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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 March 31, 2024
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
Enviri Logo Only.jpg
ENVIRI 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)
Two Logan Square
100-120 North 18th Street, 17th Floor,		Philadelphia,Pennsylvania19103
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code  267-857-8715 
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 shareNVRINew 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).   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 April 30, 2024
Common stock, par value $1.25 per share 80,103,167

ENVIRI CORPORATION
FORM 10-Q
INDEX
 
  Page
 
   
4 
 
 
 
 
 
 
   
   
   
   
   
 
   
   
   
   
   
   


2
Glossary of Defined Terms

Unless the context requires otherwise, "Enviri," the "Company," "we," "our," or "us" refers to Enviri 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)
AR Facility
Revolving trade receivables securitization facility
ASUFinancial Accounting Standards Board Accounting Standards Update
CEClean Earth reportable business segment
CERCLAComprehensive Environmental Response, Compensation, and Liability Act of 1980
Consolidated Adjusted EBITDAEBITDA as calculated in accordance with the Company's Credit Agreement.
Credit AgreementCredit Agreement governing the Senior Secured Credit Facilities
DEAUnited States Drug Enforcement Administration
Deutsche BahnNational railway company in Germany
DTSC
California Department of Toxic Substances Control
EBITDAEarnings before interest, tax, depreciation and amortization
EPAU.S. Environmental Protection Agency
ESOLStericycle Environmental Solutions business
FASBFinancial Accounting Standards Board
HEHarsco Environmental reportable business segment
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
RailThe Harsco Rail reportable business segment
Revolving Credit Facility$700 million multi-year revolving credit facility under the Senior Secured Credit Facilities
ROURight of use
SBBFederal railway system of Switzerland
SCE
Kingdom of Bahrain's Supreme Council for Environment
SECSecurities and Exchange Commission
Senior Notes5.75% Notes due July 31, 2027
Senior Secured Credit FacilitiesPrimary source of borrowings comprised of the New Term Loan and the Revolving Credit Facility
SOFRSecured Overnight Financing Rate
SPEThe Company's wholly-owned bankruptcy-remote special purpose entity, which is used in connection with the AR Facility
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
ENVIRI CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)March 31
2024		December 31
2023
ASSETS  
Current assets:  
Cash and cash equivalents$103,876 $121,239 
Restricted cash3,532 3,375 
Trade accounts receivable, net308,213 338,187 
Other receivables33,693 40,565 
Inventories190,288 189,369 
Current portion of contract assets69,057 64,875 
Prepaid expenses53,081 58,723 
Current portion of assets held-for-sale8,282 195 
Other current assets13,627 10,828 
Total current assets783,649 827,356 
Property, plant and equipment, net688,638 707,397 
Right-of-use assets, net102,278 102,891 
Goodwill771,404 780,978 
Intangible assets, net319,522 327,983 
Deferred income tax assets15,884 16,295 
Assets held-for-sale8,873 — 
Other assets100,030 91,798 
Total assets$2,790,278 $2,854,698 
LIABILITIES  
Current liabilities:  
Short-term borrowings$3,251 $14,871 
Current maturities of long-term debt16,021 15,558 
Accounts payable224,509 243,279 
Accrued compensation52,947 79,609 
Income taxes payable5,172 7,567 
Reserve for forward losses on contracts46,592 52,919 
Current portion of advances on contracts35,965 38,313 
Current portion of operating lease liabilities28,569 28,775 
Current portion of liabilities of assets held-for-sale2,342 — 
Other current liabilities162,415 174,342 
Total current liabilities577,783 655,233 
Long-term debt1,444,883 1,401,437 
Retirement plan liabilities44,866 45,087 
Operating lease liabilities75,151 75,476 
Environmental liabilities25,253 25,682 
Deferred tax liabilities33,651 29,160 
Other liabilities42,567 47,215 
Total liabilities2,244,154 2,279,290 
COMMITMENTS AND CONTINGENCIES
ENVIRI CORPORATION STOCKHOLDERS’ EQUITY   
Common stock146,548 146,105 
Additional paid-in capital241,833 238,416 
Accumulated other comprehensive loss(546,532)(539,694)
Retained earnings1,510,358 1,528,320 
Treasury stock(851,266)(849,996)
Total Enviri Corporation stockholders’ equity500,941 523,151 
Noncontrolling interests45,183 52,257 
Total equity546,124 575,408 
Total liabilities and equity$2,790,278 $2,854,698 
See accompanying notes to unaudited condensed consolidated financial statements.
4
ENVIRI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended
March 31
(In thousands, except per share amounts)20242023
Revenues from continuing operations:  
Service revenues$499,154 $461,560 
Product revenues101,163 99,145 
Total revenues
600,317 560,705 
Costs and expenses from continuing operations:  
Cost of services sold392,852 369,508 
Cost of products sold85,410 82,549 
Selling, general and administrative expenses87,126 81,861 
Research and development expenses861 520 
Remeasurement of long-lived assets
10,695 — 
Other expense (income), net(2,440)(5,648)
Total costs and expenses574,504 528,790 
Operating income (loss) from continuing operations25,813 31,915 
Interest income1,697 1,480 
Interest expense(28,122)(24,995)
Facility fees and debt-related income (expense)(2,789)(2,363)
Defined benefit pension income (expense)(4,176)(5,329)
Income (loss) from continuing operations before income taxes and equity income(7,577)708 
Income tax benefit (expense) from continuing operations(7,915)(8,017)
Equity income (loss) of unconsolidated entities, net(249)(133)
Income (loss) from continuing operations(15,741)(7,442)
Discontinued operations:  
Income (loss) from discontinued businesses(1,492)(1,655)
Income tax benefit (expense) from discontinued businesses387 507 
Income (loss) from discontinued operations, net of tax(1,105)(1,148)
Net income (loss)(16,846)(8,590)
Less: Net loss (income) attributable to noncontrolling interests(1,116)(935)
Net income (loss) attributable to Enviri Corporation$(17,962)$(9,525)
Amounts attributable to Enviri Corporation common stockholders:
Income (loss) from continuing operations, net of tax$(16,857)$(8,377)
Income (loss) from discontinued operations, net of tax(1,105)(1,148)
Net income (loss) attributable to Enviri Corporation common stockholders$(17,962)$(9,525)
Weighted-average shares of common stock outstanding79,945 79,633 
Basic earnings (loss) per common share attributable to Enviri Corporation common stockholders:
Continuing operations$(0.21)$(0.11)
Discontinued operations(0.01)(0.01)
Basic earnings (loss) per share attributable to Enviri Corporation common stockholders$(0.22)$(0.12)
Diluted weighted-average shares of common stock outstanding79,945 79,633 
Diluted earnings (loss) per common share attributable to Enviri Corporation common stockholders:
Continuing operations$(0.21)$(0.11)
Discontinued operations(0.01)(0.01)
Diluted earnings (loss) per share attributable to Enviri Corporation common stockholders$(0.22)$(0.12)
(a) Does not total due to rounding
See accompanying notes to unaudited condensed consolidated financial statements.
5
ENVIRI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
Three Months Ended
 March 31
(In thousands)20242023
Net income (loss)$(16,846)$(8,590)
Other comprehensive income (loss):  
Foreign currency translation adjustments, net of deferred income taxes of $(481) and $1,472 in 2024 and 2023, respectively
(16,535)12,446 
Net gain (loss) on cash flow hedging instruments, net of deferred income taxes of $(655) and $847 in 2024 and 2023, respectively
1,863 (2,560)
Pension liability adjustments, net of deferred income taxes of $(296) and $(418) in 2024 and 2023, respectively
7,011 (2,735)
Unrealized gain (loss) on marketable securities, net of deferred income taxes of $(1) and $— in 2024 and 2023, respectively
2 1 
Total other comprehensive income (loss)(7,659)7,152 
Total comprehensive income (loss)(24,505)(1,438)
Comprehensive (income) loss attributable to noncontrolling interests(295)(1,293)
Comprehensive income (loss) attributable to Enviri Corporation$(24,800)$(2,731)

See accompanying notes to unaudited condensed consolidated financial statements.
6
ENVIRI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
 Three Months Ended March 31
(In thousands)20242023
Cash flows from operating activities:  
Net income (loss)$(16,846)$(8,590)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:  
Depreciation36,920 33,039 
Amortization8,174 7,965 
Deferred income tax (benefit) expense3,445 (56)
Equity (income) loss of unconsolidated entities, net249 133 
Remeasurement of long-lived assets
10,695 — 
Other, net772 1,009 
Changes in assets and liabilities, net of acquisitions and dispositions of businesses:  
Accounts receivable24,426 (14,533)
Inventories(5,297)(8,534)
Contract assets(9,199)11,698 
Right-of-use assets8,599 7,842 
Accounts payable(13,751)17,735 
Accrued interest payable(6,820)(6,998)
Accrued compensation(25,531)7,343 
Advances on contracts(1,618)(5,591)
Operating lease liabilities(8,212)(7,202)
Retirement plan liabilities, net(340)814 
Other assets and liabilities(4,318)838 
Net cash (used) provided by operating activities1,348 36,912 
Cash flows from investing activities:  
Purchases of property, plant and equipment(26,881)(22,146)
Proceeds from sales of assets4,313 823 
Expenditures for intangible assets(77)(36)
Net proceeds (payments) from settlement of foreign currency forward exchange contracts(602)(1,212)
Other investing activities, net1 32 
Net cash used by investing activities(23,246)(22,539)
Cash flows from financing activities:  
Short-term borrowings, net(9,003)(3,029)
Current maturities and long-term debt:  
Additions35,323 59,000 
Reductions(4,967)(57,200)
Dividends paid to noncontrolling interests(8,243)— 
Contributions from noncontrolling interests874 — 
Stock-based compensation - Employee taxes paid(1,040)(930)
Other financing activities, net(1)— 
Net cash (used) provided by financing activities12,943 (2,159)
Effect of exchange rate changes on cash and cash equivalents, including restricted cash(8,251)(1,072)
Net increase (decrease) in cash and cash equivalents, including restricted cash
(17,206)11,142 
Cash and cash equivalents, including restricted cash, at beginning of period124,614 85,094 
Cash and cash equivalents, including restricted cash, at end of period$107,408 $96,236 
Supplementary cash flow information:
Change in accrual for purchases of property, plant and equipment included in accounts payable$120 $7,524 
See accompanying notes to unaudited condensed consolidated financial statements.
7
ENVIRI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)
 Enviri Corporation Stockholders’ Equity  
Common StockAdditional Paid-in CapitalRetained
Earnings		Accumulated Other
Comprehensive
Loss		Noncontrolling
Interests		 
(In thousands, except share  amounts)IssuedTreasuryTotal
Balances, December 31, 2022
$145,448 $(848,570)$225,759 $1,614,441 $(567,636)$53,600 $623,042 
Net income (loss)
— — — (9,525)— 935 (8,590)
Total other comprehensive income (loss), net of deferred income taxes of $1,901
— — — — 6,794 358 7,152 
Purchase of subsidiary shares from noncontrolling interest— — 398 — — (398)— 
Vesting of restricted stock units and other stock grants, net 177,574 shares
395 (1,108)(395)— — — (1,108)
Amortization of unearned portion of stock-based compensation, net of forfeitures— — 3,456 — — — 3,456 
Balances, March 31, 2023
$145,843 $(849,678)$229,218 $1,604,916 (560,842)54,495 623,952 


 Enviri Corporation Stockholders’ Equity  
(In thousands, except share amounts)Common StockAdditional Paid-in CapitalRetained
Earnings		Accumulated Other
Comprehensive
Loss		Noncontrolling
Interests		 
IssuedTreasuryTotal
Balances, December 31, 2023
$146,105 $(849,996)$238,416 $1,528,320 $(539,694)$52,257 $575,408 
Net income (loss)— — — (17,962)— 1,116 (16,846)
Cash dividends declared:     
Noncontrolling interests— — — — — (8,243)(8,243)
Total other comprehensive income (loss), net of deferred income taxes of $(1,433)
— — — — (6,838)(821)(7,659)
Contributions from noncontrolling interests— — — — — 874 874 
Vesting of restricted stock units, net 201,053 shares
443 (1,270)(443)— — — (1,270)
Amortization of unearned portion of stock-based compensation, net of forfeitures— — 3,860 — — — 3,860 
Balances, March 31, 2024
$146,548 $(851,266)$241,833 $1,510,358 $(546,532)$45,183 $546,124 


See accompanying notes to unaudited condensed consolidated financial statements.
8
ENVIRI 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, 2023 Condensed Consolidated Balance Sheet information contained in this Quarterly Report on Form 10-Q was derived from the 2023 audited consolidated financial statements. These 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, 2023. 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 these unaudited Condensed Consolidated Financial Statements.

Liquidity

The Company’s cash flow forecasts, combined with existing cash and cash equivalents and borrowings available under the Senior Secured Credit Facilities, indicate sufficient liquidity to fund the Company’s operations for at least the next twelve months. As such, the Company’s unaudited 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 unaudited 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, Debt and Credit Agreements).

Reclassifications

During the three months ended March 31, 2024, the Company determined that the held-for-sale criteria for Rail was no longer met and, as a result, the Company made reclassifications to prior year amounts previously classified as discontinued operations and assets held-for-sale in the Company's Consolidated Statements of Operations and Consolidated Balance Sheets, along with the accompanying notes to the Company's Consolidated Financial Statements. See Note 3, Discontinued Operations and Dispositions for further details.

2.     Recently Adopted and Recently Issued Accounting Standards

The Company has not adopted any accounting standards during the first quarter in 2024:

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

In November 2023, the FASB issued changes that require expansion of annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The changes become effective starting with the Company's annual financial statements for the year ended December 31, 2024. The Company is currently evaluating the impact that this change will have on the Company's disclosures.

In December 2023, the FASB issued changes which require greater disaggregation of income tax disclosures related to the income tax rate reconciliation and income taxes paid. The changes become effective starting with the Company's annual financial statements for the year ended December 31, 2025. The guidance should be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating the impact that this change will have on the Company's disclosures.

9
3. Discontinued Operations and Dispositions

Harsco Rail Segment
The results of the Rail business were previously presented as discontinued operations. However, the held for sale criteria were no longer met as of March 31, 2024 as the sales process has been paused. The assets and liabilities of the Rail business, previously presented as held for sale, have been reclassified to held and used in the Condensed Consolidated Balance Sheets as of December 31, 2023, and the results of the Rail business have been reclassified from discontinued operations to continuing operations for all periods presented in the Condensed Consolidated Statements of Operations. The Rail business’ assets and liabilities as of March 31, 2024 were measured at the carrying amount before the assets were classified as held for sale, reduced by $10.7 million representing the depreciation and amortization expense that would have been recognized had the assets been continuously classified as held for use. The $10.7 million reduction to the carrying value of the Rail assets was reported in Remeasurement of long-lived assets in the first quarter of 2024.

The reclassification of the Rail business's balance sheet positions as of December 31, 2023 had the following impacts on the Condensed Consolidated Balance Sheets and are summarized as follows:
(in thousands)December 31
2023
Trade accounts receivable, net$57,415 
Other receivables6,708 
Inventories103,077 
Current portion of contract assets56,341 
Prepaid expenses28,797 
Other current assets2,895 
Property, plant and equipment, net44,113 
Right-of-use assets, net7,050 
Goodwill13,026 
Intangible assets, net3,122 
Deferred income tax assets973 
Other assets22,792 
Total assets$346,309 
Accounts payable$44,703 
Accrued compensation6,056 
Income taxes payable1,434 
Current portion of operating lease liabilities3,656 
Current portion of advances on contracts32,912 
Reserve for forward losses on contracts52,725 
Other current liabilities30,550 
Operating lease liabilities3,331 
Deferred tax liabilities350 
Other liabilities494 
Total liabilities$176,211 
10

The reclassification of the results of the Rail business to continuing operations had the following impacts on the Consolidated Statement of Operations for the three months ended March 31, 2023:
Three Months Ended
March 31
(In thousands)2023
Service revenues$7,720 
Product revenues57,332 
Total revenues65,052 
Cost of services sold5,626 
Cost of products sold45,743 
Total cost of sales51,369 
Selling, general and administrative expenses9,926 
Research and development expenses344 
Other expense (income)503 
Total costs and expenses62,142 
Operating income from continuing operations2,910 
Interest income25 
Interest expense(667)
Defined benefit pension income6 
Income (loss) from continuing operations before income taxes
2,274 
Income tax benefit (expense) from continuing operations
(1,094)
Income (loss) from continuing operations
$1,180 

Harsco Environmental Segment
On April 1, 2024, the Company completed the sale of Performix Metallurgical Additives, LLC, a subsidiary of HE. As the criteria for discontinued operations accounting was not met but the sale was probable as of March 31, 2024, the assets and liabilities of this business have been classified as held for sale in the Company’s Consolidated Balance Sheet. The most material classes of assets as of March 31, 2024 were Accounts receivable of $4.7 million and Goodwill of $5.3 million.

Other
Discontinued operations include costs directly attributable to retained contingent liabilities of other previously disposed businesses.
4.    Accounts Receivable and Note Receivable
Accounts receivable consist of the following:
(In thousands)March 31
2024		December 31
2023
Trade accounts receivable$322,102 $353,709 
Less: Allowance for expected credit losses (13,889)(15,522)
Trade accounts receivable, net$308,213 $338,187 
Other receivables (a)
$33,693 $40,565 
(a) Other receivables include employee receivables, insurance receivable, tax claims and refunds and other miscellaneous items not included in Trade accounts receivable, net.

The provision for expected credit losses related to trade accounts receivable was as follows:

 Three Months Ended
March 31
(In thousands)20242023
Provision for expected credit losses related to trade accounts receivable$(167)$507 

At March 31, 2024, $14.7 million of the Company's trade accounts receivable were past due by twelve months or more, with $9.3 million of this amount reserved.
11

Accounts Receivable Securitization Facility
In June 2022, the Company and its SPE entered into an AR Facility with PNC Bank, National Association ("PNC") to accelerate cash flows from trade accounts receivable. The AR Facility has a three-year term. The maximum purchase commitment by PNC is $150.0 million.

The total outstanding balance of trade receivables that have been sold and derecognized by the SPE is $150.0 million as of March 31, 2024 and December 31, 2023. The SPE owned $71.6 million and $82.2 million of trade receivables as of March 31, 2024 and December 31, 2023, respectively, which is included in the caption Trade accounts receivable, net, on the Condensed Consolidated Balance Sheets. See Note 9, Debt and Credit Agreements, for AR Facility expenses incurred.

The Company received proceeds of $5.0 million from the AR Facility in the first quarter of 2023.
Factoring Arrangements
The Company maintains factoring arrangements with a financial institution to sell certain accounts receivable that are also accounted for as a sale of financial assets and accordingly, derecognized from the Company's Consolidated Balance Sheet. The following table reflects balances for net amounts sold and program capacities for the arrangements:

(In millions)March 31
2024		December 31
2023
Net amounts sold under factoring arrangements$14.7 $16.1 
Program capacities32.0 32.6 

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 classified as noncurrent as of March 31, 2024 and December 31, 2023, and is included in the caption Other assets on the Condensed Consolidated Balance Sheet at amortized cost.
(In millions)March 31
2024		December 31
2023
Note receivable, at amortized cost$14.3 $14.0 
Note receivable, fair value15.8 15.4 

5.    Inventories
Inventories consist of the following:
(In thousands)March 31
2024		December 31
2023
Finished goods$16,430 $16,171 
Work-in-process10,715 13,081 
Raw materials and purchased parts116,073 114,046 
Stores and supplies47,070 46,071 
Total inventories$190,288 $189,369 

12
6.     Property, Plant and Equipment
Property, plant and equipment ("PP&E") consist of the following:
(In thousands)March 31
2024		December 31
2023
Land and improvements
$92,269 $93,793 
Buildings and improvements239,651 243,472 
Machinery and equipment1,690,555 1,729,637 
Uncompleted construction66,436 66,241 
Gross property, plant and equipment2,088,911 2,133,143 
Less: Accumulated depreciation(1,400,273)(1,425,746)
Property, plant and equipment, net$688,638 $707,397 

7. Leases
The components of lease expense were as follows:
Three Months Ended
March 31
(In thousands)20242023
Finance leases:
Depreciation expense
$2,578 $1,541 
Interest on lease liabilities815 354 
Operating leases9,832 9,478 
Variable and short-term lease expense14,044 12,630 
Sublease income(2)(2)
Total lease expense
$27,267 $24,001 

8.     Goodwill and Other Intangible Assets
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.

During the three months ended March 31, 2024, the Company determined that there were no events or indicators present that would indicate that it was more-likely-than-not that its reporting units' fair values were less than their carrying amounts, which would require a further interim impairment analysis. However, unfavorable economic conditions, including continued cost inflation and labor shortages, as well as rising interest rates, could impact the Company's future projected cash flows and discount rates used to estimate fair value, which could result in an impairment charge to any of the Company's reporting units in a future period.

9. Debt and Credit Agreements

Long-term debt consists of the following:
(In thousands)March 31
2024		December 31
2023
Senior Secured Credit Facilities:
New Term Loan$486,250 $487,500 
Revolving Credit Facility 457,000 422,000 
5.75% Senior Notes
475,000 475,000 
Other financing payable (including finance leases) in varying amounts53,810 44,469 
Total debt obligations1,472,060 1,428,969 
Less: deferred financing costs(11,156)(11,974)
Total debt obligations, net of deferred financing costs1,460,904 1,416,995 
Less: current maturities of long-term debt(16,021)(15,558)
Long-term debt$1,444,883 $1,401,437 
13
The Senior Secured Credit Facilities contain a consolidated net debt to Consolidated Adjusted EBITDA ratio covenant, which is not to exceed 5.25x for the quarter ended March 31, 2024 and then decreasing quarterly until reaching 4.00x on December 31, 2024. The total net leverage ratio covenant applicable to the third quarter of 2024 and earlier is subject to a 0.50x decrease upon the divestiture of Rail. The Company's required coverage of consolidated interest charges is set at a minimum of 2.75x through the end of 2024, subject to an increase to 3.00x upon closing of the divestiture of Rail, and 3.00x beginning with the first quarter of 2025.

At March 31, 2024, the Company was in compliance with its debt covenants under the Senior Secured Credit Facilities, with a total net debt to Consolidated Adjusted EBITDA ratio of 4.08x and a total interest coverage ratio of 3.06x. 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 deterioration in economic conditions, higher than forecasted interest rate increases, the timing of working capital including the collection of receivables or an inability to realize increased pricing and implement cost reduction initiatives that mitigate the impacts of inflation and other factors that may adversely impact its realized operating margins.
Facility Fees and Debt-Related Income (Expense)
The components of the Condensed Consolidated Statements of Operations caption Facility fees and debt-related income (expense) were as follows:
Three Months Ended
March 31
(In thousands)20242023
Unused debt commitment and amendment fees$— $(12)
Securitization and factoring fees(2,789)(2,351)
Facility fees and debt-related income (expense)$(2,789)$(2,363)
10.  Employee Benefit Plans
 Three Months Ended
March 31
Defined Benefit Pension Plan Net Periodic Pension Cost (Benefit)U.S. PlansInternational Plans
(In thousands)2024202320242023
Service costs$— $— $338 $313 
Interest costs2,419 2,543 7,460 7,429 
Expected return on plan assets(2,236)(1,750)(8,370)(7,678)
Recognized prior service costs— — 118 114 
Recognized actuarial losses1,045 1,151 3,801 3,519 
Defined benefit pension plan net periodic pension cost (benefit)$1,228 $1,944 $3,347 $3,697 
Cash contributions to U.S. and international defined benefit pension plans totaled $0.4 million and $4.3 million for the three months ended March 31, 2024, respectively. The Company's estimate of expected cash contributions to be paid during the remainder of 2024 for the U.S. and international defined benefit pension plans is $7.3 million and $13.2 million, respectively.

11.     Income Taxes 

Income tax expense from continuing operations for the three months ended March 31, 2024 and 2023 was $7.9 million and $8.0 million, respectively. The decrease in expense for the three months ended March 31, 2024, compared with the three months ended March 31, 2023, is primarily due to a decrease in disallowed interest expense and business improvement in various countries with no tax expense.

For the three months ended March 31, 2024, the Company calculated its quarterly tax provision based on its best estimate of the full year tax rate applicable to the quarter. For the three months ended March 31, 2023, due to the insignificant amount of pre-tax book loss relative to the size of permanent book-tax differences and a varying net income (loss) pattern projected for the year, the Company’s tax provision estimate was determined using an actual year-to-date method.

The reserve for uncertain tax positions on March 31, 2024 and December 31, 2023 was $3.4 million, including interest and penalties. Within the next twelve months, it is reasonably possible that $0.6 million in unrecognized income tax benefits will be recognized upon settlement of tax examinations and the expiration of various statutes of limitations.

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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)March 31
2024		December 31
2023
Current portion of environmental liabilities (a)
$7,395 $7,540 
Long-term environmental liabilities25,253 25,682 
Total environmental liabilities$32,648 $33,222 
(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. Unless stated otherwise below, the Company has not determined a loss to be probable or estimable for the legal proceedings.

In November 2022, the EPA and the Kentucky Department for Environmental Protection (the “KDEP”) conducted an inspection of Clean Earth of Calvert City LLC’s facility in Calvert City, KY. In September 2023, the EPA verbally proposed a civil penalty of $0.8 million to address alleged violations identified at the time of the inspection. The Company recorded a liability during the year ended December 31,2023 of $0.7 million. At March 31, 2024, the liability is $0.7 million and the Company is still assessing the alleged violations and is engaging with the EPA to resolve this matter.

On January 27, 2020, the 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 EPA expects to issue a Record of Decision for the sitewide cleanup plan no sooner than 2028 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 ("PRPs") 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.

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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. The Company has exhausted its legal challenges to the denial of the Hazardous Waste facility permit, and the hazardous waste facility is in the process of closing. The Company continues to utilize the site for non-hazardous waste and is evaluating additional 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. 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.

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 Company's current reserve of $5.1 million at March 31, 2024 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 (the "MPF" and "MPE", respectively) filed a Civil Public Action against CSN, one of the Company's customers, 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 (the "Volta Redonda Court") 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. Nevertheless, the Volta Redonda Court issued two orders fining the Company and CSN for what it views as ongoing violations of the injunction. The Company is appealing the fines and the underlying injunction. Both the Company and CSN continue to have discussions with the MPF, MPE and the governmental authorities regarding 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 and staying any additional fines and interest accruals while the parties discuss a possible resolution to the matter. The aggregate amount of fines levied against the Company, exclusive of interest, is approximately 32 million Brazilian reais (or approximately $6 million) as of March 31, 2024. The Company does not believe that a loss relating to this matter is probable or estimable at this point.

On October 19, 2018, local environmental authorities issued an enforcement action against the Company concerning the Company’s operations at a customer site in Ijmuiden, Netherlands. The enforcement action 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 of the Netherlands 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 before the Amsterdam District Court in the Netherlands. The Amsterdam Public Prosecutor’s Office ("APPO") issued 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 €0.1 million in fines with a smaller amount held in abeyance. On February 2, 2022, the APPO announced that it would further investigate residents’ claims related to this matter. 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 APPO have appealed this ruling. 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.


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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, CA and an administrative inspection warrant at a facility in Indianapolis, IN. 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. 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. Pursuant to an agreement with Stericycle, the Company has contractual recourse for any material loss the Company has determined is reasonably possible. The Company has not accrued any amounts in respect of these investigations and does not believe a loss is reasonably possible.

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, at the collection action or court of appeals phase, the losing party 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 March 31, 2024, 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 $18.6 million. On June 4, 2018, the Appellate Court of the State of São 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 through March 31, 2024, the Company estimates that this ruling reduced the current overall potential liability for this case to approximately $8.1 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, 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 aggregate amount assessed by the tax authorities in August 2005 was $5.0 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 $3.8 million. On December 6, 2018, the administrative tribunal reduced the applicable penalties to $0.6 million. After calculating the interest accrued on the current penalty through March 31, 2024, the Company estimates that the current overall liability for this case to be approximately $5.6 million. All such amounts include the effect of foreign currency translation. The Company has appealed to the judicial phase at the Third Trial Court of the District of Cubatão, State of São Paulo. On October 14, 2022, the District Court issued a decision holding that the Company is not liable for the taxes at issue. The SPRA appealed this decision on December 28, 2022 to the Appellate Court of the State of São Paulo (the "São Paulo Appellate Court"). On March 26, 2024, the São Paulo Appellate Court ruled that the Company is liable for the taxes at issue. In the same decision, the São Paulo Appellate Court also ruled in the Company's favor regarding the applicable tax rate. 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 April 23, 2024, the Company’s customer directed the Company to accept a settlement offer made by SPRA and the Company accepted the settlement offer on April 26, 2024. Under the settlement, the Company will pay a total of $3.8 million over sixty months in return for a full release from the SPRA as to both claims. Pursuant to our contractual rights, the Company is indemnified by its customer for these amounts; therefore, no net loss has been recorded by the Company for this settlement.
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On December 30, 2020, the Company received an assessment from the municipal authority in Ipatinga, Brazil alleging $2.1 million in unpaid service taxes from the period 2015 to 2020. After calculating the interest and penalties accrued, the Company estimates that the current overall potential liability for this case to be approximately $5.8 million. On July 21, 2023, the Company filed the last administrative appeal against the decision that maintained the assessment and a final administrative decision is still pending. 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.
Asbestos Actions
The Company is named as one of many defendants 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.
At March 31, 2024, there were approximately 17,000 pending asbestos personal injury actions filed against the Company. The vast majority of these actions were filed in the New York Supreme Court (New York County), of which the majority of such actions were on the Deferred/Inactive Docket created by the New York Supreme 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. A relatively small portion of cases are on the Active or In Extremis docket in New York County or on active dockets in other jurisdictions. The complaints in most of those actions generally follow a form that contains a standard demand of significant damages, regardless of the individual plaintiff's alleged medical condition, and without identifying any Company product.
The Company will continue to vigorously defend against such claims and is confident that it will be successful in doing so. 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.
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 March 31, 2024, the Company has successfully dismissed 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.
Other
On November 5, 2020, a worker suffered a fatal injury at a site owned by the Company’s customer, Gerdau Ameristeel US, Inc. ("Gerdau"), 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, seeking monetary damages. On May 11, 2023, the parties completed a formal settlement agreement, settling the claims brought by the worker's family. The Company paid its insurance deductible of $5.0 million and has recorded an indemnification receivable from Gerdau for the recovery of certain losses based upon the contractual indemnity rights. On August 25, 2023, the Company initiated arbitration proceedings against Gerdau before the American Arbitration Association to enforce its contractual indemnity rights. There can be no assurances that the Company's position will ultimately prevail; however, any financial statement impact is not expected to be material.
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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 in Part II, Item 8 Financial Statements and Supplementary Data in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, under Accrued Insurance and Loss Reserves, for additional information.

13.  Reconciliation of Basic and Diluted Shares
Three Months Ended
March 31
(In thousands, except per share amounts)20242023
Income (loss) from continuing operations attributable to Enviri Corporation common stockholders$(16,857)$(8,377)
Weighted-average shares outstanding:
Weighted-average shares outstanding - basic79,945 79,633 
Dilutive effect of stock-based compensation— — 
Weighted-average shares outstanding - diluted79,945 79,633 
Earnings (loss) from continuing operations per common share, attributable to Enviri Corporation common stockholders:
Basic$(0.21)$(0.11)
Diluted$(0.21)$(0.11)

The following average outstanding stock-based compensation units were not included in the computation of diluted earnings (loss) per share because the effect was either antidilutive or the market conditions for the performance share units were not met:
Three Months Ended
March 31
(In thousands)20242023
Restricted stock units1,686 1,000 
Stock appreciation rights2,890 2,473 
Performance share units1,880 1,394 


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.
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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:
(In thousands)Balance Sheet LocationFair Value of Derivatives Designated as Hedging InstrumentsFair Value of Derivatives Not Designated as Hedging InstrumentsTotal Fair Value
March 31, 2024    
Asset derivatives (Level 2):
Foreign currency exchange forward contractsOther current assets$101 $4,443 $4,544 
Interest rate swapsOther current assets2,202