($16,567) | | Depreciation | $98,383 | $93,864 | | Amortization | $26,554 | $24,721 | | Deferred Income Tax (Benefit) Expense | ($8,911) | $2,346 | | Gain on Sale of Discontinued Business | — | ($18,371) | | Loss on Early Extinguishment of Debt | $2,668 | — | | Changes in Working Capital | ($85,200) | ($20,089) | | Net Cash Provided by Operating Activities | $46,750 | $42,276 | | Purchases of Property, Plant and Equipment | ($109,507) | ($79,096) | | Purchases of Businesses, Net of Cash Acquired | — | ($432,855) | | Net Proceeds from Sale of Discontinued Business | — | $37,219 | | Net Cash Used in Investing Activities | ($88,765) | ($470,089) | | Net Short-Term Borrowings | $4,650 | $1,712 | | Proceeds from Long-Term Debt | $507,468 | $580,903 | | Payments of Long-Term Debt | ($452,351) | ($111,999) | | Net Cash Provided by Financing Activities | $44,228 | $460,790 | | Effect of Exchange Rate Changes | ($1,779) | ($6,567) | | Net Increase in Cash and Cash Equivalents | $434 | $26,410 | | Cash and Cash Equivalents at End of Period | $80,103 | $86,142 | Condensed Consolidated Statements of Equity (Unaudited) As of September 30, 2021, total equity increased to $753.227 million, driven by net income, increased other comprehensive income, and stock-based compensation amortization, partially offset by treasury stock repurchases and non-controlling interest dividends Condensed Consolidated Statements of Equity Key Data (as of September 30, in thousands of dollars, except share amounts) | Indicator | Balance December 31, 2020 | Balance September 30, 2021 | | :--- | :--- | :--- | | Common Stock | $144,288 | $144,856 | | Treasury Stock | ($843,230) | ($846,502) | | Additional Paid-in Capital | $204,078 | $213,095 | | Retained Earnings | $1,797,759 | $1,818,846 | | Accumulated Other Comprehensive Loss | ($645,741) | ($634,759) | | Total Equity Attributable to Harsco Corporation Shareholders | $657,154 | $695,536 | | Noncontrolling Interests | $56,245 | $57,691 | | Total Equity | $713,399 | $753,227 | - For the first nine months of 2021, net income was $26.473 million, of which $21.087 million was attributable to Harsco Corporation[14] - For the first nine months of 2021, total other comprehensive income was $10.145 million, primarily influenced by foreign currency translation adjustments and pension liability adjustments[15] Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed notes to the condensed consolidated financial statements, covering accounting policies, recent accounting standards, acquisitions, dispositions, balance sheet item details, debt, employee benefit plans, income taxes, commitments, contingencies, EPS calculation, derivatives, and segment operations review 1. Basis of Presentation The company prepared its unaudited condensed consolidated financial statements under U.S. GAAP and SEC rules, disclosing restricted cash and the ongoing impact of COVID-19, with significant business improvement expected in 2021 - The company has prepared its unaudited condensed consolidated financial statements in accordance with U.S. GAAP and SEC rules for Form 10-Q and Regulation S-X[22] - As of September 30, 2021, and December 31, 2020, restricted cash was $4.5 million and $3.2 million, respectively, primarily related to collateral for company performance guarantees[23] - The COVID-19 pandemic has significantly impacted the global economy since early 2020, but the company, as an essential service provider, has seen business conditions improve since Q2 2020, with significant improvement expected in 2021[24] - The company did not record long-lived asset, indefinite-lived asset, or goodwill impairments, or significant inventory write-downs in the first nine months of 2021, but warns that such charges could occur if economic conditions deteriorate[25] 2. Recently Adopted and Recently Issued Accounting Standards The company adopted FASB changes to simplify income tax accounting on January 1, 2021, with no material impact, and expects no material impact from FASB changes on reference rate reform and financial instruments - The company adopted FASB changes to simplify income tax accounting on January 1, 2021, with no material impact on its condensed consolidated financial statements[27] - FASB issued changes in March 2020 to simplify accounting for the transition from reference rates like LIBOR, which management believes will not materially impact the financial statements[28] - FASB issued changes in August 2020 to simplify accounting for financial instruments with characteristics of liabilities and equity, which management believes will not impact the financial statements[29][30] 3. Acquisitions and Dispositions The company acquired ESOL for $429 million cash on April 6, 2020, recognizing $153.3 million in goodwill and $161 million in intangible assets, and completed the divestiture of the Harsco Industrial Segment in January 2020, reported as discontinued operations - The company completed the acquisition of ESOL, a hazardous waste transportation, treatment, and service provider, for $429 million in cash on April 6, 2020[31] ESOL Acquisition Balance Sheet (in millions of dollars) | Item | April 6, 2020 | September 30, 2021 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $0.4 | $0.4 | | Trade Accounts Receivable | $124.1 | $122.6 | | Property, Plant and Equipment | $105.3 | $101.4 | | Goodwill | $152.0 | $153.3 | | Intangible Assets | $161.0 | $161.0 | | Environmental Liabilities | ($24.4) | ($24.4) | | Total ESOL Identifiable Net Assets | $436.3 | $426.5 | | Non-Compete Agreement | $2.5 | $2.5 | | Total ESOL Identifiable Net Assets (including Non-Compete Agreement) | $438.8 | $429.0 | - Goodwill from the ESOL acquisition is primarily attributed to operational efficiencies and synergies from expanding the geographic scale of hazardous waste treatment facilities when combined with existing Clean Earth operations, and the value of ESOL's workforce[32] ESOL Identifiable Intangible Assets and Amortization Period (in millions of dollars) | Item | Weighted-Average Amortization Period | April 6, 2020 | September 30, 2021 | | :--- | :--- | :--- | :--- | | Licenses and Rights | 22 years | $138.0 | $138.0 | | Customer Relationships | 10 years | $23.0 | $23.0 | | Total ESOL Identifiable Intangible Assets | | $161.0 | $161.0 | | Non-Compete Agreement | 4 years | $2.5 | $2.5 | | Total Acquired Identifiable Intangible Assets | | $163.5 | $163.5 | - The company sold IKG in January 2020, completing the divestiture of the former Harsco Industrial Segment, with its operating results reported as discontinued operations[38] Former Harsco Industrial Segment Discontinued Operations Key Financial Information (in millions of dollars) | Indicator | 3 Months Ended September 30, 2021 | 3 Months Ended September 30, 2020 | 9 Months Ended September 30, 2021 | 9 Months Ended September 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $— | $— | $— | $10,203 | | Cost of Sales | $— | $— | $— | $8,082 | | Gain on Sale of Discontinued Business | $— | $— | $— | $18,371 | | Income (Loss) from Discontinued Operations | ($856) | ($716) | ($2,859) | ($593) | 4. Accounts Receivable and Note Receivable As of September 30, 2021, net trade accounts receivable increased to $425.897 million and other receivables to $39.454 million. Compared to 2020, the allowance for expected credit losses on trade receivables increased, but the company still expects to recover most overdue amounts. Additionally, the company holds a $30.631 million note receivable related to the IKG sale Accounts Receivable Composition (in thousands of dollars) | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Trade Accounts Receivable | $434,295 | $414,891 | | Less: Allowance for Expected Credit Losses | ($8,398) | ($7,501) | | Trade Accounts Receivable, Net | $425,897 | $407,390 | | Other Accounts Receivable | $39,454 | $34,253 | Trade Accounts Receivable Expected Credit Loss (Benefit) Expense (in thousands of dollars) | Period | 3 Months Ended September 30, 2021 | 3 Months Ended September 30, 2020 | 9 Months Ended September 30, 2021 | 9 Months Ended September 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Expected Credit Loss and Bad Debt Allowance (Benefit) Expense | ($145) | $861 | $1,087 | $1,098 | - As of September 30, 2021, approximately $12 million of the company's trade accounts receivable were 12 months or more past due, with approximately $7.2 million effectively reserved, and the remainder expected to be recoverable[41] - The company holds a $40 million note receivable related to the January 2020 sale of the IKG business, with an amortized cost of $30.631 million and a fair value of $31.8 million as of September 30, 2021[42][43] 5. Inventories As of September 30, 2021, total inventory was $163.072 million, a decrease from $173.013 million at December 31, 2020, primarily due to reductions in work-in-process and raw materials and purchased parts Inventory Composition (in thousands of dollars) | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Finished Goods | $9,052 | $8,505 | | Work-in-Process | $23,793 | $29,005 | | Raw Materials and Purchased Parts | $95,156 | $105,306 | | Stores and Supplies | $35,071 | $30,197 | | Total Inventories | $163,072 | $173,013 | 6. Property, Plant and Equipment As of September 30, 2021, net property, plant, and equipment was $678.325 million, a slight increase from year-end 2020, mainly due to increased construction in progress. The company is evaluating idle equipment recovery from a Chinese customer's steel mill relocation and currently expects no asset impairment Property, Plant and Equipment Composition (in thousands of dollars) | Item | September 30, 2021 Original Cost | September 30, 2021 Accumulated Depreciation | December 31, 2020 Original Cost | December 31, 2020 Accumulated Depreciation | | :--- | :--- | :--- | :--- | :--- | | Land | $75,469 | — | $75,559 | — | | Land Improvements | $19,730 | ($10,000) | $20,166 | ($9,800) | | Buildings and Improvements | $253,659 | ($120,000) | $249,954 | ($115,000) | | Machinery and Equipment | $1,564,936 | ($1,170,000) | $1,597,592 | ($1,190,000) | | Construction in Progress | $69,206 | — | $42,185 | — | | Property, Plant and Equipment at Cost | $1,983,000 | ($1,300,000) | $1,985,456 | ($1,314,800) | | Less: Accumulated Depreciation | ($1,304,675) | | ($1,317,247) | | | Property, Plant and Equipment, Net | $678,325 | | $668,209 | | - In Q3 2020, approximately $20 million of idle equipment net book value from a Chinese customer's steel mill relocation is still under evaluation, and the company believes it will recover the book value, thus no asset impairment was recognized as of September 30, 2021[46] 7. Leases The company's total lease expense for the first nine months of 2021 significantly increased to $66.228 million. As of September 30, 2021, operating lease right-of-use assets were $98.841 million, operating lease liabilities were $97.202 million, and the weighted-average remaining lease term was 7.44 years Lease Expense Composition (in thousands of dollars) | Item | 3 Months Ended September 30, 2021 | 3 Months Ended September 30, 2020 | 9 Months Ended September 30, 2021 | 9 Months Ended September 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Finance Leases: Amortization Expense | $743 | $377 | $1,692 | $1,115 | | Finance Leases: Interest | $129 | $43 | $340 | $139 | | Operating Leases | $8,554 | $8,558 | $25,296 | $21,745 | | Variable and Short-Term Lease Expense | $12,756 | $11,572 | $38,952 | $29,169 | | Total Lease Expense from Continuing Operations | $22,181 | $20,499 | $66,228 | $52,018 | Lease-Related Supplemental Balance Sheet Information (in thousands of dollars) | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Operating Lease Right-of-Use Assets | $98,841 | $96,849 | | Operating Lease Liabilities (Current Portion) | $25,112 | $24,862 | | Operating Lease Liabilities | $72,090 | $69,860 | | Finance Leases: Property, Plant and Equipment, Net | $12,508 | $8,434 | | Finance Leases: Long-Term Debt (Current Portion) | $2,724 | $1,683 | | Finance Leases: Long-Term Debt | $10,011 | $6,867 | Lease Supplemental Information (as of September 30) | Item | 2021 | 2020 | | :--- | :--- | :--- | | Weighted-Average Remaining Operating Lease Term (Years) | 7.44 | 8.00 | | Weighted-Average Remaining Finance Lease Term (Years) | 6.41 | 8.20 | | Weighted-Average Operating Lease Discount Rate | 5.9% | 6.1% | | Weighted-Average Finance Lease Discount Rate | 4.9% | 5.1% | - As of September 30, 2021, the company had approximately $11.8 million in uncommenced operating lease obligations, expected to commence between Q4 2021 and Q2 2022[48] 8. Goodwill and Other Intangible Assets As of September 30, 2021, total goodwill was $896.728 million, slightly down from year-end 2020 due to foreign currency translation. Net intangible assets were $413.538 million, primarily customer relationships, licenses, and technology-related assets, with amortization expenses expected to remain above $30 million for the next five years Goodwill Changes (9 Months Ended September 30, in thousands of dollars) | Segment | Balance December 31, 2020 | Goodwill Changes (a) | Foreign Currency Translation | Balance September 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Harsco Environmental | $406,401 | — | ($6,578) | $399,823 | | Harsco Clean Earth | $482,647 | $1,232 | — | $483,879 | | Harsco Rail | $13,026 | — | — | $13,026 | | Consolidated Total | $902,074 | $1,232 | ($6,578) | $896,728 | (a) Goodwill changes relate to measurement period adjustments for the ESOL acquisition in the Harsco Clean Earth segment. - The company performs its annual goodwill impairment test on October 1 and continuously monitors for impairment triggering events. As of September 30, 2021, no triggering events requiring an interim goodwill impairment test were identified[51] Intangible Assets, Net Composition (in thousands of dollars) | Item | September 30, 2021 Original Cost | September 30, 2021 Accumulated Amortization | December 31, 2020 Original Cost | December 31, 2020 Accumulated Amortization | | :--- | :--- | :--- | :--- | :--- | | Customer Related | $108,226 | $53,757 | $109,378 | $48,057 | | Licenses | $308,998 | $30,856 | $308,705 | $18,955 | | Technology Related | $39,604 | $12,363 | $40,274 | $9,654 | | Trademarks | $31,876 | $6,797 | $31,949 | $4,834 | | Air Rights | $26,139 | $1,561 | $26,139 | $1,044 | | Patents | $185 | $140 | $192 | $139 | | Non-Compete Agreements | $2,500 | $937 | $2,500 | $469 | | Other | $3,896 | $1,475 | $3,911 | $1,331 | | Total | $521,424 | $107,886 | $523,048 | $84,483 | Intangible Asset Amortization Expense (in thousands of dollars) | Period | 3 Months Ended September 30, 2021 | 3 Months Ended September 30, 2020 | 9 Months Ended September 30, 2021 | 9 Months Ended September 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Intangible Asset Amortization Expense | $8,115 | $8,272 | $24,514 | $22,542 | Estimated Intangible Asset Amortization Expense for the Next Five Years (in thousands of dollars) | Year | 2021 | 2022 | 2023 | 2024 | 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | Estimated Amortization Expense | $32,900 | $32,400 | $32,300 | $31,800 | $31,600 | 9. Debt and Credit Agreements The company amended its Senior Secured Credit Agreement on March 10, 2021, extending the revolving credit facility maturity to March 10, 2026, and issued $500 million in new term loans to repay existing term loans. As of September 30, 2021, total long-term debt was $1.3336 billion, primarily new term loans, revolving credit facility, and 5.75% notes - The company amended its Senior Secured Credit Agreement on March 10, 2021, extending the revolving credit facility maturity to March 10, 2026, and adjusting the net debt to consolidated adjusted EBITDA ratio covenant terms[55][56] - The company issued $500 million in new term loans to fully repay existing Term Loan A and Term Loan B, with the new term loans maturing on March 10, 2028[57] - For the first nine months of 2021, the company recognized total fees of $5.5 million related to amending the Senior Secured Credit Agreement, including a $2.7 million write-off of deferred financing costs[58] Long-Term Debt Composition (in thousands of dollars) | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Senior Secured Credit Agreement: New Term Loans | $498,750 | $— | | Senior Secured Credit Agreement: Term Loan A | $— | $280,000 | | Senior Secured Credit Agreement: Term Loan B | $— | $218,188 | | Senior Secured Credit Agreement: Revolving Credit Facility | $338,486 | $281,000 | | 5.75% Notes, Due July 31, 2027 | $500,000 | $500,000 | | Other Financing Payables | $24,406 | $21,344 | | Total Debt | $1,361,642 | $1,300,532 | | Less: Deferred Financing Costs | ($18,887) | ($15,767) | | Total Debt, Net of Deferred Financing Costs | $1,342,755 | $1,284,765 | | Less: Current Portion of Long-Term Debt | ($9,181) | ($13,576) | | Long-Term Debt | $1,333,574 | $1,271,189 | 10. Employee Benefit Plans The company's net periodic pension cost (benefit) for the first nine months of 2021 was negative $1.387 million (U.S. plans) and negative $8.976 million (international plans), primarily due to expected returns on plan assets. The company expects to contribute $3.8 million to pension plans for the remainder of 2021 Net Periodic Pension Cost (Benefit) (9 Months Ended September 30, in thousands of dollars) | Item | U.S. Plans (2021) | U.S. Plans (2020) | International Plans (2021) | International Plans (2020) | | :--- | :--- | :--- | :--- | :--- | | Service Cost | $— | $— | $1,482 | $1,303 | | Interest Cost | $3,609 | $5,535 | $9,619 | $13,104 | | Expected Return on Plan Assets | ($9,150) | ($8,526) | ($34,181) | ($30,428) | | Recognized Prior Service Cost | $— | $— | $381 | $326 | | Recognized Loss | $4,154 | $3,875 | $13,723 | $10,924 | | Net Periodic Pension Cost (Benefit) | ($1,387) | $884 | ($8,976) | ($4,771) | Company Contributions (9 Months Ended September 30, in thousands of dollars) | Item | 2021 | 2020 | | :--- | :--- | :--- | | Defined Benefit Pension Plans (U.S.) | $3,768 | $2,940 | | Defined Benefit Pension Plans (International) | $21,472 | $14,235 | | Multi-Employer Pension Plans | $1,311 | $1,178 | | Defined Contribution Pension Plans | $9,507 | $7,936 | - The company expects to contribute $0.5 million and $3.3 million to its U.S. and international defined benefit pension plans, respectively, for the remainder of 2021[60] 11. Income Taxes The company's income tax expense from continuing operations was $7 million in Q3 2021 and $19.8 million for the first nine months, shifting from a benefit in 2020, mainly due to increased pre-tax income, the absence of 2020 acquisition and integration costs, and non-recurrence of favorable 2020 Clean Earth acquisition tax adjustments - In Q3 and the first nine months of 2021, income tax expense from continuing operations was $7 million and $19.8 million, respectively[61] - In the comparable 2020 periods, income tax benefit from continuing operations was $1.7 million and $4.6 million, respectively[61] - The change in tax expense is primarily due to increased pre-tax income, the non-recurrence of 2020 acquisition and integration costs, and the non-recurrence of a $2.8 million favorable income tax adjustment related to the 2020 Clean Earth acquisition[61] - As of September 30, 2021, the reserve for uncertain tax positions was $4.3 million, with $0.3 million of unrecognized income tax benefits expected to be recognized within the next 12 months[62] 12. Commitments and Contingencies The company faces various environmental, legal, and tax proceedings, including environmental remediation liabilities related to ESOL, EPA investigations at Newtown Creek, California hazardous waste facility permits, Bahrain salt cake treatment, Brazil slag accumulation, and Dutch environmental violations. Additionally, the company faces tax and labor disputes in Brazil and approximately 17,200 asbestos-related personal injury lawsuits in the U.S. The company has accrued for some contingencies and is actively defending, believing these matters will not materially adversely affect its financial condition - The company is involved in various environmental remediation investigations and cleanups and has been identified as a "potentially responsible party" at certain byproduct disposal sites, but related costs are not expected to materially adversely affect its financial condition[63][65][66] Environmental Liabilities Summary (in thousands of dollars) | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Current Portion of Environmental Liabilities | $7,005 | $6,933 | | Long-Term Environmental Liabilities | $28,589 | $29,424 | | Total Environmental Liabilities | $35,594 | $36,357 | - The company is actively responding to a potential liability notice from the EPA for the Newtown Creek Superfund site and allegations of violations by the California Department of Toxic Substances Control at an ESOL facility, for which it has indemnification rights from Stericycle, Inc[70][71] - The company has established a $7 million reserve for the Bahrain salt cake treatment project, with facility commissioning and treatment operations commencing in Q3 2021[72] - The company faces a civil lawsuit in Brazil related to slag accumulation with customer CSN and has been fined, but is appealing and believes a loss is not probable[74] - The company faces enforcement actions and criminal charges in the Netherlands for environmental permit violations, has recorded approximately $0.7 million in fines, and has contractual indemnification rights from its customer[75] - The company faces various tax and labor disputes in Brazil, including ICMS tax controversies and claims for overtime and vacation pay, has accrued $3.5 million for labor claims, but believes tax dispute losses are not probable[77][79][80][82][83][84] - The company faces approximately 17,200 asbestos-related personal injury lawsuits in the U.S., but believes the claims are without merit and has adequate liability insurance coverage, expecting no material adverse effect on its financial condition[85][86][88][91][93] 13. Reconciliation of Basic and Diluted Shares The company's basic and diluted EPS from continuing operations were $0.11 and $0.31 for Q3 and the first nine months of 2021, respectively, turning profitable from a loss in the prior year. Diluted share count is primarily affected by the dilutive effect of stock-based compensation plans Basic and Diluted Shares Reconciliation (in thousands of shares, except per share amounts) | Indicator | 3 Months Ended September 30, 2021 | 3 Months Ended September 30, 2020 | 9 Months Ended September 30, 2021 | 9 Months Ended September 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Income (Loss) from Continuing Operations Attributable to Harsco Corporation Common Shareholders | $8,696 | ($7,843) | $24,621 | ($27,375) | | Weighted-Average Common Shares Outstanding - Basic | 79,287 | 79,000 | 79,214 | 78,916 | | Dilutive Effect of Stock-Based Compensation | 988 | — | 1,142 | — | | Weighted-Average Common Shares Outstanding - Diluted | 80,275 | 79,000 | 80,356 | 78,916 | | Earnings (Loss) Per Share from Continuing Operations - Basic | $0.11 | ($0.10) | $0.31 | ($0.35) | | Earnings (Loss) Per Share from Continuing Operations - Diluted | $0.11 | ($0.10) | $0.31 | ($0.35) | Stock-Based Compensation Units Not Included in Diluted EPS Calculation (in thousands of shares) | Item | 3 Months Ended September 30, 2021 | 3 Months Ended September 30, 2020 | 9 Months Ended September 30, 2021 | 9 Months Ended September 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Restricted Stock Units | — | 691 | — | 723 | | Stock Appreciation Rights | 842 | 2,383 | 719 | 2,499 | | Performance Stock Units | 1,004 | 857 | 902 | 894 | 14. Derivative Instruments, Hedging Activities and Fair Value The company uses derivatives to manage foreign currency and interest rate risks, including forward foreign exchange contracts, interest rate swaps, and cross-currency interest rate swaps. As of September 30, 2021, the company held $9.648 million in derivative assets and $6.838 million in derivative liabilities, primarily for cash flow hedges and economic hedges, with disclosed impacts on the income statement and comprehensive income statement - The company uses derivative instruments such as forward foreign exchange contracts, interest rate swaps, and cross-currency interest rate swaps to manage foreign currency and interest rate risks, not for trading or speculative purposes[98] Fair Value of Derivative Instruments (in thousands of dollars) | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Asset Derivatives (Level 2) | | | | Forward Foreign Exchange Contracts | $9,648 | $3,677 | | Total Asset Derivatives | $9,648 | $3,677 | | Liability Derivatives (Level 2) | | | | Forward Foreign Exchange Contracts | $1,717 | $5,048 | | Interest Rate Swaps | $5,121 | $7,677 | | Total Liability Derivatives | $6,838 | $12,725 | Impact of Derivative Instruments on Statements of Comprehensive Income (Loss) (9 Months Ended September 30, in thousands of dollars) | Item | 2021 | 2020 | | :--- | :--- | :--- | | Amount Recognized in OCI for Derivatives | $129 | ($2,962) | | Amount Reclassified from AOCI to Income (Loss) | $2,134 | $1,199 | - As of September 30, 2021, and December 31, 2020, the notional amounts of forward foreign exchange contracts were $363.2 million and $460.5 million, respectively, primarily denominated in GBP and EUR, and maturing by March 2023[109] - As of September 30, 2021, the company had entered into a series of interest rate swap agreements to convert $200 million of its term loans from floating to fixed rates, ranging from 2.71% (2021) to 3.12% (2022)[112] - As of September 30, 2021, the company had no outstanding cross-currency interest rate swaps[113] - As of September 30, 2021, the fair value of long-term debt (excluding deferred financing costs) was $1.3785 billion, compared to a carrying value of $1.3616 billion[114] 15. Review of Operations by Segment All three of the company's segments showed significant revenue and operating profit growth in Q3 and the first nine months of 2021, with strong performance from Harsco Environmental and Harsco Clean Earth, while Harsco Rail's revenue slightly decreased but operating profit remained stable. The company's overall operating profit margin significantly improved Segment Revenues and Operating Profit (in thousands of dollars, except percentages) | Indicator | 3 Months Ended September 30, 2021 | 3 Months Ended September 30, 2020 | 9 Months Ended September 30, 2021 | 9 Months Ended September 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenues: | | | | | | Harsco Environmental | $269,901 | $222,507 | $800,433 | $668,057 | | Harsco Clean Earth | $200,484 | $194,098 | $585,891 | $434,489 | | Harsco Rail | $73,916 | $92,793 | $256,652 | $252,974 | | Total Revenues | $544,301 | $509,398 | $1,642,976 | $1,355,520 | | Operating Profit (Loss): | | | | | | Harsco Environmental | $27,630 | $12,317 | $83,788 | $36,400 | | Harsco Clean Earth | $9,893 | $8,902 | $20,457 | $12,945 | | Harsco Rail | $1,957 | $4,059 | $15,533 | $19,162 | | Corporate | ($9,560) | ($20,214) | ($28,815) | ($58,694) | | Total Operating Profit | $29,920 | $5,064 | $90,963 | $9,813 | | Operating Profit Margin: | | | | | | Harsco Environmental | 10.2% | 5.5% | 10.5% | 5.4% | | Harsco Clean Earth | 4.9% | 4.6% | 3.5% | 3.0% | | Harsco Rail | 2.6% | 4.4% | 6.1% | 7.6% | | Consolidated Operating Profit Margin | 5.5% | 1.0% | 5.5% | 0.7% | Segment Depreciation, Amortization and Capital Expenditures (in thousands of dollars) | Indicator | 3 Months Ended September 30, 2021 | 3 Months Ended September 30, 2020 | 9 Months Ended September 30, 2021 | 9 Months Ended September 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Depreciation: | | | | | | Harsco Environmental | $27,179 | $25,588 | $78,446 | $75,626 | | Harsco Clean Earth | $4,576 | $5,010 | $14,818 | $12,769 | | Harsco Rail | $1,233 | $1,258 | $3,651 | $3,730 | | Corporate | $491 | $497 | $1,468 | $1,531 | | Total Depreciation | $33,479 | $32,353 | $98,383 | $93,656 | | Amortization: | | | | | | Harsco Environmental | $1,997 | $1,970 | $6,080 | $5,827 | | Harsco Clean Earth | $6,033 | $6,218 | $18,179 | $16,463 | | Harsco Rail | $84 | $85 | $254 | $252 | | Corporate | $657 | $776 | $2,041 | $2,179 | | Total Amortization | $8,771 | $9,049 | $26,554 | $24,721 | | Capital Expenditures: | | | | | | Harsco Environmental | $34,218 | $21,700 | $94,630 | $65,102 | | Harsco Clean Earth | $5,707 | $2,647 | $12,962 | $7,134 | | Harsco Rail | $529 | $3,474 | $1,329 | $6,310 | | Corporate | $407 | $62 | $586 | $444 | | Total Capital Expenditures | $40,861 | $27,883 | $109,507 | $78,990 | Reconciliation of Segment Operating Profit to Income (Loss) from Continuing Operations Before Income Taxes and Equity in Earnings (in thousands of dollars) | Item | 3 Months Ended September 30, 2021 | 3 Months Ended September 30, 2020 | 9 Months Ended September 30, 2021 | 9 Months Ended September 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Segment Operating Profit | $39,480 | $25,278 | $119,778 | $68,507 | | General Corporate Expenses | ($9,560) | ($20,214) | ($28,815) | ($58,694) | | Operating Income from Continuing Operations | $29,920 | $5,064 | $90,963 | $9,813 | | Interest Income | $618 | $604 | $1,841 | $1,613 | | Interest Expense | ($16,004) | ($15,794) | ($48,854) | ($43,396) | | Unused Debt Commitment Fees, Amendment Fees and Loss on Extinguishment of Debt | ($198) | — | ($5,506) | ($1,920) | | Defined Benefit Pension Income | $3,906 | $1,859 | $11,833 | $5,171 | | Income (Loss) from Continuing Operations Before Income Taxes and Equity in Earnings | $18,242 | ($8,267) | $50,277 | ($28,719) | 16. Revenue Recognition The company recognizes revenue by transferring promised services and products to customers, segmented by geographic market and product/service category. As of September 30, 2021, contract assets increased to $111.8 million, contract liabilities decreased to $67.8 million, and the company disclosed unfulfilled performance obligations for Harsco Environmental and Harsco Rail segments - The company recognizes revenue for the amount that reflects the consideration it expects to receive in exchange for transferring promised services and products to its customers[119] Revenues by Major Geographic Market (3 Months Ended September 30, 2021, in thousands of dollars) | Region | Harsco Environmental | Harsco Clean Earth | Harsco Rail | Consolidated Total | | :--- | :--- | :--- | :--- | :--- | | North America | $71,479 | $200,484 | $48,553 | $320,516 | | Western Europe | $106,859 | — | $16,915 | $123,774 | | Latin America | $35,072 | — | $693 | $35,765 | | Asia Pacific | $30,228 | — | $7,755 | $37,983 | | Middle East and Africa | $20,804 | — | — | $20,804 | | Eastern Europe | $5,459 | — | — | $5,459 | | Total Revenues | $269,901 | $200,484 | $73,916 | $544,301 | Revenues by Major Product and Service Category (3 Months Ended September 30, 2021, in thousands of dollars) | Category | Harsco Environmental | Harsco Clean Earth | Harsco Rail | Consolidated Total | | :--- | :--- | :--- | :--- | :--- | | Environmental Services and Logistics Related to Metal Manufacturing Resource Recovery | $230,340 | — | — | $230,340 | | Applied Products | $36,091 | — | — | $36,091 | | Aluminum Dross and Scrap Processing Environmental Systems | $3,470 | — | — | $3,470 | | Railway Track Maintenance Equipment | — | — | $33,553 | $33,553 | | Aftermarket Parts and Services; Safety and Diagnostic Technologies | — | — | $33,030 | $33,030 | | Railway Contracting Services | — | — | $7,333 | $7,333 | | Waste Treatment, Recycling, Reuse, and Transportation Solutions | — | $200,484 | — | $200,484 | | Total Revenues | $269,901 | $200,484 | $73,916 | $544,301 | - As of September 30, 2021, total contract assets were $111.8 million, an increase from $60.1 million at December 31, 2020, primarily due to ongoing construction on long-term contracts in the Harsco Rail segment and increased transfers from contract assets to accounts receivable[125] - As of September 30, 2021, total contract liabilities were $67.8 million, a decrease from $84.9 million at December 31, 2020, primarily due to revenue recognition from previously received advances exceeding new advances received[125] - As of September 30, 2021, the Harsco Environmental segment had remaining unfulfilled performance obligations totaling $88.8 million, and the Harsco Rail segment had $246.3 million, expected to be fulfilled over the next several years[126][127] - The company recognized $5.4 million and $15.4 million in revenue from its SBB contract in Q3 and the first nine months of 2021, respectively, with the second contract approximately 81% complete[130] 17. Other (Income) Expenses, Net The company's other (income) expenses, net, were negative $2.835 million in Q3 2021 and negative $7.81 million for the first nine months, primarily due to increased net gains, shifting from expenses to income compared to the prior year Other (Income) Expenses, Net Composition (in thousands of dollars) | Item | 3 Months Ended September 30, 2021 | 3 Months Ended September 30, 2020 | 9 Months Ended September 30, 2021 | 9 Months Ended September 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Employee Termination Benefits Cost | ($65) | $798 | $1,285 | $6,694 | | Other Exit Activity Costs | ($27) | $13 | $611 | $478 | | Asset Impairment Write-Offs | $41 | $2 | $203 | $75 | | Contingent Consideration Adjustments | — | $2,437 | — | $2,437 | | Net Gains | ($1,575) | ($7) | ($8,622) | ($255) | | Other | ($1,209) | $390 | ($1,287) | ($355) | | Other (Income) Expenses, Net | ($2,835) | $3,633 | ($7,810) | $9,074 | 18. Components of Accumulated Other Comprehensive Loss As of September 30, 2021, accumulated other comprehensive loss was $634.759 million, an improvement from year-end 2020, primarily influenced by the cumulative effect of unrecognized actuarial losses on pension obligations, foreign currency translation adjustments, and changes in the effective portion of derivative hedges Accumulated Other Comprehensive Loss Components (as of September 30, in thousands of dollars) | Item | Balance December 31, 2020 | Balance September 30, 2021 | | :--- | :--- | :--- | | Cumulative Foreign Currency Translation Adjustments | ($125,392) | ($139,992) | | Effective Portion of Derivatives Designated as Hedging Instruments | ($5,840) | ($4,095) | | Unrecognized Actuarial Loss on Pension Obligations | ($514,500) | ($490,688) | | Unrealized Gain (Loss) on Available-for-Sale Securities | ($9) | $16 | | Total | ($645,741) | ($634,759) | Amounts Reclassified from AOCI (9 Months Ended September 30, in thousands of dollars) | Item | 2021 | 2020 | | :--- | :--- | :--- | | Amortization of Cash Flow Hedges (Net of Tax) | $1,488 | $604 | | Amortization of Defined Benefit Pension Items (Net of Tax) | $17,184 | $18,132 | 19. Subsequent Event The company announced on November 2, 2021, its plan to explore strategic alternatives for its Rail business, intending to sell it, thus classifying the Rail segment as held for sale and discontinued operations starting in Q4 2021 - The company announced on November 2, 2021, its plan to explore strategic alternatives for its Rail business, with the intent to sell the business[140] - Consequently, the Rail segment will be classified as held for sale and reported as discontinued operations starting in Q4 2021[140] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides a detailed discussion and analysis of the company's financial condition and operating results as of September 30, 2021, covering business overview, forward-looking statements, Q3 and nine-month performance highlights, segment operations, consolidated results, and liquidity and capital resources Forward-Looking Statements This section contains forward-looking statements, cautioning investors that future results may differ materially from expectations due to global economy, exchange rates, interest rates, commodity costs, government regulations, market competition, cybersecurity, geopolitical instability, labor disputes, seasonality, acquisition integration, divestiture risks, and customer financial conditions - Forward-looking statements may include management's confidence and strategies regarding performance, expectations for new products, technologies, and opportunities, and projections for growth, sales, cash flow, and earnings[144] - Factors that could cause actual results to differ materially from forward-looking statements include changes in the global business environment (e.g., COVID-19 impact), fluctuations in exchange and interest rates, commodity and fuel costs, changes in government regulations, market competition, intellectual property protection, cybersecurity breaches, geopolitical instability, labor disputes, business seasonality, success of acquisitions and divestitures, capital market volatility, and loss of key management personnel[145] - The company specifically notes that the plan to divest the Rail segment, announced on November 2, 2021, may face risks of not completing the transaction or completing it on unfavorable terms, and could adversely affect the business, operating results, and financial condition[145] Executive Overview The company is transforming into a global leader in environmental solutions across Harsco Environmental, Harsco Clean Earth, and Harsco Rail. In Q3 and the first nine months of 2021, revenue and income from continuing operations significantly grew, diluted EPS turned profitable, and operating cash flow increased, though capital expenditures also rose. The company is positive about future prospects, expecting benefits from market demand, acquisition synergies, and infrastructure investment, but faces supply chain, labor, and inflation challenges - The company is a market-leading global provider of environmental solutions for industrial, retail, and healthcare waste treatment, and innovative equipment and technologies for the railway sector, with three reporting segments: Harsco Environmental, Harsco Clean Earth, and Harsco Rail[147] - The company is committed to transforming into a single-themed environmental solutions company, becoming a global leader in its served markets[147] - On March 10, 2021, the company amended its Senior Secured Credit Agreement, extending the revolving credit facility maturity and issuing new term loans[148] - The COVID-19 pandemic has significantly impacted the global economy, but the company's business conditions have continuously improved since Q2 2020, with strengthening business fundamentals expected in 2021[149] 2021 Q3 and Nine-Month Performance Highlights | Indicator | 2021 Q3 | 2021 Nine Months | | :--- | :--- | :--- | | Revenue Growth | Approximately 7% | Approximately 21% | | Income from Continuing Operations Growth | $24.9 million | $81.2 million | | Diluted EPS from Continuing Operations | $0.11 (Profitable) | $0.31 (Profitable) | | Operating Cash Flow | | $46.8 million (Increased by $4.5 million) | | Property, Plant and Equipment Capital Expenditures | | $109.5 million (Increased by 38.4%) | - The company maintains a positive outlook for all businesses, expecting Harsco Environmental to benefit from improved steel production demand and higher commodity prices; Harsco Clean Earth to benefit from organic growth in hazardous waste business and ESOL acquisition integration; and Harsco Rail to benefit from infrastructure investment and economic development, but facing cost inflation and supply chain challenges[151][152] - The company announced on November 2, 2021, its plan to explore strategic alternatives for its Rail business, intending to classify it as held for sale and discontinued operations[153] Results of Operations The company achieved significant growth in consolidated revenue and operating income in Q3 and the first nine months of 2021, driven by strong performance from Harsco Environmental and Harsco Clean Earth. Harsco Environmental's operating margin substantially improved, Harsco Clean Earth's operating income continued to grow, while Harsco Rail's operating margin declined. The company's overall operating margin significantly rebounded from 2020 lows Consolidated Income Statement Key Data (in millions of dollars, except per share amounts) | Indicator | 3 Months Ended September 30, 2021 | 3 Months Ended September 30, 2020 | 9 Months Ended September 30, 2021 | 9 Months Ended September 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $544.3 | $509.4 | $1,643.0 | $1,355.5 | | Cost of Sales | $434.4 | $412.2 | $1,309.8 | $1,092.8 | | Selling, General and Administrative Expenses | $82.1 | $88.0 | $247.8 | $241.2 | | Research and Development Expenses | $0.8 | $0.6 | $2.2 | $2.6 | | Other (Income) Expenses, Net | ($2.8) | $3.6 | ($7.8) | $9.1 | | Operating Income from Continuing Operations | $29.9 | $5.1 | $91.0 | $9.8 | | Interest Income | $0.6 | $0.6 | $1.8 | $1.6 | | Interest Expense | ($16.0) | ($15.8) | ($48.9) | ($43.4) | | Unused Debt Commitment Fees, Amendment Fees and Loss on Extinguishment of Debt | ($0.2) | — | ($5.5) | ($1.9) | | Defined Benefit Pension Income | $3.9 | $1.9 | $11.8 | $5.2 | | Income Tax (Expense) Benefit from Continuing Operations | ($7.0) | $1.7 | ($19.8) | $4.6 | | Equity in Earnings (Loss) | ($0.3) | — | ($0.5) | $0.2 | | Income (Loss) from Continuing Operations | $11.0 | ($6.6) | $30.0 | ($23.9) | | Gain on Sale of Discontinued Business | — | — | — | $18.4 | | Loss from Discontinued Operations | ($1.5) | ($1.5) | ($4.8) | ($1.2) | | Income Tax (Expense) Benefit from Discontinued Operations | $0.4 | ($0.2) | $1.2 | ($9.8) | | Income (Loss) from Discontinued Operations, Net of Tax | ($1.1) | ($1.7) | ($3.5) | $7.3 | | Net Income (Loss) | $9.8 | ($8.3) | $26.5 | ($16.6) | | Total Other Comprehensive Income (Loss) | ($9.0) | $8.1 | $10.1 | ($8.9) | | Total Comprehensive Income (Loss) | $0.8 | ($0.2) | $36.6 | ($25.4) | | Diluted EPS from Continuing Operations (Loss) | $0.11 | ($0.10) | $0.31 | ($0.35) | | Effective Income Tax Rate from Continuing Operations | 38.3% | 20.0% | 39.3% | 16.2% | Segment Results Harsco Environmental segment saw significant revenue and operating profit growth due to improved steel production and applied product contributions. Harsco Clean Earth segment's revenue and operating profit increased from favorable hazardous waste volumes and the ESOL acquisition. Harsco Rail segment's revenue declined, and operating profit decreased due to lower equipment sales and unfavorable aftermarket parts mix, along with increased costs Harsco Environmental Segment Harsco Environmental segment's revenue grew by $47.4 million in Q3 and $132.3 million in the first nine months of 2021, with significantly increased operating profit, driven by improved steel production, higher applied product contributions, and asset sale gains Harsco Environmental Segment Revenue Changes (in millions of dollars) | Item | 2020 Revenue | Net Effect of Price/Volume Changes | Foreign Currency Translation Impact | Net Impact of New and Lost Contracts | Other | 2021 Revenue | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | 3 Months Ended September 30, 2021 | $222.5 | $47.1 | $3.5 | ($3.5) | $0.3 | $269.9 | | 9 Months Ended September 30, 2021 | $668.1 | $109.0 | $24.5 | ($2.6) | $1.4 | $800.4 | - Operating profit was positively impacted by overall improved customer steel production under environmental services contracts and increased applied product contributions[156][157] - For the first nine months of 2021, a $7.5 million increase in gains from asset sales positively impacted operating profit[157] - Operating profit was negatively impacted by increased costs for raw materials, labor, equipment rentals, and maintenance[157] Harsco Clean Earth Segment Harsco Clean Earth segment's revenue grew by $6.4 million in Q3 and $151.4 million in the first nine months of 2021, primarily from favorable hazardous waste volumes and the ESOL acquisition, but was negatively impacted by increased labor, transportation, and material costs, and decreased contaminated material volumes Harsco Clean Earth Segment Revenue Changes (in millions of dollars) | Item | 2020 Revenue | ESOL Acquisition Impact (a) | Net Effect of Price/Volume Changes | Other | 2021 Revenue | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | 3 Months Ended September 30, 2021 | $194.1 | — | $6.4 | — | $200.5 | | 9 Months Ended September 30, 2021 | $434.5 | $134.2 | $15.8 | $1.4 | $585.9 | (a) Reflects ESOL's net revenue for the three months ended March 31, 2021. - Favorable hazardous waste volumes and the ESOL acquisition contributed to operating profit growth[163][165] - Increased selling, general and administrative expenses, along with higher labor, transportation, and material costs, negatively impacted operating profit[163][165] - Contaminated material (soil) and dredge volumes decreased, primarily due to the impact of COVID-19[165] Harsco Rail Segment Harsco Rail segment's revenue decreased by $19.3 million in Q3 but slightly increased by $3.7 million in the first nine months of 2021. Operating profit declined due to lower equipment sales, an unfavorable aftermarket parts sales mix, and increased costs, leading to a reduced operating profit margin Harsco Rail Segment Revenue Changes (in millions of dollars) | Item | 2020 Revenue | Foreign Currency Translation Impact | Net Effect of Price/Volume Changes | Other | 2021 Revenue | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | 3 Months Ended September 30, 2021 | $92.8 | $0.4 | ($19.3) | — | $73.9 | | 9 Months Ended September 30, 2021 | $253.0 | $4.9 | ($1.3) | $0.1 | $256.7 | - A favorable mix of equipment sales increased operating profit for the first nine months of 2021[166] - An unfavorable mix of aftermarket parts sales and lower equipment sales volumes negatively impacted operating profit[165][169] - Increased costs, including an unfavorable $1.6 million LIFO adjustment for the first nine months of 2021, negatively impacted operating profit[169] Corporate Costs Corporate function operating profit improved in Q3 and the first nine months of 2021, primarily due to the non-recurrence of approximately $11 million and $42 million in acquisition and integration costs from 2020, partially offset by increased insurance and compensation expenses - Corporate function operating profit was positively impacted by the non-recurrence of approximately $11 million and $42 million in acquisition and integration costs incurred in Q3 and the first nine months of 2020, respectively[167] - Increased insurance and compensation costs partially offset the positive impact[167] Consolidated Results The company's consolidated revenue grew by 6.9% in Q3 and 21.2% in the first nine months of 2021, with a substantial increase in income from continuing operations and a shift from net loss to net income. Costs and expenses increased with revenue, but SG&A decreased due to the non-recurrence of 2020 acquisition integration costs. Interest expense and debt-related fees increased, while defined benefit pension income and income tax expense also changed Revenues In Q3 and the first nine months of 2021, the company's revenue grew by 6.9% and 21.2% respectively, primarily driven by the ESOL acquisition, increased business volumes in Harsco Environmental and Harsco Clean Earth segments, and positive foreign currency translation - Q3 2021 revenues increased by $34.9 million (6.9%) compared to Q3 2020[169] - For the first nine months of 2021, revenues increased by $287.5 million (21.2%) compared to the first nine months of 2020[169] - Foreign currency translation positively impacted revenues by $3.9 million in Q3 2021 and $29.4 million for the first nine months of 2021[169] Cost of Services and Products Sold In Q3 and the first nine months of 2021, cost of services and products sold increased by 5.4% and 19.9% respectively, primarily influenced by revenue changes, the ESOL acquisition, and foreign currency translation - Q3 2021 cost of services and products sold increased by $22.2 million (5.4%) compared to Q3 2020[170] - For the first nine months of 2021, cost of services and products sold increased by $217 million (19.9%) compared to the first nine months of 2020[170] Cost of Services and Products Sold Changes (in millions of dollars) | Item | 3 Months Ended September 30, 2021 | 9 Months Ended September 30, 2021 | | :--- | :--- | :--- | | Cost Changes Due to Revenue Changes (Excluding ESOL Acquisition and Foreign Currency Translation Impact) | $18.6 | $84.2 | | ESOL Acquisition Impact | — | $104.0 | | Foreign Currency Translation Impact | $3.4 | $26.9 | | Other | $0.2 | $1.9 | | Total Cost Changes | $22.2 | $217.0 | Selling, General and Administrative Expenses Selling, general and administrative expenses decreased by 6.7% in Q3 2021, mainly due to the non-recurrence of integration costs related to the 2020 ESOL acquisition. For the first nine months, they increased by 2.7%, primarily due to the inclusion of ESOL operations and higher compensation costs - Q3 2021 selling, general and administrative expenses decreased by $5.9 million (6.7%) compared to Q3 2020, primarily due to the non-recurrence of integration costs related to the 2020 ESOL acquisition[171] - For the first nine months of 2021, selling, general and administrative expenses increased by $6.6 million (2.7%) compared to the first nine months of 2020, primarily due to the inclusion of ESOL operations and increased compensation costs[171](index=171&typ