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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                    For the fiscal year ended December 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-03970
HARSCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-1483991
(State or other jurisdiction of incorporation or organization) (I.R.S. employer identification number)
350 Poplar Church Road, Camp Hill, Pennsylvania 17011
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code    717-763-7064
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s)   Name of each exchange on which registered
Common stock, par value $1.25 per share
HSC   New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:    NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý   No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o   No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý  Accelerated filer o
 Non-accelerated filer   o Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o  
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes     No ý
The aggregate market value of the Company's voting stock held by non-affiliates of the Company as of June 30, 2020 was $1,065,987,000
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:
Class   Outstanding at January 31, 2021
Common stock, par value $1.25 per share   78,924,370
DOCUMENTS INCORPORATED BY REFERENCE
Selected portions of the 2021 Proxy Statement are incorporated by reference into Part III of this Report.



HARSCO CORPORATION
FORM 10-K
INDEX
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Glossary of Terms

Unless the context requires otherwise, "Harsco," the "Company," "we," "our," or "us" refers to Harsco Corporation on a consolidated basis. The Company may use other terms in this Annual Report on Form 10-K, including the Consolidated Financial Statements and Notes, which are defined below:

Term Description
AOCI Accumulated Other Comprehensive Income (Loss)
AXC The former Harsco Industrial Air-X-Changers business
CARES Act Coronavirus Aid, Relief, and Economic Security Act
CCIRs Cross-currency interest rate swaps
CE Harsco Clean Earth Segment
CERCLA Comprehensive Environmental Response, Compensation, and Liability Act of 1980
Clean Earth CEHI Acquisition Corporation and Subsidiaries
COVID-19 The COVID-19 coronavirus pandemic
Credit Agreement Credit Agreement governing the Senior Secured Credit Facilities
DEA United States Drug Enforcement Agency
DTSC California Department of Toxic Substances Control
EBITDA Earnings before interest, tax, depreciation and amortization
ESOL Stericycle Environmental Solutions business
FASB Financial Accounting Standards Board
HE Harsco Environmental Segment
IBORs Interbank offered rates
ICMS Type of value-added tax in Brazil
IKG The former Harsco Industrial IKG business
ISDA International Swaps and Derivatives Association
LIBOR London Interbank Offered Rates
MEPP Multiemployer pension plan
New Term Loan $280 million term loan raised in March 2020 under the Senior Secured Credit Facilities, maturing on June 28, 2024
Notes 5.75% Notes due July 31, 2027
NPPC Net periodic pension cost
OCI Other Comprehensive Income (Loss)
Original Term Loan Term loan issued under the Senior Secured Credit Facilities, maturing on December 8, 2024
PA DEP Pennsylvania Department of Environmental Protection
PK The former Harsco Industrial Patterson-Kelley business
RCRA Resource Conservation and Recovery Act
Revolving Credit Facility Multi-year revolving credit facility under the Senior Secured Credit Facility, with a facility limit of $700 million
ROU Right of use
SBB Federal railway system of Switzerland
SCE Supreme Council for Environment in Bahrain
SEC Securities and Exchange Commission
Senior Secured Credit Facilities Primary source of borrowings comprised of the Revolving Credit Facility, Original Term Loan and New Term Loan
SPRA State Revenue Authorities from the State of São Paulo, Brazil
TSDF Treatment, storage, and disposal facility permits issued under the Resource Conservation and Recovery Act
U.S. GAAP Accounting principles generally accepted in the U.S.



PART I
Item 1.    Business.
OUR COMPANY - OUR VISION
Harsco Corporation is a market-leading, global provider of environmental solutions for industrial and specialty waste streams, and innovative equipment and technology for the rail sector. Our three reportable business segments are Harsco Environmental, Harsco Clean Earth, and Harsco Rail and we are working towards transforming the Company into a single-thesis environmental solutions company that is a global leader in the markets we serve.

We have worked in recent years to both transform our portfolio and strengthen our financial results, and we have invested to achieve these objectives and to grow the Company. These investments include targeted organic investments, as well as mergers and acquisitions, and have accelerated our business transformation. The purchase of Clean Earth and ESOL along with the prior sale of our energy-linked business in 2019 were significant strategic steps for our Company. As a result, approximately 82% of our revenues in 2020 were generated from our two environmentally-focused segments. It also is important to note that these transactions have reduced the Company’s portfolio complexity and business cyclicality.

More broadly, we are committed to viewing every customer need through a sustainability lens. Our customers are increasingly expecting more customizable solutions that address environmental challenges within their industries. The Company is responding to this need by helping our customers build better businesses and, in a larger sense, a better environment. Our go-forward strategy is clear: to continue our transformation with the goal of becoming a leading, global environmental solutions company.

SEGMENT INFORMATION
The Company’s current operations consist of three reportable business segments: Harsco Environmental, Harsco Clean Earth, and Harsco Rail. Until 2019, the Company also reported the Harsco Industrial Segment composed of three businesses, which were sold in 2019 and 2020. Historical results for these businesses are now accounted for as discontinued operations.

The Company reports segment information using the “management approach,” based on the way management organizes and reports the segments within the enterprise for making operating decisions and assessing performance. The Company’s reporting segments are identified based upon differences in products, services, and markets served. Financial information concerning segments and international and domestic operations is included in Note 16, Information by Segment and Geographic Area, in Part II, Item 8, “Financial Statements and Supplementary Data,” which information is incorporated herein by reference.

Our revenues by business segment are as follows, and a further description of the products and services offered through these business segments is presented below.
HSC-20201231_G1.JPG HSC-20201231_G2.JPG HSC-20201231_G3.JPG





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HARSCO ENVIRONMENTAL

BUSINESS OVERVIEW
Our Harsco Environmental Segment can trace its heritage back to the earliest efforts in industrial recycling and environmental resource management. Where others only saw waste and expense, our predecessors saw opportunity and value nearly 100 years ago. HE was founded upon market insights, grounded in respect for environments, efficient use of resources, and optimism for the future.

Today, HE is the premier, global provider of environmental services and material processing to the global steel and metals industries. HE partners with its global customer base to deliver production-critical on-site operational support and resource recovery services, through management of our customers’ primary waste or byproduct streams. Our services support the metal manufacturing process, generating significant operational and financial efficiencies for our customers and allowing them to focus on their core steelmaking businesses.

HE serves 70 customers at over 155 sites in approximately 30 countries. Our diversified customer base includes the largest steel producers in the regions where we operate, serving a mix of mini-mill and integrated operations. In recent years, HE has greatly extended its reach, signing major new services contracts in bellwether emerging markets like China and India, and further strengthening our footprint in Western economies. As a result, our global portfolio is balanced and diversified, with foreign currency risk partially mitigated by the fact that our operating costs and revenues are regularly denominated in local currencies.

In addition to providing critical services to our customers, we provide zero-waste solutions for relevant waste or byproduct streams - an important component of our value proposition. We repurpose processed material for alternative uses and / or convert this material into viable products to be sold in other markets via our applied products offerings and capabilities. Our applied products portfolio includes road and roofing materials, abrasives, agriculture products and aggregates. This expertise is increasingly important to our customers as environmental regulations increase and the marketplace grows more averse to landfilling waste.

CUSTOMERS AND SERVICE CONTRACTS
We offer our customers a suite of more than 30 services, and our on-site work is performed under long-term contracts. These contracts typically include fixed fees or minimum billings, which de-risk our investment during periods of economic weakness, and variable fees often linked to the amount of metal produced or waste processed at a site. Our variable fees under contracts are, importantly, not linked to steel prices. Additionally, in recent years we have strengthened our contract terms and underwriting practices in an effort to earn a sufficient and timely return on our investments, as well as achieve other objectives. These measures, along with various improvement initiatives, have boosted our site portfolio results and driven more consistent performance across our operations.

Our contract renewal rates are high, with many customer relationships that span decades. Our largest customers today include ArcelorMittal, Gerdau, Tisco, SSAB, and Heibei. We serve most of our major customers at multiple sites, often under multiple contracts. The length of our customer relationships reflects our value proposition. Customers choose the Company to (1) achieve operational and financial efficiencies; (2) concentrate their efforts on metal manufacturing and supporting end-market product demands; (3) gain access to process innovations and technologies developed by the Company; and (4) leverage our downstream product applications and know-how. Lastly, HE had one customer in the past three years that provided more than 10% of this segment's revenues, again under many long-term contracts at multiple sites.

On December 31, 2020, the Company's services contracts had estimated future revenues of $3.5 billion at current production levels, compared with $3.2 billion at December 31, 2019, with the increase primarily due to new and renewed contracts and the timing of contract expirations. These contract values provide the Company with a substantial base of anticipated long-term revenues. Approximately 19% of these revenues are expected to be recognized by December 31, 2021; approximately 39% of these revenues are expected to be recognized between January 1, 2022 and December 31, 2024; approximately 19% of these revenues are expected to be recognized between January 1, 2025 and December 31, 2027; and the remaining revenues are expected to be recognized thereafter. Estimated future revenues are exclusive of anticipated contract renewals, projected volume increases and ad-hoc services as well as future revenues from roofing granules, abrasives products, roadmaking materials, additives and specialty recovery technology services.

ON-SITE SERVICES
HE provides a broad range of services, most of which address our customers’ environmental challenges. In total, these services reduce both landfill waste and the carbon footprint of our customers’ sites and in 2020, on-site services represented approximately 85% of HE’s revenues. A summary of our most significant services is as follows:
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Resource Recovery, Metal Recycling and Slag Optimization
Resource recovery, metal recycling and slag optimization is the core component of our service offerings. We capture liquid steel waste or byproduct (slag) and transport it for cooling, treatment and conditioning. We then recover valuable metal from the waste-stream, which is returned to our customer in a form suitable for recycling through the customers’ manufacturing process. The residual non-metallic processed material is then finally transformed into environmental products that create new and additional revenue streams to other customers.

Scrap Management
We manage customer scrap inventories and upgrade scrap by making it cleaner and denser. Improved scrap characteristics reduce electricity usage which, combined with the usage of recycled material, provides sustainability benefits to our customers.

Materials Handling and Logistics
We transport materials, including semi-finished and finished products, safely and efficiently for our customers. Our tracking technology also provides real-time analysis of material location, quantities and product quality.

Meltshop and Furnace Services
Meltshop and furnace services allow the molten metal production process to run smoothly and efficiently. These services include under-vessel cleaning and the removal of ladle slag (waste) and general melt shop debris.

APPLIED PRODUCTS
HE creates value-added downstream products from industrial waste-streams. Our experience in manufacturing these products and successfully penetrating relevant end-markets is an important differentiator for the Company. These zero-waste solutions preserve our natural resources and reduce or eliminate landfill disposal. Applied products in 2020 represented approximately 13% of HE’s revenues, and our major applied products include the following:

Road Surfacing and Materials
Because of its natural shape and interlocking properties, steel slag holds many advantages when used in asphalt roadway surfaces, ranging from high skid resistance to better durability.  The Company’s slag-based asphalt product, developed and sold as SteelPhalt™, maintains positive surface characteristics throughout the life of the road, allowing longer replacement intervals and lower maintenance costs.  The Company also sells a slag aggregate that is a sustainable and cost-effective alternative to natural stone. This aggregate is often used as unbound road base material for secondary roads and sub-base material elsewhere.

Abrasives and Roofing Materials
Our Reed Minerals business is among the largest roofing granule suppliers in the U.S., partnering with the country's leading shingle manufacturers. Nearly 100 years ago, we pioneered a process of recycling coal combustion waste from power plants. Through the Company's proprietary process, we create premium quality roofing granules that are a critical raw material in asphalt roofing shingles.

Reed is also one of the largest U.S. manufacturers of abrasives, using coal as well as copper slag and crushed glass, for the surface preparation market. Our BLACK BEAUTY® abrasives are well-recognized within the industry and are used as blast material to remove paint, rust, and other coatings from surfaces, prior to applying a new finish. 

Metallurgical Additives
The Company’s custom-designed steelmaking additives facilitate fluid slag formation in the steelmaking process, thus improving customer productivity and helping achieve the steel product specifications required for today’s premium applications.

Agriculture and Turf Products
We produce soil conditioners and fertilizers, principally from stainless steel slag that optimize crop yields and turf performance. CrossOver® and AgrowSil products are our leading silicon, calcium and magnesium-based product brands, sold mainly in the Americas. These products are formulated to address nutrient deficiencies and toxicity issue in soil as well as help plants withstand outside pressures and disease.
Cement Additives
Steel slag is naturally cementitious and commonly blended with other materials to produce environmentally-friendly, high-performing cement products. Cement made with slag aggregate can achieve permeabilities and strengths that compare favorably to concrete made with conventional aggregates.

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ALTEK GROUP
In 2018, the Company acquired Altek Europe Holdings Limited and its affiliated entities ("Altek"), a UK-based manufacturer of market-leading products that enable aluminum producers and recyclers to manage and extract value from critical waste streams, reduce waste generation, and improve operating productivity. The cost-efficient recovery of metal and other valuable materials is increasingly important to the aluminum industry. Altek’s products and technologies address this challenge, and its latest AluSalt™ innovation offers customers a breakthrough technology that converts salt slag waste into valuable products, addressing one of the largest environmental concerns within the aluminum market.

GROWTH STRATEGY
After a period of business improvement, we have started in recent years to invest growth capital in HE. We have identified attractive opportunities that meet our return thresholds to expand our service portfolio, and our pipeline of opportunities remains significant. Additionally, we have initiated efforts to expand our downstream products business and plan to continue investing in innovation to support our business sustainability.

A summary of our key growth initiatives is as follows:
Further Penetrate Existing Sites. Given our broad services capabilities, we see significant potential for add-on services contracts at existing sites.
New Sites. We continue to pursue new services contracts in certain markets, particularly in emerging economies where out-sourcing opportunities are significant because of increased environmental awareness or where steel consumption (production) is set to grow.
Investment in Downstream Products. We see ample opportunities to expand certain products businesses, and our investment in a second SteelPhalt™ (road materials) plant in Europe is a recent example.
Innovation. We are at the forefront of innovation in our industry. Our Pure and Applied Innovation Programs are specifically focused on helping our customers solve their most pressing environmental challenges amid ever-increasing regulation. This initiative includes developing new customer or industry solutions, either in-house or externally, and expanding the usage of technologies that already exist within our business.

COMPETITORS
HE competes principally with a small number of privately-held businesses for services outsourced by customers on a global basis. We also compete with numerous smaller, privately-held businesses in each of our regional markets and, to some degree, customers that may decide to perform certain services themselves.

We believe that HE differentiates itself from its competition through innovative technologies that support our service offerings, and through the operating expertise developed by sharing best practices across our global portfolio. Our safety practices and performance also support our business, as do our long-standing relationships and our downstream product solutions.

HARSCO CLEAN EARTH

BUSINESS OVERVIEW
In June 2019, the Company acquired Clean Earth, one of the largest specialty waste processing companies in the U.S. CE provides processing and beneficial reuse solutions for hazardous wastes, contaminated materials, and dredged volumes. In April 2020 the Company acquired ESOL, an established waste transportation, processing and services provider with a comprehensive portfolio of disposal solutions for customers primarily across the industrial, retail and healthcare markets. These acquisitions accelerated Harsco’s transformation into a global, market-leading, single-thesis environmental solutions platform.

Combined, this business now operates 19 permitted TSDF facilities and 51 10-day transfer facilities across the U.S., serving more than 90,000 customer locations while utilizing a fleet of over 700 vehicles. It also holds a portfolio of more than 560 critically-important permits, and approximately 94 percent of the waste handled by CE is recycled or beneficially reused.

Specialty-waste permits have considerable value, and CE is positioned to take advantage of increasingly stringent regulation on the handling of this waste. These dynamics provide recurring revenues and support attractive underlying growth. CE also operates in a fragmented market where acquisition opportunities are likely to develop. As a result, we see CE as a platform for growth as we continue the transformation of the Company’s business portfolio.

INTEGRATION
By the end of 2022, the Company expects to integrate and fully realize identified synergies and profit improvement potential from the acquisition of ESOL. These improvements are anticipated through transportation and disposal efficiencies, procurement and operational savings, and commercial benefits.
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CUSTOMERS
CE provides low-cost, regulatory-compliant solutions to a diverse base of customers or suppliers (waste originators). These customers include waste generators in numerous industries, including chemicals, power, aerospace, medical, retail and metals, as well as integrated waste companies and brokers. CE also services federal, state and local governments as well as developers linked to large infrastructure and redevelopment projects, and it processes a variety of consumer goods, including electronics, cleaners, pesticides and aerosols, which must be handled in strict compliance with environmental regulations.

LINES OF BUSINESS

Hazardous Waste
CE provides testing, tracking, processing, recycling, and disposal services for hazardous waste and it operates 24 Resource Conservation and Recovery Act ("RCRA") Part B Permits and waste water processing permits. This includes 19 Treatment, Storage and Disposal Facility permits (TSDFs) that enable the Company to process a variety of complex hazardous wastes, consisting of toxic, reactive and flammable materials such as industrial wastewater, manufacturing sludge, oily-mixtures, chemicals, pesticides, asbestos and pharmaceutical waste. The remaining facilities handle a limited number of other wastes, including landfill leachate with per- and polyfluoroalkyl substances ("PFAS"), electronics, batteries and light bulbs. These operations possess unique and differentiated processing technologies, such as applications for aerosol can and medical waste recycling. In 2020, this line of business represented approximately 76% of CE’s revenues.

Contaminated Materials
CE processes approximately 3.3 million tons per year of contaminated soil at thirteen locations. These soils are contaminated with heavy metals, PCBs, pesticides, PFAS or other chemicals, and the related clean-up work is often the result of infrastructure improvements, private redevelopment, industrial site remediation and/or underground storage tank removal. CE treats and recycles this soil through various processes, after which the material is suitable for beneficial reuse as construction fill material or landfill capping. In 2020, this line of business represented approximately 20% of CE’s revenues.

Dredged Materials
CE operates one facility to treat dredged material, the sediment accumulated at the bottom of waterways that is removed for environmental (clean-up) or maintenance (maintain depth) purposes. After treatment, these materials are also beneficially reused as fill material. In 2020, dredged material processing represented approximately 4% of CE’s revenues.

OPERATIONS AND PERMITS
CE maintains a full suite of regulation-compliant treatment capabilities that de-characterize waste and that can be tailored to meet customer-specific requirements. These solutions include: a) Thermal Desorption - a remediation technology that involves heating soil to remove or separate the contaminants; b.) Bioremediation - a treatment process that degrades contaminants by the application of microorganisms or engineered bacteria; c.) Chemical fixation - a remediation process using chemical additives; and d.) Physical treatment - a sizing and segregation process to remove unsuitable materials.

Additionally, CE holds a portfolio of more than 560 process, treatment and operating permits, including the ones mentioned above. This permit portfolio is difficult to duplicate, making these permits valuable and critically-important assets in this heavily-regulated industry. CE has achieved a 100% renewal-retention rate on desired permits in the past 20 years, and the number of permits held by CE has increased considerably over the past few years. CE’s ability to secure new permits or permit modifications for new waste streams or processes in the future remains an important growth lever for the business.

BACKLOG
The dollar value of CE's backlog is excluded due to the short-cycle nature of services provided and variability in revenues due to the timing of receipt and composition of materials. CE had an estimated material backlog on December 31, 2020 of approximately 2.7 million tons, most of which can be attributed to its contaminated materials business. This backlog provides us significant visibility on future performance within our contaminated materials business.

GROWTH
Favorable underlying market dynamics, driven by increased regulation and a growing list of contaminants and hazardous materials, and investment are anticipated to fuel CE’s growth in the coming years. We also anticipate penetrating the market with new treatment solutions and expansion of existing technologies, including permit modifications and applications in new geographic markets. Lastly, CE is well-positioned to benefit from an improved outlook for maintenance and environmental dredging, and we expect acquisitions to be an important growth lever for CE. CE operates in a very fragmented, regionally-driven market, and as a result, we expect to pursue acquisition opportunities that may provide increased scale and/or new capabilities, along with synergies and attractive financial returns to the Company.

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COMPETITION
Given the fragmented nature of the specialty waste industry, CE competes with numerous companies. Our larger peers include Clean Harbors, Heritage Environmental Services, and U.S. Ecology within the hazardous materials line of business, and GFL Environmental and Impact Environmental within the contaminated materials market. CE differentiates itself from competitors through service reliability and responsiveness, its diverse operating capabilities and regulatory compliant solutions, and the value it provides through providing low-cost solutions relative to other disposal alternatives in the regions where it operates.

HARSCO RAIL

BUSINESS OVERVIEW
Harsco Rail is recognized for technical leadership and our worldwide experience in all aspects of railway track maintenance. We enable railroads to operate at peak efficiency over smooth, precisely aligned track, which improves safety performance and reduces fuel consumption. Our broad array of products and services helps every type of railway operator, from major national and international railway systems, to short lines and high-speed urban transit networks, achieve their productivity and sustainability objectives.

More specifically, Harsco Rail is a supplier of equipment, after-market parts and services for the construction and maintenance of railway track. We manufacture highly-engineered railway track maintenance equipment and support a large installed-base of the Company's equipment with a full suite of aftermarket parts. We are a leading supplier of collision avoidance and warning systems to enhance passenger, rail worker and pedestrian safety, and we pioneered a number of measurement and diagnostic technologies that further support railway maintenance programs.

RAIL EQUIPMENT
Manufacturing high-quality, cutting-edge technology equipment is core to Harsco Rail. These products are developed through an active research and development effort, often in conjunction with our customers. Our primary operating costs include product engineering, metal and electrical components. Rail equipment sales represented approximately 56% of segment revenues in 2020. Below is a summary of our major equipment categories.

Surfacing Equipment
Harsco Rail’s surfacing machines precisely align and stabilize railway track by raising the rail to the desired height and packing the supporting ballast foundation.  This process increases rail productivity and limits maintenance downtime for our customers. The Company is also a leader in the development of automated tamping equipment through the integration of drone technology, which provides customers with incremental operating flexibility.

Utility Track Vehicles ("UTVs")
Our all-purpose UTVs are used to power work trains for a broad range of rail maintenance requirements, including snow removal, catenary maintenance, and other repairs. UTVs are engineered to order, providing highly versatile configurations equipped with cranes, generators and/or work platforms used by our customers. Harsco Rail has also developed and introduced a hybrid diesel-electric maintenance vehicle, a breakthrough technology, that supports customer ambitions to electrify their rails and lower their carbon footprint.

Production Grinders
Harsco Rail’s suite of grinding products extend the life of track and enhance customer performance. Our grinders remove cracks and other surface defects and re-profile rail heads. The result is smoother and quieter track that enables our customers to operate at higher speeds and lower fuel consumption.

Tie Equipment
Harsco Rail provides a full line of tie equipment, with drone capabilities, to help customers maintain their linear assets. These products include spike puller, anchor spreader and tie replacement vehicles that support optimal track performance and safety.

New Track Construction Equipment
A new track construction machine produced by the Company can lay roughly a mile of track per day in continuous operation. The equipment constructs track three times faster than the stick-building alternative and works with all forms of ties.

AFTERMARKET PARTS AND SERVICE
Harsco Rail sells a full range of aftermarket parts and provides on-site technical assistance and training programs to our customers. These products include OEM genuine replacement parts and upgrade kits to ensure equipment achieves peak performance and to minimize operating costs. Our service representatives are deployed around the world, and our e-commerce
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website features over 20,000 parts. Aftermarket parts sales and services represented approximately 32% of segment revenues in 2020.

PROTRAN TECHNOLOGY
Protran is a leading technology provider to the rail and transit market. Its railway track worker and train operator safety systems help protect railway personnel from oncoming rail traffic and prevent vehicle-to-vehicle collisions. Protran’s safety equipment is found on transit buses as well, providing turn alerts to pedestrians. Protran also sells track measurement and diagnostic solutions. This technology provides analytical data on track conditions, thereby helping railways plan the timing and location of preventive maintenance. Protran represented approximately 3% of segment revenues in 2020.

RAILWAY CONTRACTING SERVICES
Harsco Rail's contracting services provide customers with a quality service through work crews that operate the equipment and understand the customer's maintenance needs. With years of experience, Harsco Rail's contract service teams have covered more than 397 thousand miles of track, helping customers achieve desired productivity goals. Railways contracting services represented approximately 9% of segment revenues in 2020.

CUSTOMERS
Over 125 major railways, including Class-1 railroads in North America, mass transit systems (authorities), equipment leasing companies and state-owned railroads around the world have chosen Harsco Rail to optimize the condition of their tracks. Harsco Rail’s geographic and product mix is diversified. In 2020, approximately 34% of Harsco Rail’s revenues were derived outside of North America. Harsco Rail had one customer in 2020, 2019 and 2018 that provided more than 10% of the segment's revenues.

BACKLOG
Harsco Rail had an order backlog on December 31, 2020 of $441.4 million compared with $446.9 million on December 31, 2019. Most of this backlog can be attributed to our Rail equipment business. Equipment is often sold through long lead-time purchase orders or under large, multi-year supply contracts, while aftermarket and Protran sales have shorter-cycle characteristics.

Importantly, this backlog also provides us significant visibility for future quarters. As of December 31, 2020, $241.1 million or 55% of the Harsco Rail segment's manufactured products order backlog is expected to be filled in 2021. The remainder of this backlog is expected to be filled through 2026.

MANUFACTURING AND WORKING CAPITAL
Our primary equipment manufacturing facility is in Columbia, South Carolina. We also maintain a manufacturing presence in Europe, mainly to support certain large, multi-year supply contracts in that region.

Given the time required to manufacture certain equipment, Rail manages its inventories to meet forecasted demand and customer requirements. We will usually build inventories during the design and production phase for large or long-lead-time orders, and the opposite is true as equipment is delivered under these contracts. Further, the overall cash impact of these inventory changes is partially mitigated by the fact that Rail often receives advance or progress payments on large orders.

GROWTH
Developing new and differentiated technology is critical to our growth, and we see numerous potential growth levers for Harsco Rail throughout our product portfolio and expanding global presence. We expect to benefit in North America from the efficiency or productivity goals of our freight customers and investments by transit authorities to upgrade and improve asset performance. In the international market, we anticipate further share gains through our equipment innovations, and we are positioned to benefit as global spending for safety and measurement technologies and rail electrification increases.

COMPETITION
We have many competitors across our global product and services portfolio, including Plasser & Theurer, Nordco, Loram, and Matisa Materiel Industriel SA. We believe Harsco Rail differentiates itself from competitors through innovative technology solutions, as well as service and product quality. We create customized products designed to meet the specific needs of our customers’ railway projects, while at the same time meeting their productivity, safety and environmental goals.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE
We are committed to building a global, market-leading environmental solutions company that preserves our environment, adheres to ethical and responsible business practices, and supports our customers as they do the same. Environmental, Social
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and Governance ("ESG") is central to our business strategy and operations - our employees are inspired to develop innovative products and services that positively impact the environment and support the Company’s growth.

Our ESG focus areas include:
Innovative Solutions. We help our customers solve their most pressing sustainability challenges by providing services and products that meet their environmental and business objectives. We deliver solutions for treating, recycling and repurposing materials across a wide range of customers, industries, and industrial by-products and specialty wastes, including steel, aluminum, soils, water, electronics, fuel, batteries and more.
Thriving Environment. We strive to reduce or eliminate our global environmental impacts by providing the highest-quality environmental management in our operations and improving our environmental footprint through continuous improvement efforts. Our Corporate Environmental Policy outlines our environmental stewardship commitments. We also expect all third parties that do business with the Company to share our environmental standards.
Safe Workplaces. Safety is of paramount importance in everything we do - our goal, each and every day, is that our people return home unharmed. We have built a best-in-class safety culture, and our cross-divisional Executive Safety Committee is responsible for implementing best practices with a goal of eliminating all incidents within our business activities.
Inspired People. We invest in the career development of our employees, knowing that diversity of perspective, backgrounds and talents strengthens our business. We are also committed to building strong, sustainable communities where we live and work.
Excellence in Corporate Governance. Excellence in corporate governance is fundamental to how we manage and operate Harsco, from our everyday business to ESG issues. Our Code of Conduct and Core Values lie at the center of all we do. Through these policies and guidelines, we have equipped every employee with the tools, training, and guidance to always do the right things, the right way. Oversight of our ESG practices is provided by the Governance Committee of the Company’s Board of Directors.

Further details on our ESG initiatives and accomplishments can be found in our latest ESG Report. This report, published in the second-half of 2020, is our most comprehensive sustainability report to date and can be found on the Company’s website (www.harsco.com/sustainability) along with other related policies.

HARSCO BUSINESS SYSTEM ("HBS")
Our HBS is a shared set of processes that reflect and support our corporate strategy. These repeatable and replicable standards and practices are the hallmark of a high-performing company. There is intrinsic value in a common language, and a defined business system does away, in large part, with ambiguity about what constitutes success. The elements of our HBS are:
Environmental, Health & Safety; Continuous Improvement; Talent Development; Strategic Planning; and Acquisitions & Divestitures.

ACQUISITIONS AND DIVESTITURES
Given the Company’s evolution to a single-thesis environmental solutions company, acquisitions and divestitures have been an important element of our business strategy. These actions support the Company’s growth ambitions, while reducing business cyclicality and portfolio complexity.

In April 2020 the Company completed the acquisition of ESOL, from Stericycle, Inc., for $429.0 million in cash, inclusive of post-closing adjustments. ESOL is an established waste transportation, processing and services provider with a comprehensive portfolio of disposal solutions for customers primarily across the industrial, retail and healthcare markets. ESOL's network includes thirteen permitted TSDF facilities and forty-eight 10-day transfer facilities serving more than ninety thousand customer locations utilizing a fleet of more than seven hundred vehicles. The acquisition of ESOL furthers Harsco’s transformation into a global, market-leading, single-thesis environmental solutions platform. The results of ESOL are included in the Harsco Clean Earth Segment.

In June 2019, the Company acquired CE from Compass Diversified Holdings for approximately $628 million in cash. This acquisition expanded the Company’s environmental service capabilities, while providing the Company entry into the specialty market, which possesses attractive organic growth and recurring revenues characteristics as well as a platform for future acquisition growth.

Also, in 2019, the Company completed the sale of the AXC business for approximately $600 million (July 2019) and the Harsco Industrial Patterson-Kelley business (November 2019) for approximately $60 million in cash. In January 2020 the Company sold IKG for $85.0 million, including a note receivable with a face value of $40.0 million. These divestitures accelerated the transformation of the Company's portfolio of businesses into a global leading provider of environmental solutions and services, and significantly reduce the Company’s exposure to the cyclicality of the U.S. energy market.
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In May 2018, the Company acquired Altek, a U.K.-based manufacturer of market leading products that enable aluminum producers and recyclers to manage critical waste streams and improve operating productivity. Altek has developed unique technologies that support the sustainability of its customers, which complements the Company’s other industrial waste services. The Company acquired Altek for a purchase price of £45 million (approximately $60 million). Altek's revenues and operating results are included in the results of the Harsco Environmental Segment.

SEASONALITY
Certain of the Company's businesses can be subject to seasonal fluctuations. Demand for services and solutions provided by HE are subject to seasonal changes related to weather conditions, inventory management through the steel-industry supply chain, and customer operating outages linked to regular holidays. The timing of these impacts varies by region, however, overall customer demand for HE across its global footprint tend to be strongest in the second quarter and third quarter of each year. CE, meanwhile, provides services that can also fluctuate seasonally with weather, construction activity, retail spending and municipal waste collection programs. As a result, demand for CE services tends to be weakest in the first quarter of each year. Harsco Rail is not considered to be influenced by seasonal trends, although its business is often influenced by the timing of budgetary practices by customers.

Due to these factors, the Company’s revenues and earnings are usually higher during the second and third quarters of each year relative to the first and fourth quarter of the year. Additionally, the Company’s cash flows are also influenced by seasonality. The Company’s cash flow from operations has historically been higher in the second half of the year, compared with the first half, due to working capital management, receivable collections during the fourth quarter as a result of higher revenues in preceding quarters and the timing of certain cash payments, including for incentive compensation and pension contributions.

ENVIRONMENTAL COMPLIANCE
The Company is subject to various environmental regulations within its global operations and the scope of relevant environmental regulation is expanded following the Company’s acquisition of CE and ESOL in 2019 and 2020, respectively. CE operates within an industry that is subject to stringent environmental regulations by federal, state and local authorities, which regulate the treatment and disposal of specialty waste. Facility and operating permits or approvals from these authorities are required to maintain operations. The nature of these permits varies by jurisdiction and are based on the activities at a particular site. These permits are generally difficult to obtain. This dynamic, along with increased regulation on the treatment and disposal of specialty waste, is beneficial to our CE business.

The most significant U.S. federal environmental regulation that impacts our business is the RCRA. RCRA created a cradle-to-grave system which governs the transportation, treatment, storage and disposal of hazardous waste. Under RCRA, each hazardous waste processing facility must maintain a RCRA permit and comply with defined operating practices. This legislation is administered by the U.S. Environmental Protection Agency ("EPA"), although its authority may be delegated to a State EPA with similar or more stringent environmental standards.

The Company is also subject to air and water quality control legislation in the U.S. and in foreign countries where the Company operates. The Clean Water Act regulates the discharge of pollutants into waterways and sewers in the U.S, and, where necessary, we obtain and must comply with permits to discharge wastewater from our facilities. Similarly, the Clean Air Act in the U.S. controls emissions of pollutants into the air and requires permits for certain emissions.

The Company regards compliance with all applicable environmental regulations as critical to its business. Historically, the Company has been able to renew and retain all required permits to maintain its operations and it has not experienced substantial difficulty complying with relevant environmental regulations. The Company also does not anticipate making any material capital expenditures to comply with or improve environmental performance in the future, and while environmental regulations may increase or expand, it cannot predict the extent of this future environmental regulation, its related costs and the overall effect on the Company’s business.

For additional information regarding environmental matters see Note 12, Commitment and Contingencies, in Part II, Item 8, “Financial Statements and Supplementary Data.”

HUMAN CAPITAL RESOURCES
As of December 31, 2020, we had approximately 12,000 employees, excluding contingent workers, in more than 35 countries. The majority of these employees are represented by labor unions, through more than 100 collective bargaining agreements.

Our business relies on our ability to attract and retain talented employees. To attract and retain talent, we strive to create a diverse, inclusive and supportive workplace while providing opportunities for our employees to grow and develop in their careers.
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Corporate Values
Across cultures, time zones and organizational lines, our values are the link that connects us all. As the cornerstone to our shared Company culture, these values reflect our overarching direction and purpose as a business:
Employee Care - We are committed to safe, appealing work environments, market-competitive benefits programs and investment in personal development. We must treat our people as we would like to be treated ourselves, and we must attract and retain the very best talent throughout our organization.
Passion for Winning - We are passionate about winning through creating exceptional value for our employees, customers and shareholders. Excellence is not an act, but a habit.
Satisfy the Customer - We are engaged in the relentless pursuit of customer satisfaction by listening to the customers' needs, and consistently delivering value that exceeds their expectations.
Inclusion - We strive to create an environment where all people are actively included. Our diverse global workforce is our most valuable asset. We must foster a climate in which every employee is encouraged to engage and dedicate his or her talents and experiences.
Integrity - We demonstrate an uncompromising commitment to ethical principles. We act ethically and in the interest of the customers we serve. We treat others with dignity and respect, and value honesty above all else.
Respect - We respect all individuals and their contributions. Harsco will not tolerate discrimination or harassment of any kind. Our employees have a right to a safe, respectful workplace. Our management has a mandate to provide it.

Health, Safety and Wellness
We are committed to the health, safety and wellness of our employees. We are passionate about establishing a culture of ownership and accountability for which all employees are responsible for safety. We evaluate our safety processes, programs and procedures to continuously improve our safety performance. We provide our employees and their families with access to a variety of health and wellness programs globally.

In response to the COVID-19 pandemic, we developed and implemented robust principals and standards, in consultation with infectious disease and public health experts, we consider to be in the best interest of our employees, as well as the communities in which we operate, to ensure we not only complied with governmental regulations, but created safe work environments for our employees.

Compensation and Benefits
We provide competitive compensation and benefits programs for our employees. In addition to salaries, these programs, which vary by employee level and by the country where the employees are located, may include, among other items, bonuses, stock awards, retirement programs including pension and savings plans, health savings and flexible spending accounts, paid time off, paid parental leave, disability programs, flexible work schedules and employee assistance programs.

CORPORATE INFORMATION
The Company was incorporated in 1956. The Company’s global headquarters and executive offices are located at 350 Poplar Church Road, Camp Hill, Pennsylvania 17011, and its main telephone number is 717.763.7064.

The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such reports filed with or furnished to the Securities and Exchange Commission (the “SEC”) under Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available on the Company’s website at www.harsco.com as soon as reasonably practicable after such reports are electronically filed with the SEC. Additionally, the SEC maintains a website that contains reports, proxy and other information regarding issuers that electronically file with the SEC at www.sec.gov.

AVAILABLE INFORMATION
Our website address is www.harsco.com. Copies of our key Corporate governance documents, such as our Code of Business Conduct and Internal Controls Framework, as well as our Board of Directors composition and structure can be viewed on our website under the “Corporate Governance” subheading of the “Our Company” page. Additionally, further information on our Corporate Sustainability initiatives also can be accessed through the “Our Company” page. The information posted on the Company’s website is not incorporated into the Company’s SEC filings.


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Item 1A. Risk Factors.

Set forth below are risks and uncertainties that could materially and adversely affect the Company's results of operations, financial condition, liquidity and cash flows. The following discussion of risks contains forward-looking statements, and the risks set forth below are not the only risks faced by the Company. The Company's business operations could also be affected by other factors not presently known to the Company or factors that the Company currently does not consider to be material.

STRATEGIC AND OPERATIONAL RISKS

The Company may not be able to successfully integrate the ESOL and Clean Earth businesses.
On April 6, 2020 the Company completed the acquisition of ESOL. Prior to the acquisition, ESOL was operated as a division of Stericycle. The success of the acquisition, as well as the Company’s ability to realize its anticipated benefits, depends in large part on the ability to successfully integrate the ESOL and Clean Earth businesses and improve the operating results of the ESOL business. This integration is complex and time consuming, and the failure of successfully integrating may result in the Company not fully achieving the anticipated benefits of the ESOL acquisition. Potential difficulties the Company may encounter as part of the integration process include (i) the inability to successfully integrate the transportation network of the former ESOL business with the Clean Earth facilities; (ii) complexities and unanticipated issues associated with integrating the two businesses’ complex systems, technologies and operating procedures; (iii) integrating the workforces of the two businesses while maintaining focus on achieving strategic initiatives; (iv) potential unknown liabilities and unforeseen increased or new expenses; (v) the possibility of faulty assumptions underlying expectations regarding the integration process; (vi) the inability to improve on ESOL’s historical operating results; and (vii) making any necessary modifications to the internal control environment.

The seasonality of the Company's business may cause quarterly results to fluctuate.
The majority of the Company's cash flows provided by operations has historically been generated in the second half of the year. This is a result of normally higher income during the second and third quarters of the year, as the Company's business tends to follow seasonal patterns. If the Company is unable to successfully manage the cash flow and other effects of seasonality on the business, its results of operations may suffer.

Customer concentration and related credit and commercial risks may adversely impact the Company's results of operations, financial condition and cash flows.
For the year ended December 31, 2020, the Company’s top five customers in the Harsco Environmental Segment accounted for approximately 31% of revenues in that Segment and 15% of the Company’s consolidated revenues. The Company routinely enters into multiple contracts with its top customers, and many vary in contract length and scope. Disagreements between the parties can arise as a result of the scope, nature and varying degree of relationship between the Company and these customers.

The Harsco Environmental Segment has several large customers and, if a large customer were to experience financial difficulty or file for bankruptcy or receivership protection, it could adversely impact the Company's results of operations, cash flows and asset valuations.

Disputes with customers with long-term contracts could adversely affect the Company’s financial condition.
The Company routinely enters into multiple contracts with customers, many of which can be long-term contracts. Under long-term contracts, the Company may incur capital expenditures or other costs at the beginning of the contract that it expects to recoup through the life of the contract. Some of these contracts provide for advance payments to assist the Company in covering these costs and expenses. A dispute with a customer during the life of a long-term contract could impact the ability of the Company to receive payments or otherwise recoup incurred costs and expenses.

The Company may lose customers or be required to reduce prices as a result of competition.
The industries in which the Company operates are highly competitive. Some examples are as follows:
The Harsco Environmental Segment is sustained mainly through contract renewals and new contract signings. The Company may be unable to renew contracts at historical price levels or to obtain additional contracts at historical rates as a result of competition. If the Company is unable to renew its contracts at the historical rates or renewals are made at reduced prices, or if its customers terminate their contracts, revenue and results of operations may decline.
The Harsco Rail Segment competes with companies that manufacture similar products both internationally and domestically. Certain international competitors export their products into the U.S. and sell them at lower prices, which can be the result of lower labor costs and government subsidies for exports. In addition, certain competitors may from time to time sell their products below their cost of production in an attempt to increase their market share. Such practices may limit the prices the Company can charge for its products and services. Unfavorable foreign exchange
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rates can also adversely impact the Company's ability to match the prices charged by international competitors. If the Company is unable to match the prices charged by competitors, it may lose customers.
Like the Harsco Environmental Segment, the Harsco Clean Earth Segment is sustained primarily through contract renewals and new contract signings. The Harsco Clean Earth Segment faces competition from companies with greater resources than the Company, with closer geographic proximity to waste sites, with captive end disposal assets, and who may provide service offerings that we do not provide. In order to compete, the Company may be required to reduce price levels below historical price levels or obtain additional contracts at rates lower than historical rates.

If the Harsco Clean Earth Segment is unable to obtain or renew its operating permits or license agreements with regulatory bodies, its business would be adversely affected.
The Harsco Clean Earth Segment's facilities operate using permits and licenses issued by various regulatory bodies at various local, state and federal government levels. Failure to obtain permits and licenses necessary to operate these facilities on a timely basis or failure to renew or maintain compliance with its permits, licenses and site lease agreements on a timely basis could prevent or restrict the Company's ability to provide certain services, resulting in a material adverse effect on its business. There can be no assurance that the Company will continue to be successful in obtaining timely permit or license applications approval, maintaining compliance with its permits, licenses and lease agreements and obtaining timely license renewals.

Higher than expected claims under insurance policies, under which the Company retains a portion of the risk, could adversely impact results of operations and cash flows.
The Company retains a significant portion of the risk for property, workers' compensation, U.K. employers' liability, automobile and general and product liability losses. Reserves have been recorded 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 are higher than those projected by management, an increase to the Company's insurance reserves may be required and would be recorded as a charge to income in the period the need for the change was determined.

The Harsco Clean Earth Segment's insurance policies do not cover all losses, costs, or liabilities that it may experience.
The Harsco Clean Earth Segment maintains insurance coverage, but these policies do not cover all of its potential losses, costs, or liabilities. The Company could suffer losses for uninsurable or uninsured risks or in amounts in excess of its existing insurance coverage which would significantly affect its financial performance. For example, the Company's pollution legal liability insurance excludes costs related to fines, penalties, or assessments. The Company's insurance policies also have deductibles and self-retention limits that could expose it to significant financial expense. The Company’s ability to obtain and maintain adequate insurance may be affected by conditions in the insurance market over which it has no control. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on the Company’s business, financial condition, and results of operations. In addition, the Harsco Clean Earth Segment’s business requires that it maintain various types of insurance. If such insurance is not available or not available on economically acceptable terms, the Clean Earth Segment’s and our businesses could be materially and adversely affected.

The waste management industry, in which the Harsco Clean Earth Segment is a participant, is subject to various economic, business, and regulatory risks.
The future operating results of the Harsco Clean Earth Segment may be affected by such factors as its ability to utilize its facilities and workforce profitably in the face of intense price competition, maintain or increase market share during periods of economic contraction or industry consolidation, realize benefits from cost reduction programs, invest in new technologies for treatment of various waste streams, generate incremental volumes of waste to be handled through the Harsco Clean Earth Segment’s facilities from existing and acquired sales offices and service centers, obtain sufficient volumes of waste at prices which produce revenue sufficient to offset the operating costs of its facilities and minimize downtime and disruptions of operations.

Outdoor construction, which may be limited due to colder weather, and dredging, which may be limited due to environmental restrictions in certain waterways in the Northeastern United States, can be cyclical in nature. If those cyclical industries slow significantly, the business that the Harsco Clean Earth Segment receives from them would likely decrease.

Increases or decreases in purchase prices (or selling prices) or availability of steel or other materials and commodities may affect the Company's profitability.
The profitability of the Company's manufactured products may be affected by changing purchase prices of raw material, including steel and other materials and commodities. If raw material costs associated with the Company's manufactured products increase and the costs cannot be transferred to the Company's customers, results of operations would be adversely
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affected. Additionally, decreased availability of steel or other materials could affect the Company's ability to produce manufactured products in a timely manner. If the Company cannot obtain the necessary raw materials for its manufactured products, then revenues, results of operations and cash flows could be adversely affected.

Certain services performed by the Harsco Environmental Segment result in the recovery, processing and sale of recovered metals and minerals and other high-value metal byproducts to its customers. The selling price of the byproducts material is market-based and varies based upon the current fair value of its components. Therefore, the revenue amounts generated from the sale of such byproducts material vary based upon the fair value of the commodity components being sold.

The success of the Company's strategic ventures depends on the satisfactory performance by strategic venture partners of their strategic venture obligations.
The Company enters into various strategic ventures as part of its strategic growth initiatives as well as to comply with local laws. Differences in opinions or views between strategic venture partners can result in delayed decision-making or failure to agree on material issues which could adversely affect the business and operations of the venture. From time to time, in order to establish or preserve a relationship, or to better ensure venture success, the Company may accept risks or responsibilities for the strategic venture that are not necessarily proportionate with the reward it expects to receive. The success of these and other strategic ventures also depends, in large part, on the satisfactory performance by the Company's strategic venture partners of their strategic venture obligations, including their obligation to commit working capital, equity or credit support as required by the strategic venture and to support their indemnification and other contractual obligations.

If the Company's strategic venture partners fail to satisfactorily perform their strategic venture obligations as a result of financial or other difficulties, the strategic venture may be unable to adequately perform or deliver its contracted services. Under these circumstances, the Company may be required to make additional investments and provide additional services to ensure the adequate performance and delivery of the contracted services. These additional obligations could result in reduced profits or, in some cases, increased liabilities or significant losses for the Company with respect to the strategic venture. In addition, although the Company generally performs due diligence with regard to potential strategic partners or ventures, a failure by a strategic venture partner to comply with applicable laws, rules or regulations could negatively impact its business and, in the case of government contracts, could result in fines, penalties, suspension or even debarment. Unexpected strategic venture developments could have a material adverse effect on results of operations, financial condition and cash flows.

If the Harsco Clean Earth Segment fails to comply with applicable environmental laws and regulations, its business could be adversely affected.
The regulatory framework governing the Harsco Clean Earth Segment's business is extensive. The Company could be held liable if its operations cause contamination of air, groundwater or soil or expose its employees or the public to contamination. The Company may be held liable for damage caused by conditions that existed before it acquired the assets, business or operations involved. Also, it may be liable if it generates, transports or arranges for the transportation, disposal or treatment of hazardous substances that cause environmental contamination at facilities operated by others, or if a predecessor generated, transported, or made such arrangements and the Company is a successor. Liability for environmental damage could have a material adverse effect on the Company’s financial condition, results of operations and cash flows. The Company may also be held liable for the mishandling of waste streams resulting from the misrepresentations by a customer as to the nature of such waste streams.

Stringent regulations of federal, state or local governments have a substantial impact on the Harsco Clean Earth Segment’s transportation, treatment, storage, disposal and beneficial use activities. Many complex laws, rules, orders and regulatory interpretations govern environmental protection, health, safety, noise, visual impact, odor, land use, zoning, transportation and related matters. The Company also may be subject to laws concerning the protection of certain marine and bird species, their habitats, and wetlands. It may incur substantial costs in order to conduct its operations in compliance with these environmental laws and regulations. Changes in environmental laws or regulations or changes in the enforcement or interpretation of existing laws, regulations or permitted activities may require the Company to make significant capital or other expenditures, to modify existing operating licenses or permits, or obtain additional approvals or limit operations. New environmental laws or regulations that raise compliance standards or require changes in operating practices or technology may impose significant costs and/or limit the Company’s operations.

The Harsco Clean Earth Segment’s revenue is primarily generated as a result of requirements imposed on its customers under federal, state and local laws and regulations to protect public health and the environment. If requirements to comply with laws and regulations governing management of contaminated soils, dredge material, and hazardous wastes were relaxed or less vigorously enforced at the federal, state and local levels, demand for the Harsco Clean Earth Segment’s services could materially decrease and the Company's revenues and earnings could be reduced.

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If the Company fails to maintain safe worksites, it may be subject to significant operating risks and hazards.
The Company operates at facilities that may be inherently dangerous workplaces. The Harsco Clean Earth Segment operates facilities that accept, process and/or treat materials provided by its customers. The Harsco Environmental Segment has operations at customers' steel producing sites, which often times involve extreme conditions. If serious accidents or fatalities occur or its safety record was to deteriorate, it may be ineligible to bid on certain work, and existing service arrangements could be terminated. Further, regulatory changes implemented by the Occupational Safety and Health Administration could impose additional costs on the Company. Adverse experience with hazards and claims could result in liabilities caused by, among other things, injury or death to persons, which could have a negative effect on the Company’s reputation with its existing or potential new customers and its prospects for future business.

The Company maintains a workforce based upon current and anticipated workload. If the Company does not receive future contract awards or if these awards are delayed, significant cost may result that could have a material adverse effect on results of operations, financial condition, liquidity and cash flows.
The Company's estimates of future performance depend on, among other matters, whether and when the Company will receive certain new contract awards, including the extent to which the Company utilizes its workforce. The rate at which the Company utilizes its workforce is impacted by a variety of factors, including:
the ability to manage attrition;
the ability to forecast the need for services, which allows the Company to maintain an appropriately sized workforce;
the ability to transition employees from completed projects to new projects or between segments; and
the need to devote resources to non-revenue generating activities such as training or business development.
While the Company's estimates are based upon good faith judgment, these estimates can be unreliable and may frequently change based on newly available information. In the case of large-scale domestic and international projects where timing is often uncertain, it is particularly difficult to predict whether and when the Company will receive a contract award. The uncertainty of contract award timing can present difficulties in matching the Company's workforce size with contract needs. If an expected contract award is delayed or not received, the Company could incur cost resulting from reductions in staff or redundancy of facilities or equipment that could have a material adverse effect on results of operations, financial condition, liquidity and cash flows.

Union disputes or other labor matters could adversely affect the Company's operations and financial results.
A significant portion of the Company's employees are represented by labor unions in a number of countries under various collective bargaining agreements with varying durations and expiration dates. There can be no assurance that any current or future issues with the Company's employees will be resolved or that the Company will not encounter future strikes, work stoppages or other types of conflicts with labor unions or the Company's employees. The Company may not be able to satisfactorily renegotiate collective bargaining agreements in the U.S. and other countries when they expire. If the Company fails to renegotiate existing collective bargaining agreements, the Company could encounter strikes or work stoppages or other types of conflicts with labor unions. In addition, existing collective bargaining agreements may not prevent a strike or work stoppage at the Company's facilities in the future. The Company may also be subject to general country strikes or work stoppages unrelated to the Company's business or collective bargaining agreements. A work stoppage or other limitations on production at the Company's facilities for any reason could have an adverse effect on the Company's business, results of operations, financial condition and cash flows. In addition, many of the Company's customers and suppliers have unionized work forces. Strikes or work stoppages experienced by the Company's customers or suppliers could have an adverse effect on the Company's business, results of operations and financial condition.

The Company's intellectual property portfolio may not prevent competitors from independently developing similar or duplicative products and services.
The Company's patents and other intellectual property may not prevent competitors from independently developing or selling similar or duplicative products and services, and there can be no assurance that the resources invested by the Company to protect the Company's intellectual property will be sufficient or that the Company's intellectual property portfolio will adequately deter misappropriation or improper use of the Company's technology. The Company could also face competition in some countries where the Company has not protected its intellectual property portfolio. The Company may also face attempts to gain unauthorized access to the Company's information technology systems or products for the purpose of improperly acquiring trade secrets or confidential business information. The theft or unauthorized use or publication of the Company's trade secrets and other confidential business information as a result of such an incident could adversely affect the Company's competitive position and the value of the Company's investment in research and development. The Company may be unable to secure or retain ownership or rights to use data in certain software analytics or services offerings. In addition, the Company may be the target of aggressive and opportunistic enforcement of patents by third parties, including non-practicing entities. Regardless of the merit of such claims, responding to infringement claims can be expensive and time-consuming. If the
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Company is found to infringe any third-party rights, the Company could be required to pay substantial damages or could be enjoined from offering some of the Company's products and services. Also, there can be no assurances that the Company will be able to obtain or renew from third parties the licenses needed in the future, and there is no assurance that such licenses can be obtained on reasonable terms.

Increased information technology security threats and more sophisticated computer crime pose a risk to the Company's systems, networks, products and services.
The Company relies upon information technology systems and networks in connection with a variety of business activities, some of which are managed by third parties. Additionally, the Company collects and stores data that is of a sensitive nature. The secure operation of these information technology systems and networks, and the processing and maintenance of this data is critical to the Company's business operations and strategy. Information technology security threats - from user error to attacks designed to gain unauthorized access to the Company's systems, networks and data - are increasing in frequency and sophistication. These threats pose a risk to the security of the Company's systems and networks and the confidentiality, availability and integrity of the Company's data. Should an attack on the Company's information technology systems and networks succeed, it could expose the Company and the Company's employees, customers, dealers and suppliers to misuse of information or systems, the compromising of confidential information, manipulation and destruction of data, production downtimes and operations disruptions. The occurrence of any of these events could adversely affect the Company's reputation, competitive position, business, results of operations and cash flows. In addition, various privacy and security laws govern the protection of this information and breaches in security could result in litigation, regulatory action, potential liability and the costs and operational consequences of implementing further data protection measures. For example, the European Union's ("EU") General Data Protection Regulation ("GDPR") extends the scope of the EU data protection laws to all companies processing data of EU residents, regardless of the company’s location.

MACROECONOMIC AND INDUSTRY RISKS

Outbreaks of disease and health epidemics, such as COVID-19, have had, and could continue to have, a negative impact on the Company's business revenues, financial position, results of operations and/or stock price.
COVID-19, and the actions taken by governments, businesses and individuals in response to the pandemic have resulted in, and continue to result in, challenges for the Company. Since the time that the virus was first identified, travel to and from most countries has been suspended or restricted by air carriers and foreign governments, extended shutdowns of certain businesses and other activities in many countries have occurred, and global supply chains have been disrupted. Additionally, we have experienced temporary site closures and other supply chain disruptions because of COVID-19.

COVID-19 continues to impact worldwide economic activity and pose the risk that the Company or its employees, contractors, suppliers, customers and other business partners may be prevented from conducting certain business activities for an indefinite period of time, including shutdowns that may be requested or mandated by governmental authorities or otherwise elected by the Company or its customers as a preventive measure to limit the spread of coronavirus disease. In addition, mandated government authority measures or other measures elected by companies as preventative measures may lead to the Company's customers being unable to complete purchases or other activities.

COVID-19 may continue have an adverse effect on the Company's operations and, given the uncertainty around the extent and timing of the potential future spread or mitigation and around the imposition or relaxation of protective measures, the Company cannot reasonably estimate the impact to the Company's future results of operations, cash flows, financial condition or stock price.

Negative economic conditions may adversely impact demand for the Company's products and services, as well as the ability of the Company's customers to meet their obligations to the Company on a timely basis.
Negative economic conditions, including the tightening of credit in financial markets, can lead businesses to postpone spending, which may impact the Company's customers, causing them to cancel, decrease or delay their existing and future orders with the Company. In addition, economic conditions may impact the Company's customers by either causing them to close locations serviced by the Harsco Environmental Segment or causing their financial condition to deteriorate to a point where they are unable to meet their obligations to the Company on a timely basis. One or more of these events could adversely impact the Company's operating results and ability to collect its receivables.

Cyclical industry and economic conditions may adversely affect the Company's businesses.
The Company's businesses are subject to general economic slowdowns and cyclical conditions in each of the industries served. Examples are:

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The Harsco Environmental Segment may be adversely impacted by prolonged slowdowns in steel mill production, excess production capacity, bankruptcy or receivership of steel producers and changes in outsourcing practices;
The resource recovery and slag optimization technologies business of the Harsco Environmental Segment can also be adversely impacted by prolonged slowdowns in customer production or a reduction in the selling prices of its materials, which are in some cases market-based and vary based upon the current fair value of the components being sold. Therefore, the revenue generated from the sale of such recycled materials varies based upon the fair value of the commodity components being sold;
The abrasives and roofing materials business of the Harsco Environmental Segment may be adversely impacted by economic conditions that slow the rate of residential roof replacement, or by slowdowns in the industrial and infrastructure refurbishment industries;
The Harsco Rail Segment may be adversely impacted by developments in the railroad industry that lead to lower capital spending or reduced track maintenance spending; and
Capital constraints and increased borrowing costs may also adversely impact the financial position and operations of the Company's customers across all business segments.

Furthermore, utilization of deferred tax assets is ultimately dependent on generating sufficient income in future periods to ensure recovery of those assets. The cyclicality of the Company's end markets and adverse economic conditions may negatively impact the future income levels that are necessary for the utilization of deferred tax assets.

Exchange rate fluctuations may adversely impact the Company's business.
Fluctuations in foreign exchange rates between the U.S. dollar and the approximately 25 other currencies in which the Company currently conducts business may adversely impact the Company's results of operations in any given fiscal period. The Company’s principal foreign currency exposures are in the EU, the U.K., China and Brazil. Given the structure of the Company's operations, an increase in the value of the U.S. dollar relative to the foreign currencies in which the Company earns its revenues generally has a negative impact on the translated amounts of the assets and liabilities, results of operations and cash flows. The Company's foreign currency exposures increase the risk of volatility in its financial position, results of operations and cash flows. If currencies in the below regions change materially in relation to the U.S. dollar, the Company's financial position, results of operations, or cash flows may be materially affected.

Compared with the corresponding full-year period in 2019, the average value of major currencies changed as follows in relation to the U.S. dollar during the full-year 2020, impacting the Company's revenues and income:

British pound sterling strengthened by 1%;
Euro strengthened by 2%;
Chinese yuan strengthened by less than 1%; and
Brazilian real weakened by 24%

Compared with exchange rates at December 31, 2019, the value of major currencies at December 31, 2020 changed as follows:

British pound sterling strengthened by 3%;
Euro strengthened by 9%;
Chinese yuan strengthened by 7%; and
Brazilian real weakened by 23%

To illustrate the effect of foreign exchange rate changes in certain key markets of the Company, in 2020 revenues would have been approximately 1% or $24 million higher and operating income would have been approximately 19% or $4 million higher if the average exchange rates for 2019 were utilized. In a similar comparison for 2019 revenues would have been 3% or approximately $41 million higher and operating income would have been 3% or approximately $3 million higher if the average exchange rates for 2018 were utilized.

Currency changes also result in assets and liabilities denominated in local currencies being translated into U.S. dollars at different amounts than at the prior period end. Generally, if the U.S. dollar weakens in relation to currencies in countries in which the Company does business, the translated amounts of the related assets, liabilities, and therefore stockholders' equity, would increase. Conversely, if the U.S. dollar strengthens in relation to currencies in countries in which the Company does business, the translated amounts of the related assets, liabilities, and therefore stockholders' equity, would decrease.

Although the Company engages in foreign currency exchange forward contracts and other hedging strategies to mitigate foreign exchange transactional risks, hedging strategies may not be successful or may fail to completely offset these risks. In addition, competitive conditions in the Company's manufacturing businesses may limit the Company's ability to increase product prices in the face of adverse currency movement. Sales of products manufactured in the U.S. for the domestic and export markets may
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be affected by the value of the U.S. dollar relative to other currencies. Any long-term strengthening of the U.S. dollar could depress demand for these products and reduce sales. Conversely, any long-term weakening of the U.S. dollar could improve demand for these products and increase sales.


LEGAL AND REGULATORY RISKS

The Company's global presence subjects it to a variety of risks arising from doing business internationally.
The Company operates in approximately 30 countries, generating 44% of its revenues outside of the U.S. (based on location of the facility generating the revenue) for the year ended December 31, 2020. In addition, as of December 31, 2020, approximately 57% of the Company’s property, plant and equipment is located outside of the U.S. The Company's global footprint exposes it to a variety of risks that may adversely affect the Company's results of operations, financial condition, liquidity and cash flows. These include, but may not be limited to, the following:
periodic economic downturns in the countries in which the Company does business;
complexities around changes in the still developing relationship between the U.K. and the EU arising out of the U.K.’s withdrawal from the EU;
imposition of or increases in currency exchange controls and hard currency shortages;
customs matters and changes in trade policy or tariff regulations;
changes in regulatory requirements in the countries in which the Company does business;
changes in tax regulations, higher tax rates in certain jurisdictions and potentially adverse tax consequences including restrictions on repatriating earnings, adverse tax withholding requirements and "double taxation";
longer payment cycles and difficulty in collecting accounts receivable;
complexities in complying with a variety of U.S. and foreign government laws, controls and regulations;
political, economic and social instability, civil and political unrest, terrorist actions and armed hostilities in the regions or countries in which, or adjacent to which, the Company does business;
increasingly complex laws and regulations concerning privacy and data security, including the EU's GDPR;
inflation rates in the countries in which the Company does business;
complying with complex labor laws in foreign jurisdictions;
laws in various international jurisdictions that limit the right and ability of subsidiaries to pay dividends and remit earnings to affiliated companies unless specified conditions are met;
sovereign risk related to international governments, including, but not limited to, governments stopping interest payments or repudiating their debt, nationalizing private businesses or altering foreign exchange regulations;
uncertainties arising from local business practices, cultural considerations and international political and trade tensions; and
public health issues or other calamities impacting regions or countries in which the Company operates, including travel to and/or imports or exports to or from such regions or countries.

If the Company is unable to successfully manage the risks associated with its global business, the Company's results of operations, financial condition, liquidity and cash flows may be negatively impacted.

Due to the international nature of the Company's business, the Company could be adversely affected by violations of certain laws.
The U.S. Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery laws in non-U.S. jurisdictions generally prohibit companies and their intermediaries from making improper payments to officials for the purpose of obtaining or retaining business. The FCPA also imposes accounting standards and requirements on publicly traded U.S. corporations and their foreign affiliates, which, among other things, are intended to prevent the diversion of corporate funds to the payment of bribes and other improper payments, and to prevent the establishment of “off the books” slush funds from which improper payments can be made. The Company may be unsuccessful in its efforts to prevent reckless or criminal acts by employees or agents and may be exposed to liability due to pre-acquisition conduct of employees or agents of businesses or operations the Company may acquire. Violations of these laws, or allegations of such violations, could disrupt the Company’s operations, require significant management involvement and have a material adverse effect on the Company’s results of operations, financial condition and cash flows. If the Company is found to be liable for violations of these laws (either due to its own acts, out of inadvertence or due to the acts or inadvertence of others), the Company could also be subject to severe criminal or civil penalties or other sanctions; disgorgement; further changes or enhancements to its procedures, policies and controls; personnel changes and other remedial actions.

Furthermore, the Company is subject to the export controls and economic embargo rules and regulations of the U.S., including the Export Administration Regulations and trade sanctions against embargoed countries, which are administered by the Office
17


of Foreign Asset Control within the Department of Treasury, as well as other laws and regulations administered by the Department of Commerce. These regulations limit the Company’s ability to market, sell, distribute or otherwise transfer its
products to prohibited countries or persons. Failure to comply with these rules and regulations may result in substantial civil and criminal penalties, including fines and disgorgement of profits, the imposition of a court-appointed monitor, the denial of export privileges and debarment from participation in U.S. Government contracts.

A negative outcome on personal injury claims against the Company may adversely impact results of operations and financial condition.
The Company has been named as one of many defendants (approximately 90 or more in most cases) in legal actions 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 majority of the asbestos complaints pending against the Company have been filed in New York. Almost all of the New York complaints contain a standard claim for damages of $20 million or $25 million against the approximately 90 defendants, regardless of the individual plaintiff's alleged medical condition and without specifically identifying any of the Company’s products as the source of plaintiff's asbestos exposure. If the Company is found to be liable in any of these actions and the liability exceeds the Company's insurance coverage, results of operations, cash flows and financial condition could be adversely affected.

The Company’s ongoing operations are subject to extensive laws, regulations, rules and ordinances relating to safety, health and environmental matters that impose significant costs and liabilities on the Company, and future laws and governmental standards could increase these costs and liabilities.
The Company is subject to a variety of international, federal, state and local laws and governmental regulations, rules and ordinances regulating the use of certain materials contained in its products and/or used in its manufacturing processes. Many of these laws and governmental standards provide for extensive obligations that require the Company to incur significant compliance costs and impose substantial monetary fines and/or criminal sanctions for violations.

Furthermore, such laws and standards are subject to change and may become more stringent. Although it is not possible to predict changes in laws or other governmental standards, the development, proposal or adoption of more stringent laws or governmental standards may require the Company to change its manufacturing processes, for example, by reducing or eliminating use of the regulated component or material in its manufacturing process. The Company may not be able to develop a new manufacturing process to comply with such legal and regulatory changes without investing significant time and resources, if at all. In addition, such legal and regulatory changes may also affect buying decisions by the users of the Company’s products that contain regulated materials or that involve the use of such materials in the manufacturing process. If applicable laws and governmental standards become more stringent, the Company’s results of operations, liquidity and financial condition could be materially adversely affected.

The Company is subject to various environmental laws, and the success of existing or future environmental claims against it could adversely impact the Company's results of operations and cash flows.
In addition to the environmental and safety considerations discussed above with respect to the Harsco Clean Earth Segment, the Company's operations generally are subject to various federal, state, local and international laws, regulations and ordinances relating to the protection of health, safety and the environment, including those governing discharges to air and water, handling and disposal practices for solid and hazardous byproducts, the remediation of contaminated sites and the maintenance of a safe workplace. These laws impose penalties, fines and other sanctions for non-compliance and liability for response costs, property damages and personal injury resulting from past and current spills, disposals or other releases of, or exposure to, hazardous materials. The Company could incur substantial costs as a result of non-compliance with or liability for remediation or other costs or damages under these laws. The Company may be subject to more stringent environmental laws in the future, and compliance with more stringent environmental requirements may require the Company to make material expenditures or subject it to liabilities that the Company currently does not anticipate.

The Company is currently 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 under the federal "Superfund" law. At several sites, the Company is currently conducting environmental remediation, and it is probable that the Company will agree to make payments toward funding certain other of these remediation activities. It also is possible that some of these matters will be decided unfavorably to the Company and that other sites requiring remediation will be identified. Each of these matters is subject to various uncertainties, and financial exposure is dependent upon the following factors:
the continuing evolution of environmental laws and regulatory requirements;
the availability and application of technology;
the allocation of cost among potentially responsible parties;
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the years of remedial activity required; and
the remediation methods selected.

The nature of the Company’s products creates the possibility of significant product liability and warranty claims, which could harm its business.
The Company’s customers use some of its products in potentially hazardous applications that can cause injury or loss of life and damage to property, equipment or the environment. In addition, the Company’s products are integral to the production process for some end-users and any failure of the Company’s products could result in a suspension of operations, including products historically sold by business units of the Company to the extent that the Company retains liability for such historical products. Accidents may occur at a location where the Company’s equipment and services have been or are being used. Investigations into such accidents, even if the Company and its products are ultimately found not to be the cause of such accidents, require the Company to expend significant time, effort and resources. The Company cannot be certain that its products will be completely free from defects. The Company may be named as a defendant in product liability or other lawsuits asserting potentially large claims. In addition, the Company cannot guarantee that insurance will be available or adequate to cover any or all liabilities incurred. The Company also may not be able to maintain insurance in the future at levels it believes are necessary and at rates it considers reasonable.

FINANCIAL, TAX AND FINANCIAL MARKET RISKS

Restrictions imposed by the Company's Senior Secured Credit Facilities and other financing arrangements may limit the Company's operating and financial flexibility.
The agreements governing the Company's outstanding financing arrangements impose a number of restrictions. Under the Company's Senior Secured Credit Facilities, the Company must comply with certain financial covenants on a quarterly basis. The covenants also place limitations on dividends, acquisitions, investments in joint ventures, unrestricted subsidiaries, indebtedness and the imposition of liens on the Company's assets. In the event of a default, the Company's lenders and the counterparties to the Company's other financing arrangements could terminate their commitments to the Company and declare all amounts borrowed, together with accrued interests and fees, immediately due and payable. If this were to occur, the Company might not be able to pay these amounts, or the Company might be forced to seek an amendment to the Company's financing arrangements which could make the terms of these arrangements more onerous for the Company. In addition, this could also trigger an event of default under the cross-default provisions of the Company's other obligations. As a result, a default under one or more of the existing or future financing arrangements could have significant consequences for the Company.

The Company is exposed to counterparty risk in its derivative financial arrangements.
The Company uses derivative financial instruments, such as interest rate swaps and foreign currency exchange forward contracts, for a variety of purposes. The Company uses interest rate swaps in conjunction with certain debt issuances in order to secure either a fixed or floating interest rate. The Company uses foreign currency exchange forward contracts as part of a worldwide program to minimize foreign currency operating income and balance sheet exposure. In particular, the Company uses foreign currency exchange forward contracts to hedge commitments, such as foreign currency debt, firm purchase commitments and foreign currency cash flows for certain export sales transactions. The unsecured contracts for foreign currency exchange forward contracts outstanding at December 31, 2020 mature at various times through 2022 and are with major financial institutions. The Company may also enter into derivative contracts to hedge commodity exposures. The failure of one or more counterparties to the Company's derivative financial instruments to fulfill their obligations could adversely affect the Company's results of operations, financial condition, liquidity and cash flows.

The Company’s variable rate indebtedness subjects it to interest rate risk, which could cause the Company's debt service obligations to increase significantly.
The Company's total debt at December 31, 2020 was $1.3 billion. Of this amount, approximately 60% had variable rates of interest and approximately 40% had fixed interest rates. The weighted average interest rate of total debt was approximately 4.2%. At debt levels as of December 31, 2020, a one percentage point increase in variable interest rates would increase interest expense by $3.8 million per year and a one percentage point decrease in variable interest rates would decrease interest expense by $0.6 million due to the interest rate floors on certain credit agreements. Each incremental one percentage point increase in variable interest rates would increase interest expense by an additional $7.9 million. If the Company is unable to successfully manage its exposure to variable interest rates, including through interest rate swaps that the Company has put into place, its debt service obligations may increase even though the amount borrowed remains the same and, in turn, its results of operations and financial condition may be negatively impacted.


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The Company is subject to taxes in numerous jurisdictions and could be subject to additional tax liabilities, which could materially adversely affect the Company’s results of operations and cash flows and impact the Company’s ability to compete abroad.
The Company is subject to U.S. federal, U.S. state and international income, payroll, property, sales and use, value-added, fuel and other types of taxes in numerous jurisdictions. Changes in tax rates, enactments of new tax laws, revisions of tax regulations, and claims or litigation with taxing authorities could result in substantially higher taxes, and therefore could have a significant adverse effect on the Company's results of operations, financial condition and liquidity.

The Company's tax expense and liabilities may also be affected by other factors, such as changes in business operations, acquisitions, investments, entry into new geographies, intercompany transactions, the relative amount of foreign earnings, losses incurred in jurisdictions for which the related tax benefits may not be realized, and changes in deferred tax assets and their valuation. Significant judgment is required in evaluating and estimating the Company's tax expense and liabilities. The ultimate tax determination for many transactions and calculations is uncertain. For example, the legislation known as the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”) requires complex computations to be performed that were not historically required, significant judgments to be made in interpretations of the provisions of the Tax Act, estimates in calculations, and the preparation and analysis of information not previously relevant or regularly produced. The U.S. Treasury Department, the IRS, and other standard-setting bodies will continue to interpret or issue guidance on how provisions of the Tax Act will be applied or administered. As future guidance is issued, the Company may need to make adjustments to amounts previously recorded, and those adjustments could materially impact the Company's consolidated financial statements in the period in which the adjustments are made.

The Company's defined benefit net periodic pension cost ("NPPC") is directly affected by equity and bond markets. A downward trend in those markets could adversely impact the Company's results of operations, financial condition and cash flows.
In addition to the economic issues that directly affect the Company's businesses, changes in the performance of equity and bond markets, particularly in the U.K. and the U.S., impact actuarial assumptions used in determining annual NPPC, pension liabilities and the valuation of the assets in the Company's defined benefit pension plans. Financial market deterioration would most likely have a negative impact on the Company's NPPC and the pension assets and liabilities. This could result in a decrease to stockholders' equity and an increase in the Company's statutory funding requirements.


Item 1B.    Unresolved Staff Comments.
None.

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Item 2.    Properties.
Operations of the Company and its subsidiaries are conducted at both owned and leased properties in domestic and international locations. The Company's executive offices are located at 350 Poplar Church Road, Camp Hill, Pennsylvania 17011 and are owned. The following table describes the location and principal use of the Company's more significant properties.
Location Principal Products/Services   Interest
Harsco Environmental Segment      
Taiyuan City, China Environmental Services Leased
Rotherham, U.K. Environmental Services Owned
Drakesboro, Kentucky, U.S. Applied Products - Roofing Granules/Abrasives   Owned
Sarver, Pennsylvania, U.S. Environmental Services   Owned
Chesterfield, U.K. Aluminum Dross and Scrap Processing Systems Owned
Harsco Clean Earth Segment
Middlesex, New Jersey, U.S. Contaminated Materials Processing Leased
Hudson, New Jersey, U.S. Hazardous Waste Processing Owned/Leased
New Castle, Delaware, U.S. Contaminated Materials Processing
Leased
Prince Georges, Maryland, U.S. Contaminated Materials Processing Owned
Marshall, Kentucky, U.S. Hazardous Waste Processing Owned
Wayne, Michigan, U.S. Hazardous Waste Processing Owned
Birmingham, Alabama, U. S. Hazardous Waste Processing Owned
Inglewood, California, U.S. Hazardous Waste Processing Owned
Rancho Cordova, California, U.S. Hazardous Waste Processing Owned
Indianapolis, Indiana, U.S. Hazardous Waste Processing Leased
Detroit, Michigan, U.S. Hazardous Waste Processing Owned
Kansas City, Missouri, U.S. Hazardous Waste Processing Owned
Fernley, Nevada, U.S. Hazardous Waste Processing Owned
Hatfield, Pennsylvania, U.S. Hazardous Waste Processing Owned
Providence, Rhode Island, U.S. Hazardous Waste Processing Owned
Avalon, Texas, U.S. Hazardous Waste Processing Owned
Houston, Texas, U.S. Hazardous Waste Processing Owned
Kent, Washington, U.S. Hazardous Waste Processing Owned
Tacoma, Washington, U.S. Hazardous Waste Processing Owned
Harsco Rail Segment      
Columbia, South Carolina, U.S. Rail Maintenance-of-way Equipment   Owned
The Harsco Environmental Segment principally operates on customer-owned sites and has administrative offices throughout the world, including Camp Hill, Pennsylvania and Leatherhead, U.K. The above table includes the principal properties owned or leased by the Company. The Company also operates from a number of other smaller plants, warehouses and offices in addition to the above. The Company considers all of its properties at which operations are currently performed to be in satisfactory condition and suitable for their intended use.

Item 3.    Legal Proceedings.
Information regarding legal proceedings is included in Note 12, Commitments and Contingencies, in Part II, Item 8, "Financial Statements and Supplementary Data."

Item 4.    Mine Safety Disclosures.
Not applicable.
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Supplementary Item.    Information About Our Executive Officers.
Set forth below, at February 25, 2021, are the executive officers of the Company and certain information with respect to each of them. There are no family relationships among any of the executive officers.
Name Age Position with the Company
Executive Officers:    
F. Nicholas Grasberger III 57  Chairman, President and Chief Executive Officer
Peter F. Minan 59  Senior Vice President and Chief Financial Officer
Samuel C. Fenice 46  Vice President and Corporate Controller
Jeswant Gill 58  Senior Vice President and Group President - Harsco Rail
Russell C. Hochman 56  Senior Vice President and General Counsel, Chief Compliance Officer & Corporate Secretary
Wendy Livingston 47  Senior Vice President and Chief Human Resources Officer
David Stanton 55  Senior Vice President and Group President - Clean Earth

F. Nicholas Grasberger III - Chairman, President and Chief Executive Officer since October 22, 2018. President and Chief Executive Officer from August 1, 2014 to October 22, 2018.  Mr. Grasberger served as Senior Vice President and Chief Financial Officer from April 2013 to November 2014, and as President and Chief Operating Officer from April 2014 to
August 2014. Prior to joining Harsco in 2013, Mr. Grasberger served as the Managing Director of the multinational Precision Polymers division of Fenner Plc from March 2011 to April 2013. From April 2009 to November 2009 he served as Executive Vice President and Chief Executive Officer of Armstrong Building Products. From January 2005 to March 2009 he served as Senior Vice President and Chief Financial Officer of Armstrong World Industries, Inc. Prior to his employment with Armstrong, Mr. Grasberger served as Vice President and Chief Financial Officer of Kennametal Inc. and before that as Corporate Treasurer and Director of the corporate planning process at H.J. Heinz Company. He started his career with USX Corporation. In June 2019, Mr. Grasberger joined the Board of Directors of Louisiana-Pacific Corporation.

Peter F. Minan - Senior Vice President and Chief Financial Officer since November 11, 2014. Mr. Minan has an extensive background in global financial management acquired through a nearly 30-year career with KPMG from 1983 to 2012. He became a partner at KPMG in 1993 and served as global lead partner for several multi-national Fortune 500 industrial and consumer audits. His roles included National Managing Partner, U.S. Audit practice, and Partner in Charge, Washington/Baltimore Audit practice. His most recent role was with Computer Sciences Corporation, where he served as Vice President of Enterprise Risk Management and Internal Audit from 2012 to 2013. In December 2020, the Company announced the planned retirement of Mr. Minan with an expected effective date of April 1, 2021.

Samuel C. Fenice - Vice President and Corporate Controller since August 16, 2016. Mr. Fenice oversees the administration of all corporate accounting policies and procedures, including internal and external corporate reporting. Mr. Fenice joined Harsco’s Internal Audit team in 2002 and has since held progressively responsible roles in Finance, including two terms as Interim Corporate Controller. Mr. Fenice is a graduate of Penn State University and a Certified Public Accountant.

Jeswant Gill - Senior Vice President and Group President - Harsco Rail since November 2016. Prior to joining the Company, Mr. Gill served as Senior Executive/Managing Director, Global Solutions of The Arcadia Group International, LLC from October 2015 to November 2016. From June 2014 to September 2015 Mr. Gill served as Vice President and Executive Vice President, Industrial Segment of Kennametal, Inc. From January 2008 to May 2014 Mr. Gill worked for Ingersoll Rand Company Limited, acting as Vice President of Global Services, Industrial Technologies from January 2011 to May 2014, and as President of Security Technologies, Asia Pacific from January 2008 until December 2010. Prior to his employment with Ingersoll Rand Company Limited, Mr. Gill worked for Invensys, Johnson Controls Inc. and Schlumberger. Mr. Gill holds a B.S. in engineering physics and an MBA, both from Queen's University in Ontario, Canada.

Russell C. Hochman - Senior Vice President and General Counsel, Chief Compliance Officer and Corporate Secretary since May 2015. Served as Vice President, Interim General Counsel, Chief Compliance Officer and Corporate Secretary from
March 2015 to May 2015. Served as Deputy General Counsel from July 2013 to March 2015. Prior to joining Harsco in 2013, Mr. Hochman served in senior legal roles with Pitney Bowes Inc. and leading law firms based in New York.  Mr. Hochman holds a J.D. from Albany Law School of Union University and a B.A. from Cornell University.

Wendy Livingston - Senior Vice President and Chief Human Resources Officer since September 2, 2020. Prior to joining the Company, Ms. Livingston was with The Boeing Company where she served as interim Sr. Vice President, Human Resources
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from April 2020 until July 2020. Previously she was Vice President, Corporate Human Resources from February 2017 until April 2020 and Vice President Talent & Leadership from February 2016 until February 2017. Ms. Livingston holds a Bachelor of Science degree in Business Administration: Marketing & Management from Peru State College; a Master of Science degree in Human Resources Management from Lindenwood University; participated in the nomination-only Modern CHRO Role program at Cornell University; and was certified as a Professional in Human Resources (PHR) by the Society for Human Resource Management (SHRM).

David Stanton - Senior Vice President and Group President - Clean Earth since March 2, 2020. Prior to joining the Company in March 2020, Mr. Stanton was with Suez Utility where he served as President from September 2010 until March 2020. From January 2008 until June 2010 Mr. Stanton served as Chief Executive Officer of an early stage company focused on developing and commercializing advanced technology for the reuse of water. Earlier in his career, he held progressively responsible roles in operations and finance at Tyco International and SouthWest Water. Mr. Stanton holds a Bachelor of Science in Electrical Engineering from Cornell University.
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PART II
Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Harsco Corporation common stock is listed on the New York Stock Exchange under the trading symbol HSC. At December 31, 2020, there were 78,924,370 shares outstanding. In 2020, the Company's common stock traded in a range of $4.19 to $23.44 and closed at $17.98 at year-end. At December 31, 2020, there were approximately 25,052 stockholders. For additional information regarding the Company's equity compensation plans see Note 14, Stock-Based Compensation, in Part II, Item 8, "Financial Statements and Supplementary Data," Part III, Item 11, "Executive Compensation," and Part III, Item 12 "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters."

Stock Performance Graph
HSC-20201231_G4.JPG
*$100 invested on 12/31/15 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.

Copyright© 2021 Standard & Poor's, a division of S&P Global. All rights reserved.
Copyright© 2021 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved
December 2015 December 2016 December 2016 December 2018 December 2019 December 2020
Harsco Corporation 100.00  174.01  238.62  254.10  294.40  230.05 
S&P Smallcap 600 100.00  126.56  143.30  131.15  161.03  179.20 
Dow Jones US Diversified Industrials 100.00  110.96  103.64  77.65  98.53  110.79 

Issuer Purchases of Equity Securities
On May 2, 2018, the Company announced that the Board of Directors adopted a share repurchase program authorizing the Company to repurchase up to $75,000,000 of outstanding shares of the Company’s common stock through April 24, 2021. The Company did not purchase any shares of common stock under this program during the year ended December 31, 2020. The approximate dollar value of shares that may yet be purchased under the share repurchase program is $13,151,485. When and if appropriate, repurchases are made in open market transactions, depending on market conditions. Share repurchases may not occur and may be discontinued at any time.
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Item 6.    Selected Financial Data.
Five-Year Statistical Summary
(In thousands, except per share and employee information) 2020 (b) (c) (d)   2019 (c) (d)   2018 (d) 2017   2016
Statement of operations information
Revenues from continuing operations (a) (e) $ 1,863,864  $ 1,503,742  $ 1,347,672  $ 1,307,470  $ 1,203,681 
Amounts attributable to Harsco Corporation common stockholders (a)
Income (loss) from continuing operations, net of tax (e) $ (32,526) $ 28,231  $ 100,578  $ (6,810) $ (102,550)
Income from discontinued operations (e) 6,185  475,688  36,479  14,632  16,883 
Net income (loss) attributable to Harsco Corporation (26,341) 503,919  137,057  7,822  (85,667)
Financial position and cash flow information
Working capital (f) $ 277,868  $ 187,918  $ 188,038  $ 117,964  $ 122,602 
Total assets (g) 2,993,287  2,367,467  1,632,867  1,578,685  1,581,338 
Long-term debt 1,271,189  775,498  585,662  566,794  629,239 
Total debt 1,292,215  781,811  602,229  586,623  659,072 
Depreciation and amortization (h) 159,702  138,395    132,785  129,937  141,486 
Capital expenditures (h) (120,224) (184,973)   (132,168) (98,314) (69,340)
Cash provided (used) by operating activities (h)(i) 53,818  (163)   192,022  176,892  159,876 
Cash provided (used) by investing activities (h) (520,644) (132,192) (161,143) (103,325) 122,887 
Cash provided (used) by financing activities (h)(i) 486,958  125,734  (25,538) (83,715) (292,364)
Ratios              
Return on average equity (j) (3.7) % 100.2  % 50.7  % 4.1  % (29.5) %
Current ratio (g) (k) 1.5  :1 1.4  :1 1.5  :1 1.2  :1 1.3  :1
Per share information attributable to Harsco Corporation common stockholders (e)
Basic—Income (loss) from continuing operations $ (0.41) $ 0.35  $ 1.25  $ (0.08) $ (1.28)
Income from discontinued operations 0.08  5.97  0.45  0.18  0.21 
Net income (loss) $ (0.33) $ 6.33  (n) $ 1.70  $ 0.10  $ (1.07)
Diluted—Income (loss) from continuing operations $ (0.41) $ 0.35  $ 1.20  $ (0.08) $ (1.28)
Income from discontinued operations 0.08  5.85  0.44  0.18  0.21 
Net income (loss) $ (0.33) $ 6.19  (n) $ 1.64  $ 0.10  $ (1.07)
Other information            
Book value per share (l) $ 9.04    $ 10.06    $ 3.94  $ 2.67  $ 1.72 
Diluted weighted-average number of shares outstanding 78,939  81,375  83,595  80,553  80,333 
Number of employees (m) 11,900  10,500    9,900  9,400  9,400 
(a)On January 1, 2018, the Company adopted the new revenue recognition standard utilizing the modified retrospective transition method, including the use of practical expedients. Prior period comparative information has not been restated and continues to be reported under accounting principles generally accepted in the U.S. in effect for those periods.
(b)Includes the effects of the acquisition of ESOL. See Note 3, Acquisitions and Dispositions, in Part II, Item 8, "Financial Statements and Supplementary Data" for additional information.
(c)Includes the effects of the acquisition of Clean Earth. See Note 3, Acquisitions and Dispositions, in Part II, Item 8, "Financial Statements and Supplementary Data" for additional information.
(d)Includes the effects of the acquisition of Altek Europe Holdings Limited and its affiliated entities. See Note 3, Acquisitions and Dispositions, in Part II, Item 8, "Financial Statements and Supplementary Data" for additional information.
(e)During 2019, the Company announced the sale of the businesses that comprised its former Industrial Segment. As a result, 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 Consolidated Statements of Operations as discontinued operations for all periods presented. See Note 3, Acquisitions and Dispositions, for additional information.
(f)On January 1, 2017, the Company adopted changes issued by the FASB related to the reclassification of current deferred tax assets and liabilities to non-current. As a result of these changes, the Company reclassified its net current deferred tax assets and liabilities to non-current, which reduced Net working capital by $27.1 million at December 31, 2016.
(g)On January 1, 2019, the Company adopted changes issued by the FASB related to the accounting for leases which introduced a lessee model that brought most leases onto the balance sheet. The Company elected to apply the transition requirements at the January 1, 2019 effective date and therefore, comparative information has not been restated and continues to be reported under U.S. GAAP in effect for those periods.
(h)Includes the Harsco Industrial Segment.
(i)On January 1, 2017, the Company adopted changes issued by the FASB related to the accounting for stock-based compensation. The Company reclassified employee taxes paid on stock compensation in the amount of $0.1 million for the year ended December 31, 2016 from Cash provided (used) by operating activities to Cash provided (used) by financing activities on its Consolidated Statement of Cash Flows.
(j)Return on average equity is calculated by dividing net income attributable to Harsco Corporation by average Harsco Corporation stockholders' equity throughout the year. The 2020 calculation includes the after tax gains on the sale of IKG of approximately $9 million, and the 2019 calculation includes the after-tax gains on the sale of AXC and PK of approximately $454 million.
(k)Current ratio is calculated by dividing total current assets by total current liabilities.
(l)Book value per share is calculated by dividing total equity by shares outstanding.
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(m)Number of employees excludes contingent workers.
(n)Does not total due to rounding.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.
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 changes in general economic conditions or changes due to COVID-19 and governmental and market reactions to COVID-19; (2) changes in currency exchange rates, interest rates, commodity and fuel costs and capital costs; (3) changes in the performance of equity and bond markets that could affect, among other things, the valuation of the assets in the Company's pension plans and the accounting for pension assets, liabilities and expenses; (4) changes in governmental laws and regulations, including environmental, occupational health and safety, tax and import tariff standards and amounts; (5) market and competitive changes, including pricing pressures, market demand and acceptance for new products, services and technologies; (6) the Company's inability or failure to protect its intellectual property rights from infringement in one or more of the many countries in which the Company operates; (7) failure to effectively prevent, detect or recover from breaches in the Company's cybersecurity infrastructure; (8) unforeseen business disruptions in one or more of the many countries in which the Company operates due to political instability, civil disobedience, armed hostilities, public health issues or other calamities; (9) disruptions associated with labor disputes and increased operating costs associated with union organization; (10) the seasonal nature of the Company's business; (11) the Company's ability to successfully enter into new contracts and complete new acquisitions or strategic ventures in the time-frame contemplated, or at all; (12) the 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, have inadequate liquidity or whose business is significantly impacted by COVID-19) to maintain their credit availability; (18) implementation of environmental remediation matters; (19) risk and uncertainty associated with intangible assets 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, retail and medical 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. The Company is working towards transforming Harsco into a single-thesis environmental solutions company that is a global leader in the markets the Company serves. The Harsco Environmental Segment operates primarily under long-term contracts, providing critical environmental services and material processing to the global steel and metals industries, including zero waste solutions for manufacturing byproducts within the metals industry. The Harsco Clean Earth Segment provides waste management services including transportation, specialty waste processing, recycling and beneficial reuse solutions for hazardous waste, 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 April 2020 the Company completed the previously announced acquisition of ESOL, from Stericycle, Inc., for $429.0 million in cash, inclusive of post-closing adjustments. ESOL is an established waste transportation, processing and services provider with a comprehensive portfolio of disposal solutions for customers primarily across the industrial, retail and healthcare markets. ESOL's network includes thirteen permitted TSDF facilities and forty-eight 10-day transfer facilities serving more than ninety thousand customer locations utilizing a fleet of more than seven hundred vehicles. The acquisition of ESOL furthers Harsco’s transformation into a global, market-leading, single-thesis environmental solutions platform. The results of ESOL are included in the Harsco Clean Earth Segment.

In March 2020, the Company raised $280.0 million pursuant to the New Term Loan as a new tranche under its existing Senior Secured Credit Facilities. The New Term Loan was fully drawn on April 6, 2020 to partially fund the ESOL acquisition. 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). The New Term Loan will mature on June 28, 2024. The Company capitalized $1.9 million of fees related to the issuance of the New Term Loan.

In both March 2020 and June 2020, the Company amended the Senior Secured Credit Facilities to increase the net debt to consolidated adjusted EBITDA ratio covenant. As a result of these amendments, the net debt to consolidated adjusted EBITDA ratio covenant has been increased to 5.75 through March 2021 and then decreasing quarterly until reaching 4.75 in December 2021. There is no change to the previously agreed interest rates as long as the Company's total leverage ratio does not equal or exceed 4.50 at which time it would increase by 25 basis points. During 2020, the Company recognized $1.9 million of fees and expenses related to the amended Senior Secured Credit Facilities in the caption Unused debt commitment and amendment fees on the Consolidated Statement of Operations.

In January 2020 the Company sold IKG for $85.0 million, including a note receivable with a face value of $40.0 million (initial fair value $34.3 million) and recognized a gain on sale of $18.3 million pre-tax (or approximately $9 million after-tax). This disposal, along with the disposals of AXC and PK in 2019, accelerated the transformation of the Company into a global, market-leading, single-thesis environmental solutions platform.

Beginning in March 2020 overall global economic conditions were significantly impacted by COVID-19. Business conditions have slowly improved since the mid-point of the second quarter, with the ongoing COVID-19 impacts varying by end market as well as local conditions (including applicable government mandates). The ultimate duration and impact of COVID-19 on the Company and its customers' operations is presently unclear, though the Company expects impacts to continue for at least the next few quarters. The Company is operating as a provider of certain essential services, and it continues to take actions to protect all stakeholders and to minimize the operational and financial impacts of COVID-19 where possible. Work safety and flexibility measures have been implemented. In addition, the Company is also focused on actions to adjust its cost structure, reduce capital and operating expenditures, and to preserve its financial flexibility and liquidity position. Please refer to the below discussion of business outlook and Part I, Item 1A, "Risk Factors" for additional information related to the potential impacts of COVID-19 on the Company.







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Highlights for 2020 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, 2020 increased approximately 24% compared with the year ended December 31, 2019. The primary drivers for this increase were the acquisitions of Clean Earth and ESOL as well as increased revenue related to maintenance-of-way equipment sales in the Harsco Rail Segment, partially offset by lower customer production in the Harsco Environmental Segment, inclusive of the impacts form COVID-19, and the impact of foreign currency translation.
Operating income from continuing operations for the year ended December 31, 2020 decreased approximately 80% compared with the year ended December 31, 2019. The primary drivers for these decreases were decreased customer production levels in the Harsco Environmental Segment, inclusive of the impacts of COVID-19; incremental acquisition and integration costs primarily related to the ESOL acquisition; the timing and mix of sales in the Harsco Rail Segment and severance costs of approximately $9 million in the Harsco Environmental Segment. These decreases were partially offset by the inclusion of operating results for ESOL and full year results of Clean Earth as well as lower selling, general and administrative expenses in the Harsco Environmental and Harsco Rail Segments, and in Corporate (exclusive of the aforementioned incremental acquisition and integration costs).
Diluted losses per common share from continuing operations attributable to Harsco Corporation for the year ended December 31, 2020 were $0.41, a decrease compared with diluted earnings per common share from continuing operations of $0.35 for the year ended December 31, 2019. In addition to the factors noted above for revenue and operating income from continuing operations, the primary driver of this decrease was increased interest expense partially offset by a decrease in debt-related transaction expenses, defined benefit pension income and the effect of income taxes.
Cash flows provided by operating activities for the year ended December 31, 2020 were $53.8 million, an increase of $54.0 million compared with cash flows provided by operating activities the year ended December 31, 2019. The primary drivers for this increase were the $103 million tax payment on the sale of AXC in 2019 not repeated in 2020, favorable changes in net working capital, primarily due to improved collection of accounts receivable and timing of inventories, partially offset by timing of accounts payable. These were partially offset by lower net income (excluding the impacts of the gains on sales of discontinued operations and including the incremental acquisition and integration costs principally related to the ESOL acquisition) and the impact of taxes paid related to the sales of PK and IKG.
Capital expenditures for purchases of property, plant and equipment for the year ended December 31, 2020 were $120.2 million, a decrease of $64.7 million or 35.0% compared with the year ended December 31, 2019. The decrease was the result of the Company's goal of maintaining financial flexibility and strengthening cash flow during COVID-19.

The Company works diligently and safely to provide customers with services and products, and the Company maintains a positive outlook across all businesses supported by favorable underlying growth characteristics in its businesses and investments by the Company to further supplement growth. Financial results, however, continue to be negatively impacted by the global COVID-19 pandemic that began in 2020. These business pressures were most intense during the second and third quarters of 2020 and economic conditions in the majority of Harsco's businesses have improved meaningfully since. With that said, however, the scale and pace of the recovery varies and a slowdown in customer demand persists, with the ultimate extent and duration of such future impacts on the Company's businesses not presently known. The Company’s view for 2021 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 operates throughout the world to support critical metal production. The Company has been impacted by an overall decline in global steel demand, with several customer mill locations temporarily idled during the second quarter of 2020, as a result of COVID-19. Nearly all of these locations have restarted production since, though overall output remains below normalized levels and will remain so until underlying demand fully recovers. Estimated customer mill utilization decreased by 7% for the year ended December 31, 2020 compared with the same period in the prior year. Over the longer-term the Company expects that the Harsco Environmental Segment's return to growth will be driven by investments, innovation and economic growth that supports higher global steel consumption.
The Harsco Clean Earth Segment locations operate throughout the U.S. as an essential services provider, by performing critical environmental services. The segment's hazardous waste line of business, including the 2020 ESOL acquisition, has proven to be economically resilient with overall business levels returning to near pre-COVID, reflecting the nature of its services as well as the diversity of customers in the retail, medical and industrial industries. Meanwhile, the segment's contaminated materials line of business has continued to be negatively impacted by the pandemic. This dynamic reflects a slowing in non-residential construction activity and governmental constraints on project spending, and this business pressure is likely to persist in the near term. Over the longer-term, the Company
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expects this segment to benefit from growth opportunities, including from the acquired ESOL business, positive underlying market trends and operational synergy opportunities as well as from the less cyclical and recurring nature of this business that is expected to provide favorable returns on the Company's investments.
The Harsco Rail Segment continues to fulfill orders critical to global transportation and increased capacity during 2020 through the implementation of its Supply Chain Operation Recovery program, allowing the business to deliver on its backlog in the coming years. In the near term, the Harsco Rail Segment has been impacted by a decrease in certain short-cycle equipment, aftermarket and technology sales as a result of COVID-19 which is likely to continue in the coming quarters. Overall, the Harsco Rail Segment is supported by a record backlog and the longer-term outlook for this business remains strong, supported by future infrastructure investments, economic development in emerging economies, rail electrification in certain geographies, safety awareness and automation.
Additionally, the Company undertook significant actions to reduce corporate costs and capital spending in 2020 as a result of the pandemic. During this time, the Company developed a tiered approach to potential supplemental cost mitigation efforts should the impacts of COVID-19 become more severe or prolonged in nature. The Company's disciplined approach to overall costs and free cash flow will remain in place during 2021.
Interest expense for 2021 is expected to increase due to higher average debt balances following the purchase of ESOL.
Net periodic pension income will increase by approximately $8 million during 2021 which will primarily be reflected in the caption Defined benefit pension (income) expense on the Consolidated Statement of Operations. The increase is primarily the result of higher plan asset values at December 31, 2020.

Results of Operations

Revenues by Segment
(Dollars in millions) 2020 2019 Change %
Harsco Environmental $ 914.4  $ 1,034.8  $ (120.4) (11.6) %
Harsco Clean Earth 619.6  169.5  450.1  265.5 
Harsco Rail 329.8  299.4  30.5  10.2 
Total Revenues $ 1,863.9  $ 1,503.7  $ 360.1  23.9  %
Revenues by Region
(Dollars in millions) 2020 2019 Change %
North America $ 1,087.1  $ 685.6  $ 401.5  58.6  %
Western Europe 455.6  431.2  24.5  5.7 
Latin America (a)
126.6  148.6  (22.1) (14.9)
Asia-Pacific 114.2  159.4  (45.3) (28.4)
Middle East and Africa 63.4  60.4  3.0  5.0 
Eastern Europe 17.0  18.5  (1.5) (8.2)
Total Revenues $ 1,863.9  $ 1,503.7  $ 360.1  23.9  %
(a)     Includes Mexico.

Operating Income (Loss) and Operating Margins by Segment
(Dollars in millions) 2020 2019 Change %
Harsco Environmental $ 59.0  $ 112.3  $ (53.3) (47.5) %
Harsco Clean Earth 16.1  20.0  (3.9) (19.6)
Harsco Rail 20.2  23.7  (3.5) (14.7)
Corporate (74.2) (51.7) (22.5) (43.5)
Total Operating Income $ 21.1  $ 104.3  $ (83.2) (79.8) %
2020 2019
Harsco Environmental 6.5  % 10.9  %
Harsco Clean Earth 2.6  11.8 
Harsco Rail 6.1  7.9 
Consolidated Operating Margin 1.1  % 6.9  %

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Harsco Environmental Segment:
Significant Effects on Revenues (In millions)
Revenues—2019 $ 1,034.8 
Net effects of price/volume changes, primarily attributable to volume changes. (73.7)
Foreign currency translation. (24.4)
Net impact of new contracts and lost contracts. (21.3)
Other. (1.0)
Revenues—2020 $ 914.4 

Factors Positively Affecting Operating Income:
Lower selling, general and administrative expenses, exclusive of provisions for doubtful accounts, improved operating income by $8.4 million during 2020 compared to the same period in the prior year.
The Company recorded a provision for doubtful accounts of $6.2 million related to a U.K. customer that entered administration during 2019 that did not repeat in 2020.

Factors Negatively Impacting Operating Income:
Overall steel production by customers under environmental services contracts, including the impact of new and exited contracts, decreased 10% during 2020 compared with the same period in the prior year. The decreased production was attributable to the global economic impact of COVID-19.
Operating results for 2020 were impacted by decreased demand for applied products and by-products. The decreased demand was attributable to the global economic impact of COVID-19.
Operating results for 2020 were also negatively impacted by $8.1 million of incremental employee termination benefit costs incurred to improve operational efficiency and support near-term financial performance.
Foreign currency translation decreased operating income $3.6 million during 2020 compared with the same period in the prior year.
Incremental costs directly related to COVID-19 of $1.5 million for 2020 decreased operating income compared with the same period in prior year.
Operating income for 2020 was negatively impacted in comparison to the prior year by a $2.3 million gain during 2019 related to the recognition of a foreign currency cumulative translation adjustment resulting from the substantial liquidation of a subsidiary that did not repeat in 2020.
Operating results for 2020 were negatively impacted by a $8.5 million net positive contingent consideration adjustment related to the Altek acquisition which occurred in 2019 and did not repeat in 2020.


Harsco Clean Earth Segment:

The Company acquired ESOL on April 6, 2020 and Clean Earth on June 28, 2019 and the operating results of both are reflected in the Harsco Clean Earth Segment.

Significant Effects on Revenues (In millions)
Revenues—2019 $ 169.5 
Impact of ESOL and Clean Earth acquisitions. (b)
500.9 
Net effects of price/volume changes, primarily attributable to volume changes. (36.1)
Other. (14.7)
Revenues—2020 $ 619.6 
(b) Includes net revenue of ESOL for the period of April 6, 2020 through December 31, 2020 and of Clean Earth from January 1, 2020 through June 30, 2020 as Revenues in 2019 only reflect the six months ended December 31, 2019.

Operating Income for the year ended December 31, 2020 and 2019 was $16.1 million and $20.0 million, respectively, which included $22.8 million and $7.9 million of intangible asset amortization expense, respectively. In addition to the impacts of the ESOL and CE acquisitions, the following factors contributed to the changes in operating income in 2020.

Factors Positively Affecting Operating Income:
Decrease in severance costs related to the Clean Earth acquisition that occurred in 2019 and did not repeat.

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Factors Negatively Impacting Operating Income:
Decrease in contaminated material and hazardous waste volume due principally to the impacts of COVID-19.

Harsco Rail Segment:
Significant Effects on Revenues (In millions)
Revenues—2019 $ 299.4 
Net effects of price/volume changes, primarily attributable to volume changes. 29.7 
Foreign currency translation. 0.6 
Other. 0.1 
Revenues—2020 $ 329.8 

Factors Positively Affecting Operating Income:
Increased railway contracting services, primarily related to the start of a new contract in the U.S., increased operating income during 2020 compared with the same period in the prior year.
Results for 2019 included $5.6 million of costs associated with the consolidation of U.S. manufacturing and distribution into one facility that did not repeat during 2020.
Lower selling, general and administrative expenses improved operating income by $3.9 million during 2020 compared to the same period in the prior year.

Factors Negatively Impacting Operating Income:
The mix of maintenance-of-way equipment sales, as well as the timing and mix of after-market parts sales, decreased operating income during 2020 compared with the same period in the prior year as a result of lower end market demand.
Incremental costs directly related to COVID-19 of $0.6 million during 2020 decreased operating income compared with the same period in the prior year.

Corporate Costs:
In addition to the factors highlighted above that positively affected or negatively impacted segment operating income, the Company's Corporate function was impacted by incremental acquisition related and integration costs of approximately $23.4 million in 2020, primarily related to the acquisition of ESOL, as well as an increase in the contingent consideration for the Clean Earth acquisition related to an increase in expected values of assumed net operating losses (offset by an income tax benefit). These increased costs were partially offset by decreases in other selling, general and administrative costs, including lower compensation expense and cost reduction actions due to COVID-19.


Consolidated Results
(In millions, except per share information and percentages) 2020 2019 2018
Total revenues $ 1,863.9  $ 1,503.7  $ 1,347.7 
Cost of services and products sold 1,500.8  1,144.3  1,012.5 
Selling, general and administrative expenses 327.9  253.0  202.7 
Research and development expenses 3.2  4.8  3.9 
Other (income) expenses, net 10.8  (2.6) (2.2)
Operating income from continuing operations 21.1  104.3  130.7 
Interest income 2.2  2.0  2.2 
Interest expense (59.7) (36.6) (21.5)
Unused debt commitment and amendment fees (1.9) (7.7) (1.1)
Defined benefit pension income (expense) 7.2  (5.5) 3.5 
Income tax benefit (expense) from continuing operations 2.8  (20.2) (5.5)
Equity in income of unconsolidated entities, net 0.2  0.3  0.4 
Income (loss) from continuing operations (28.2) 36.5  108.5 
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(In millions, except per share information and percentages) 2020 2019 2018
Gain on sale of discontinued businesses 18.3  569.1  — 
Income (loss) from discontinued businesses (2.7) 27.5  43.9 
Income tax expense from discontinued businesses (9.4) (121.0) (7.5)
Income from discontinued operations, net of tax 6.2  475.7  36.5 
Net income (loss) (22.0) 512.2  145.0 
Total other comprehensive loss (55.3) (0.1) (21.5)
Total comprehensive (income) loss (77.3) 512.2  123.5 
Diluted income (loss) per common share from continuing operations attributable to Harsco Corporation common stockholders (0.41) 0.35  1.20 
Effective income tax rate from continuing operations 8.9  % 35.8  % 4.8  %
Comparative Analysis of Consolidated Results
Total Revenues
Revenues for 2020 increased $360.1 million or 24% from 2019. Revenues for 2019 increased $156.1 million or 12% from 2018. These increases were attributable to the following significant items:
Changes in Revenues (In millions)  2020 vs. 2019  2019 vs. 2018
Impact of ESOL and Clean Earth acquisitions. $ 500.9  $ 169.5 
Net effect of price/volume changes in the Harsco Environmental Segment, primarily attributable to volume changes. (73.7) 6.4 
Net effect of price/volume changes in the Harsco Clean Earth Segment, primarily attributable to volume changes. (36.1) — 
Net effect of price/volume changes, primarily attributable to volume changes in the Harsco Rail Segment. 29.7  23.4 
Foreign currency translation. (23.8) (40.9)
Net impact of new contracts and lost contracts (including exited underperforming contracts) in the Harsco Environmental Segment. (21.3) (10.0)
Effect of Altek acquisition on Harsco Environmental Segment. —  7.4 
Other. (15.6) 0.3 
Total change in revenues $ 360.1  $ 156.1 
Cost of Services and Products Sold
Cost of services and products sold for 2020 increased $356.5 million or 31% from 2019. Cost of services and products sold for 2019 increased $131.8 million or 13% from 2018. These increases were attributable to the following significant items:
Change in Cost of Services and Products Sold (In millions)  2020 vs. 2019  2019 vs. 2018
Impact of ESOL and Clean Earth acquisitions. $ 409.5  $ 124.2 
Change in costs due to changes in revenues (exclusive of the ESOL and Clean Earth acquisitions and effects of foreign currency translation and including fluctuations in commodity costs included in selling prices). (38.7) 47.2 
Foreign currency translation. (17.6) (35.1)
Other. 3.3  (4.5)
Total change in cost of services and products sold $ 356.5  $ 131.8 


Selling, General and Administrative Expenses
Selling, general and administrative expenses for 2020 increased $75.0 million or 30% from 2019. This increase primarily relates to incremental acquisition related and integration costs of $24 million during 2020, primarily related to the acquisition of ESOL and the inclusion of selling, general and administrative expenses associated with the ESOL and Clean Earth acquisitions, which occurred in April 2020 and June 2019, respectively. These increases were partially offset by a provision for doubtful accounts related to a U.K. customer that entered administration during 2019 that did not repeat in 2020 and decreased travel and entertainment 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 acquisitions of Clean Earth and 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.


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Other (Income) Expenses, Net
The major components of this Statement of operations caption are detailed below. See Note 18, Other (Income) Expenses, Net, in Part II, Item 8, "Financial Statements and Supplementary Data" for additional information.
  Other Expenses
(In thousands) 2020 2019 2018
Employee termination benefits costs $ 10,888  $ 6,619  $ 4,763 
Net gains (3,723) (6,303) (3,868)
Contingent consideration adjustments 2,386  (7,681) (2,939)
Impaired asset write-downs 776  773  104 
Other costs to exit activities 693  4,208  170 
Other income (226) (237) (431)
Total other (income) expenses, net $ 10,794  $ (2,621) $ (2,201)

Interest Expense
Interest expense in 2020 was $59.7 million, an increase of $23.1 million or 63% compared with 2019. This increase primarily relates to higher outstanding borrowings and weighted average interest rates related to the June 2019 issuance of the Notes and the April 2020 issuance of the New Term Loan.
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.
See Note 8, Debt and Credit Agreements, in Part II, Item 8, "Financial Statements and Supplementary Data" for additional information.

Unused Debt Commitment and Amendment Fees
During 2020, the Company recognized $1.9 million of fees and expenses related to the amended Senior Secured Credit Facilities in the caption Unused debt commitment and amendment fees on the Consolidated Statement of Operations.

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.
See Note 8, 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 income in 2020 was $7.2 million compared to defined benefit pension income of $5.5 million in 2019. This change is primarily the result of higher plan asset values at December 31, 2019.

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.

Income Tax Benefit (Expense) from Continuing Operations
Income tax benefit from continuing operations in 2020 was $2.8 million, compared with tax expense from continuing operations of $20.2 million in 2019. The effective income tax rate relating to continuing operations for 2020 was 8.9% versus 35.8% for 2019. The decrease in income tax expense and the effective tax rate related to continuing operations was primarily due to increased acquisition and integration costs, decreased operating income due to impacts of COVID-19 and a $2.7 million favorable income tax adjustment in connection with an increase in estimated usage of assumed net operating losses related to the Clean Earth acquisition.

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.

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See Note 11, Income Taxes, in Part II, Item 8, “Financial Statements and Supplementary Data" for additional information.
Gain on Sale of Discontinued Businesses
In January 2020, the Company sold IKG and recognized a gain on sale of $18.3 million pre-tax (or approximately $9 million after-tax).

In July 2019, the Company completed the 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 (Loss) 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. In addition, this caption includes costs directly attributable to retained contingent liabilities of the Harsco Industrial Segment. See Note 3, Acquisitions and Dispositions, in Part II, Item 8, "Financial Statements and Supplementary Data" for additional information.

Total Other Comprehensive Income (Loss)
Total other comprehensive loss was $55.3 million in 2020, compared with total other comprehensive loss of $0.1 million in 2019. The primary driver of the decrease is due to lower discount rates for the U.S. and U.K. pension plans.

Total other comprehensive loss was $0.1 million in 2019, compared with total other comprehensive loss of $21.5 million in 2018. The primary driver of the decrease is due to the strengthening of the U.S. dollar against certain currencies, including foreign currency translation of cumulative unrecognized actuarial losses on the Company's pension obligations, being less than the strengthening of the U.S. dollar for the corresponding period in 2018, partially offset by unrealized cash flow hedge losses in 2019 compared to unrealized cash flow hedge gains for the same period in 2018.


Liquidity and Capital Resources
Cash Flow Summary
The global economy continues to be impacted by COVID-19, the ultimate extent and duration of which is not presently known,
and the Company expects its liquidity to continue to be negatively impacted in the near term. As a result, the Company has
taken significant proactive actions to minimize the operational and financial impacts.

The Company currently expects to have sufficient financial liquidity and borrowing capacity to support the strategies within each of its businesses.  The Company currently expects operational and business needs to be met by cash provided by operations supplemented with borrowings from time to time principally under the Senior Secured Credit Facilities, due to historical patterns of seasonal cash flow, the funding of various projects and the impact of COVID-19. 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) 2020 2019 2018
Net cash provided (used) by:      
Operating activities $ 53.8  $ (0.2) $ 192.0 
Investing activities (520.6) (132.2) (161.1)
Financing activities 487.0  125.7  (25.5)
Effect of exchange rate changes on cash (0.2) (0.8) (4.4)
Net change in cash and cash equivalents $ 19.9  $ (7.4) $ 0.9 
Cash provided (used) by operating activities Net cash provided by operating activities in 2020 was $53.8 million, an increase of $54.0 million from 2019. The primary drivers for this increase were the $103 million tax payment on the sale of AXC in 2019 not repeated in 2020, favorable changes in net working capital, primarily due to improved collection of accounts receivable and timing of inventories, partially offset by timing of accounts payable. These were partially offset by lower net
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income (excluding the impacts of the gains on sales of discontinued operations and including the incremental acquisition and integration costs principally related to the ESOL acquisition) and the impact of taxes paid related to the sales of PK and IKG.
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) 2020 2019 2018
Net cash provided (used) by:
  Change in income taxes $ (1.1) $ 5.3  $ (15.3)
  Change in prepaid expenses (7.4) (13.0) 2.1 
Change in contingent consideration liabilities 0.3  (8.2) (2.9)
 Other (a)
7.1  (8.7) (17.4)
  Total change in Other assets and liabilities $ (1.1) $ (24.6) $ (33.5)
(a)     Other relates primarily to other accruals that are individually not significant.
Cash used by investing activities — Net cash used by investing activities in 2020 was $520.6 million, a decrease of $388.5 million from 2019. The decrease reflects reduced proceeds from the sale of businesses (AXC and PK in 2019 compared with IKG in 2020), partially offset by decreased cash paid for businesses acquired (Clean Earth in 2019 compared with ESOL in 2020) and reduced capital expenditures, primarily in the Harsco Environmental Segment.
Cash provided (used) by financing activities — Net cash provided by financing activities in 2020 was $487.0 million, an increase of $361.2 million from 2019. The increase was primarily due to higher net cash borrowings of $500.4 million in 2020 compared with net cash borrowings of $181.3 million in 2019 resulting from the investing activities; decreases in the payments of deferred financing costs, decreases in acquisition of treasury shares and decreases in payments of employee taxes related to stock-based compensation vesting.
Cash Requirements
The following summarizes the Company's expected future payments related to contractual obligations and commercial commitments at December 31, 2020:
Contractual Obligations and Commercial Commitments at December 31, 2020 (b)
    Payments Due by Period
(In millions) Total Less than
1 year
1-3
years
3-5
years
After 5
years
Short-term borrowings $ 7.5  $ 7.5  $ —  $ —  $ — 
Long-term debt (including current maturities and finance leases) 1,300.5  13.6  65.7  718.7  502.5 
Projected interest payments on long-term debt (c)
287.4  58.1  111.6  72.2  45.5 
Purchase obligations (d)
147.7  98.3  49.4  —  — 
Operating lease liabilities 132.6  30.6  42.6  21.0  38.4 
Pension obligations (e)
29.6  29.6  —  —  — 
Foreign currency exchange forward contracts (f)
1.4  1.4  —  —  — 
Contingent consideration (g)
12.5  11.9  0.6  — 
Total contractual obligations (h)
$ 1,919.2  $ 251.0  $ 269.9  $ 811.9  $ 586.4 
(b)     See Note 3, Acquisitions and Dispositions; Note 8, Debt and Credit Agreements; Note 9, Leases; Note 10, Employee Benefit Plans; Note 11, Income Taxes; and Note 15, 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, 2020, 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.
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(f)     Amounts represent the fair value of the foreign currency exchange contracts outstanding at December 31, 2020. Due to the nature of these contracts, based on fair values at December 31, 2020 there will be a net cash payable of $1.4 million comprised of cash receipts of $460.5 million and cash payments of $461.9 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, 2020, 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.

Off-Balance Sheet Arrangements
The following table summarizes the Company's contingent commercial commitments at December 31, 2020. 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, 2020
    Amount of Commercial Commitment Expiration Per Period
(In millions) Total Less than
1 Year
1-3
Years
3-5
Years
Over 5
Years
Indefinite
Expiration
Performance bonds $ 242.6  $ 211.4  $ 27.0  $ —  $ —  $ 4.2 
Standby letters of credit 64.5  36.8  20.4  1.9  5.4  — 
Guarantees 103.5  0.7  1.3  4.6  78.9  18.0 
Total commercial commitments $ 410.6  $ 248.9  $ 48.7  $ 6.5  $ 84.3  $ 22.2 
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 15, 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:
(In millions)
December 31
2020
December 31
2019
By type:
     Revolving Credit Facility $ 281.0  $ 67.0 
     Original Term Loan 218.2  218.2 
     New Term Loan 280.0  — 
5.75% Notes 500.0  500.0 
     Total $ 1,279.2  $ 785.2 
By classification:
     Current $ 10.5  $ — 
     Long-term 1,268.7  785.2 
     Total $ 1,279.2  $ 785.2 

December 31, 2020
(In thousands) Facility
Limit
Outstanding
Balance
Outstanding Letters of Credit Available
Credit
Revolving Credit Facility (a U.S.-based program) $ 700,000  $ 281,000  $ 25,352  $ 393,648 


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In March 2020 the Company raised $280 million pursuant to the New Term Loan as a new tranche under the existing Senior Secured Credit Facilities. The New Term Loan was fully drawn on April 6, 2020 to partially fund the acquisition of ESOL. See Note 3, Acquisition and Dispositions, for additional information related to the ESOL acquisition. Borrowings under the New Term Loan bear interest at a rate per annum ranging from 150 to 250 basis points over adjusted LIBOR as defined in the Credit Agreement. The New Term Loan will mature on June 28, 2024. The Company capitalized $1.9 million of fees related to the issuance of the New Term Loan.

In both March 2020 and June 2020, the Company amended the Senior Secured Credit Facilities to increase the net debt to consolidated adjusted EBITDA ratio covenant as defined in the Credit Agreement. As a result of these amendments, the net debt to consolidated adjusted EBITDA ratio covenant has been increased to 5.75 through March 2021 and then decreases quarterly until reaching 4.75 in December 2021. There is no change to the previously agreed interest rates as long as the Company's total leverage ratio, as defined in the Credit Agreement, does not equal or exceed 4.50, at which time it would increase by 25 basis points for the New Term Loan and the Revolving Credit Facility. At December 31, 2020, the Company was in compliance with these and all other covenants. During 2020, the Company recognized $1.9 million of fees and expenses related to the amended Senior Secured Credit Facilities in the caption Unused debt commitment and amendment fees on the Consolidated Statements of Operations.

In July 2019, the Company made a prepayment of $320.9 million on the Original Term Loan, 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 expensed $5.3 million of previously recorded deferred financing costs on the Consolidated Statement of Operations as discontinued operations in 2019. The prepayment satisfied all future quarterly principal payment requirements under the Original Term Loan; the remaining principal is due at maturity.

During June 2019, the Company completed a private placement of $500.0 million principal amount of Notes. The Notes 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. The Notes were used, together with borrowings under the Company's Revolving Credit Facility, to fund the acquisition of Clean Earth in 2019. See Note 3, Acquisitions and Dispositions, for additional information. The Company capitalized $9.0 million of fees related to the issuance of the Notes.

In 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 and extend the maturity date of the Revolving Credit Facility until June 2024. Total expenses of $1.0 million were recognized in 2019 related to the amended Credit Agreement in the caption Unused debt commitment and amendment fees on the Consolidated Statements of Operations.

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

In addition, during 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.
In 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. No purchases of shares were made by the Company during 2020. 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 recurring nature of revenues within the Clean Earth segment, the order backlog for the Company's
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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, and debt repayment.
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 Senior Secured Credit Facility contains a consolidated net debt to consolidated adjusted EBITDA ratio covenant, which is not to exceed 5.75 through March 2021 and then decreasing quarterly until reaching 4.75 in December 2021 and 4.00 in March 2022, and a minimum consolidated adjusted EBITDA to consolidated interest charges ratio covenant, which is not to be less than 3.0. At December 31, 2020, the Company was in compliance with these covenants as the net leverage ratio was 4.6 to 1.0 and interest coverage ratio was 4.5 to 1.0. Based on balances and covenants in effect at December 31, 2020, the Company could increase net debt by $301.7 million and still be in compliance with these debt covenants.  Alternatively, adjusted EBITDA could decrease by $52.5 million, and the Company would remain in compliance with these covenants. The Company has estimated the negative impact of COVID-19 on its financial position, results of operations and cash flows, and believes it will continue to maintain compliance with these covenants. However, due to the inherent uncertainty of COVID-19 on the Company’s businesses, the Company’s estimates of compliance with these covenants could change in the future.

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, 2020, the Company's consolidated cash and cash equivalents included $74.9 million held by non-U.S. subsidiaries. At December 31, 2020, approximately 4% 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 $21.6 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.

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 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, fair value estimates for business combinations and 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."
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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, 2020 measurement date for the U.K. and U.S. defined benefit pension plans were 1.4% and 2.4%, respectively, and the global weighted-average discount rate was 1.6%. 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 2020 expense were 2.1% for the U.K. plan, 3.2% for the U.S. plans and 2.4% 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 2021 and 2020, the global weighted-average expected long-term rate of return on asset assumption is 5.1% and 5.6%, respectively. This rate was determined based on a model of expected asset returns for an actively managed portfolio.
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, 2020 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 2021 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   Increase of $0.2 million
Expected long-term rate of return on plan assets      
One-quarter percent increase Decrease of $0.5 million   Increase of $2.3 million
One-quarter percent decrease Increase of $0.5 million   Decrease of $2.3 million
Increases or decreases to 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 10, Employee Benefit Plans, in Part II, Item 8, "Financial Statements and Supplementary Data," for additional information.

Notes and Accounts 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
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conditions for a period which corresponds with the contractual life of its accounts receivable. 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 expected credit loss allowance methodology on January 1, 2020, the Company established an allowance for doubtful accounts based upon a specific-identification method, as well as historical collection experience, as appropriate. At December 31, 2020 and 2019, trade accounts receivable of $407.4 million and $310.0 million, respectively, were net of reserves of $7.5 million and $13.5 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 expected credit losses and doubtful accounts during 2020, 2019 and 2018 were $2.0 million, $7.5 million and $0.4 million, respectively.
On at least a quarterly basis, customer accounts are analyzed for collectability. Reserves are established based upon the expected credit loss allowance methodology noted above. Reserves are based on the facts available to the Company and are re-evaluated and adjusted as additional information becomes available. 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. The increase in the provision for doubtful accounts in 2019 primarily resulted from a provision for doubtful accounts in the Harsco Environmental Segment related to a customer in the U.K. entering administration which was subsequently written off in 2020.
See Note 4, Accounts Receivable and Note Receivable, in Part II, Item 8, "Financial Statements and Supplementary Data," for additional information.
Fair Value Estimates for 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 2020, the Company acquired 100% of ESOL, an established waste transportation, processing and services provider with a comprehensive portfolio of disposal solutions for customers primarily across the industrial, retail and healthcare markets. 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 beneficial 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 $902.1 million and $738.4 million at December 31, 2020 and 2019, respectively. The Company performs its annual goodwill impairment test as of October 1. 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
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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 or a quantitative test. Under the qualitative test, 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 a quantitative test.
The quantitative 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, then an impairment charge would be recognized as the difference between the fair value and the net book value.
The performance of the Company’s 2020 annual impairment tests did not result in any impairment of the Company’s goodwill.
See Note 1, Summary of Significant Accounting Policies and Note 7, 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, $0.8 million and $0.1 million in 2020, 2019 and 2018, 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 its 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.
Because of the lower-than-expected results for the Altek Group of the Harsco Environmental Segment for 2020, the Company tested Altek’s asset groups' recoverability in the fourth quarter of 2020. The asset group primarily consists of intangible assets which had a carrying value of $42.6 million at the measurement date. Recoverability of the carrying value of the asset groups was based upon estimated future cash flows while taking into consideration various assumptions and estimates, including future use of the assets, remaining useful life of the assets, and eventual disposition of the assets. Undiscounted estimated cash flows of the Altek asset group exceeded the carrying value, therefore, no impairment was recorded. If actual results prove inconsistent with the Company’s assumptions and judgments, it could result in impairment of the Altek intangible assets in future periods.
In the third quarter of 2020, a customer of the Harsco Environmental Segment in China ceased steel making operations at its steel mill site in order to relocate the operations to a new site, as a result of a government mandate to improve environmental
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conditions of the area. The Company will continue to provide services to the same customer at the new site. The net book value of the idled equipment associated with the previous location is approximately $19 million. The customer has entered into an agreement with the government where it will receive compensation for the losses the customer has incurred as a result of the forced shutdown. The Company has continued discussions with the customer regarding compensation, which are expected to be protracted. While the customer has initially indicated that they will not provide us compensation, we disagree with their interpretation and are evaluating our legal position in response. In addition, there may be other avenues of pursuing recovery, including seeking relief directly from the local government. At this point, considering the ongoing discussions with the customer, and other avenues, we believe we will recover the book value of the equipment thus do not believe we have an asset impairment as of December 31, 2020. However, the Company will continue to evaluate changes in facts and circumstances and record any impairment charge when and if indicated.
See Note 18, 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, 2020 and 2019, inventories of $173.0 million and $157.0 million, respectively, are net of reserves of $15.1 million and $12.5 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 $0.6 million in 2020, pre-tax income of $1.6 million in 2019 and pre-tax expense of $0.6 million in 2018.
The Company has not materially changed its methodology for calculating inventory reserves for the years presented. See Note 5, 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, as well as estimating any liquidating damages or penalties related to performance); estimating contract costs (including estimating engineering costs to design the machine and the material, labor and overhead manufacturing 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. Railway track maintenance equipment revenue of approximately $142 million was recognized using the cost-to-cost method method in 2020.
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The Company recognized an estimated forward loss provision related to the contracts with the federal railway system of Switzerland. At December 31, 2020 and 2019, the entire remaining estimated forward loss provision of $4.4 million and $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, 2020, the Company has substantially completed the first SBB contract and the second SBB contract is approximately 70% complete. Based on all information currently available, the Company is unable to estimate any further possible loss or range of loss at this time. The finalization of prototype, as well as the handover and commissioning of vehicles are planned to occur in 2021 and could affect the cost estimates. The Company is currently manufacturing seven multipurpose Stoneblower machines for the U.K.-based customer Network Rail under a long-term contract. Delivery of these machines have been delayed due to several factors, including customer expectations and requirements and COVID-19, and the Company's estimated delivery schedule would trigger liquidated damages. However, based on the nature of these delays and negotiations with the customer, the Company expects that it will get relief from the customer for most of these liquidated damages, and as such the Company's current estimate of contract revenues has not been reduced. However, if the Company is not granted relief, any adjustment to the estimate of these liquidated damages in the future 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, 2020 and 2019, the Company recorded liabilities of $28.3 million and $28.7 million, respectively, related to both asserted and unasserted insurance claims. At December 31, 2020 and 2019,
$5.2 million and $3.7 million, respectively, was included in insurance liabilities related to claims covered by insurance carriers for which a corresponding receivable has been recorded.

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, 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 2020, 2019 and 2018, the Company recorded insurance reserve adjustments that decreased pre-tax insurance expense from continuing operations for self-insured programs by $2.1 million, $1.5 million and $2.0 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 its 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, 2020, 2019 and 2018, the Company's annual effective income tax rate on income from continuing operations was 8.9%, 35.8% and 4.8%, respectively.

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
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their net recorded amount, an adjustment to the valuation allowance would be made that would reduce the provision for income taxes.
Valuation allowances of $140.6 million, $127.1 million and $137.5 million at December 31, 2020, 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 2020, the Company recorded a valuation allowance reduction of $15.5 million related to foreign tax credit carryforwards due to statutory limitation expiration. The Company recorded a valuation allowance increase of $13.0 million related to pension liabilities, a net valuation allowance increase of $9.8 million related to losses in certain jurisdictions where the Company determined that it is more likely than not that these assets will not be realized, and a valuation allowance increase of $3.3 million from the effects of foreign currency translation adjustments. 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.
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, 2020 and 2019 were $2.9 and $3.1 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 11, Income Taxes, in Part II, Item 8, "Financial Statements and Supplementary Data," for additional information.


Research and Development

Internal funding for research and development was as follows:
  Research and Development Expenses
(In millions) 2020 2019 2018
Harsco Environmental $ 0.5  $ 0.9  $ 1.6 
Harsco Rail 2.7  3.9  2.3 
Total research and development expenses $ 3.2  $ 4.8  $ 3.9 
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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Item 7A.    Quantitative and Qualitative Disclosures about Market Risk.
See the Risk Factors captioned "Exchange rate fluctuations may adversely impact the Company's business," "The Company is exposed to counterparty risk in its derivative financial arrangements" and "The Company's variable rate indebtedness subjects it to interest rate risk, which could cause the Company's debt service obligations to increase significantly" in Part I, Item 1A, "Risk Factors," for quantitative and qualitative disclosures about market risk.
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Item 8.    Financial Statements and Supplementary Data.
Index to Consolidated Financial Statements and Supplementary Data
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Management's Report on Internal Control Over Financial Reporting
Management of Harsco Corporation, together with its consolidated subsidiaries (the "Company"), is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Securities Exchange Act Rule 13a-15(f) or 15d-15(f). The Company's internal control over financial reporting is a process designed under the supervision of the Company's principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's consolidated financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.
The Company's internal control over financial reporting includes policies and procedures that:
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the directors of the Company; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the Company's consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management has assessed the effectiveness of its internal control over financial reporting at December 31, 2020 based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management has excluded ESOL, which we acquired in 2020, from the scope of our assessment of internal control over financial reporting as permitted under SEC rules. The total assets and operating revenues of ESOL, excluded from assessment, represent approximately 10% and 20%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2020. Based on this assessment, management has determined that the Company's internal control over financial reporting was effective at December 31, 2020.
The effectiveness of the Company's internal control over financial reporting at December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing in this Annual Report on Form 10-K, which expresses an unqualified opinion on the effectiveness of the Company's internal control over financial reporting at December 31, 2020.
/s/ F. NICHOLAS GRASBERGER III /s/ PETER F. MINAN
F. Nicholas Grasberger III
Chairman, President and Chief Executive Officer
 
Peter F. Minan
Senior Vice President and Chief Financial Officer
February 25, 2021 February 25, 2021
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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Harsco Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Harsco Corporation and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for each of the three years in the period ended December 31, 2020, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and revenue recognition in 2018.

Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded ESOL from its assessment of internal control over financial reporting as of December 31, 2020, because it was acquired by the Company in a purchase business combination during 2020. We have also excluded ESOL from our audit of internal control over financial reporting. ESOL is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent approximately 10% and 20%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2020.
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Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Impairment Assessments – Environmental and Clean Earth Reporting Units
As described in Notes 1 and 7 to the consolidated financial statements, the Company’s consolidated goodwill balance was $902.1 million as of December 31, 2020, and the goodwill associated with the Environmental and Clean Earth reporting units was $406.4 million and $482.6 million, respectively. The Company performs the annual goodwill impairment test as of October 1, or more frequently if indicators of impairment exist, or if a decision is made to dispose of a business. If after assessing qualitative factors the Company determines it is “more-likely-than-not” that the fair value of a reporting unit is less than the carrying value, the Company compares the current fair value of the reporting unit to the carrying value, including goodwill. The Company uses a discounted cash flow model to estimate the current fair value of reporting units. A number of significant assumptions and estimates are involved in the preparation of the discounted cash flow model, including future revenues, operating margin growth, the weighted-average cost of capital, tax rates, capital spending, pension funding, the impact of business initiatives and working capital projections.
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments of the Environmental and Clean Earth reporting units is a critical audit matter are the significant judgment by management when developing the fair value measurements of the reporting units; this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s assumptions related to future revenues, operating margin growth, and the weighted-average costs of capital. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Company’s Environmental and Clean Earth reporting units. These procedures also included, among others (i) testing management’s process for developing the fair value estimates, (ii) evaluating the appropriateness of the discounted cash flow models, (iii) testing the completeness and accuracy of underlying data used in the models, and (iv) evaluating the assumptions used by management related to future revenues, operating margin growth and the weighted-average costs of capital. Evaluating management’s assumptions related to future revenues and operating margin growth involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting units, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
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Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow models and the weighted-average costs of capital assumptions.

Revenue Recognition using the Cost-to-Cost Method - Harsco Rail Segment
As described in Notes 1 and 17 to the consolidated financial statements, the Company’s total railway track maintenance and equipment sales revenue was $184.1 million, which included $142.0 million related to revenue recognized over time using the cost-to-cost method. The Company uses the cost-to-cost method to measure progress because management believes it is the measure that best depicts the transfer of control to the customer, which occurs as costs are incurred under the contracts. 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 as well as estimating any liquidating damages or penalties related to performance), estimating contract costs (including engineering costs to design the machine and material, labor, and overhead manufacturing 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.
The principal considerations for our determination that performing procedures relating to revenue recognition using the cost-to-cost method in the Harsco Rail segment is a critical audit matter are the significant judgment by management when developing the estimated variable consideration and the costs to complete contracts; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s assumptions related to liquidating damages, the engineering costs to design the machine and the material, labor, and overhead manufacturing costs to build the machine.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the determination of estimated contract revenues and costs. The procedures also included, among others, evaluating and testing management’s process for developing the estimated variable consideration and costs at completion for certain open contracts, which included evaluating the reasonableness of assumptions used by management related to liquidating damages, the engineering costs to design the machine and the material, labor, and overhead manufacturing costs to build the machine. Evaluating the reasonableness of the assumptions involved assessing management’s ability to reasonably estimate variable consideration and costs to complete contracts by testing management’s process for evaluating the Company’s ability to properly develop the estimated variable consideration, including assessing the likelihood and amount of relief that will be negotiated with the customer, and costs to complete a contract, including comparing the actual cost of completed contracts to the estimated cost at completion for similar contracts, using actual costs to date to assess the reasonableness of the estimate of the remaining costs to complete the contract, and physically observing the progress of open contracts.

ESOL Acquisition - Fair Value of Intangible Assets
As described in Notes 1 and 3 to the consolidated financial statements, the Company completed the acquisition of ESOL for $429.0 million of cash consideration in 2020, which resulted in $161.0 million of identifiable intangible assets being recorded. 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.
The principal considerations for our determination that performing procedures relating to the ESOL acquisition - fair value of intangible assets is a critical audit matter are the significant judgment by management when developing the estimate; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s assumptions relating to the timing and amounts of cash flow projections, revenue growth rates, customer attrition rates, discount rates, and useful lives. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the intangible assets and controls over development of the timing and amounts of cash flow projections, revenue growth rates, customer attrition rates, discount rates, and useful lives utilized in the valuation of the intangible assets. These procedures also included, among others (i) reading the purchase agreement and (ii) testing management’s process for estimating the fair value of intangible assets. Testing management’s process included evaluating the appropriateness of the valuation method, testing the completeness and accuracy of data provided by management, and evaluating the reasonableness of assumptions related to the timing and amounts of cash flow
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projections, revenue growth rates, customer attrition rates, discount rates, and useful lives. Evaluating the reasonableness of the timing and amounts of cash flow projections, revenue growth rates, customer attrition rates, and useful lives involved considering the past performance of the acquired business, as well as economic and industry forecasts. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s valuation methods and the discount rate assumptions.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 25, 2021
We have served as the Company’s auditor since at least 1933. We have not been able to determine the specific year we began serving as auditor of the Company.



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HARSCO CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts) December 31
2020
December 31
2019
ASSETS    
Current assets:    
Cash and cash equivalents $ 76,454  $ 57,259 
Restricted cash 3,215  2,473 
Trade accounts receivable, net 407,390  309,990 
Other receivables 34,253  21,265 
Inventories 173,013  156,991 
Current portion of contract assets 54,754  31,166 
Prepaid expenses 56,099  42,355 
Current portion of assets held-for-sale   22,093 
Other current assets 10,645  9,220 
Total current assets 815,823  652,812 
Property, plant and equipment, net 668,209  561,786 
Right-of-use assets, net 96,849  52,065 
Goodwill 902,074  738,369 
Intangible assets, net 438,565  299,082 
Deferred income tax assets 15,274  14,288 
Assets held-for-sale   32,029 
Other assets 56,493  17,036 
Total assets $ 2,993,287  $ 2,367,467 
LIABILITIES    
Current liabilities:    
Short-term borrowings $ 7,450  $ 3,647 
Current maturities of long-term debt 13,576  2,666 
Accounts payable 218,039  176,755 
Accrued compensation 45,885  37,992 
Income taxes payable 3,499  18,692 
Insurance liabilities 13,173  10,140 
Current portion of advances on contracts 39,917  53,906 
Current portion of operating lease liabilities 24,862  12,544 
Current portion of liabilities of assets held-for-sale   11,344 
Other current liabilities 171,554  137,208 
Total current liabilities 537,955  464,894 
Long-term debt 1,271,189  775,498 
Insurance liabilities 15,083  18,515 
Retirement plan liabilities 231,335  189,954 
Advances on contracts 45,017  6,408 
Operating lease liabilities 69,860  36,974