NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Basis of Presentation
Harsco Corporation (the "Company") has prepared these unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the U.S. ("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 Securities and Exchange Commission (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, 2019 Condensed Consolidated Balance Sheet information contained in this Quarterly Report on Form 10-Q was derived from the 2019 audited consolidated financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. In the opinion of management, all adjustments (all of which are of a normal recurring nature) that are necessary for a fair statement are reflected in the unaudited condensed consolidated financial statements.
Discontinued Operations
In January 2020 the Company sold Harsco Industrial IKG ("IKG") and together with the 2019 sales of Harsco Industrial Air-X-Changers ("AXC") and Harsco Industrial Patterson-Kelly ("PK"), this completes the divestiture of the former Harsco Industrial Segment originally announced in May 2019. These disposals represent a strategic shift and accelerated 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 Company's Condensed Consolidated Balance Sheets; (ii) the operating results of the Harsco Industrial Segment, costs directly related to the 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 in the Company's Condensed Consolidated Statements of Operations as discontinued operations for all periods presented; and (iii) all disclosures have been updated to reflect these changes. See Note 3, Acquisitions and Dispositions, for additional information.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform with current year classifications.
2. Recently Adopted and Recently Issued Accounting Standards
The following accounting standards have been adopted in 2020:
On January 1, 2020 the Company adopted changes issued by the Financial Accounting Standards Boards ("FASB") which updated the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. Provisions for receivables will be recorded as Allowance for expected credit losses, replacing the previously utilized Allowance for doubtful accounts. In addition, these changes required certain expanded disclosures. Other than changes in disclosure, these changes did not have a material impact on the Company's condensed consolidated financial statements as the calculation of expected credit losses did not yield results that were materially different from the methodology previously utilized by the Company. See Note 4, Accounts Receivable and Note Receivable for additional information.
On January 1, 2020 the Company adopted changes issued by FASB that removed the second step of the annual goodwill impairment test, which requires a hypothetical purchase price allocation. The changes provide that the amount of goodwill impairment will be equal to the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance remains largely unchanged. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill at reporting units with zero or negative carrying amounts. These changes did not have a material impact on the Company's condensed consolidated financial statements.
On January 1, 2020 the Company adopted changes issued by FASB which modified the disclosure requirements for fair value measurements. The amendments in this update remove the requirement to disclose the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. The changes require disclosure of changes in unrealized gains and losses for
the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. Other than required expanded disclosures, the adoption of these changes did not have a material impact on the Company's condensed consolidated financial statements.
The following accounting standards have been issued and become effective for the Company at a future date:
In December 2019 the FASB issued changes which are intended to reduce complexity and simplify the accounting for income taxes in accordance with U.S. GAAP by removing certain exceptions related to investments, intraperiod allocations and interim calculations and clarifying existing guidance to improve consistent application. The changes become effective for the Company on January 1, 2021 with early adoption permitted. Management is currently evaluating the impact of these changes on its condensed consolidated financial statements.
In March 2020 the FASB issued changes that provides companies with optional guidance to ease the potential accounting burden associated with transitioning from reference rates that are expected to be discontinued. In response to the concerns about risks of interbank offered rates (IBORs) and, particularly, the risk of cessation of the London Interbank Offered Rate ("LIBOR"), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The changes provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The changes can be adopted no later than December 31, 2022 with early adoption permitted. Management does not believe these changes will have a material impact on its condensed consolidated financial statements.
3. Acquisitions and Dispositions
Clean Earth
On June 28, 2019 the Company acquired 100% of the outstanding stock of CEHI Acquisition Corporation and Subsidiaries ("Clean Earth"), one of the largest U.S. providers of specialty waste processing and beneficial reuse solutions for hazardous wastes, contaminated materials and dredged volumes, for an enterprise valuation of approximately $625 million on a cash free, debt free basis, subject to normal working capital adjustments. The Company transferred approximately $628 million of cash consideration and agreed to reimburse the sellers for any usage of assumed net operating losses in a post-closing period for up to five years, the present value of which is estimated at approximately $8 million.
The fair value recorded for the assets acquired and liabilities assumed for Clean Earth is as follows:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preliminary Valuation
|
|
(In millions)
|
|
June 28,
2019
|
|
Measurement Period Adjustments (a)
|
|
March 31
2020
|
|
Cash and cash equivalents (b)
|
|
$
|
42.8
|
|
|
$
|
(39.2
|
)
|
|
$
|
3.6
|
|
|
Trade accounts receivable, net
|
|
63.7
|
|
|
(1.2
|
)
|
|
62.5
|
|
|
Other receivables
|
|
0.8
|
|
|
1.3
|
|
|
2.1
|
|
|
Other current assets
|
|
8.7
|
|
|
(1.4
|
)
|
|
7.3
|
|
|
Property, plant and equipment
|
|
75.6
|
|
|
1.6
|
|
|
77.2
|
|
|
Right-of-use assets
|
|
14.4
|
|
|
11.4
|
|
|
25.8
|
|
|
Goodwill
|
|
313.8
|
|
|
16.3
|
|
|
330.1
|
|
|
Intangible assets
|
|
261.1
|
|
|
(18.9
|
)
|
|
242.2
|
|
|
Other assets
|
|
4.0
|
|
|
(2.8
|
)
|
|
1.2
|
|
|
Accounts payable
|
|
(23.0
|
)
|
|
(0.1
|
)
|
|
(23.1
|
)
|
|
Acquisition consideration payable (b)
|
|
(39.2
|
)
|
|
39.2
|
|
|
—
|
|
|
Other current liabilities
|
|
(18.0
|
)
|
|
(1.7
|
)
|
|
(19.7
|
)
|
|
Net deferred taxes liabilities
|
|
(51.2
|
)
|
|
5.8
|
|
|
(45.4
|
)
|
|
Operating lease liabilities
|
|
(11.1
|
)
|
|
(8.4
|
)
|
|
(19.5
|
)
|
|
Other liabilities
|
|
(6.5
|
)
|
|
(2.1
|
)
|
|
(8.6
|
)
|
|
Total identifiable net assets of Clean Earth
|
|
$
|
635.9
|
|
|
$
|
(0.2
|
)
|
|
$
|
635.7
|
|
|
|
|
|
(a)
|
The measurement period adjustments did not have a material impact on the Company's previously reported operating results.
|
|
|
|
|
(b)
|
Acquisition consideration payable represents a portion of the cash consideration not paid out until July 2019.
|
The goodwill is attributable to strategic benefits, including enhanced operational and financial scale, as well as product and market diversification that the Company expects to realize. The Company expects $16.3 million of goodwill to be deductible for income tax purposes through 2033.
The following table details the preliminary valuation of identifiable intangible assets and amortization periods for Clean Earth:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preliminary Valuation
|
|
(Dollars in millions)
|
|
Weighted-Average Amortization Period
|
|
Preliminary
Valuation
June 28, 2019
|
|
Measurement Period Adjustments (c)
|
|
March 31
2020
|
|
Permits
|
|
18 years
|
|
$
|
176.1
|
|
|
$
|
(6.0
|
)
|
|
$
|
170.1
|
|
|
Customer relationships
|
|
8 years
|
|
33.4
|
|
|
(12.9
|
)
|
|
20.5
|
|
|
Air rights
|
|
Usage based (d)
|
|
25.6
|
|
|
—
|
|
|
25.6
|
|
|
Trade names
|
|
12 years
|
|
26.0
|
|
|
—
|
|
|
26.0
|
|
|
Total identifiable intangible assets of Clean Earth
|
|
|
|
$
|
261.1
|
|
|
$
|
(18.9
|
)
|
|
$
|
242.2
|
|
|
|
|
|
(c)
|
The measurement period adjustments did not have a material impact on the Company's previously reported operating results.
|
|
|
|
|
(d)
|
The Company estimates that based on current usage that the expected useful life would be 27 years.
|
The Company valued the identifiable intangible assets using an income-based approach that utilized either the multi-period excess earnings method or the relief from royalty method. The purchase price allocation for Clean Earth is not final and the fair value of intangible assets and goodwill may vary from those reflected in the Company's condensed consolidated financial statements at March 31, 2020.
The three months ended March 31, 2020 and 2019 include Clean Earth direct acquisition costs of $0.1 million and $0.6 million, respectively, which are included in Selling, general and administrative expenses in the Company’s Condensed Consolidated Statements of Operations.
The pro forma information below gives effect to the Clean Earth acquisition as if it had been completed on January 1, 2018. The pro forma information is not necessarily indicative of the Company’s results of operations had the acquisition been completed on the above date, nor is it necessarily indicative of future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the acquisition and does not reflect the additional revenue opportunities following the acquisition. The pro forma information below includes adjustments to reflect additional depreciation and amortization expense based on the estimated fair value and useful lives of intangible assets and fixed assets acquired; includes additional interest expense of approximately $9.0 million three months ended March 31, 2019 on the acquisition related borrowings used to finance the Clean Earth acquisition and excludes certain directly attributable transaction costs and historic Clean Earth interest expense. These pro forma adjustments are subject to change as additional analysis is performed. The values assigned to the assets acquired and liabilities assumed are based on preliminary valuations and are subject to change as the Company obtains additional information during the measurement period.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
(In millions)
|
|
2019
|
|
Pro forma revenues
|
|
$
|
393.5
|
|
|
Pro forma net income (including discontinued operations)
|
|
15.6
|
|
Harsco Industrial Segment
In January 2020 the Company sold IKG for $85 million, including a note receivable with a face value of $40.0 million (initial fair value $34.3 million), subject to post-closing adjustments, and recognized a gain on the sale of $18.5 million pre-tax (or approximately $9 million after-tax). Together with the 2019 sales of AXC and PK, this completes the divestiture of the former Harsco Industrial Segment originally announced in May 2019. These disposals represent a strategic shift and accelerated the transformation of the Company's portfolio of businesses into a leading provider of environmental solutions and services. See Note 4, Accounts Receivable and Note Receivable, for additional information related to the note receivable.
The Harsco Industrial Segment has historically been a separate reportable segment with primary operations in North America and Latin America. In accordance with U.S. GAAP, the results of the former Harsco Industrial Segment are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for the three months ended March 31, 2020 and 2019.
Certain key selected financial information included in net income from discontinued operations for the former Harsco Industrial Segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
(In millions)
|
|
2020
|
|
2019
|
|
Amounts directly attributable to the former Harsco Industrial Segment:
|
|
Total revenues
|
|
$
|
10,203
|
|
|
$
|
117,386
|
|
|
Cost of products sold
|
|
8,082
|
|
|
87,695
|
|
|
Income from discontinued business
|
|
218
|
|
|
14,192
|
|
|
Additional amounts allocated to the former Harsco Industrial Segment:
|
|
Selling, general and administrative expenses (e)
|
|
$
|
1,266
|
|
|
$
|
—
|
|
|
Interest expense (f)
|
|
—
|
|
|
4,232
|
|
(e) The Company has allocated directly attributable transaction costs to discontinued operations.
(f) The Company has allocated interest expense, including a portion of the amount reclassified into income for the Company's interest rate swaps and amortization of deferred financing costs resulting from the AXC disposal, as part of discontinued operations.
The Company has retained corporate overhead expenses previously allocated to the Harsco Industrial Segment of $1.4 million for the three months ended March 31, 2019, as part of Selling, general and administrative expenses, on the Company's Condensed Consolidated Statements of Operations.
The following is selected financial information included on the Company's Condensed Consolidated Statements of Cash Flows attributable to the former Harsco Industrial Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
(In millions)
|
|
2020
|
|
2019
|
|
Non-cash operating items
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
—
|
|
|
$
|
2,025
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
106
|
|
|
2,175
|
|
4. Accounts Receivable and Note Receivable
Accounts receivable are stated at net realizable value which represents the face value of the receivable less an allowance for expected credit losses. The allowance for expected credit losses is maintained for expected lifetime losses resulting from the inability or unwillingness of customers to make required payments.
The Company’s expected credit loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables. When required, the Company adjusts the loss-rate methodology to account for current conditions and reasonable and supportable expectations of future economic and market conditions. The Company generally assesses future economic conditions for a period which corresponds with the contractual life of its accounts receivables. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default.
Prior to the adoption of the new methodology, the Company established an allowance for doubtful accounts based upon a specific-identification method as well as historical collection experience, as appropriate.
Accounts receivable consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31
2020
|
|
December 31
2019
|
|
Trade accounts receivable
|
|
$
|
333,725
|
|
|
$
|
323,502
|
|
|
Less: Allowance for expected credit losses and doubtful accounts
|
|
(13,015
|
)
|
|
(13,512
|
)
|
|
Trade accounts receivable, net
|
|
$
|
320,710
|
|
|
$
|
309,990
|
|
|
Other receivables (a)
|
|
$
|
18,685
|
|
|
$
|
21,265
|
|
|
|
|
|
(a)
|
Other receivables include employee receivables, insurance receivable, tax claims and other miscellaneous items not included in Trade accounts receivable, net.
|
The change in the provision for expected credit losses and doubtful accounts related to trade accounts receivable was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
(In thousands)
|
|
2020
|
|
2019
|
|
Increase (decrease) in provision for expected credit losses and doubtful accounts related to trade accounts receivable
|
|
$
|
219
|
|
|
$
|
(10
|
)
|
At March 31, 2020 approximately $3.7 million of the Company's accounts receivable balance was past due by twelve months or more, primarily in the Clean Earth Segment, of which the majority of the balance was represented by a single customer from whom payment is expected within the next twelve months, while the rest were either fully or nearly fully reserved, although collection is still ultimately expected.
In January 2020 the Company sold IKG for $85 million including cash and a note receivable, subject to post-closing adjustments. The note receivable from the buyer has a face value of $40 million bearing interest at 2.50%, that is paid in kind and matures on January 31, 2027. Any unpaid principal, along with any accrued but unpaid interest is payable at maturity. Prepayment is required in case of a change in control or a percentage of excess cash flow, as defined in the note receivable agreement. Because there are no scheduled payments under the terms of the note receivable, the balance is not classified as current as of March 31, 2020 and is included in the caption Other assets on the Condensed Consolidated Balance Sheet. The initial fair value of the note receivable was $34.3 million which was calculated using an average of various discounted cash flow scenarios based on anticipated timing of repayments (Level 3) and was a non-cash transaction. The note receivable is subsequently measured as amortized costs. Key inputs into the valuation model include: projected timing and amount of cash flows, pro forma debt rating, option-adjusted spread and U.S. Treasury spot rate. At March 31, 2020 the amortized cost of the note receivable was $34.6 million, compared with a fair value of $31.0 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31
2020
|
|
December 31
2019
|
|
Note receivable
|
|
$
|
34,569
|
|
|
$
|
—
|
|
5. Inventories
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31
2020
|
|
December 31
2019
|
|
Finished goods
|
|
$
|
13,138
|
|
|
$
|
14,550
|
|
|
Work-in-process
|
|
10,795
|
|
|
13,088
|
|
|
Raw materials and purchased parts
|
|
118,637
|
|
|
104,488
|
|
|
Stores and supplies
|
|
25,320
|
|
|
24,865
|
|
|
Total inventories
|
|
$
|
167,890
|
|
|
$
|
156,991
|
|
During 2016 the Company recognized an initial estimated forward loss provision related to the contracts with the federal railway system of Switzerland ("SBB") of $45.1 million. The Company recorded an additional forward loss provision of $1.8 million during 2018. At March 31, 2020 the entire remaining estimated forward loss provision of $6.4 million is included as Other current liabilities on the Company's Condensed 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.
The Company recognized $10.1 million and $4.7 million of revenues for the contracts with SBB at zero margin, on an over time basis, utilizing a cost-to-cost method for the three months ended March 31, 2020 and 2019, respectively. For the three months ended March 31, 2020 and 2019 consolidated product revenue gross margins were not significantly impacted by the revenue recognized under the SBB contracts. The Company has substantially completed the first contract and is approximately 50% complete on the second contract with SBB as of March 31, 2020.
6. Property, Plant and Equipment
Property, plant and equipment consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31
2020
|
|
December 31
2019
|
|
Land
|
|
$
|
29,811
|
|
|
$
|
30,409
|
|
|
Land improvements
|
|
17,822
|
|
|
19,155
|
|
|
Buildings and improvements
|
|
180,907
|
|
|
182,795
|
|
|
Machinery and equipment
|
|
1,418,493
|
|
|
1,518,652
|
|
|
Uncompleted construction
|
|
57,327
|
|
|
55,592
|
|
|
Gross property, plant and equipment
|
|
1,704,360
|
|
|
1,806,603
|
|
|
Less: Accumulated depreciation
|
|
(1,171,011
|
)
|
|
(1,244,817
|
)
|
|
Property, plant and equipment, net
|
|
$
|
533,349
|
|
|
$
|
561,786
|
|
7. Leases
The components of lease expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
(In thousands)
|
|
March 31
2020
|
|
March 31
2019
|
|
Finance leases:
|
|
|
|
|
|
Amortization expense
|
|
$
|
371
|
|
|
$
|
310
|
|
|
Interest on lease liabilities
|
|
52
|
|
|
4
|
|
|
Operating leases
|
|
4,284
|
|
|
3,693
|
|
|
Short-term leases
|
|
6,703
|
|
|
4,571
|
|
|
Variable lease expense
|
|
408
|
|
|
219
|
|
|
Sublease income
|
|
(50
|
)
|
|
(49
|
)
|
|
Total lease expense from continuing operations
|
|
$
|
11,768
|
|
|
$
|
8,748
|
|
Supplemental cash flow information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
(In thousands)
|
|
March 31
2020
|
|
March 31
2019
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
Cash flows from operating activities - Operating leases
|
|
$
|
3,789
|
|
|
$
|
3,552
|
|
|
Cash flows from financing activities - Finance leases
|
|
324
|
|
|
363
|
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
|
|
|
|
Operating leases (a)
|
|
$
|
2,217
|
|
|
$
|
34,750
|
|
|
Finance leases
|
|
1,234
|
|
|
373
|
|
|
|
|
|
(a)
|
Cash flows for Three Months Ended March 31, 2019 include ROU assets of approximately $34 million that were recorded upon adoption at January 1, 2019.
|
Supplemental balance sheet information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31
2020
|
|
December 31, 2019
|
|
Operating Leases:
|
|
|
|
|
|
Operating lease right-of-use assets
|
|
$
|
50,491
|
|
|
$
|
52,065
|
|
|
Current portion of operating lease liabilities
|
|
12,421
|
|
|
$
|
12,544
|
|
|
Operating lease liabilities
|
|
35,561
|
|
|
36,974
|
|
|
Finance Leases:
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
4,291
|
|
|
$
|
3,519
|
|
|
Current maturities of long-term debt
|
|
1,346
|
|
|
$
|
1,237
|
|
|
Long-term debt
|
|
2,984
|
|
|
2,218
|
|
Supplemental additional information related to leases is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
2020
|
|
December 31
2019
|
|
Other information:
|
|
|
|
|
|
Weighted average remaining lease term - Operating leases (in years)
|
|
11.81
|
|
|
11.57
|
|
|
Weighted average remaining lease term - Finance leases (in years)
|
|
3.89
|
|
|
4.01
|
|
|
Weighted average discount rate - Operating leases
|
|
6.3
|
%
|
|
6.3
|
%
|
|
Weighted average discount rate - Finance leases
|
|
4.3
|
%
|
|
4.2
|
%
|
Maturities of lease liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousand)
|
|
Operating Leases
|
|
Finance
Leases
|
|
Year Ending December 31st:
|
|
|
|
|
|
2020 (excluding the three months ended March 31, 2020)
|
|
$
|
11,458
|
|
|
$
|
1,069
|
|
|
2021
|
|
11,527
|
|
|
1,198
|
|
|
2022
|
|
7,615
|
|
|
941
|
|
|
2023
|
|
5,369
|
|
|
748
|
|
|
2024
|
|
3,210
|
|
|
587
|
|
|
After 2024
|
|
32,018
|
|
|
43
|
|
|
Total lease payments
|
|
71,197
|
|
|
4,586
|
|
|
Less: Imputed interest
|
|
(23,215
|
)
|
|
(256
|
)
|
|
Total
|
|
$
|
47,982
|
|
|
$
|
4,330
|
|
The Company's leases, excluding short-term leases, have remaining terms of less than one year to 30.6 years, some of which include options to extend for up to 10 years, and some of which include options to terminate within one year. As of
March 31, 2020 the Company had no material operating leases that had not yet commenced. There are no material residual value guarantees or material restrictive covenants.
8. Goodwill and Other Intangible Assets
The following table reflects the changes in carrying amounts of goodwill by segment for the three months ended March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Harsco Environmental Segment
|
|
Harsco
Clean Earth Segment
|
|
Harsco Rail
Segment
|
|
Consolidated
Totals
|
|
Balance at December 31, 2019
|
|
$
|
395,113
|
|
|
$
|
330,230
|
|
|
$
|
13,026
|
|
|
$
|
738,369
|
|
|
Changes to goodwill (a)
|
|
1,785
|
|
|
(129
|
)
|
|
—
|
|
|
1,656
|
|
|
Foreign currency translation
|
|
(12,143
|
)
|
|
—
|
|
|
—
|
|
|
(12,143
|
)
|
|
Balance at March 31, 2020
|
|
$
|
384,755
|
|
|
$
|
330,101
|
|
|
$
|
13,026
|
|
|
$
|
727,882
|
|
(a) The changes to goodwill relate to immaterial acquisitions in the Harsco Environmental Segment.
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 the annual goodwill impairment test as of October 1 and monitors for triggering events on an ongoing basis. The Company determined that, as of March 31, 2020, no interim goodwill impairment testing was necessary.
The Company has concluded that no triggering event occurred during the three months ended March 31, 2020. However, a prolonged economic downturn resulting from the COVID-19 coronavirus pandemic could impact the Company's future projected cash flows used to estimate fair value, and/or result in a sustained decrease in the Company’s share price, which could indicate an impairment.
Intangible assets, net on the Company's Condensed Consolidated Balance Sheets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
(In thousands)
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Customer related
|
|
$
|
143,092
|
|
|
$
|
99,280
|
|
|
$
|
143,996
|
|
|
$
|
99,327
|
|
|
Permits
|
|
170,448
|
|
|
7,045
|
|
|
170,322
|
|
|
4,694
|
|
|
Technology related
|
|
36,739
|
|
|
6,142
|
|
|
36,467
|
|
|
5,635
|
|
|
Trade names
|
|
31,558
|
|
|
2,801
|
|
|
31,719
|
|
|
2,182
|
|
|
Air rights
|
|
26,139
|
|
|
549
|
|
|
26,139
|
|
|
411
|
|
|
Patents
|
|
192
|
|
|
132
|
|
|
249
|
|
|
168
|
|
|
Other
|
|
3,677
|
|
|
1,176
|
|
|
3,765
|
|
|
1,158
|
|
|
Total
|
|
$
|
411,845
|
|
|
$
|
117,125
|
|
|
$
|
412,657
|
|
|
$
|
113,575
|
|
Amortization expense for intangible assets was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
(In thousands)
|
|
2020
|
|
2019
|
|
Amortization expense for intangible assets
|
|
$
|
5,918
|
|
|
$
|
1,939
|
|
The estimated amortization expense for the next five fiscal years based on current intangible assets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Estimated amortization expense (b)
|
|
$
|
24,300
|
|
|
$
|
23,100
|
|
|
$
|
22,400
|
|
|
$
|
22,400
|
|
|
$
|
22,400
|
|
|
|
|
|
(b)
|
These estimated amortization expense amounts do not reflect the potential effect of future foreign currency exchange fluctuations.
|
9. Debt and Credit Agreements
In March 2020 the Company raised a new term loan facility of $280 million ("New Term Loan") as a new tranche under the existing Senior Secured Credit Facilities. There were no borrowings outstanding under the New Term Loan at March 31, 2020. The New Term Loan was fully drawn on April 6, 2020 to partially fund the acquisition of the Stericycle Environmental Solutions business ("ESOL"). Borrowings under the New Term Loan bear interest at a rate per annum ranging from 150 to 225 basis points over adjusted LIBOR (as defined in the Credit Agreement governing the Senior Secured Credit Facilities). The New Term Loan will mature on June 28, 2024. The Company capitalized $1.7 million of fees related to the issuance of the New Term Loan, of which $1.6 million has been paid as of March 31, 2020.
Additionally, the Company amended the Senior Secured Credit Facilities to increase the net debt to consolidated adjusted earnings before interest, tax, depreciation and amortization ratio covenant to 5.0 through December 2020, which decreases to 4.5 through December 2021 and 4.0 for periods thereafter. During the three months ended March 31, 2020, $0.5 million of fees and expenses were recognized related to the amended Senior Secured Credit Facilities.
10. Employee Benefit Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
Defined Benefit Pension Plans Net Periodic Pension Cost (Benefit)
|
|
U.S. Plans
|
|
International Plans
|
|
(In thousands)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Service costs
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
429
|
|
|
$
|
356
|
|
|
Interest costs
|
|
1,845
|
|
|
2,651
|
|
|
4,395
|
|
|
5,664
|
|
|
Expected return on plan assets
|
|
(2,842
|
)
|
|
(2,593
|
)
|
|
(10,190
|
)
|
|
(9,517
|
)
|
|
Recognized prior service costs
|
|
—
|
|
|
—
|
|
|
107
|
|
|
66
|
|
|
Recognized loss
|
|
1,425
|
|
|
1,405
|
|
|
3,655
|
|
|
3,653
|
|
|
Defined benefit pension plans net periodic pension cost (benefit)
|
|
$
|
428
|
|
|
$
|
1,473
|
|
|
$
|
(1,604
|
)
|
|
$
|
222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Company Contributions
|
|
March 31
|
|
(In thousands)
|
|
2020
|
|
2019
|
|
Defined benefit pension plans (U.S.)
|
|
$
|
2,027
|
|
|
$
|
1,479
|
|
|
Defined benefit pension plans (International)
|
|
10,060
|
|
|
9,270
|
|
|
Multiemployer pension plans
|
|
409
|
|
|
521
|
|
|
Defined contribution pension plans
|
|
3,169
|
|
|
3,390
|
|
The Company's estimate of expected contributions to be paid during the remainder of 2020 for the U.S. and international defined benefit pension plans are $6.2 million and $11.0 million, respectively. The recently enacted Coronavirus Aid, Relief, and Economic Security Act (CARES Act) allows for the deferral, until 2021, of certain expected pension contributions in the U.S. The Company is currently evaluating this alternative.
11. Income Taxes
Income tax benefit related to continuing operations for the three months ended March 31, 2020 was $0.7 million compared with an income tax expense related to continuing operations of $1.2 million for the three months ended March 31, 2019. The change in the income tax benefit for the three months ended March 31, 2020 compared with the income tax expense for the three months ended March 31, 2019 is the result of lower taxable income, primarily resulting from a net increase in strategic costs related to the ESOL acquisition, partially offset by a decreased income tax benefit recognized for stock-based compensation vesting during the first quarter of 2020 compared to the first quarter of 2019.
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, based on technical merits, including resolutions of any related appeals or litigation processes. The reserve for uncertain tax positions at March 31, 2020 was $4.5 million, including interest and penalties. Within the next twelve months, it is reasonably possible that $0.3 million unrecognized income tax benefits will be recognized upon settlement of tax examinations and the expiration of various statutes of limitations.
12. Commitments and Contingencies
Environmental
The Company is involved in a number of environmental remediation investigations and cleanups and, along with other companies, has been identified as a “potentially responsible party” for certain byproduct disposal sites. While each of these matters is subject to various uncertainties, it is probable that the Company will agree to make payments toward funding certain of these activities, and it is possible that some of these matters will be decided unfavorably to the Company. The Company has evaluated its potential liability, and its financial exposure is dependent upon such factors as the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the allocation of cost among potentially responsible parties, the years of remedial activity required and the remediation methods selected. Other than set forth herein the Company did not have any material accruals or record any material expenses related to environmental matters during the periods presented.
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.
As previously disclosed, the Company has had ongoing meetings with the Supreme Council for Environment in Bahrain ("SCE") over processing a byproduct ("salt cakes") stored at the Al Hafeerah site. The Company’s Bahrain operations that produced the salt cakes has ceased operations and are owned under a strategic venture for which its strategic venture partner owns a 35% minority interest. An Environmental Impact Assessment and Technical Feasibility Study were approved by the SCE during the first quarter of 2018. The Company is constructing facilities to process the salt cakes, and the Company currently expects those facilities to come online in 2020. The Company has previously established a reserve of $7.0 million, which represents the Company's best estimate of the ultimate costs to be incurred to resolve this matter. The Company continues to evaluate this reserve and any future change in estimated costs could be material to the Company’s results of operations in any one period.
On July 27, 2018 Brazil’s Federal and Rio de Janeiro State Public Prosecution Offices (MPF and MPE) filed a Civil Public Action against one of the Company's customers (CSN), the Company’s Brazilian subsidiary, the Municipality of Volta Redonda, Brazil, and the Instituto Estadual do Ambiente (local environmental protection agency) seeking the implementation of various measures to limit and reduce the accumulation of customer-owned slag at the site in Brazil. On August 6, 2018 the 3rd Federal Court in Volta Redonda granted the MPF and MPE an injunction against the same parties requiring, among other things, CSN and the Company’s Brazilian subsidiary to limit the volume of slag sent to the site. Because the customer owns the site and the slag located on the site, the Company believes that complying with this injunction is the steel producer’s responsibility. On March 18, 2019 the Court issued an order fining the Company 5,000 Brazilian reais per day (or approximately $1,000 per day) and CSN 20,000 Brazilian reais per day (or approximately $4,000 per day) until the requirements of the injunction are met. On November 1, 2019 the Court issued an additional order increasing the fines assessed to the Company to 25,000 Brazilian reais per day (or approximately $5,000 per day) and raising the fines assessed to CSN to 100,000 Brazilian reais per day (or approximately $19,000 per day). The Court also assessed an additional fine of 10,000,000 Brazilian reais (or approximately $1.9 million) against CSN and the Company jointly. The Company is appealing the fines and the underlying injunction. Both the Company and CSN continue to have discussions with the governmental authorities on the injunction and the possible resolution of the underlying case. The Company does not believe that a loss relating to this matter is probable or estimable at this point.
On October 19, 2018 local environmental authorities issued an enforcement action against the Company concerning the Company’s operations at a customer site in Ijmuiden, Netherlands. The enforcement action alleges violations of the Company’s environmental permit at the site, which restricts the release of any visible dust emissions. The enforcement action ordered the Company to cease all violations of the permit by October 31, 2018. The authorities have issued three additional enforcement actions since that time and have asserted fines of approximately $0.5 million which the Company has recorded, with the possibility of additional fines for any future violations. The Company is vigorously contesting the enforcement action and fines and is also working with its customer to ensure the control of emissions. The Company has contractual indemnity rights from its customer, should it be required to pay the assessed fines.
On June 13, 2019 the Pennsylvania Department of Environmental Protection ("PA DEP") indicated to the Company and a landowner who received processed slag from the Company that it plans to require action to bring the landowner’s site into compliance and to assess a civil penalty against the Company and the landowner. The Company is working with the landowner and PA DEP to determine the most effective way to address PA DEP’s concerns about the site and has established a $0.4 million reserve, which represents the Company’s best estimate of the costs to bring the landowner's site into compliance.
On March 24, 2017 the Allegheny County Health Department issued a notice of violation against the Company concerning the Company’s operations at a customer site in Natrona, Pennsylvania. On January 21, 2020 the Company paid $0.1 million to settle the civil penalties accrued up to that date. In April 2020, the Company received a penalty assessment of $4,500 for three alleged additional events. It is possible the Company could incur additional penalties for future violations. Pursuant to the settlement agreement, the Company and its customer have also agreed to construct at its customer's costs and bring certain slag processing operations into a building.
Brazilian Tax Disputes
The Company is involved in a number of tax disputes with federal, state and municipal tax authorities in Brazil. These disputes are at various stages of the legal process, including the administrative review phase and the collection action phase, and include assessments of fixed amounts of principal and penalties, plus interest charges that increase at statutorily determined amounts per month and are assessed on the aggregate amount of the principal and penalties. In addition, the losing party, at the collection action or court of appeals phase, could be subject to a charge to cover statutorily mandated legal fees, which are generally calculated as a percentage of the total assessed amounts due, inclusive of penalty and interest. Many of the claims relate to value-added ("ICMS"), services and social security tax disputes. The largest proportion of the assessed amounts relate to ICMS claims filed by the State Revenue Authorities from the State of São Paulo, Brazil (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, 2020 the principal amount of the tax assessment from the SPRA with regard to this case is approximately $1.2 million, with penalty, interest and fees assessed to date increasing such amount by an additional $16.2 million. On
June 4, 2018 the Appellate Court of the State of Sao Paulo ruled in favor of the SPRA but ruled that the assessed penalty should be reduced to approximately $1 million. After calculating the interest accrued on the penalty, the Company estimates that this ruling reduces the current overall potential liability for this case to approximately $7 million. The Company has appealed the ruling in favor of the SPRA to the Superior Court of Justice. Due to multiple court precedents in the Company’s favor, as well as the Company’s ability to appeal, the Company does not believe a loss is probable.
Another ICMS tax case involving the SPRA refers to the tax period from January 2002 to December 2003. In December 2018 the administrative tribunal hearing the case upheld the Company's liability. The Company has appealed to the judicial phase. The aggregate amount assessed by the tax authorities in August 2005 was $4.9 million (the amounts with regard to this claim are valued as of the date of the assessment since it has not yet reached the collection phase), composed of a principal amount of $1.2 million, with penalty and interest assessed through that date increasing such amount by an additional $3.7 million. On December 6, 2018 the administrative tribunal reduced the applicable penalties to $1.2 million. After calculating the interest accrued on the current penalty, the Company estimates that the current overall liability for this case to be approximately $10 million. All such amounts include the effect of foreign currency translation. Due to multiple court precedents in the Company's favor the Company does not believe a loss is probable.
The Company continues to believe that sufficient coverage for these claims exists as a result of the indemnification obligations of the Company's customer and such customer’s pledge of assets in connection with the October 2009 notice, as required by Brazilian law.
The Company intends to continue its practice of vigorously defending itself against these tax claims under various alternatives, including judicial appeal. The Company will continue to evaluate its potential liability with regard to these claims on a quarterly basis; however, it is not possible to predict the ultimate outcome of these tax-related disputes in Brazil. No loss provision has been recorded in the Company's condensed consolidated financial statements for the disputes described above because the loss contingency is not deemed probable, and the Company does not expect that any costs that are reasonably possible to be incurred by the Company in connection with Brazilian tax disputes would have a material adverse effect on the Company's financial condition, results of operations or cash flows.
Brazilian Labor Disputes
The Company is subject to ongoing collective bargaining and individual labor claims in Brazil through the Harsco Environmental Segment which allege, among other things, the Company's failure to pay required amounts for overtime and vacation at certain sites. The Company is vigorously defending itself against these claims; however, litigation is inherently unpredictable, particularly in foreign jurisdictions. While the Company does not currently expect that the ultimate resolution of these claims will have a material adverse effect on the Company’s financial condition, results of operations or cash flows, it is not possible to predict the ultimate outcome of these labor-related disputes. As of March 31, 2020 and December 31, 2019 the Company has established reserves of $5.0 million and $6.5 million, respectively, on the Company's Condensed Consolidated Balance Sheets for amounts considered to be probable and estimable.
Customer Disputes
The Company may, in the normal course of business, become involved in commercial disputes with subcontractors or customers. Although results of operations and cash flows for a given period could be adversely affected by a negative outcome in these or other lawsuits, claims or proceedings, management believes that the ultimate outcome of any ongoing matters will not have a material adverse effect on the Company's financial condition, results of operations or cash flows.
Other
The Company is named as one of many defendants (approximately 90 or more in most cases) in legal actions in the U.S. alleging personal injury from exposure to airborne asbestos over the past several decades. In their suits, the plaintiffs have named as defendants, among others, many manufacturers, distributors and installers of numerous types of equipment or products that allegedly contained asbestos.
The Company believes that the claims against it are without merit. The Company has never been a producer, manufacturer or processor of asbestos fibers. Any asbestos-containing part of a Company product used in the past was purchased from a supplier and the asbestos encapsulated in other materials such that airborne exposure, if it occurred, was not harmful and is not associated with the types of injuries alleged in the pending actions.
At March 31, 2020 there were approximately 17,138 pending asbestos personal injury actions filed against the Company. Of those actions, approximately 16,585 were filed in the New York Supreme Court (New York County), approximately 118 were filed in other New York State Supreme Court Counties and approximately 435 were filed in courts located in other states.
The complaints in most of those actions generally follow a form that contains a standard damages demand of $20 million or $25 million, regardless of the individual plaintiff’s alleged medical condition, and without identifying any specific Company product.
At March 31, 2020 approximately 16,550 of the actions filed in New York Supreme Court (New York County) were on the Deferred/Inactive Docket created by the court in December 2002 for all pending and future asbestos actions filed by persons who cannot demonstrate that they have a malignant condition or discernible physical impairment. The remaining approximately 35 cases in New York County are pending on the Active or In Extremis Docket created for plaintiffs who can demonstrate a malignant condition or physical impairment.
The Company has liability insurance coverage under various primary and excess policies that the Company believes will be available, if necessary, to substantially cover any liability that might ultimately be incurred in the asbestos actions referred to above. The costs and expenses of the asbestos actions are being paid by the Company's insurers.
In view of the persistence of asbestos litigation in the U.S., the Company expects to continue to receive additional claims in the future. The Company intends to continue its practice of vigorously defending these claims and cases. At March 31, 2020 the Company has obtained dismissal in approximately 28,245 cases by stipulation or summary judgment prior to trial.
It is not possible to predict the ultimate outcome of asbestos-related actions in the U.S. due to the unpredictable nature of this litigation, and no loss provision has been recorded in the Company's condensed consolidated financial statements because a loss contingency is not deemed probable or estimable. Despite this uncertainty, and although results of operations and cash flows for a given period could be adversely affected by asbestos-related actions, the Company does not expect that any costs that are reasonably possible to be incurred by the Company in connection with asbestos litigation would have a material adverse effect on the Company's financial condition, results of operations or cash flows.
The Company is subject to various other claims and legal proceedings covering a wide range of matters that arose in the ordinary course of business. In the opinion of management, all such matters are adequately covered by insurance or by established reserves, and, if not so covered, are without merit or are of such kind, or involve such amounts, as would not have a material adverse effect on the financial position, results of operations or cash flows of the Company.
Insurance liabilities are recorded when it is probable that a liability has been incurred for a particular event and the amount of loss associated with the event can be reasonably estimated. Insurance reserves have been estimated based primarily upon actuarial calculations and reflect the undiscounted estimated liabilities for ultimate losses, including claims incurred but not reported. Inherent in these estimates are assumptions that are based on the Company's history of claims and losses, a detailed analysis of existing claims with respect to potential value, and current legal and legislative trends. If actual claims differ from those projected by management, changes (either increases or decreases) to insurance reserves may be required and would be recorded through income in the period the change was determined. When a recognized liability is covered by third-party insurance, the Company records an insurance claim receivable to reflect the covered liability. Insurance claim receivables are included in Other receivables on the Company's Condensed Consolidated Balance Sheets. See Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for additional information on Accrued insurance and loss reserves.
13. Reconciliation of Basic and Diluted Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
(In thousands, except per share amounts)
|
|
2020
|
|
2019
|
|
Income (loss) from continuing operations attributable to Harsco Corporation common stockholders
|
|
$
|
(8,782
|
)
|
|
$
|
10,474
|
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
Weighted-average shares outstanding - basic
|
|
78,761
|
|
|
79,907
|
|
|
Dilutive effect of stock-based compensation
|
|
—
|
|
|
1,746
|
|
|
Weighted-average shares outstanding - diluted
|
|
78,761
|
|
|
81,653
|
|
|
Earnings (loss) from continuing operations per common share, attributable to Harsco Corporation common stockholders:
|
|
Basic
|
|
$
|
(0.11
|
)
|
|
$
|
0.13
|
|
|
Diluted
|
|
$
|
(0.11
|
)
|
|
$
|
0.13
|
|
The following average outstanding stock-based compensation units were not included in the computation of diluted earnings per share because the effect was antidilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
(In thousands)
|
|
2020
|
|
2019
|
|
Restricted stock units
|
|
749
|
|
|
—
|
|
|
Stock appreciation rights
|
|
2,643
|
|
|
608
|
|
|
Performance share units
|
|
940
|
|
|
233
|
|
14. Derivative Instruments, Hedging Activities and Fair Value
Derivative Instruments and Hedging Activities
The Company uses derivative instruments, including foreign currency exchange forward contracts, interest rate swaps and cross-currency interest rate swaps ("CCIRs"), to manage certain foreign currency and interest rate exposures. Derivative instruments are viewed as risk management tools by the Company and are not used for trading or speculative purposes. All derivative instruments are recorded on the Company's Condensed Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.
The Company primarily applies the market approach for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs, such as forward rates, interest rates, the Company’s credit risk and counterparties’ credit risks, and which minimize the use of unobservable inputs. The Company is able to classify fair value balances based on the ability to observe those inputs. Foreign currency exchange forward contracts, interest rate swaps and CCIRs are based upon pricing models using market-based inputs (Level 2). Model inputs can be verified and valuation techniques do not involve significant management judgment.
The fair value of outstanding derivative contracts recorded as assets and liabilities on the Company's Condensed Consolidated Balance Sheets was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Balance Sheet Location
|
|
Fair Value of Derivatives Designated as Hedging Instruments
|
|
Fair Value of Derivatives Not Designated as Hedging Instruments
|
|
Total Fair Value
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
|
Asset derivatives (Level 2):
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange forward contracts
|
|
Other current assets
|
|
$
|
4,113
|
|
|
$
|
4,898
|
|
|
$
|
9,011
|
|
|
Total
|
|
|
|
$
|
4,113
|
|
|
$
|
4,898
|
|
|
$
|
9,011
|
|
|
Liability derivatives (Level 2):
|
|
Foreign currency exchange forward contracts
|
|
Other current liabilities
|
|
$
|
27
|
|
|
$
|
13,471
|
|
|
$
|
13,498
|
|
|
Interest rate swaps
|
|
Other current liabilities
|
|
3,543
|
|
|
—
|
|
|
3,543
|
|
|
Interest rate swaps
|
|
Other liabilities
|
|
6,035
|
|
|
—
|
|
|
6,035
|
|
|
Total
|
|
|
|
$
|
9,605
|
|
|
$
|
13,471
|
|
|
$
|
23,076
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
Asset derivatives (Level 2):
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange forward contracts
|
|
Other current assets
|
|
$
|
2,039
|
|
|
$
|
946
|
|
|
$
|
2,985
|
|
|
Total
|
|
|
|
$
|
2,039
|
|
|
$
|
946
|
|
|
$
|
2,985
|
|
|
Liability derivatives (Level 2):
|
|
Foreign currency exchange forward contracts
|
|
Other current liabilities
|
|
$
|
140
|
|
|
$
|
3,733
|
|
|
$
|
3,873
|
|
|
Interest rate swaps
|
|
Other current liabilities
|
|
2,098
|
|
|
—
|
|
|
2,098
|
|
|
Interest rate swaps
|
|
Other liabilities
|
|
4,281
|
|
|
—
|
|
|
4,281
|
|
|
Total
|
|
|
|
$
|
6,519
|
|
|
$
|
3,733
|
|
|
$
|
10,252
|
|
All of the Company's derivatives are recorded on the Company's Condensed Consolidated Balance Sheets at gross amounts and not offset. All of the Company's interest rate swaps, CCIRs and certain foreign currency exchange forward contracts are transacted under International Swaps and Derivatives Association ("ISDA") documentation. Each ISDA master agreement permits the net settlement of amounts owed in the event of default. The Company's derivative assets and liabilities subject to enforceable master netting arrangements did not result in a net asset or liability at March 31, 2020 or December 31, 2019.
The effect of derivative instruments on the Company's Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income (Loss):
Derivatives Designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount Recognized in
Other Comprehensive
Income (“OCI”) on Derivatives
|
|
Location of Amount Reclassified
from Accumulated
OCI into Income
|
|
Amount Reclassified from
Accumulated OCI into Income - Effective Portion or Equity
|
|
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
|
March 31
|
|
(In thousands)
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
Foreign currency exchange forward contracts
|
|
$
|
2,037
|
|
|
$
|
(712
|
)
|
|
Product revenues
|
|
$
|
(1,404
|
)
|
|
$
|
(32
|
)
|
|
Interest rate swaps
|
|
(3,578
|
)
|
|
(3,309
|
)
|
|
Interest expense
|
|
378
|
|
|
(301
|
)
|
|
Cross-currency interest rate swaps (a)
|
|
58
|
|
|
(52
|
)
|
|
Interest expense
|
|
305
|
|
|
314
|
|
|
|
|
$
|
(1,483
|
)
|
|
$
|
(4,073
|
)
|
|
|
|
$
|
(721
|
)
|
|
$
|
(19
|
)
|
|
|
|
|
(a)
|
Amounts represent changes in foreign currency translation related to balances in Accumulated other comprehensive loss.
|
The location and amount of gain (loss) recognized on the Company's Condensed Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
|
|
2020
|
|
2019
|
|
(in thousands)
|
|
Product Revenues
|
|
Interest Expense
|
|
Product Revenues
|
|
Interest Expense
|
|
Total amounts of line items presented in the Condensed Consolidated Statement of Operations in which the effects of cash flow hedges are recorded
|
|
$
|
107,502
|
|
|
$
|
(12,649
|
)
|
|
$
|
100,382
|
|
|
$
|
(5,507
|
)
|
|
Interest rate swaps:
|
|
|
|
|
|
|
|
|
|
Amount of gain or (loss) reclassified from accumulated other comprehensive loss into income
|
|
—
|
|
|
(378
|
)
|
|
—
|
|
|
301
|
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
Amount of gain or reclassified from accumulated other comprehensive loss into income
|
|
1,404
|
|
|
—
|
|
|
32
|
|
|
—
|
|
|
Amount excluded from effectiveness testing recognized in earnings based on changes in fair value
|
|
183
|
|
|
—
|
|
|
78
|
|
|
—
|
|
|
Cross-currency interest rate swaps:
|
|
|
|
|
|
|
|
Amount of loss reclassified from accumulated other comprehensive income into income
|
|
—
|
|
|
(305
|
)
|
|
—
|
|
|
(314
|
)
|
Derivatives Not Designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain Recognized in Income on Derivatives
|
|
Amount of Gain Recognized in Income on Derivatives (b)
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31
|
|
(In thousands)
|
|
|
2020
|
|
2019
|
|
Foreign currency exchange forward contracts
|
|
Cost of services and products sold
|
|
$
|
5,542
|
|
|
$
|
2,323
|
|
|
|
|
|
(b)
|
These gains offset amounts recognized in cost of services and products sold principally as a result of intercompany or third party foreign currency exposures.
|
Foreign Currency Exchange Forward Contracts
The Company conducts business in multiple currencies and, accordingly, is subject to the inherent risks associated with foreign exchange rate movements. Foreign currency-denominated assets and liabilities are translated into U.S. dollars at the exchange rates existing at the respective balance sheet dates, and income and expense items are translated at the average exchange rates during the respective periods.
The Company uses derivative instruments to hedge cash flows related to foreign currency fluctuations. Foreign currency exchange forward contracts outstanding are part of a worldwide program to minimize foreign currency exchange operating income and balance sheet exposure by offsetting foreign currency exposures of certain future payments between the Company and various subsidiaries, suppliers or customers. The unsecured contracts are with major financial institutions. The Company may be exposed to credit loss in the event of non-performance by the contract counterparties. The Company evaluates the creditworthiness of the counterparties and does not expect default by them. Foreign currency exchange forward contracts are used to hedge commitments, such as foreign currency debt, firm purchase commitments and foreign currency cash flows for certain export sales transactions.
Changes in the fair value of derivatives used to hedge foreign currency denominated balance sheet items are reported directly in earnings, along with offsetting transaction gains and losses on the items being hedged. Derivatives used to hedge forecasted cash flows associated with foreign currency commitments may be accounted for as cash flow hedges, as deemed appropriate, if the criteria for hedge accounting are met. Gains and losses on derivatives designated as cash flow hedges are deferred in Accumulated other comprehensive loss, a separate component of equity, and reclassified to earnings in a manner that matches the timing of the earnings impact of the hedged transactions. The ineffective portion of all hedges, if any, is recognized currently in earnings.
At March 31, 2020 and December 31, 2019 the notional amounts of foreign currency exchange forward contracts were $432.0 million and $496.3 million, respectively. These contracts are primarily denominated in British pounds sterling and Euros and mature through October 2021.
In addition to foreign currency exchange forward contracts, the Company designates certain loans as hedges of net investments in international subsidiaries. The Company recorded pre-tax net losses of $9.7 million and pre-tax net gains of $4.8 million for the three months ended March 31, 2020 and 2019, respectively, in Accumulated other comprehensive loss.
Interest Rate Swaps
The Company uses interest rate swaps in conjunction with certain variable rate debt issuances in order to secure a fixed interest rate. Changes in the fair value attributed to the effect of the swaps’ interest spread and changes in the credit worthiness of the counter-parties are recorded in Accumulated other comprehensive loss.
In January 2017 and February 2018 the Company entered into a series of interest rate swaps that cover the period from 2018 through 2022 and had the effect of converting $300.0 million of the Term Loan Facility from floating-rate to fixed-rate. The fixed rates provided by the swaps replace the adjusted LIBOR rate in the interest calculation, ranging from 2.45% for 2020 to 3.12% for 2022.
During June 2019 the Company effected the early termination of interest rate swaps that covered the period from 2019 through 2022 and had the effect of converting $100.0 million of the Term Loan Facility from floating-rate to fixed-rate. This termination was conducted as a result of the Company's new Notes offering and required repayment of a portion of the Term Loan Facility with proceeds from the AXC disposal. The total notional of the Company's interest rate swaps is $200.0 million as of March 31, 2020.
Cross-Currency Interest Rate Swaps
The Company may use CCIRs in conjunction with certain debt issuances in order to secure a fixed local currency interest rate. Under these CCIRs, the Company receives interest based on a fixed or floating U.S. dollar rate and pays interest on a fixed local currency rate based on the contractual amounts in dollars and the local currency, respectively. At maturity, there is also the payment of principal amounts between currencies. Changes in the fair value attributed to the effect of the swaps' interest spread and changes in the credit worthiness of the counter-parties are recorded in Accumulated other comprehensive loss. Changes in value attributed to the effect of foreign currency fluctuations are recorded on the Company's Condensed Consolidated Statements of Operations and offset currency fluctuation effects on the debt principal. The Company had no outstanding CCIRs at March 31, 2020.
Fair Value of Other Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term borrowings approximate fair value due to the short-term maturities of these assets and liabilities. At March 31, 2020 and December 31, 2019 the total fair value of long-term debt (excluding deferred financing costs), including current maturities, was $739.2 million and $827.2 million, respectively, compared with a carrying value of $810.3 million and $795.0 million, respectively. Fair values for debt are based on pricing models using market-based inputs (Level 2) for similar issues or on the current rates offered to the Company for debt of the same remaining maturities.
15. Review of Operations by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
(In thousands)
|
|
2020
|
|
2019
|
|
Revenues From Continuing Operations (a)
|
|
|
|
|
|
|
|
Harsco Environmental
|
|
$
|
241,559
|
|
|
$
|
261,312
|
|
|
Harsco Clean Earth
|
|
78,812
|
|
|
—
|
|
|
Harsco Rail
|
|
78,470
|
|
|
68,590
|
|
|
Total Revenues From Continuing Operations
|
|
$
|
398,841
|
|
|
$
|
329,902
|
|
|
Operating Income (Loss) From Continuing Operations (a)
|
|
Harsco Environmental
|
|
$
|
10,520
|
|
|
$
|
24,497
|
|
|
Harsco Clean Earth
|
|
4,245
|
|
|
—
|
|
|
Harsco Rail
|
|
6,472
|
|
|
5,389
|
|
|
Corporate
|
|
(18,356
|
)
|
|
(10,062
|
)
|
|
Total Operating Income From Continuing Operations
|
|
$
|
2,881
|
|
|
$
|
19,824
|
|
|
Depreciation and Amortization (a)
|
|
|
|
|
|
Harsco Environmental
|
|
$
|
27,311
|
|
|
$
|
28,705
|
|
|
Harsco Clean Earth
|
|
6,519
|
|
|
—
|
|
|
Harsco Rail
|
|
1,299
|
|
|
1,167
|
|
|
Corporate
|
|
1,152
|
|
|
1,352
|
|
|
Total Depreciation and Amortization
|
|
$
|
36,281
|
|
|
$
|
31,224
|
|
|
Capital Expenditures (a)
|
|
|
|
|
|
Harsco Environmental
|
|
$
|
24,748
|
|
|
$
|
29,163
|
|
|
Harsco Clean Earth
|
|
1,442
|
|
|
—
|
|
|
Harsco Rail
|
|
1,539
|
|
|
3,916
|
|
|
Corporate
|
|
58
|
|
|
1,153
|
|
|
Total Capital Expenditures
|
|
$
|
27,787
|
|
|
$
|
34,232
|
|
|
|
|
|
(a)
|
The Company's acquisition of Clean Earth closed on June 28, 2019. The operating results of the former Harsco Industrial Segment has been reflected as discontinued operations in the Company's Condensed Consolidated Statement of Operations for all periods presented. See Note 3, Acquisitions and Dispositions, for additional details.
|
Reconciliation of Segment Operating Income to Income (Loss) From Continuing Operations Before Income Taxes and Equity Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
(In thousands)
|
|
2020
|
|
2019
|
|
Segment operating income
|
|
$
|
21,237
|
|
|
$
|
29,886
|
|
|
General Corporate expense
|
|
(18,356
|
)
|
|
(10,062
|
)
|
|
Operating income from continuing operations
|
|
2,881
|
|
|
19,824
|
|
|
Interest income
|
|
193
|
|
|
533
|
|
|
Interest expense
|
|
(12,649
|
)
|
|
(5,507
|
)
|
|
Unused debt commitment and amendment fees
|
|
(488
|
)
|
|
—
|
|
|
Defined benefit pension income (expense)
|
|
1,589
|
|
|
(1,338
|
)
|
|
Income (loss) from continuing operations before income taxes and equity income
|
|
$
|
(8,474
|
)
|
|
$
|
13,512
|
|
16. Revenue Recognition
The Company recognizes revenues to depict the transfer of promised services and products to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services or products. Service revenues include the Harsco Clean Earth Segment and the service components of the Harsco Environmental and Harsco Rail Segments. Product revenues include portions of the Harsco Environmental and Harsco Rail Segments.
A summary of the Company's revenues by primary geographical markets as well as by key product and service groups is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2020
|
|
(In thousands)
|
|
Harsco Environmental Segment
|
|
Harsco
Clean Earth Segment
|
|
Harsco
Rail
Segment
|
|
Corporate
|
|
Consolidated Totals
|
|
Primary Geographical Markets (a) (b):
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
69,881
|
|
|
$
|
78,812
|
|
|
$
|
53,773
|
|
|
$
|
—
|
|
|
$
|
202,466
|
|
|
Western Europe
|
|
96,317
|
|
|
—
|
|
|
18,164
|
|
|
—
|
|
|
114,481
|
|
|
Latin America (c)
|
|
33,260
|
|
|
—
|
|
|
665
|
|
|
—
|
|
|
33,925
|
|
|
Asia-Pacific
|
|
21,996
|
|
|
—
|
|
|
5,868
|
|
|
—
|
|
|
27,864
|
|
|
Middle East and Africa
|
|
15,889
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,889
|
|
|
Eastern Europe
|
|
4,216
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,216
|
|
|
Total Revenues
|
|
$
|
241,559
|
|
|
$
|
78,812
|
|
|
$
|
78,470
|
|
|
$
|
—
|
|
|
$
|
398,841
|
|
|
Key Product and Service Groups (a):
|
|
|
|
|
|
|
|
|
|
|
|
Environmental services related to resource recovery for metals manufacturing and related logistical services
|
|
$
|
207,346
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
207,346
|
|
|
Applied products
|
|
30,262
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,262
|
|
|
Environmental systems for aluminum dross and scrap processing
|
|
3,951
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,951
|
|
|
Railway track maintenance equipment
|
|
—
|
|
|
—
|
|
|
42,615
|
|
|
—
|
|
|
42,615
|
|
|
After-market parts and services; safety and diagnostic technology
|
|
—
|
|
|
—
|
|
|
31,200
|
|
|
—
|
|
|
31,200
|
|
|
Railway contracting services
|
|
—
|
|
|
—
|
|
|
4,655
|
|
|
—
|
|
|
4,655
|
|
|
Waste processing and reuse solutions
|
|
—
|
|
|
78,812
|
|
|
—
|
|
|
—
|
|
|
78,812
|
|
|
Total Revenues
|
|
$
|
241,559
|
|
|
$
|
78,812
|
|
|
$
|
78,470
|
|
|
$
|
—
|
|
|
$
|
398,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2019
|
|
(In thousands)
|
|
Harsco Environmental Segment
|
|
Harsco
Clean Earth Segment
|
|
Harsco
Rail
Segment
|
|
Corporate
|
|
Consolidated Totals
|
|
Primary Geographical Markets (a) (b):
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
73,349
|
|
|
$
|
—
|
|
|
$
|
50,365
|
|
|
$
|
—
|
|
|
$
|
123,714
|
|
|
Western Europe
|
|
98,221
|
|
|
—
|
|
|
10,013
|
|
|
—
|
|
|
108,234
|
|
|
Latin America (c)
|
|
36,991
|
|
|
—
|
|
|
591
|
|
|
—
|
|
|
37,582
|
|
|
Asia-Pacific
|
|
34,138
|
|
|
—
|
|
|
7,621
|
|
|
—
|
|
|
41,759
|
|
|
Middle East and Africa
|
|
13,915
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,915
|
|
|
Eastern Europe
|
|
4,698
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,698
|
|
|
Total Revenues
|
|
$
|
261,312
|
|
|
$
|
—
|
|
|
$
|
68,590
|
|
|
$
|
—
|
|
|
$
|
329,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Product and Service Groups (a):
|
|
|
|
|
|
|
|
|
|
|
|
Environmental services related to resource recovery for metals manufacturing and related logistical services
|
|
$
|
224,061
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
224,061
|
|
|
Applied products
|
|
30,390
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,390
|
|
|
Environmental systems for aluminum dross and scrap processing
|
|
6,861
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,861
|
|
|
Railway track maintenance equipment
|
|
—
|
|
|
—
|
|
|
33,608
|
|
|
—
|
|
|
33,608
|
|
|
After-market parts and services; safety and diagnostic technology
|
|
—
|
|
|
—
|
|
|
31,301
|
|
|
—
|
|
|
31,301
|
|
|
Railway contracting services
|
|
—
|
|
|
—
|
|
|
3,681
|
|
|
—
|
|
|
3,681
|
|
|
Waste processing and reuse solutions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total Revenues
|
|
$
|
261,312
|
|
|
$
|
—
|
|
|
$
|
68,590
|
|
|
$
|
—
|
|
|
$
|
329,902
|
|
|
|
|
|
(a)
|
The Company's acquisition of Clean Earth closed on June 28, 2019. The operating results of the former Harsco Industrial Segment have been reflected as discontinued operations in the Company's Condensed Consolidated Statement of Operations for all periods presented. See Note 3, Acquisitions and Dispositions, for additional details.
|
|
|
|
|
(b)
|
Revenues are attributed to individual countries based on the location of the facility generating the revenue.
|
The Company may receive payments in advance of earning revenue, which are treated as Advances on contracts on the Company's Condensed Consolidated Balance Sheets. The Company may recognize revenue in advance of being able to contractually invoice the customer, which is treated as Contract assets on the Company's Condensed Consolidated Balance Sheets. Contract assets are transferred to Trade accounts receivable, net when right to payment becomes unconditional. Contract assets and Contract liabilities are reported as a net position, on a contract-by-contract basis, at the end of each reporting period. These instances are primarily related to the Harsco Rail Segment.
The Company had Contract assets totaling $50.5 million and $31.2 million at March 31, 2020 and December 31, 2019, respectively. The increase is due principally to recognition of additional contract assets in excess of contract assets transferred to accounts receivable during the three months ended March 31, 2020 primarily in the Harsco Rail Segment. The Company had Advances on contracts totaling $101.6 million and $60.3 million at March 31, 2020 and December 31, 2019, respectively. The increase is due principally to the receipt of new advances on contracts in excess of recognition of revenue for the Deutsche Bahn contract in the Harsco Rail Segment. During the three months ended March 31, 2020 and 2019 the Company recognized approximately $18 million and approximately $17 million, respectively, of revenue related to amounts previously included in Advances on contracts.
At March 31, 2020 the Harsco Environmental Segment had remaining, fixed, unsatisfied performance obligations where the expected contract duration exceeds one year totaling $98.1 million. Of this amount, $36.1 million is expected to be fulfilled by March 31, 2021, $17.9 million by March 31, 2022, $15.7 million by March 31, 2023, $11.6 million by March 31, 2024 and the remainder thereafter. These amounts exclude any variable fees, fixed fees subject to indexation and any performance obligations expected to be satisfied within one year. The decrease from December 31, 2019 is primarily due to the renegotiation of a contract with a customer in the U.K. who had entered into administration.
At March 31, 2020 the Harsco Rail Segment had remaining, fixed, unsatisfied performance obligations where the expected contract duration exceeds one year totaling $331.6 million. Of this amount, $111.3 million is expected to be fulfilled by
March 31, 2021, $94.6 million by March 31, 2022, $65.4 million by March 31, 2023, $49.8 million by March 31, 2024 and the remainder thereafter. These amounts exclude any variable fees, fixed fees subject to indexation and any performance obligations expected to be satisfied within one year. The increase from December 31, 2019 is primarily attributable to new contract signings in U.S. and India.
17. Other Expenses, Net
The major components of this Condensed Consolidated Statements of Operations caption are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
(In thousands)
|
|
2020
|
|
2019
|
|
Employee termination benefit costs
|
|
$
|
5,455
|
|
|
$
|
2,519
|
|
|
Other costs to exit activities
|
|
176
|
|
|
1,155
|
|
|
Impaired asset write-downs
|
|
69
|
|
|
214
|
|
|
Contingent consideration adjustments
|
|
—
|
|
|
369
|
|
|
Net gains
|
|
(19
|
)
|
|
(2,271
|
)
|
|
Other
|
|
52
|
|
|
(243
|
)
|
|
Other expenses, net
|
|
$
|
5,733
|
|
|
$
|
1,743
|
|
18. Components of Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss is included on the Company's Condensed Consolidated Statements of Equity. The components of Accumulated other comprehensive loss, net of the effect of income taxes, and activity for the three months ended March 31, 2019 and 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Accumulated Other Comprehensive Income (Loss) - Net of Tax
|
|
(In thousands)
|
|
Cumulative Foreign Exchange Translation Adjustments
|
|
Effective Portion of Derivatives Designated as Hedging Instruments
|
|
Cumulative Unrecognized Actuarial Losses on Pension Obligations
|
|
Unrealized Gain (Loss) on Marketable Securities
|
|
Total
|
|
Balance at December 31, 2018
|
|
$
|
(159,810
|
)
|
|
$
|
1,389
|
|
|
$
|
(408,655
|
)
|
|
$
|
(31
|
)
|
|
$
|
(567,107
|
)
|
|
Adoption of new accounting standard
|
|
—
|
|
|
—
|
|
|
(21,429
|
)
|
(a)
|
—
|
|
|
(21,429
|
)
|
|
Other comprehensive income (loss) before reclassifications
|
|
11,725
|
|
(b)
|
(3,084
|
)
|
(c)
|
(6,573
|
)
|
(b)
|
15
|
|
|
2,083
|
|
|
Amounts reclassified from accumulated other comprehensive loss, net of tax
|
|
(2,271
|
)
|
|
(63
|
)
|
|
4,782
|
|
|
—
|
|
|
2,448
|
|
|
Total other comprehensive income (loss)
|
|
9,454
|
|
|
(3,147
|
)
|
|
(1,791
|
)
|
|
15
|
|
|
4,531
|
|
|
Other comprehensive income attributable to noncontrolling interests
|
|
(420
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(420
|
)
|
|
Other comprehensive income (loss) attributable to Harsco Corporation
|
|
9,034
|
|
|
(3,147
|
)
|
|
(1,791
|
)
|
|
15
|
|
|
4,111
|
|
|
Balance at March 31, 2019
|
|
$
|
(150,776
|
)
|
|
$
|
(1,758
|
)
|
|
$
|
(431,875
|
)
|
|
$
|
(16
|
)
|
|
$
|
(584,425
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Accumulated Other Comprehensive Income (Loss) - Net of Tax
|
|
(In thousands)
|
|
Cumulative Foreign Exchange Translation Adjustments
|
|
Effective Portion of Derivatives Designated as Hedging Instruments
|
|
Cumulative Unrecognized Actuarial Losses on Pension Obligations
|
|
Unrealized Gain (Loss) on Marketable Securities
|
|
Total
|
|
Balance at December 31, 2019
|
|
$
|
(143,340
|
)
|
|
$
|
(3,717
|
)
|
|
$
|
(440,562
|
)
|
|
$
|
(3
|
)
|
|
$
|
(587,622
|
)
|
|
Other comprehensive income (loss) before reclassifications
|
|
(71,472
|
)
|
(b)
|
(1,042
|
)
|
(c)
|
21,429
|
|
(b)
|
(18
|
)
|
|
(51,103
|
)
|
|
Amounts reclassified from accumulated other comprehensive loss, net of tax
|
|
12,906
|
|
|
(645
|
)
|
|
8,840
|
|
|
—
|
|
|
21,101
|
|
|
Total other comprehensive income (loss)
|
|
(58,566
|
)
|
|
(1,687
|
)
|
|
30,269
|
|
|
(18
|
)
|
|
(30,002
|
)
|
|
Other comprehensive income attributable to noncontrolling interests
|
|
1,148
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,148
|
|
|
Other comprehensive income (loss) attributable to Harsco Corporation
|
|
(57,418
|
)
|
|
(1,687
|
)
|
|
30,269
|
|
|
(18
|
)
|
|
(28,854
|
)
|
|
Balance at March 31, 2020
|
|
$
|
(200,758
|
)
|
|
$
|
(5,404
|
)
|
|
$
|
(410,293
|
)
|
|
$
|
(21
|
)
|
|
$
|
(616,476
|
)
|