HARSCO : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

The following discussion should be read in conjunction with the Consolidated
Financial Statements of Harsco Corporation ("we" or the "Company") provided
under Part II, Item 8, "Financial Statements and Supplementary Data," of this
Annual Report on Form 10-K.
Amounts included in this Item 7 of this Annual Report on Form 10-K are rounded
in millions and all percentages are calculated based on actual amounts. As a
result, minor differences may exist due to rounding.
Forward-Looking Statements

The nature of the Company's business, together with the number of countries in
which it operates, subject it to changing economic, competitive, regulatory and
technological conditions, risks and uncertainties. In accordance with the "safe
harbor" provisions of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, the Company provides the following
cautionary remarks regarding important factors that, among others, could cause
future results to differ materially from the results contemplated by
forward-looking statements, including the expectations and assumptions expressed
or implied herein. Forward-looking statements contained herein could include,
among other things, statements about management's confidence in and strategies
for performance; expectations for new and existing products, technologies and
opportunities; and expectations regarding growth, sales, cash flows, and
earnings. Forward-looking statements can be identified by the use of such terms
as "may," "could," "expect," "anticipate," "intend," "believe," "likely,"
"estimate," "outlook," "plan" or other comparable terms.
Factors that could cause actual results to differ, perhaps materially, from
those implied by forward-looking statements include, but are not limited to:
(1) changes in the worldwide business environment in which the Company operates,
including general economic conditions; (2) changes in currency exchange rates,
interest rates, commodity and fuel costs and capital costs;(3) changes in the
performance of equity and bond markets that could affect, among other things,
the valuation of the assets in the Company's pension plans and the accounting
for pension assets, liabilities and expenses; (4) changes in governmental laws
and regulations, including environmental, occupational health and safety, tax
and import tariff standards and amounts; (5) market and competitive changes,
including pricing pressures, market demand and acceptance for new products,
services and technologies; (6) the Company's inability or failure to protect its
intellectual property rights from infringement in one or more of the many
countries in which the Company operates; (7) failure to effectively prevent,
detect or recover from breaches in the Company's cybersecurity infrastructure;
(8) unforeseen business disruptions in one or more of the many countries in
which the Company operates due to political instability, civil disobedience,
armed hostilities, public health issues or other calamities; (9) disruptions
associated with labor disputes and increased operating costs associated with
union organization; (10) the seasonal nature of the Company's business; (11) the
Company's ability to successfully enter into new contracts and complete new
acquisitions or strategic ventures in the time-frame contemplated, or at all;
(12) the integration of the Company's strategic acquisitions; (13) potential
severe volatility in the capital markets; (14) failure to retain key management
and employees; (15) the amount and timing of repurchases of the Company's common
stock, if any; (16) the outcome of any disputes with customers, contractors and
subcontractors; (17) the financial condition of the Company's customers,
including the ability of customers (especially those that may be highly
leveraged and those with inadequate liquidity) to maintain their credit
availability; (18) implementation of environmental remediation matters; (19)
risk and uncertainty associated with intangible assets; and (20) other risk
factors listed from time to time in the Company's SEC reports. A further
discussion of these, along with other potential risk factors, can be found in
Part I, Item 1A, "Risk Factors," of this Annual Report on Form 10-K. The Company
cautions that these factors may not be exhaustive and that many of these factors
are beyond the Company's ability to control or predict. Accordingly,
forward-looking statements should not be relied upon as a prediction of actual
results. The Company undertakes no duty to update forward-looking statements
except as may be required by law.

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Executive Overview
The Company is a market-leading, global provider of environmental solutions for
industrial and specialty waste streams, and innovative equipment and technology
for the rail sector. The Company's operations consist of three reportable
segments: Harsco Environmental, Harsco Clean Earth and Harsco Rail and we are
working towards transforming Harsco into a single-thesis environmental solutions
company that is a global leader in the markets we serve. The Harsco
Environmental Segment operates primarily under long-term contracts, providing
critical environmental services and material processing to the global steel and
metals industries including zero waste solutions for manufacturing byproducts
within the metals industry. The Harsco Clean Earth Segment provides specialty
waste processing and beneficial reuse solutions for hazardous wastes,
contaminated materials and dredged volumes. The Harsco Rail Segment is a
provider of highly engineered maintenance equipment, after-market parts and
safety and diagnostic systems which support railroad and transit customers
worldwide. The Company has locations in approximately 30 countries, including
the U.S. The Company was incorporated in 1956.

In June 2019, the Company completed the previously announced acquisition of
Clean Earth from Compass Diversified Holdings for approximately $628 million in
cash. Clean Earth operates 27 permitted facilities in the U.S. and maintains a
portfolio of more than 200 permits with a 100% permit renewal success rate to
date. In addition, Clean Earth owns 9 Resource Conservation and Recovery Act
(RCRA) Part B Permits which include 6 Treatment, Storage and Disposal Facility
(TSDF) permits that enable the Company to process complex and highly recurring
hazardous waste streams. The results of Clean Earth will be reflected in the
Harsco Clean Earth Segment, which is a new reportable segment of the Company.

Also, in June 2019, the Company completed a private placement of $500 million
principal amount of senior unsecured notes (the "Notes"). The Notes are due July
31, 2027 and bear interest, which is payable on January 31 and July 31 of each
year, at a fixed rate of 5.75%. The bonds were issued at par and the proceeds
were used, together with borrowings under the Company's Revolving Credit
Facility, to fund the acquisition of Clean Earth. The Company also amended the
existing Senior Secured Credit Facilities to increase the borrowing capacity of
the Revolving Credit Facility by $200 million to a total of $700 million, extend
the maturity date of the Revolving Credit Facility until June 2024 and increase
the net debt to consolidated adjusted earnings before interest, tax,
depreciation and amortization ("EBITDA") ratio covenant from 3.5 to 4.5, which
decreases to 4.0 for the second quarter of 2020 and periods thereafter. Refer to
Liquidity and Capital Resources for additional information pertaining to the
Notes and amendment of the Senior Secured Credit Facilities.
In May 2019, the Company announced its intent to divest the businesses that
comprised the Harsco Industrial Segment: Harsco Industrial Air-X-Changers
("AXC"), Harsco Industrial IKG ("IKG") and Harsco Industrial Patterson-Kelley
("PK"). These disposals represent a strategic shift and accelerate the
transformation of the Company's portfolio of businesses into a leading provider
of environmental solutions and services. As a result of these disposals (i) the
carrying value of the remaining assets and liabilities of the Harsco Industrial
Segment have been classified as Assets held-for-sale and Liabilities of assets
held-for-sale on the Consolidated Balance Sheets; (ii) the operating results of
the Harsco Industrial Segment, costs directly related to the disposals and an
allocation of interest expense associated with mandatory debt repayments
required as a result of the disposals have been reflected in the Consolidated
Statements of Operations as discontinued operations for all periods presented;
and (iii) all disclosures have been updated to reflect these changes. In July
2019, the Company sold AXC for $600 million in cash and recognized a gain on
sale of $527.9 million pre-tax (or approximately $421 million after-tax). In
November 2019, the Company sold PK for approximately $60 million in cash and
recognized a gain on sale of $41.2 million pre-tax (or approximately $33 million
after-tax). These gains have been recorded in the Consolidated Statements of
Operations as discontinued operations for the year ended December 31, 2019. In
January 2020, the Company sold IKG for $85 million in cash and notes.

Utilizing a portion of the proceeds from the AXC transaction, the Company made a
required prepayment and further reduced amounts outstanding under the Term Loan
Facility in the amount of $320.9 million. The remainder of the proceeds from the
sale were used to pay down the Company's Revolving Credit Facility. As a result
of this prepayment, the Company recorded a charge of $5.3 million, related to
the write-off of previously recorded deferred financing costs associated with
the Term Loan Facility, in the Company's Condensed Consolidated Statements of
Operations as discontinued operations for the year ended December 31, 2019.








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Highlights for 2019 include (refer to the discussion of segment and consolidated
results included within Results of Operations below, as well as Liquidity and
Capital Resources, for additional information pertaining to the key drivers
impacting these highlights):

• Revenues for the year ended December 31, 2019 increased approximately 12%

       compared with the year ended December 31, 2018. The primary drivers for
       this increase were the acquisition of Clean Earth; strong
       maintenance-of-way equipment sales in the Harsco Rail Segment; and new

contract starts and the Altek acquisition in the Harsco Environmental

Segment; partially offset by the impact of foreign currency translation.

•      Operating income from continuing operations for the year ended
       December 31, 2019 decreased approximately 20% compared with the year ended
       December 31, 2018. The primary drivers for this decrease were
       approximately


$25 million of strategic costs primarily related to the acquisition of Clean
Earth and the recently announced acquisition of Stericycle's Environmental
Solutions Business ("ESOL"); lower operating results in the Harsco Rail Segment
due to operational challenges and higher manufacturing costs resulting from the
consolidation of North American manufacturing operations into a single facility;
lower operating results in the Harsco Environmental Segment resulting from lower
services demand and weak customer production levels, a $6.2 million provision
for doubtful accounts related to a customer in the U.K. entering administration
during the second quarter of 2019, site exits and the impact of foreign currency
translation. These decreases were partially offset by the inclusion of Clean
Earth operating results for the second half of 2019.
•      Diluted earnings per common share from continuing operations attributable

to Harsco Corporation for the year ended December 31, 2019 were $0.35, a

decrease of approximately 71% compared with the year ended December 31,

2018. In addition to the factors noted above for revenue and operating

income from continuing operations, the primary drivers of these decreases

were finance related costs associated with the Clean Earth acquisition and

Term Loan Facility amendment, increased interest expense and increased

defined benefit pension expense.

• Cash flows used by operating activities for the year ended December 31,

       2019 were $0.2 million, a decrease of $192.2 million compared with cash
       flows provided by operating activities the year ended December 31, 2018.

The primary drivers for this decrease were lower net income (excluding the

impacts of the AXC and PK sales), including approximately $29 million of

strategic costs principally associated with the Clean Earth acquisition

and sale of the Industrial businesses, a $103 million income tax payment

related to the gain on the sale of AXC (the proceeds of the sale are

reflected in cash flows from investing activities) as well as unfavorable

changes in working capital.

Looking forward, the Company maintains a positive outlook across all businesses.
The Company's view for 2020 and beyond is supported by the below factors, which
should be considered in the context of other risks, trends and strategies:

• The Harsco Environmental Segment experienced lower services demand and

customer steel output during 2019, primarily in North America and Europe,

resulting from supply-chain rebalancing and lower customer profitability.

A number of internal actions are underway to support near-term financial

performance. While this current weakness is expected to persist, Harsco

Environmental expects modest improvements in operating results during

2020, primarily during the second-half of the year, driven by the positive

affect of growth investments and contracts as well as improved services

demand, partially offset by the impact of lost contracts.

• As previously noted, a U.K.-based customer in the Harsco Environmental

Segment entered administration, resulting in the Company recording a $6.2

million provision for doubtful accounts, related to pre-administration

receivables, primarily during the second quarter of 2019. The Company

continues to provide services to the customer and continues to collect on

post-administration invoices timely while the customer seeks a buyer for

its operations. Depending on the outcome of any potential transactions,

there could be an impact on the Company's results of operations, cash

flows and asset valuations in the future, which may be material in any one

period.

• The Harsco Clean Earth Segment has performed well since the acquisition.

Operating results for 2020, exclusive of corporate allocations of

administrative expenses, are expected to improve due to permit

modifications and increased volumes for all lines of business. These

improved operating results will be partially offset by a less favorable

       business mix during 2020.


•      The Harsco Rail Segment experienced commercial shipment delays and
       operating challenges related to consolidation of North American

manufacturing operations during the latter part of 2019. A portion of the

delayed shipments will be recognized during 2020 and actions are being

taken to improve efficiency and increase productivity of the manufacturing

operations. Overall, the Harsco Rail Segment expects improved operating

results during 2020 resulting from strong maintenance-of-way equipment

sales as well as growth in technology-safety products and contracting

sales, partially offset by higher selling, general and administrative

costs as well as increased research and development spending which are

necessary to support anticipated volume increases. Backlog for the Harsco

       Rail Segment remains at record levels and the long-term outlook for this
       business remains strong.

• Interest expense for 2020 is expected to increase due to higher average

debt balances during 2020 and the impact of a higher weighted average

       interest rate resulting from the issuance of the Notes in 2019.



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• Net periodic pension cost ("NPPC") will decrease by approximately $13

million during 2020, which will primarily be reflected in the caption

Defined benefit pension (income) expense on the consolidated statement of

       operations. The decrease is primarily the result of higher plan asset
       values at December 31, 2019.




Results of Operations

Revenues by Segment
(Dollars in millions)      2019         2018       Change         %
Harsco Environmental    $ 1,034.8    $ 1,068.3    $ (33.5 )     (3.1 )%
Harsco Clean Earth          169.5            -      169.5          -
Harsco Rail                 299.4        279.3       20.1        7.2
Corporate                       -          0.1       (0.1 )   (100.0 )
Total Revenues          $ 1,503.7    $ 1,347.7    $ 156.1       11.6  %

Revenues by Region (Dollars in millions) 2019 2018 Change % North America

$   685.6    $   507.5    $ 178.1      35.1
Western Europe               431.2        438.9       (7.7 )    (1.8 )
Latin America (a)            148.6        155.9       (7.2 )    (4.6 )
Asia-Pacific                 159.4        167.9       (8.4 )    (5.0 )
Middle East and Africa        60.4         50.0       10.4      20.8
Eastern Europe                18.5         27.6       (9.1 )   (32.9 )
Total Revenues           $ 1,503.7    $ 1,347.7    $ 156.1      11.6  %


(a) Includes Mexico.

Operating Income (Loss) and Operating Margins by Segment (Dollars in millions) 2019 2018 Change % Harsco Environmental $ 112.3 $ 121.2 $ (8.9 ) (7.3 )% Harsco Clean Earth 20.0

           -        20.0         -
Harsco Rail                 23.7        37.3       (13.6 )   (36.5 )
Corporate                  (51.7 )     (27.8 )     (23.9 )   (85.8 )

Total Operating Income $ 104.3 $ 130.7 $ (26.4 ) (20.2 )%

                                 2019     2018
Harsco Environmental            10.9 %   11.3 %
Harsco Clean Earth              11.8        -
Harsco Rail                      7.9     13.4
Consolidated Operating Margin    6.9 %    9.7 %



Harsco Environmental Segment:
Significant Effects on Revenues (In millions)
Revenues-2018                                                          $  

1,068.3

Foreign currency translation.                                               (37.6 )
Net impact of new contracts and lost contracts.                             (10.0 )
Effect of Altek acquisition.                                                

7.4

Net effects of price/volume changes, primarily attributable to
volume changes.                                                               6.4
Other.                                                                        0.3
Revenues-2019                                                          $  1,034.8










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Factors Positively Affecting Operating Income: • New contract starts increased operating income during 2019 compared with

prior year.

• Lower selling, general and administrative expenses improved operating

       income by $3.0 million during 2019 when compared with prior year.


•      Operating results for 2019 were positively affected by contingent
       consideration adjustments related to the Altek acquisition of $8.5

million. The fair value adjustment resulted from the decreased probability

of Altek achieving cumulative financial and non-financial performance

goals within the required time frame. The Company currently expects that

the future cash flows of the Altek business will be sufficient to recover

the net book value of its long-lived assets. An impairment charge may be

       required in future periods should the performance of this business not
       meet current expectations.

• Operating results for 2019 were positively affected by a $2.3 million gain

during the first quarter of 2019 related to the recognition of a foreign

currency cumulative translation adjustment resulting from the substantial

liquidation of a subsidiary.

• One-time costs associated with the Altek acquisition of approximately $1

million during 2018 which did not repeat during 2019.

Factors Negatively Impacting Operating Income: • The Company recorded a provision for doubtful accounts of $6.2 million

       related to a customer in the U.K. that entered administration during the
       second quarter of 2019 which represents a full write-off of
       pre-administration receivables.


•      Overall steel production by customers under services contracts for 2019
       decreased by 2% compared with prior year.

• Operating results for 2019 were negatively impacted by decreased stainless

steel and ferrous scrap prices as well as the impact of contract exits.

• Operating results for 2019 were also negatively impacted by costs

associated with the continued integration and scaling of the Altek

business acquired during 2018 including amortization expenses associated

with intangible assets recognized as part of the acquisition.

• Foreign currency translation decreased operating income by $3.9 million

during 2019 compared with prior year.

• Operating results for 2018 were positively affected by a $3.2 million

adjustment to previously accrued amounts related to the disposal of

certain slag material in Latin America due to obtaining the necessary

       permits.



Harsco Clean Earth Segment:
The Company acquired Clean Earth on June 28, 2019 and the operating results are
reflected in the Harsco Clean Earth Segment, which is a new reportable segment
of the Company. Revenues and operating income for the six months ended
December 31, 2019 were $169.5 million and $20.0 million, respectively.

Harsco Rail Segment:
Significant Effects on Revenues (In millions)
Revenues-2018                                                          $    

279.3

Net effects of price/volume changes, primarily attributable to
volume changes.                                                              23.4
Foreign currency translation.                                                (3.3 )
Revenues-2019                                                          $    299.4

Factors Positively Affecting Operating Income: • Improved demand for machine sales improved operating income during 2019

       compared with prior year.

• Results for 2018 included an additional forward contract loss provision

related to the Company's first of two contracts with the federal railway

       system of Switzerland of $1.8 million, for which costs to complete
       exceeded original estimated costs.

Factors Negatively Impacting Operating Income: • Lower after-market parts, Protran safety equipment and contract service

       volumes decreased operating income during 2019 compared with prior year.

• Operating income was negatively impacted by one-time costs associated with

the initiative to improve manufacturing efficiency, including the

consolidation of U.S. manufacturing and distribution into a single

facility. These costs decreased operating income by $4.8 million during

       2019 compared with prior year. Additionally, operational challenges and
       higher manufacturing costs resulting from this initiative negatively
       impacted operating income during 2019 compared with prior year.


•      Increased selling, general and administrative costs and research and
       development costs of $3.8 million during 2019 to support and execute the
       Company's growth strategy compared with prior year.




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Consolidated Results
(In millions, except per share information and
percentages)                                         2019           2018    

2017

Total revenues                                   $  1,503.7     $  1,347.7     $  1,307.5
Cost of services and products sold                  1,144.3        1,012.5  

997.8

Selling, general and administrative expenses 253.0 202.7

194.9

Research and development expenses                       4.8            3.9  

2.7

Other (income) expenses, net                           (2.6 )         (2.2 )          7.3
Operating income from continuing operations           104.3          130.7          104.7
Interest income                                         2.0            2.2            2.5
Interest expense                                      (36.6 )        (21.5 )        (26.9 )
Unused debt commitment and amendment fees              (7.7 )         (1.1 )         (2.3 )
Defined benefit pension income (expense)               (5.5 )          3.5           (2.6 )
Income tax expense from continuing operations         (20.2 )         (5.5 )        (78.2 )
Equity in income of unconsolidated entities,
net                                                     0.3            0.4              -
Income (loss) from continuing operations               36.5          108.5           (2.8 )
Gain on sale of discontinued businesses               569.1              -              -
Income from discontinued businesses                    27.5           43.9  

20.4

Income tax expense from discontinued
businesses                                           (121.0 )         (7.5 )         (5.7 )
Income from discontinued operations, net of
tax                                                   475.7           36.5  

14.6

Net income                                            512.2          145.0  

11.8

Total other comprehensive income (loss)                (0.1 )        (21.5 )         63.2
Total comprehensive income (loss)                     512.2          123.5  

75.0

Diluted income (loss) per common share from
continuing operations attributable to Harsco
Corporation common stockholders                        0.35           1.20          (0.08 )
Effective income tax rate from continuing
operations                                             35.8 %          4.8 

% 103.7 %

Comparative Analysis of Consolidated Results
Total Revenues
Revenues for 2019 increased $156.1 million or 12% from 2018. Revenues for 2018
increased $40.2 million or 3% from 2017. These increases were attributable to
the following significant items:
Changes in Revenues (In millions)                             2019 vs. 2018      2018 vs. 2017
Effect of the Clean Earth acquisition.                      $       169.5      $            -
Net effect of price/volume changes, primarily
attributable to volume changes in the Harsco Rail
Segment.                                                             23.4               (15.7 )

Effect of Altek acquisition in the Harsco Environmental Segment.

                                                              7.4                11.8

Net effect of price/volume changes in the Harsco Environmental Segment, primarily attributable to volume changes.

                                                              6.4                48.6
Foreign currency translation.                                       (40.9 )              (3.1 )
Net impact of new contracts and lost contracts (including
exited underperforming contracts) in the Harsco
Environmental Segment.                                              (10.0 )              (2.3 )
Other.                                                                0.3                 0.9
Total change in revenues                                    $       156.1      $         40.2


Cost of Services and Products Sold
Cost of services and products sold for 2019 increased $131.8 million or 13% from
2018. Cost of services and products sold for 2018 increased $14.7 million or 1%
from 2017. These increases were attributable to the following significant items:
Change in Cost of Services and Products Sold (In
millions)                                                     2019 vs. 2018      2018 vs. 2017
Impact of Clean Earth acquisition.                          $       124.2      $            -
Increased costs due to changes in revenues; and product
and service mix (exclusive of foreign currency
translation and fluctuations in commodity costs included
in selling prices).                                                  47.2                14.4
Foreign currency translation.                                       (35.1 )              (1.3 )
Other.                                                               (4.5 )               1.6

Total change in cost of services and products sold $ 131.8

   $         14.7







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Selling, General and Administrative Expenses
Selling, general and administrative expenses for 2019 increased $50.3 million or
25% from 2018. This increase was primarily related to approximately $25 million
of strategic costs primarily related to the acquisition of Clean Earth and
recently announced acquisition of ESOL, the provision for doubtful accounts
related to the Harsco Environmental Segment customer in the U.K. entering
administration and the inclusion of selling, general and administrative expenses
associated with the Altek acquisition which occurred in May 2018 and the Clean
Earth acquisition which occurred in June 2019.

Selling, general and administrative expenses for 2018 increased $7.8 million or
4% from 2017. This increase was primarily related to the Altek acquisition and
increased compensation expense; partially offset by a decrease in bad debt
expense in the Harsco Environmental Segment.

Other (Income) Expenses, Net
The major components of this Statement of operations caption are detailed below.
See Note 17, Other (Income) Expenses, Net, in Part II, Item 8, "Financial
Statements and Supplementary Data" for additional information.
                                                 Other Expenses
(In thousands)                            2019         2018        2017

Contingent consideration adjustments $ (7,681 ) $ (2,939 ) $ - Net gains

                                (6,303 )     (3,868 )    (1,354 )

Employee termination benefits costs 6,619 4,763 6,733 Other costs to exit activities

            4,208          170       1,262
Impaired asset write-downs                  773          104         874
Other income                               (237 )       (431 )      (188 )

Total other (income) expenses, net $ (2,621 ) $ (2,201 ) $ 7,327

Interest Expense
Interest expense in 2019 was $36.6 million, an increase of $15.1 million or 70%
compared with 2018. The increase primarily relates to higher outstanding
borrowings and weighted average interest rates.  The higher outstanding
borrowings are a result of cash paid for the Clean Earth acquisition, net of the
after-tax AXC sale proceeds, higher capital expenditures and share repurchases.
The higher interest rates are a result of the June 2019 issuance of the Notes.
Interest expense in 2018 was $21.5 million, a decrease of $5.3 million or 20%
compared with 2017. The decrease primarily relates to reduced interest rates for
the Senior Secured Credit Facilities, which was amended in December 2017 and
June 2018.
See Note 7, Debt and Credit Agreements, in Part II, Item 8, "Financial
Statements and Supplementary Data" for additional information.

Unused Debt Commitment and Amendment Fees
During 2019, the Company recognized $6.7 million of expenses for fees and other
costs related to the unused bridge financing commitment that the Company
arranged in the event that the Notes were not issued prior to the acquisition of
Clean Earth. Additionally, the Company recognized $1.0 million of expenses
related to the amendment of the Term Loan Facility.
In June 2018, the Company amended the Senior Secured Credit Facilities in order
to, among other things, reduce the interest rate applicable to the Company's
Term Loan Facility and to increase the limit of the Company's Revolving Credit
Facility. As a result, charges of $1.1 million were recorded during 2018
consisting principally of fees associated with the transaction and the write-off
of unamortized deferred financing costs.

See Note 7, Debt and Credit Agreements, in Part II, Item 8, "Financial
Statements and Supplementary Data" for additional information.
Defined Benefit Pension Income (Expense)
Defined benefit pension expense in 2019 was $5.5 million compared to defined
benefit pension income of $3.5 million in 2018. This change is primarily the
result of lower plan asset values at December 31, 2018.

Defined benefit pension income in 2018 was $3.5 million compared to defined benefit pension expense of $2.6 million in 2017. This change is primarily the result of higher plan asset values at December 31, 2017.

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Income Tax Expense from Continuing Operations
Income tax expense from continuing operations in 2019 was $20.2 million, an
increase of $14.7 million compared with 2018. The effective income tax rate
relating to continued operations for 2019 was 35.8% versus 4.8% for 2018. The
increase in income tax expense and the effective income tax rate related to
continuing operations was primarily due to a $11.7 million tax benefit as a
result of the Tax Act and an $8.3 million tax benefit as a result of the Altek
acquisition in 2018 not recurring in 2019, a change in the mix of international
income and withholding taxes on remitted earnings, partially offset by decreased
income from U.S. continuing operations.
Income tax expense from continuing operations in 2018 was $5.5 million, a
decrease of $72.7 million compared with 2017. The effective income tax rate
relating to continued operations for 2018 was 4.8% versus 103.7% for 2017. The
decrease in income tax expense and the effective income tax rate related to
continuing operations was primarily due to the impact of the Tax Act. The
Company recognized a provisional $49.8 million income tax charge as a result of
revaluing the U.S. ending net deferred tax assets and liabilities for the year
ended December 31, 2017 and made a favorable adjustment of a $11.7 million to
the provisional amount during the fourth quarter 2018. Additionally, as a result
of the Altek acquisition, an $8.3 million income tax benefit arising from the
adjustment to certain existing deferred tax asset valuation allowances was
realized.

See Note 10, Income Taxes, in Part II, Item 8, "Financial Statements and
Supplementary Data" for additional information.
Gain on Sale of Discontinued Businesses
In July 2019, the Company completed the previously announced sale of AXC for
$600 million in cash and recognized a gain on sale of $527.9 million pre-tax
(approximately $421 million after tax). In November 2019, the Company completed
the previously announced sale of PK for $60 million cash and recognized a gain
on sale of $41.2 million pre-tax (or approximately $33 million after-tax). These
transactions have been recorded in the Consolidated Statements of Operations as
discontinued operations for the year ended December 31, 2019.

Income from Discontinued Businesses
The operating results of the former Harsco Industrial Segment, costs directly
related to these disposals, an allocation of interest expense associated with
mandatory debt repayments required as a result of the disposals and the
write-off of deferred financing costs resulting from the mandatory repayment
have been reflected as discontinued operations in the Consolidated Statement of
Operations for all periods presented. See Note 3, Acquisitions and Dispositions,
in Part II, Item 8, "Financial Statements and Supplementary Data" for additional
information.


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

The Company's cash flows from operating, investing and financing activities, as
reflected on the Consolidated Statements of Cash Flows, are summarized in the
following table:
(In millions)                               2019        2018        2017
Net cash provided (used) by:
Operating activities                      $  (0.2 )   $ 192.0     $ 176.9
Investing activities                       (132.2 )    (161.1 )    (103.3 )
Financing activities                        125.7       (25.5 )     (83.7 )

Impact of exchange rate changes on cash (0.8 ) (4.4 ) 4.5 Net change in cash and cash equivalents $ (7.4 ) $ 0.9 $ (5.7 )

Cash provided (used) by operating activities - Net cash used by operating
activities in 2019 was $0.2 million, a decrease of $192.2 million from 2018. The
primary drivers for this decrease were a $103 million tax payment related to the
gain on the sale of AXC, the proceeds for which are reflected in investing
activities, approximately $29 million of transaction related costs principally
associated with the Clean Earth acquisition and sale of the Harsco Industrial
Segment businesses and increases in working capital principally due to higher
inventory balances in the Harsco Rail Segment.

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Also included in the Cash flows from operating activities section of the
Consolidated Statements of Cash Flows is the caption, Other assets and
liabilities. A summary of the major components of this caption for the periods
presented is as follows:
(In millions)                                      2019        2018       

2017

Net cash provided (used) by:

 Change in income taxes                          $   5.3     $ (15.3 )   $ 

0.9

 Change in prepaid expenses                        (13.0 )       2.1      (3.7 )
Change in contingent consideration liabilities      (8.2 )      (2.9 )      

-

 Other (a)                                          (8.7 )     (17.4 )     

6.2

Total change in other assets and liabilities $ (24.6 ) $ (33.5 ) $ 3.4

(a) Other relates primarily to other accruals that are individually not

significant.

Cash used by investing activities - Net cash used by investing activities in
2019 was $132.2 million, a decrease of $29.0 million from 2018. The decrease was
primarily due to proceeds from the sale of AXC and PK; partially offset by the
purchase of Clean Earth and an increase in purchases of property, plant and
equipment.
Cash provided (used) by financing activities - Net cash provided by financing
activities in 2019 was $125.7 million, an increase of $151.3 million from 2018.
The change was primarily due to net cash borrowings of $181.3 million in 2019
compared with net cash borrowings of $13.8 million in 2018, partially offset by
payment of deferred financing costs and employee taxes paid on stock-based
compensation. The increase in net cash borrowings was primarily related to
proceeds from the Notes offering, which were used to acquire Clean Earth and pay
related transaction costs, and borrowings for additional capital expenditures;
partially offset by the repayment of debt using proceeds from the sale of AXC
and PK.
Cash Requirements
The following summarizes the Company's expected future payments related to
contractual obligations and commercial commitments at December 31, 2019:
  Contractual Obligations and Commercial Commitments at December 31, 2019 (b)
                                                            Payments Due by Period
                                            Less than         1-3            3-5           After 5
(In millions)                 Total          1 year          years          years           years

Short-term borrowings $ 3.6 $ 3.6 $ - $

       -     $         -
Long-term debt
(including current
maturities and finance
leases)                         795.0             2.7            4.1          288.2           500.0
Projected interest
payments on long-term
debt (c)                        271.2            39.7           77.6           79.6            74.3
Purchase obligations (d)        127.2            88.5           37.7            1.0               -
Operating lease
liabilities                      73.3            15.0           18.3            8.1            31.9
Pension obligations (e)          33.6            33.6              -              -               -
Foreign currency
exchange forward
contracts (f)                     0.9             0.9              -              -               -
Contingent
consideration (g)                12.2             3.9            7.2            0.6             0.5
Total contractual
obligations (h)            $  1,317.0     $     187.9     $    144.9     $  

377.5 $ 606.7

(b) See Note 3, Acquisitions and Dispositions; Note 7, Debt and Credit

Agreements; Note 8, Leases; Note 9, Employee Benefit Plans; Note 10, Income

Taxes; and Note 14, Financial Instruments, in Part II, Item 8, "Financial

Statements and Supplementary Data," for additional information on short-term

borrowings and long-term debt (including finance leases); operating leases;

employee benefit plans; income taxes; interest rate swaps and foreign

currency exchange forward contracts, respectively.

(c) The total projected interest payments on long-term debt are based upon

borrowings, interest rates and foreign currency exchange rates at

December 31, 2019, including interest rate swaps currently in effect. The interest rates on variable-rate debt and the foreign currency exchange rates are subject to changes beyond the Company's control and may result in actual interest expense and payments differing from the amounts projected above. (d) Purchase obligations represent legally binding obligations to purchase

property, plant and equipment, inventory and other commitments made in the

normal course of business to meet operations requirements.

(e) Amounts represent expected employer contributions to defined benefit pension

plans for the next year.

(f) Amounts represent the fair value of the foreign currency exchange contracts

outstanding at December 31, 2019. Due to the nature of these contracts, based

on fair values at December 31, 2019 there will be a net cash payable of $0.9

million comprised of cash receipts of $495.4 million and cash payments of

$496.3 million. The foreign currency exchange contracts are recorded on the

Consolidated Balance Sheets at fair value.

(g) The Company acquired Clean Earth on June 28, 2019 and included in the

liabilities acquired was a contingent consideration liability resulting from

a prior Clean Earth acquisition. Also, included is a liability payable to

Compass Diversified Holdings related to reimbursements related to future

utilization of net operating losses by the Company.

(h) At December 31, 2019, in addition to the above contractual obligations, the

Company had $4.3 million of potential long-term tax liabilities, including

interest and penalties, related to uncertain tax positions. Because of the

high degree of uncertainty regarding the future cash flows associated with

these potential long-term tax liabilities, the Company is unable to estimate

    the years in which settlement will occur with the respective taxing
    authorities.






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Off-Balance Sheet Arrangements
The following table summarizes the Company's contingent commercial commitments
at December 31, 2019. These amounts are not included on the Consolidated Balance
Sheets since there are no current circumstances known to management indicating
that the Company will be required to make payments on these contingent
commercial commitments.
                  Commercial Commitments at December 31, 2019
                                          Amount of Commercial Commitment Expiration Per Period
(In                              Less than          1-3             3-5           Over 5        Indefinite
millions)         Total           1 Year           Years           Years           Years        Expiration
Performance
bonds          $    196.0     $       153.5     $     40.7     $       0.1     $         -     $       1.7
Standby
letters of
credit               46.4              32.3            7.3             2.1             4.7               -
Guarantees           41.3               4.4              -             4.1            18.9            13.9
Total
commercial
commitments    $    283.7     $       190.2     $     48.0     $       6.3     $      23.6     $      15.6


Certain commercial commitments that are of a continuous nature do not have an
expiration date and are therefore considered to be indefinite in nature. See
Note 14, Financial Instruments, in Part II, Item 8, "Financial Statements and
Supplementary Data," for additional information.
Sources and Uses of Cash
The Company's principal sources of liquidity are cash provided by operations and
borrowings under the Senior Secured Credit Facilities, augmented by cash
proceeds from asset sales. In addition, the Company has other bank credit
facilities available throughout the world.  The Company expects to continue to
utilize all of these sources to meet future cash requirements for operations and
growth initiatives.
Summary of Senior Secured Credit Facilities and Notes:        December 31       December 31
(In millions)                                                    2019              2018
By type:
   Revolving Credit Facility                                $        67.0     $        62.0
   Term Loan Facility                                               218.2             541.8
5.75% Notes                                                         500.0                 -
   Total                                                    $       785.2     $       603.8
By classification:
   Current                                                  $           -     $         5.4
   Long-term                                                        785.2             598.3
   Total                                                    $       785.2     $       603.8


                                                                           December 31, 2019
                                                    Facility       Outstanding        Outstanding        Available
(In thousands)                                        Limit          

Balance Letters of Credit Credit Revolving Credit Facility (a U.S.-based program) $ 700,000 $ 67,000 $ 25,352 $ 607,648

In July 2019, the Company made a prepayment of $320.9 million on the $550
million Term Loan Facility, using proceeds from the sale of AXC. The remainder
of the proceeds from the sale were used to pay down the Revolving Credit
Facility. As a result of this prepayment, the Company wrote off $5.3 million of
previously recorded deferred financing costs on the Condensed Consolidated
Statement of Operations as discontinued operations for the year ended December
31, 2019. The prepayment satisfied all future quarterly principal payment
requirements under the Term Loan Facility; the remaining principal is due at
maturity.

During June 2019, the Company completed the Notes offering. The Notes are due
July 31, 2027 and bear interest at a fixed rate of 5.75%, which is payable on
January 31 and July 31 of each year, beginning on January 31, 2020. The Notes
are fully and unconditionally guaranteed, jointly and severally, by all of the
wholly owned domestic subsidiaries of the Company that guarantee the Senior
Secured Credit Facilities. The indenture governing the Notes contains provisions
that (i) allow the Company to redeem some or all of the Notes prior to maturity;
(ii) require the Company to offer to repurchase all of the Notes upon a change
in control; and (iii) require adherence to certain covenants which are generally
less restrictive than those included in the Company's Credit Agreement governing
the Senior Secured Credit Facilities (the "Credit Agreement"). The Notes were
used, together with borrowings under the Company's Revolving Credit Facility, to
fund the acquisition of Clean Earth.


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Additionally, during June 2019, the Company amended the Credit Agreement to,
among other things, increase the borrowing capacity of the Revolving Credit
Facility by $200 million to a total of $700 million, extend the maturity date of
the Revolving Credit Facility until June 2024 and increase the maximum net debt
to consolidated adjusted EBITDA ratio from 3.5 to 4.5, which decreases to 4.0
for the second quarter of 2020 and periods thereafter. As of December 31, 2019,
$1.0 million of expenses were recognized related to the amended Credit
Agreement.

The Company has capitalized $11.6 million of fees related to the issuance of the Notes and the amendment of the Revolving Credit Facility.

In addition, during the second quarter of 2019, the Company recognized $6.7
million of expenses for fees and other costs related to bridge financing
commitments that the Company arranged in the event that the Notes were not
issued prior to the acquisition of Clean Earth. Because the Notes were issued
prior to completion of the Clean Earth acquisition, the bridge financing
commitments were not utilized.
On May 2, 2018 the Company announced that the Board authorized a share
repurchase program pursuant to which the Company could repurchase shares in an
amount up to $75 million. The extent to which the Company repurchases shares,
and the timing of such repurchases, will depend upon a variety of factors
including market conditions and other corporate considerations as determined by
the Company's management. The repurchase program may be suspended or
discontinued at any time. During 2019, the Company purchased 1.8 million shares
of common stock under this program at an average price of $18.02 per share or a
total of approximately $32 million. During 2018, the Company purchased 1.3
million shares of common stock under this program at an average price of $22.72
per share or a total of approximately $30 million.

Certainty of Cash Flows
The majority of the Company's cash flows provided by operations has historically
been generated in the second half of the year. The certainty of the Company's
future cash flows is underpinned by the long-term nature of the Company's metals
services contracts, the order backlog for the Company's railway track
maintenance services and equipment and overall discretionary cash flows
(operating cash flows plus cash from asset sales in excess of the amounts
necessary for capital expenditures to maintain current revenue levels) generated
by the Company. Historically, the Company has utilized these discretionary cash
flows for growth-related capital expenditures, strategic acquisitions, debt
repayment and dividend payments.
The types of products and services that the Company provides are not subject to
rapid technological change, which increases the stability of related cash flows.
Additionally, the Company believes each business in its portfolio is a leader in
the industries and major markets the Company serves. Due to these factors, the
Company is confident in the Company's future ability to generate positive cash
flows from operations.
Debt Covenants
The Credit Agreement contains a consolidated net debt to consolidated adjusted
EBITDA ratio covenant, which is not to exceed 4.5 to 1.0, as of December 31,
2019, and a minimum consolidated adjusted EBITDA to consolidated interest
charges ratio covenant, which is not to be less than 3.0 to 1.0. At December 31,
2019, the Company was in compliance with these covenants as the net leverage
ratio was 2.4 to 1.0 and interest coverage ratio was 6.8 to 1.0. Based on
balances and covenants in effect at December 31, 2019, the Company could
increase net debt by $644.9 million and still be in compliance with these debt
covenants.  The Company expects to continue to be in compliance with these debt
covenants for at least the next twelve months.

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

At December 31, 2019, the Company's consolidated cash and cash equivalents
included $53.8 million held by non-U.S. subsidiaries. At December 31, 2019, less
than 2% of the Company's consolidated cash and cash equivalents had regulatory
restrictions that would preclude the transfer of funds with and among
subsidiaries. Non-U.S. subsidiaries also held $19.9 million of cash and cash
equivalents in consolidated strategic ventures. The strategic venture agreements
may require strategic venture partner approval to transfer funds with and among
subsidiaries. While the Company's remaining non-U.S. cash and cash equivalents
can be transferred with and among subsidiaries, the majority of these non-U.S.
cash balances will be used to support the ongoing working capital needs and
continued growth of the Company's non-U.S. operations.

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Application of Critical Accounting Policies
The Company's discussion and analysis of its financial condition and results of
operations are based upon the consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles in the U.S.
("U.S. GAAP"). The preparation of these consolidated financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses. On an ongoing basis, the
Company evaluates the estimates, including those related to defined benefit
pension benefits, notes and accounts receivable, goodwill, long-lived asset
impairment, inventories, revenue recognition - cost-to-cost method, insurance
reserves and income taxes. The impact of changes in these estimates, as
necessary, is reflected in the respective segment's results of operations in the
period of the change. The Company bases estimates on historical experience and
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
outcomes, assumptions or conditions.
The Company believes the following critical accounting policies are affected by
the Company's more significant judgments and estimates used in the preparation
of the consolidated financial statements. Management has discussed the
development and selection of the critical accounting estimates described below
with the Audit Committee of the Board and they have reviewed the Company's
disclosures relating to these estimates in this Management's Discussion and
Analysis of Financial Condition. These items should be read in conjunction with
Note 1, Summary of Significant Accounting Policies, in Part II, Item 8,
"Financial Statements and Supplementary Data."
Defined Benefit Pension Benefits
The Company has defined benefit pension plans in several countries. The largest
of these plans are in the U.K. and the U.S. The Company's funding policy for
these plans is to contribute amounts sufficient to meet the minimum funding
pursuant to U.K. and U.S. statutory requirements, plus any additional amounts
that the Company may determine to be appropriate.
Changes in the discount rate assumption and the actual performance of plan
assets compared with the expected long-term rate of return on plan assets are
the primary drivers in the change in funded status of the Company's defined
benefit pension plans. These factors are components of actuarial loss (gain) and
impact the amount recognized in Other comprehensive income (loss), as such
actuarial changes are not reflected directly on the Consolidated Statements of
Operations but amortized over time in accordance with U.S. GAAP.

Critical Estimate-Defined Benefit Pension Benefits
Accounting for defined benefit pension plans requires the use of actuarial
assumptions. The principal assumptions used include the discount rate and the
expected long-term rate of return on plan assets. Each assumption is reviewed
annually and represents management's best estimate at that time. The assumptions
are selected to represent the average expected experience over time and may
differ, in any one year, from actual experience due to changes in capital
markets and the overall economy. These differences will impact the amount of
unfunded benefit obligation and the expense recognized.
The discount rates used in calculating the Company's projected benefit
obligations at the December 31, 2019 measurement date for the U.K. and U.S.
defined benefit pension plans were 2.0% and 3.2%, respectively, and the global
weighted-average discount rate was 2.4%. The discount rates selected represent
level-equivalent rates using the yield curve spot rates on a year-by-year
expected cash flow basis, using yield curves of high-quality corporate bonds.
Annual NPPC is determined using the discount rates at the beginning of the year.
The discount rates for 2019 expense were 2.9% for the U.K. plan, 4.2% for the
U.S. plans and 3.2% for the global weighted-average of plans.
The expected long-term rate of return on plan assets is determined by evaluating
the asset return expectations with the Company's advisors as well as actual,
long-term, historical results of asset returns for the pension plans. Generally,
the NPPC increases as the expected long-term rate of return on assets decreases.
For 2020 and 2019, the global weighted-average expected long-term rate of return
on asset assumption is 5.6% and 5.9%, respectively. This rate was determined
based on a model of expected asset returns for an actively managed portfolio.







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Changes in NPPC may occur in the future due to changes in actuarial assumptions
and due to changes in returns on plan assets resulting from financial market
conditions. Holding all other assumptions constant, using December 31, 2019 plan
data, a one-quarter percent increase or decrease in the discount rate and the
expected long-term rate of return on plan assets would increase or decrease
annual 2019 pre-tax defined benefit NPPC as follows:
                                           U.S. Plans                 U.K. Plan
Discount rate
One-quarter percent increase        Increase of $0.1 million   Decrease of $0.1 million
One-quarter percent decrease        Decrease of $0.1 million              -
Expected long-term rate of return
on plan assets
One-quarter percent increase        Decrease of $0.5 million   Decrease of $2.0 million
One-quarter percent decrease        Increase of $0.5 million   Increase of $2.0 million


Increases or decreases to the net pension obligations may be required should
circumstances that affect these estimates change. Additionally, certain events
could result in the pension obligation changing at a time other than the annual
measurement date. This would occur when a benefit plan is amended or when plan
curtailments or settlements occur.
See Note 9, Employee Benefit Plans, in Part II, Item 8, "Financial Statements
and Supplementary Data," for additional information.

Notes and Accounts Receivable
Notes and accounts receivable are stated at net realizable value through the use
of an allowance for doubtful accounts. The allowance for doubtful accounts is
maintained for estimated losses resulting from the inability or unwillingness of
customers to make required payments. The Company has policies and procedures in
place requiring customers to be evaluated for creditworthiness prior to the
execution of new service contracts or shipments of products. These reviews are
structured to minimize the Company's risk related to realizability of
receivables. Despite these policies and procedures, the Company may at times
still experience collection problems and potential bad debts due to economic
conditions within certain industries (e.g., steel industry), countries or
regions in which the Company operates. At December 31, 2019 and 2018, trade
accounts receivable of $310.0 million and $246.4 million, respectively, were net
of reserves of $13.5 million and $4.6 million, respectively.

Critical Estimate-Notes and Accounts Receivable
A considerable amount of judgment is required to assess the realizability of
receivables, including the current creditworthiness of each customer, related
aging of past due balances and the facts and circumstances surrounding any
non-payment. The Company's provisions for bad debts during 2019, 2018 and 2017
were $7.5 million, $0.4 million and $5.2 million, respectively.
On a monthly basis, customer accounts are analyzed for collectability. Reserves
are established based upon a specific-identification method as well as
historical collection experience, as appropriate. The Company also evaluates
specific accounts when it becomes aware of a situation in which a customer may
not be able to meet its financial obligations due to a deterioration in
financial condition, credit ratings, bankruptcy or receivership. The reserves
are based on the facts available to the Company and are re-evaluated and
adjusted as additional information becomes available. Reserves are also
determined by using percentages (based upon experience) applied to certain aged
receivable categories. Specific issues are discussed with corporate management
and any significant changes in reserve amounts or the write-off of balances must
be approved by specifically designated corporate personnel. All approved items
are monitored to ensure they are recorded in the proper period. Additionally,
any significant changes in reserve balances are reviewed to ensure the proper
corporate approval has occurred.
If the financial condition of the Company's customers were to deteriorate,
resulting in their inability to make payments, additional allowances may be
required. Conversely, an improvement in a customer's ability to make payments
could result in a decrease of the allowance for doubtful accounts. Changes in
the allowance for doubtful accounts related to both of these situations would be
recorded through Operating income from continuing operations in the period the
change was determined. For the year ended 2019, the Company recorded a provision
for doubtful accounts in the Harsco Environmental Segment related to a customer
in the U.K. entering administration. The Company continues to provide services
to the customer and continues to collect on post-administration invoices timely
while the customer seeks a buyer for their operations. Depending on the outcome
of any potential transactions, there could be an impact on the Company's results
of operations, cash flows and asset valuations in the future, which may be
material in any one period.
The Company has not materially changed the methodology for calculating
allowances for doubtful accounts for the years presented. See Note 4, Accounts
Receivable and Inventories, in Part II, Item 8, "Financial Statements and
Supplementary Data," for additional information.


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Business Combinations and Goodwill
The Company accounts for business combinations using the acquisition method of
accounting, which requires that once control is obtained, all assets acquired
and liabilities assumed, including amounts attributable to noncontrolling
interests, be recorded at their respective fair values at the date of
acquisition. During 2019, the Company acquired 100% of the outstanding stock of
Clean Earth, one of the largest U.S. providers of specialty waste processing and
benefit reuse solutions for hazardous wastes, contaminated materials and dredged
volumes. See Note 3, Acquisitions and Dispositions, in Part II, Item 8,
"Financial Statements and Supplementary Data," for additional information.
The Company's goodwill balances were $738.4 million and $404.7 million at
December 31, 2019 and 2018, respectively. The Company performs the annual
goodwill impairment test as of October 1. The Company has three reporting units
consisting of the Harsco Environmental Segment, the Harsco Clean Earth Segment
and the Harsco Rail Segment. Almost all of the Company's goodwill is allocated
to the Harsco Environmental Segment and the Harsco Clean Earth Segment.
Critical Estimate-Business Combinations and Goodwill
The acquisition method of accounting requires the excess of purchase price over
the fair values of identifiable assets and liabilities to be recorded as
goodwill. The determination of fair value of assets acquired and liabilities
assumed requires numerous estimates and assumptions with respect to the timing
and amounts of cash flow projections, revenue growth rates, customer attrition
rates, discount rates and useful lives. Such estimates are based upon
assumptions believed to be reasonable, and when appropriate, include assistance
from independent third-party valuation firms. During the measurement period,
which is up to one year from the acquisition date, the Company may record
adjustments to the assets acquired and liabilities assumed, with corresponding
offsets to goodwill. See Note 3, Acquisitions and Dispositions, in Part II, Item
8, "Financial Statements and Supplementary Data," for additional information
regarding the purchase price allocation related to acquisitions.
In accordance with U.S. GAAP, goodwill is not amortized and is tested for
impairment at least annually or more frequently if indicators of impairment
exist or if a decision is made to dispose of a business. Goodwill is allocated
among and evaluated for impairment at the reporting unit level, which is defined
as an operating segment or one level below an operating segment for which
discrete financial information is available. A significant amount of judgment is
involved in determining if an indicator of impairment has occurred. Such
indicators may include declining cash flows or operating losses at the reporting
unit level, a significant adverse change in legal factors or in the business
climate, an adverse action or assessment by a regulator, unanticipated
competition, a loss of key personnel or a more likely than not expectation that
a reporting unit or a significant portion of a reporting unit will be sold or
otherwise disposed of, among others.
In applying the goodwill impairment test, the Company has the option to perform
a qualitative test ("Step 0") or a quantitative test ("Step 1"). Under Step 0,
the Company assesses qualitative factors to determine whether it is more likely
than not that the fair value of the reporting units is less than its carrying
value. Qualitative factors may include, but are not limited to, economic
conditions, industry and market considerations, cost factors, overall financial
performance of the reporting unit, and other entity and reporting unit specific
events. If after assessing these qualitative factors, the Company determines it
is "more-likely-than-not" that the fair value of the reporting unit is less than
the carrying value, the Company would perform Step 1.
The Step 1 approach of testing for goodwill impairment involves comparing the
current fair value of each reporting unit to the net book value, including
goodwill. The Company uses a discounted cash flow model ("DCF model") to
estimate the current fair value of reporting units, as management believes
forecasted operating cash flows are the best indicator of current fair value. A
number of significant assumptions and estimates are involved in the preparation
of DCF models including future revenues and operating margin growth, the
weighted-average cost of capital ("WACC"), tax rates, capital spending, pension
funding, the impact of business initiatives and working capital projections.
These assumptions and estimates may vary significantly among reporting units.
DCF models are based on approved long-range plans for the early years and
historical relationships and projections for later years. WACC rates are derived
from internal and external factors including, but not limited to, the average
market price of the Company's stock, shares outstanding, book value of the
Company's debt, the long-term risk-free interest rate, and both market and
size-specific risk premiums. Due to the many variables noted above and the
relative size of the Company's goodwill, differences in assumptions may have a
material impact on the results of the Company's annual goodwill impairment
testing. If the net book value of a reporting unit were to exceed the current
fair value, the second step of the goodwill impairment test ("Step 2") would
currently be required to determine if an impairment existed and the amount of
goodwill impairment to record, if any.
Step 2 compares the net book value of a reporting unit's goodwill with the
implied fair value of that goodwill. The implied fair value of goodwill
represents the excess of fair value of the reporting unit over the fair value
amounts assigned to all of the assets and liabilities of the reporting unit if
it were to be acquired in a hypothetical business combination and the current
fair value of the reporting unit represented the purchase price. As necessary,
the Company may use independent third-party valuation firms to assist with the
Step 2 assessment.


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The performance of the Company's 2019 annual impairment tests did not result in
any impairment of the Company's goodwill.
See Note 1, Summary of Significant Accounting Policies and Note 6, Goodwill and
Other Intangible Assets, in Part II, Item 8, "Financial Statements and
Supplementary Data," for additional information.

Long-lived Asset Impairment (Other than Goodwill)
Long-lived assets (or asset groups) are reviewed for impairment when events and
circumstances indicate that the book value of an asset (or asset group) may be
impaired. The amounts charged against pre-tax income from continuing operations
related to impaired long-lived assets (or asset groups) included in Other
(income) expenses, net on the Consolidated Statements of Operations were $0.8
million, $0.1 million and $0.9 million in 2019, 2018 and 2017, respectively.

Critical Estimate-Asset Impairment
The determination of a long-lived asset (or asset group) impairment involves
significant judgments based upon short-term and long-term projections of future
asset (or asset group) performance. If the undiscounted cash flows associated
with an asset (or asset group) do not exceed the asset's book value, impairment
loss estimates would be based upon the difference between the book value and
fair value of the asset (or asset group). The fair value is generally based upon
the Company's estimate of the amount that the assets (or asset group) could be
bought or sold for in a transaction between willing parties. If quoted market
prices for the asset (or asset group) or similar assets are unavailable, the
fair value estimate is generally calculated using a DCF model. Should
circumstances change that affect these estimates, additional impairment charges
may be required and would be recorded through income in the period the change
was determined.
The Company has not materially changed the methodology for calculating
long-lived asset impairments for the years presented. U.S. GAAP requires
consideration of all valuation techniques for which market participant inputs
can be obtained without undue cost and effort. The use of a DCF model continues
to be an appropriate method for determining fair value; however, methodologies
such as quoted market prices must also be evaluated. See Note 17, Other (Income)
Expenses, Net in Part II, Item 8, "Financial Statements and Supplementary Data,"
for additional information.
Inventories
Inventory balances are adjusted for estimated obsolete or unmarketable inventory
equal to the difference between the cost of inventory and its net realizable
value or estimated market value, as applicable. At December 31, 2019 and 2018,
inventories of $157.0 million and $116.2 million, respectively, are net of
reserves of $12.5 million and $9.5 million, respectively.

Critical Estimate-Inventories
In assessing the realization of inventory balances, the Company is required to
make judgments as to future demand and compare these with current or committed
inventory levels. If actual market conditions are determined to be less
favorable than those projected by management, additional inventory write-downs
may be required and would be recorded through Operating income from continuing
operations in the period the determination is made. Additionally, the Company
records reserves to adjust a substantial portion of its U.S. inventory balances
to the LIFO method of inventory valuation. In adjusting these reserves
throughout the year, the Company estimates its year-end inventory costs and
quantities. At December 31 of each year, the reserves are adjusted to reflect
actual year-end inventory costs and quantities. During periods of inflation,
LIFO expense usually increases and during periods of deflation it decreases.
These year-end adjustments resulted in pre-tax income of $1.6 million in 2019,
pre-tax expense of $0.6 million in 2018 and pre-tax income of $1.7 million in
2017.
The Company has not materially changed the methodology for calculating inventory
reserves for the years presented. See Note 4, Accounts Receivable and
Inventories, in Part II, Item 8, "Financial Statements and Supplementary Data,"
for additional information.
Revenue Recognition - Cost-to-cost Method
For certain contracts with customers, which meet specific criteria established
in U.S. GAAP, the Company recognizes revenue on an over time basis utilizing an
input method based on costs incurred ("cost-to-cost method") to measure
progress, which requires the Company to make estimates regarding the revenues
and costs associated with design, manufacturing and delivery of products.
Critical Estimate-Revenue Recognition - Cost-to-cost Method
The Company uses the cost-to-cost method to measure progress because it is the
measure that best depicts the transfer of control to the customer, which occurs
as the Company incurs costs under the contracts. Under the cost-to-cost method,
the extent of progress towards completion is based on the ratio of costs
incurred to total estimated costs at completion which includes both actual costs
already incurred and the estimated costs to complete. Accounting for contracts
with customers using the cost-to-cost method requires significant judgment
relative to assessing risks, estimating contract revenues (including estimates
of variable consideration, if applicable), estimating contract costs (including
estimating any liquidating damages or penalties related to performance,
engineering costs to design the machine and the material, labor and overhead
manufacturing

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costs to build the machine); making assumptions for schedule and technical
items; properly executing the engineering and design phases consistent with
customer expectations; the availability and costs of labor and material
resources; productivity; and evaluating whether a significant financing
component is present. Due to the number of years it may take to complete certain
contracts and the scope and nature of the work required to be performed on those
contracts, primarily in the Harsco Rail Segment, estimating total revenues and
costs at completion is inherently complicated and subject to many variables.
Accordingly, estimates are subject to change as experience is gained and as more
information is obtained, even though the scope of the work under the contract
may not have changed. When adjustments in estimated total contract sales or
estimated total costs are required, any changes from prior estimates are
recognized in current period earnings for the inception-to-date effect of such
changes. When estimates of total costs to be incurred on a contract using the
cost-to-cost method exceed estimates of total sales to be earned, a provision
for the entire loss on the contract is recorded in current period earnings when
the loss is determined.
The Company recognized an estimated forward loss provision related to the
contracts with the federal railway system of Switzerland. At December 31, 2019,
the entire remaining estimated forward loss provision of $6.4 million is
included in the caption Other current liabilities on the Consolidated Balance
Sheets. The estimated forward loss provision represents the Company's best
estimate based on currently available information. It is possible that the
Company's overall estimate of costs to complete these contracts may increase,
which would result in an additional estimated forward loss provision at such
time. As of December 31, 2019, the Company has substantially completed the first
SBB contract and the second SBB contract is approximately 42% complete. Based on
all information currently available, the Company is unable to estimate any
further possible loss or range of loss at this time. There are a number of key
events now expected to occur in 2020, including the finalization of the
manufacturing designs for certain of the vehicles, and which could affect the
cost estimates. Any adjustment to the cost estimates would be recorded when new
information becomes available and could have a material impact on the Company's
results of operations in that period.
Insurance Reserves
The Company retains a significant portion of the risk for U.S. workers'
compensation, U.K. employers' liability, automobile, general and product
liability losses. At December 31, 2019 and 2018, the Company recorded
liabilities of $28.7 million and $60.3 million, respectively, related to both
asserted and unasserted insurance claims. At December 31, 2019 and 2018,
$3.7 million and $34.2 million, respectively, was included in insurance
liabilities related to claims covered by insurance carriers for which a
corresponding receivable has been recorded. The balance at December 31, 2018
includes an insurance receivable and related insurance liability associated with
the Lima Refining Company litigation. See Note 11, Commitments and
Contingencies, in Part II, Item 8, "Financial Statements and Supplementary
Data," for additional information.

Critical Estimate-Insurance Reserves
Insurance reserves have been recorded based upon actuarial calculations that
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 Operating income from continuing
operations in the period the change was determined. During 2019, 2018 and 2017,
the Company recorded insurance reserve adjustments that decreased pre-tax
insurance expense from continuing operations for self-insured programs by $1.5
million, $2.0 million and $1.5 million, respectively. The Company has programs
in place to improve claims experience, such as disciplined claim and insurance
litigation management and a focused approach to workplace safety.
The Company has not materially changed the methodology for calculating insurance
reserves for the years presented. There are currently no known trends, demands,
commitments, events or uncertainties that are reasonably likely to occur that
would materially affect the methodology or assumptions described above. See Note
1, Summary of Significant Accounting Policies, in Part II, Item 8, "Financial
Statements and Supplementary Data," for additional information.
Income Taxes
The Company's income tax expense, deferred tax assets and liabilities and
reserves for uncertain tax positions reflect management's best estimate of taxes
to be paid. The Company is subject to various international, federal, state and
local income taxes in jurisdictions where the Company operates. In determining
income tax expense, the Company makes its best estimate of the annual effective
income tax rate at the end of each quarter and applies that rate to year-to-date
income (loss) before income taxes to arrive at the year-to-date income tax
provision (exclusive of loss jurisdictions for which no tax benefit is
realizable with any discrete tax items recorded separately). At December 31,
2019, 2018 and 2017, the Company's annual effective income tax rate on income
from continuing operations was 35.8%, 4.8% and 103.7%, respectively.




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Critical Estimate-Income Taxes
Annual effective income tax rates are estimated by giving recognition to
currently enacted tax rates, tax holidays, tax credits, capital losses and tax
deductions as well as certain exempt income and non-deductible expenses for all
jurisdictions where the Company operates. Quarterly income tax provisions
incorporate any change in the year-to-date provision from the previous quarterly
periods.
The Company records deferred tax assets to the extent the Company believes these
assets will more likely than not be realized. In making such determinations, the
Company considers all available evidence, including future reversals of existing
deferred tax liabilities, projected future taxable income, feasible and prudent
tax planning strategies and recent financial operating results. In the event the
Company was to determine that it would be able to realize deferred tax assets in
the future in excess of their net recorded amount, an adjustment to the
valuation allowance would be made that would reduce the provision for income
taxes.
Valuation allowances of $127.1 million and $137.5 million at December 31, 2019
and 2018, respectively, related principally to deferred tax assets for pension
liabilities, NOLs, foreign tax credit carryforwards, capital loss carryforwards
and foreign currency translation that are uncertain as to realizability. In
2019, the Company recorded a valuation allowance reduction of $12.5 million
related to capital loss carryforwards, foreign tax credit carryforwards and
state NOLs due to the losses and foreign tax credit carryforwards being utilized
to reduce the tax liabilities on the capital gain realized as a result of the
sale of AXC and PK. In addition, the Company recorded a valuation allowance
reduction (and corresponding reduction to deferred tax assets) of $5.6 million
due to the merger and liquidation of certain foreign dormant entities resulting
in the loss of certain tax attributes, offset by a net increase of $7.9 million
related to losses in certain jurisdictions where the Company determined it is
more likely than not that these assets will not be realized. In 2018, the
Company finalized the impact of the Tax Act and reduced the provisional
valuation allowance by $15.2 million because of the expected realization of
foreign tax credit and state net operating loss carryforward. In addition, the
U.K. valuation allowance was reduced by $13.6 million as a result of the Altek
acquisition and change in estimates of interest deductions. The Company recorded
a valuation allowance reduction of $8.7 million from the effects of foreign
currency translation adjustments, partially offset by the net increase related
to losses in certain jurisdictions where the Company determined that it is more
likely than not that these assets will not be realized.
An income tax benefit from an uncertain tax position may be recognized when it
is more likely than not that the position will be sustained upon examination,
including resolutions of any related appeals or litigation processes, based on
its technical merits. The unrecognized tax benefits at December 31, 2019 and
2018 were $3.1 million and $2.4 million, respectively, excluding accrued
interest and penalties. The unrecognized income tax benefit may decrease as a
result of the lapse of statute of limitations or as a result of final settlement
and resolution of outstanding tax matters in various state and international
jurisdictions.
On December 22, 2017, the Tax Act was signed into law. The Tax Act significantly
changed U.S. tax law by, among other things, lowering corporate income tax
rates, implementing a territorial tax system and imposing a repatriation tax on
deemed repatriated earnings of foreign subsidiaries. The Tax Act permanently
reduced the U.S. corporate income tax rate from a maximum of 35% to a 21% rate,
effective January 1, 2018. The SEC staff issued Staff Accounting Bulletin No.
118 ("SAB 118") to address the application of U.S. GAAP in situations when a
registrant did not have the necessary information available, prepared, or
analyzed (including computations) in reasonable detail to complete the
accounting for certain income tax effects of the Tax Act. The Company recognized
provisional tax impacts related to the deemed repatriated earnings and the
revaluation of deferred tax assets and liabilities in its consolidated financial
statements for the year ended December 31, 2017. Based on an analysis of the
earnings and profits ("E&P") for the Company's foreign subsidiaries, no toll
charge was recorded in 2017 related to the Tax Act. The Company finalized its
E&P analysis in 2018 and confirmed there is no toll charge related to the Tax
Act. Adjustments made to the provisional amounts allowed under SAB 118 were
identified and recorded as discrete adjustments during the year ended December
31, 2018. The accounting was completed in the fourth quarter of 2018.

The Company has not materially changed the methodology for calculating income
tax expense, deferred tax assets and liabilities and reserves for uncertain tax
positions for the years presented or for quarterly periods. See Note 10, Income
Taxes, in Part II, Item 8, "Financial Statements and Supplementary Data," for
additional information.










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Research and Development

Internal funding for research and development was as follows:

                                                      Research and Development Expenses
(In millions)                                         2019            2018           2017
Harsco Environmental                             $        0.9     $      1.6     $      1.3
Harsco Rail                                               3.9            2.3            1.4

Total research and development expenses $ 4.8 $ 3.9 $ 2.7

The amounts shown exclude technology development and engineering costs classified in cost of services sold; cost of products sold; or selling, general and administrative expenses.

Recently Adopted and Recently Issued Accounting Standards

Information on recently adopted and recently issued accounting standards is included in Note 2, Recently Adopted and Recently Issued Accounting Standards, in Part II, Item 8, "Financial Statements and Supplementary Data."

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