Harsco Corporation
Annual Report 2018

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-KýANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018ORoTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission File Number 001-03970HARSCO CORPORATION(Exact name of registrant as specified in its charter)Delaware(State or other jurisdiction of incorporation or organization)23-1483991(I.R.S. employer identification number)350 Poplar Church Road, Camp Hill, Pennsylvania(Address of principal executive offices)17011(Zip Code)Registrant's telephone number, including area code 717-763-7064Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon stock, par value $1.25 per share New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NONEIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No oIndicate 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 ýIndicate 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 preceding12 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 oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and postedpursuant 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 suchfiles). Yes ý No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to thebest of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ýIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "largeaccelerated 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 oSmaller reporting company o Emerging growth company oIf 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 financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ýThe aggregate market value of the Company's voting stock held by non-affiliates of the Company as of June 30, 2018 was $1,786,698,000Indicate 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, 2019Common stock, par value $1.25 per share 79,545,023DOCUMENTS INCORPORATED BY REFERENCESelected portions of the 2019 Proxy Statement are incorporated by reference into Part III of this Report.Table of ContentsHARSCO CORPORATIONFORM 10-KINDEX PagePART I Item 1.Business. 1Item 1A.Risk Factors. 4Item 1B.Unresolved Staff Comments. 11Item 2.Properties. 12Item 3.Legal Proceedings. 12Item 4.Mine Safety Disclosures.12SupplementaryItem.Executive Officers of the Registrant (Pursuant to Instruction 3 to Item 401(b) of Regulation S-K). 12PART II Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities. 14Item 6.Selected Financial Data. 16Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations. 17Item 7A.Quantitative and Qualitative Disclosures About Market Risk. 34Item 8.Financial Statements and Supplementary Data. 35Item 9.Changes In and Disagreements With Accountants on Accounting and Financial Disclosure. 91Item 9A.Controls and Procedures. 91Item 9B.Other Information. 91PART III Item 10.Directors, Executive Officers and Corporate Governance. 92Item 11.Executive Compensation. 92Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 92Item 13.Certain Relationships and Related Transactions, and Director Independence. 92Item 14.Principal Accounting Fees and Services. 92PART IV Item 15.Exhibits, Financial Statement Schedules. 93Item 16.Form 10-K Summary.97SIGNATURES98Table of ContentsPART IItem 1. Business.GeneralHarsco Corporation (the "Company") is a diversified, multinational provider of industrial environmental services and engineered products serving globalindustries that are fundamental to worldwide economic growth and infrastructure development. The Company's operations consist of three reportablesegments: Harsco Metals & Minerals, Harsco Industrial and Harsco Rail. The Company has locations in approximately 30 countries, including the U.S. TheCompany was incorporated in 1956. At December 31, 2018, the Company had approximately 9,900 employees.The Company's executive offices are located at 350 Poplar Church Road, Camp Hill, Pennsylvania 17011 and the Company's 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 suchreports 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 theSEC. The information posted on the Company's website is not incorporated into the Company's SEC filings. Additionally, the SEC maintains a website thatcontains reports, proxy and other information regarding issuers that electronically file with the SEC at www.sec.gov.The Company believes each of its segments are among the global market leaders in their respective sectors. However, the Company competes with a range ofglobal, regional and local businesses of varying size and scope, and its competitive environment is complex given the diversity of services and productsprovided and the global breadth of markets served.The Company's Harsco Metals & Minerals Segment provides services which are usually subject to volume changes at certain points of the year and theCompany furnishes products within the Harsco Industrial Segment that are seasonal in nature. As a result, the Company's revenues and results of operationsfor the first quarter ending March 31 and the fourth quarter ending December 31 may be lower than the second quarter ending June 30 and the third quarterending September 30. Additionally, the majority of the Company's cash flows provided by operations has historically been generated in the second half ofthe year. This is a result of normally higher income and working capital management during the second half of the year.The raw materials used by the Company for its product manufacturing principally include steel and, to a lesser extent, aluminum, which are readily availablethe majority of the time. The profitability of the Company's manufactured products may be affected by changing purchase prices of steel, other materials andcommodities; as well as electronics and components.The practices of the Company relating to working capital are similar to those of other industrial service providers or manufacturers servicing both domesticand international industrial customers and commercial markets. These practices include the following:•Standard accounts receivable payment terms of 30 to 60 days, with progress or advance payments required for certain long-lead-time or large orders.Payment terms are slightly longer in certain international markets.•Standard accounts payable payment terms of 30 to 90 days.•Inventories are maintained in sufficient quantities to meet forecasted demand. Due to the time required to manufacture certain railway trackmaintenance equipment to customer specifications, inventory levels of this business tend to increase for an extended period of time during theproduction phase and decline when the equipment is delivered.The Company has become subject to, as have others, stringent air and water quality control legislation. In general, the Company has not experiencedsubstantial difficulty complying with these environmental regulations and does not anticipate making any material capital expenditures for environmentalcontrol facilities. While the Company expects that environmental regulations may expand, and that expenditures for air and water quality control willcontinue, the Company cannot predict the effect on its business of such expanded regulations. For additional information regarding environmental matterssee Note 12, Commitments and Contingencies, in Part II, Item 8, "Financial Statements and Supplementary Data."Segment InformationThe Company reports segment information using the "management approach," based on the way management organizes and reports the segments within theenterprise for making operating decisions and assessing performance. The Company's reportable segments are identified based upon differences in products,services and markets served. These segments and the types of products and services offered are more fully described below. Financial information concerningsegments and international and domestic operations is included in Note 16, Information by Segment and Geographic Area, in Part II, Item 8, "FinancialStatements and Supplementary Data," which information is incorporated herein by reference.1Table of ContentsHarsco Metals & Minerals Segment-62%, 63% and 67% of consolidated revenues for 2018, 2017 and 2016, respectivelyThe Harsco Metals & Minerals Segment is one of the world's largest providers of on-site services for product quality improvement; resource recovery fromsteel and metals manufacturing; and material logistics in approximately 30 countries, with the largest operations focused in the U.S., France, the U.K, Braziland China. The majority of operating costs are denominated in local currencies, therefore providing a natural hedge against revenues generated in non-U.S.dollar markets. This Segment's operations are linked to customer operations and the performance of services enables the customer to focus on their corebusiness.This Segment also provides value added environmental solutions for industrial byproducts. For example, this Segment also produces industrial abrasives androofing granules from power-plant utility coal slag at several locations throughout the U.S. The Company's BLACK BEAUTY® abrasives are used forindustrial surface preparation, such as rust removal and cleaning of bridges, ship hulls and various structures. Roofing granules are sold to residential roofingshingle manufacturers in the U.S., primarily for the replacement roofing market. This business is one of the largest U.S. producers of slag abrasives, residentialroofing granules. Additionally, this Segment extracts high-value metallic content from stainless steel by-products and specializes in the development ofminerals technologies for commercial applications, including agriculture fertilizers. The Segment also sells road base materials and manufactures highperformance asphalt products, brander under SteelPhalt, for the UK road-making market.In May 2018, the Company acquired Altek Europe Holdings Limited and its affiliated entities, a U.K.-based manufacturer of market leading products thatenable aluminum producers and recyclers to manage and efficiently extract value from critical byproduct streams, reduce byproduct generation and improveoperating productivity.As part of the Harsco Metals & Minerals Segment's initiatives to develop new products and services, in particular environmental solutions for industrial co-products and byproduct streams, the Segment is involved with several initiatives focused on developing greater environmental sustainability through therecovery of resources from byproducts and related streams. The principal business drivers of this Segment are global metals production and capacityutilization; outsourcing of services by metals producers; demand for high-value specialty steel and ferro alloys; demand for environmental solutions formetals and minerals byproduct streams; demand for industrial and infrastructure surface preparation and restoration; demand for residential roofing shingles;and demand for road making materials.This Segment's key competitive factors are innovative resource recovery solutions, significant industry experience, technology, safety performance, andservice quality. This Segment competes principally with a number of privately-held businesses for services outsourced by customers. Additionally, due to thenature of this Segment's services, it encounters a certain degree of competition from customers' desire to perform similar services themselves instead of usingan external solution.The Harsco Metals & Minerals Segment risk exposures are diverse and may vary across locations, customers and underlying end-markets. In 2018, 2017 and2016, the Harsco Metals & Minerals Segment had one customer that provided in excess of 10% of this Segment's revenues under multiple long-term contractsat several mill sites. The loss of any one of the contracts would not have a material adverse effect upon the Company's financial position or cash flows;however, it could have a significant effect on quarterly or annual results of operations. Additionally, a decline in economic conditions may impact the abilityof the Company's customers to meet their obligations to the Company on a timely basis and could result in bankruptcy or receivership filings by any of suchcustomers. If customers are unable to meet their obligations on a timely basis, or if the Company is unable to collect amounts due from customers for anyreason, it could adversely impact the realizability of receivables and inventories, and the recoverability of long-lived assets across the Company's businesses.As part of its credit risk management practices, the Company closely monitors the credit standing and accounts receivable positions of its customer base.The Harsco Metals & Minerals Segment operates generally under long-term contracts with high renewal rates, and in many cases the Harsco Metals &Minerals Segment has operated at a customer location for several decades. At December 31, 2018, the Company's metals services contracts had estimatedfuture revenues of $3.1 billion at current production levels, compared with $2.8 billion at December 31, 2017. This provides the Company with a substantialbase of anticipated long-term revenues. The increase is primarily due to new and renewed contracts and the timing of contract expirations, partially offset bythe impact of foreign currency translation. Approximately 23% of these revenues are expected to be recognized by December 31, 2019; approximately 42%of these revenues are expected to be recognized between January 1, 2020 and December 31, 2022; approximately 15% of these revenues are expected to berecognized between January 1, 2023 and December 31, 2025; and the remaining revenues are expected to be recognized thereafter. There are no significantmetals services contracts included in the estimated future revenues for which the estimated costs to complete the contract currently exceed the estimatedrevenue to be realized. The estimated future revenues are exclusive of anticipated contract renewals, projected volume increases and ad-hoc services. Theestimated future revenues are also exclusive of aluminum dross and scrap processing systems; roofing granules; industrial abrasives products; and mineralsand metal recovery technologies services.2Table of ContentsHarsco Industrial Segment-22%, 19% and 17% of consolidated revenues for 2018, 2017 and 2016, respectivelyThe Harsco Industrial Segment includes the Harsco Industrial Air-X-Changers, Harsco Industrial IKG and Harsco Industrial Patterson-Kelley businesses whichare manufacturing businesses located principally in the U.S. Primary competitors are U.S.-based manufacturers of similar products and key competitive factorsinclude product quality and durability, technology and energy-efficiency.Harsco Industrial Air-X-Changers is a leading supplier of custom-engineered and manufactured air-cooled heat exchangers for the natural gas compressionand processing industry as well as the refining and petrochemical industry in the U.S. Harsco Industrial Air-X-Changers' heat exchangers are the primaryapparatus used to condition natural gas during recovery, compression and transportation from underground reserves through major pipeline distributionchannels. Principal business drivers include investment in natural gas production capabilities and distribution, and demand for natural gas and downstreamrefined and derivative products. This business contributed 12%, 9% and 6% of the Company's consolidated revenues for 2018, 2017 and 2016.Harsco Industrial IKG manufactures a varied line of industrial grating and fencing products at several plants in the U.S. and an international plant located inMexico. These products include a full range of metal bar grating configurations, which are used mainly in industrial flooring, as well as safety and securityapplications in various industries. Principal business drivers include industrial plant and warehouse construction and expansions; off-shore drilling and newrig construction, and security fencing requirements to protect facilities and infrastructure.Harsco Industrial Patterson-Kelley is a leading manufacturer of energy-efficient heat transfer products such as boilers and water heaters for commercial andinstitutional applications. The principal business driver is demand for commercial and institutional boilers and water heaters.The Harsco Industrial Segment had no customers in 2018, one customer in 2017 and no customers in 2016 that provided in excess of 10% of the Segment'srevenues. The loss of any individual customer would not have a material adverse impact on the Company's financial positions or cash flows; however, itcould have a material effect on quarterly or annual results of operations.At December 31, 2018, the Harsco Industrial Segment had an estimated order backlog of $209.1 million compared with $85.3 million at December 31, 2017.This increase is primarily due to fundamental market improvements for the Segment's air-cooled heat exchangers businesses for customers primarily in thenatural gas compression, processing and distribution markets as well as downstream markets, ultimately driving higher capital spending. There was alsomoderate growth in the Segment's industrial and commercial boilers and hot water heater group. At December 31, 2018, all of the Harsco Industrial Segment'sbacklog is expected to be filled in 2019.Harsco Rail Segment-16%, 18% and 16% of consolidated revenues for 2018, 2017 and 2016, respectivelyThe Harsco Rail Segment is a global provider of equipment, after-market parts and services for the maintenance, repair and construction of railway track. ThisSegment manufactures and sells highly-engineered railway track maintenance equipment, collision avoidance and warning systems to support passenger, railworker and pedestrian safety, and measurement and diagnostic technologies that support railway maintenance programs. These products are producedprimarily in the U.S. for customers throughout the world. Additionally, this Segment provides railway track maintenance services principally in the U.S. andthe U.K. The principal business drivers of this business are global railway track maintenance-of-way capital spending; outsourcing of track maintenance andnew track construction by railroads; increased market attention on safety, including collision avoidance and warning systems; and measurement andinspection technologies to monitor track conditions and plan maintenance practices. This Segment's key competitive factors are product quality, technologyand customer service. Primary competitors for both products and services are privately-held global businesses as well as certain regional competitors.The Harsco Rail Segment had one customer in 2018, 2017 and 2016 that provided in excess of 10% of the Segment's revenues. The loss of any individualcustomer would not have a material adverse impact on the Company's financial positions or cash flows; however, it could have a material effect on quarterlyor annual results of operations.At December 31, 2018, the Harsco Rail Segment had an estimated order backlog of $297.2 million compared with $260.5 million at December 31, 2017. Thisincrease is primarily attributable to higher bookings of equipment and aftermarket parts projects. At December 31, 2018, $144.3 million or 49% of the HarscoRail Segment's manufactured products order backlog is not expected to be filled in 2019. The remainder of this backlog is expected to be filled through2021.3Table of ContentsItem 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 andcash flows. 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 factorsnot presently known to the Company or factors that the Company currently does not consider to be material.Negative economic conditions may adversely impact demand for the Company's products and services, as well as the ability of the Company's customers tomeet 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 theCompany's customers, causing them to cancel, decrease or delay their existing and future orders with the Company. In addition, economic conditions mayimpact the ability of the Company's customers by either causing them to close locations serviced by the Harsco Metals & Minerals Segment or cause theirfinancial 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 eventscould 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:•The Harsco Metals & Minerals 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 technologies business of the Harsco Metals & Minerals Segment can also be adversely impacted by prolonged slowdowns incustomer production or a reduction in the selling prices of its materials, which are in some cases market-based and vary based upon the current fairvalue of the components being sold. Therefore, the revenue generated from the sale of such recycled materials varies based upon the fair value of thecommodity components being sold;•The industrial abrasives and roofing granules business of the Harsco Metals & Minerals Segment may be adversely impacted by economicconditions that slow the rate of residential roof replacement, or by slowdowns in the industrial and infrastructure refurbishment industries;•Decreasing oil prices may adversely impact purchasing by energy sector customers in the Harsco Industrial Segment;•The industrial grating products business of the Harsco Industrial Segment may be adversely impacted by slowdowns in non-residential constructionand industrial production;•The Harsco Rail Segment may be adversely impacted by developments in the railroad industry that lead to lower capital spending or reduced trackmaintenance spending; and•Capital constraints and increased borrowing costs may also adversely impact the financial position and operations of the Company's customersacross 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 theutilization of deferred tax assets.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 normallyhigher income during the second half of the year, as the Company's business tends to follow seasonal patterns. If the Company is unable to successfullymanage 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 cashflows.For the year ended December 31, 2018, the Company’s top five customers in the Harsco Metals & Minerals Segment accounted for approximately 30% ofrevenues in that Segment and 19% 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 relationshipbetween the Company and these customers.The Harsco Metals & Minerals Segment has several large customers and if a large customer were to experience financial difficulty or file for bankruptcy orreceivership protection, it could adversely impact the Company's results of operations, cash flows and asset valuations.4Table of ContentsDisputes 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 Companymay 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 contractsprovide 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 contractcould impact the ability of the Company to receive payments or otherwise recoup incurred costs and expenses.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 53% of its revenues outside of the U.S. (based on location of the facility generating therevenue) for the year ended December 31, 2018. In addition, as of December 31, 2018, approximately 71% of the Company’s property, plant and equipmentare 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;•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 repatriatingearnings, 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, oradjacent to which, the Company does business;•increasingly complex laws and regulations concerning privacy and data security, including the European Union's ("EU") General Data ProtectionRegulation ("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 companiesunless 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; and•uncertainties arising from local business practices, cultural considerations and international political and trade tensions.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 intermediariesfrom making improper payments to officials for the purpose of obtaining or retaining business. The FCPA also imposes accounting standards andrequirements on publicly traded U.S. corporations and their foreign affiliates, which, among other things, are intended to prevent the diversion of corporatefunds to the payment of bribes and other improper payments, and to prevent the establishment of “off the books” slush funds from which improper paymentscan 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 dueto pre-acquisition conduct of employees or agents of businesses or operations the Company may acquire. Violations of these laws, or allegations of suchviolations, could disrupt the Company’s operations, require significant management involvement and have a material adverse effect on the Company’sresults 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 ofinadvertence 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 AdministrationRegulations and trade sanctions against embargoed countries, which are administered by the Office of Foreign Asset Control within the Department ofTreasury, 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 substantialcivil and criminal penalties, including fines and disgorgement of profits, the imposition of a court-appointed monitor, the denial of export privileges anddebarment from participation in U.S. Government contracts.5Table of ContentsExchange 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 businessmay adversely impact the Company's results of operations in any given fiscal period. The Company’s principal foreign currency exposures are in the EU, theU.K. 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 theCompany earns its revenues generally has a negative impact on the translated amounts of the assets and liabilities, results of operations and cash flows. TheCompany's foreign currency exposures increase the risk of volatility in its financial position, results of operations and cash flows. If currencies in the belowregions 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 2017, the average value of major currencies changed as follows in relation to the U.S. dollar during thefull-year 2018, impacting the Company's revenues and income:•British pound sterling strengthened by 3%;•euro strengthened by 4%; and•Brazilian real weakened by 12%Compared with exchange rates at December 31, 2017, the value of major currencies at December 31, 2018 changed as follows:•British pound sterling weakened by 6%;•euro weakened by 4%; and•Brazilian real weakened by 15%To illustrate the effect of foreign exchange rate changes in certain key markets of the Company, in 2018 revenues would have been less than 1% or $3million higher and operating income would have been approximately less than 1% or less than $1 million higher if the average exchange rates for 2017 wereutilized. In a similar comparison for 2017 revenues would have been less than 1% or $8 million lower and operating income would have been approximatelyless than 1% or less than $1 million higher if the average exchange rates for 2016 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 priorperiod end. Generally, if the U.S. dollar weakens in relation to currencies in countries in which the Company does business, the translated amounts of therelated assets, liabilities, and therefore stockholders' equity, would increase. Conversely, if the U.S. dollar strengthens in relation to currencies in countries inwhich 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 transactionalrisks, hedging strategies may not be successful or may fail to completely offset these risks. In addition, competitive conditions in the Company'smanufacturing businesses may limit the Company's ability to increase product prices in the face of adverse currency movement. Sales of productsmanufactured in the U.S. for the domestic and export markets may be affected by the value of the U.S. dollar relative to other currencies. Any long-termstrengthening of the U.S. dollar could depress demand for these products and reduce sales. Conversely, any long-term weakening of the U.S. dollar couldimprove demand for these products and increase sales.Economic conditions and regulatory changes following the U.K.’s referendum on withdrawal from the EU could impact the Company's business andresults of operations.In June 2016, a majority of voters in the U.K. approved a withdrawal from the EU in a national referendum (often referred to as Brexit). In March 2017 theU.K. invoked Article 50 of the Lisbon Treaty, initiating the withdrawal process, and the U.K. is scheduled to depart from the EU on March 29, 2019. The U.K.and the EU are continuing to negotiate their future relationship, including whether there will be a transition period. The scheduled withdrawal of the U.K.from the EU, as well as the manner of withdrawal, has created significant uncertainty about the future relationship between the U.K. and the EU, includingwith respect to the laws and regulations that will apply as the U.K. determines which EU laws to replace or replicate in the event of a withdrawal.The Company's business, particularly the Harsco Metals & Minerals Segment, whose headquarters is in the U.K., could be impacted by the likely exit of theU.K. from the EU. Adverse consequences such as deterioration in economic conditions and volatility in currency exchange rates could have a negativeimpact on the Company's operations, financial condition and results of operations. In addition, incremental regulatory controls and regulations governingtrade between the U.K. and the rest of the EU could have adverse consequences on the steel industry in the U.K. and/or the EU and could negatively impactthe Company's operations and financial condition.6Table of ContentsThe 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:•The Harsco Metals & Minerals Segment is sustained mainly through contract renewals and new contract signings. The Company may be unable torenew contracts at historical price levels or to obtain additional contracts at historical rates as a result of competition. If the Company is unable torenew its contracts at the historical rates or renewals are made at reduced prices, or if its customers terminate their contracts, revenue and results ofoperations may decline.•The Harsco Industrial and Harsco Rail Segments compete with companies that manufacture similar products bothinternationally and domestically. Certain international competitors export their products into the U.S. and sell them at lower prices, which can be theresult of lower labor costs and government subsidies for exports. In addition, certain competitors may from time to time sell their products belowtheir cost of production in an attempt to increase their market share. Such practices may limit the prices the Company can charge for its products andservices. Unfavorable foreign exchange rates can also adversely impact the Company's ability to match the prices charged by internationalcompetitors. If the Company is unable to match the prices charged by competitors, it may lose customers.Restrictions imposed by the Company's Senior Secured Credit Facility and other financing arrangements may limit the Company's operating andfinancial flexibility.The agreements governing the Company's outstanding financing arrangements impose a number of restrictions. Under the Company's Senior Secured CreditFacility, 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, theCompany's lenders and the counterparties to the Company's other financing arrangements could terminate their commitments to the Company and declare allamounts borrowed, together with accrued interests and fees, immediately due and payable. If this were to occur, the Company might not be able to pay theseamounts, or the Company might be forced to seek an amendment to the Company's financing arrangements which could make the terms of thesearrangements more onerous for the Company. In addition, this could also trigger an event of default under the cross-default provisions of the Company's otherobligations. 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 usesforeign currency exchange forward contracts as part of a worldwide program to minimize foreign currency operating income and balance sheet exposure. Inparticular, the Company uses foreign currency exchange forward contracts to hedge commitments, such as foreign currency debt, firm purchase commitmentsand foreign currency cash flows for certain export sales transactions. The unsecured contracts for foreign currency exchange forward contracts outstanding atDecember 31, 2018 mature at various times through 2021 and are with major financial institutions. The Company may also enter into derivative contracts tohedge commodity exposures. The failure of one or more counterparties to the Company's derivative financial instruments to fulfill their obligations couldadversely 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 increasesignificantly.The Company's total debt at December 31, 2018 was $602.2 million. Of this amount, approximately 100% had variable rates of interest. The weightedaverage interest rate of total debt was approximately 4.9%. At debt levels as of December 31, 2018, a one percentage point increase/decrease in variableinterest rates would increase/decrease interest expense by $6.1 million per year. If the Company is unable to successfully manage its exposure to variableinterest rates, including through interest rate swaps that the Company has put into place, its debt service obligations may increase even though the amountborrowed remains the same, and in turn, its results of operations and financial condition may be negatively impacted.The Company is subject to taxes in numerous jurisdictions and could be subject to additional tax liabilities, which could materially adversely affect theCompany’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 innumerous jurisdictions. Changes in tax rates, enactments of new tax laws, revisions of tax regulations, and claims or litigation with taxing authorities couldresult in substantially higher taxes, and therefore, could have a significant adverse effect on the Company's results of operations, financial condition andliquidity.7Table of ContentsThe Company's tax expense and liabilities may also be affected by other factors, such as changes in business operations, acquisitions, investments, entry intonew geographies, intercompany transactions, the relative amount of foreign earnings, losses incurred in jurisdictions for which the related tax benefits maynot be realized, and changes in deferred tax assets and their valuation. Significant judgment is required in evaluating and estimating the Company's taxexpense 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 tobe made in interpretations of the provisions of the Tax Act, estimates in calculations, and the preparation and analysis of information not previously relevantor regularly produced. The U.S. Treasury Department, the IRS, and other standard-setting bodies will continue to interpret or issue guidance on howprovisions of the Tax Act will be applied or administered. As future guidance is issued, the Company may need to make adjustments to amounts previouslyrecorded, 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 marketscould 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 theU.K. and the U.S., impact actuarial assumptions used in determining annual NPPC, pension liabilities and the valuation of the assets in the Company'sdefined benefit pension plans. Financial market deterioration would most likely have a negative impact on the Company's NPPC and the pension assets andliabilities. This could result in a decrease to stockholders' equity and an increase in the Company's statutory funding requirements.In addition to the Company's defined benefit pension plans, the Company also participates in several multiemployer pension plans ("MEPPs") throughout theworld. Within the U.S., the Pension Protection Act of 2006 may require additional funding for MEPPs that could cause the Company to be subject to highercash contributions in the future. Additionally, market conditions and the number of participating employers remaining in each plan may affect the fundedstatus of MEPPs and consequently, any Company withdrawal liability, if applicable.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 toairborne asbestos over the past several decades. In their suits, the plaintiffs have named as defendants, among others, many manufacturers, distributors andinstallers of numerous types of equipment or products that allegedly contained asbestos. The majority of the asbestos complaints pending against theCompany 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 againstthe approximately 90 defendants, regardless of the individual plaintiff's alleged medical condition and without specifically identifying any of theCompany’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 theCompany's insurance coverage, results of operations, cash flows and financial condition could be adversely affected.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 theCompany’s products could result in a suspension of operations. Accidents may occur at a location where the Company’s equipment and services have been orare being used. Investigations into such accidents, even if the Company and its products are ultimately found not to be the cause of such accidents, requirethe Company to expend significant time, effort and resources. The Company cannot be certain that its products will be completely free from defects. TheCompany may be named as a defendant in product liability or other lawsuits asserting potentially large claims. In addition, the Company cannot guaranteethat 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 atlevels it believes are necessary and at rates it considers reasonable.8Table of ContentsHigher than expected claims under insurance policies, under which the Company retains a portion of the risk, could adversely impact results of operationsand cash flows.The Company retains a significant portion of the risk for property, workers' compensation, U.K. employers' liability, automobile and general and productliability 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 topotential value, and current legal and legislative trends. If actual claims are higher than those projected by management, an increase to the Company'sinsurance reserves may be required and would be recorded as a charge to income in the period the need for the change was determined.Increases or decreases in purchase prices (or selling prices) or availability of steel or other materials and commodities may affect the Company'sprofitability.The profitability of the Company's manufactured products may be affected by changing purchase prices of raw material, including steel and other materialsand commodities. If raw material costs associated with the Company's manufactured products increase and the costs cannot be transferred to the Company'scustomers, results of operations would be adversely affected. Additionally, decreased availability of steel or other materials could affect the Company'sability to produce manufactured products in a timely manner. If the Company cannot obtain the necessary raw materials for its manufactured products, thenrevenues, results of operations and cash flows could be adversely affected.Certain services performed by the Harsco Metals & Minerals Segment result in the recovery, processing and sale of recovered metals and minerals and otherhigh-value metal by-products to its customers. The selling price of the by-products material is market-based and varies based upon the current fair value of itscomponents. Therefore, the revenue amounts generated from the sale of such by-products material vary based upon the fair value of the commoditycomponents being sold.The success of the Company's strategic ventures depends on the satisfactory performance by strategic venture partners of their strategic ventureobligations.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 orviews between strategic venture partners can result in delayed decision-making or failure to agree on material issues which could adversely affect thebusiness and operations of the venture. From time to time, in order to establish or preserve a relationship, or to better ensure venture success, the Companymay accept risks or responsibilities for the strategic venture that are not necessarily proportionate with the reward it expects to receive. The success of theseand other strategic ventures also depends, in large part, on the satisfactory performance by the Company's strategic venture partners of their strategic ventureobligations, including their obligation to commit working capital, equity or credit support as required by the strategic venture and to support theirindemnification 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, thestrategic venture may be unable to adequately perform or deliver its contracted services. Under these circumstances, the Company may be required to makeadditional investments and provide additional services to ensure the adequate performance and delivery of the contracted services. These additionalobligations could result in reduced profits or, in some cases, increased liabilities or significant losses for the Company with respect to the strategic venture. Inaddition, although the Company generally performs due diligence with regard to potential strategic partners or ventures, a failure by a strategic venturepartner to comply with applicable laws, rules or regulations could negatively impact its business and, in the case of government contracts, could result infines, penalties, suspension or even debarment. Unexpected strategic venture developments could have a material adverse effect on results of operations,financial condition and cash flows.The Company is subject to various environmental laws, and the success of existing or future environmental claims against it could adversely impact theCompany's results of operations and cash flows.The Company's operations 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, theremediation of contaminated sites and the maintenance of a safe workplace. These laws impose penalties, fines and other sanctions for non-compliance andliability 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 damagesunder these laws. The Company may be subject to more stringent environmental laws in the future, and compliance with more stringent environmentalrequirements may require the Company to make material expenditures or subject it to liabilities that the Company currently does not anticipate.9Table of ContentsThe Company is currently involved in a number of environmental remediation investigations and cleanups and, along with other companies, has beenidentified as a "potentially responsible party" for certain byproduct disposal sites under the federal "Superfund" law. At several sites, the Company iscurrently conducting environmental remediation, and it is probable that the Company will agree to make payments toward funding certain other of theseremediation activities. It also is possible that some of these matters will be decided unfavorably to the Company and that other sites requiring remediationwill be identified. Each of these matters is subject to various uncertainties, and financial exposure is dependent upon such factors as:•the continuing evolution of environmental laws and regulatory requirements;•the availability and application of technology;•the allocation of cost among potentially responsible parties;•the years of remedial activity required; and•the remediation methods selected.The Company’s ongoing operations are subject to extensive laws, regulations, rules and ordinances relating to safety, health and environmental mattersthat 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 ofcertain materials contained in its products and/or used in its manufacturing processes. Many of these laws and governmental standards provide for extensiveobligations 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 othergovernmental standards, the development, proposal or adoption of more stringent laws or governmental standards may require the Company to change itsmanufacturing processes, for example, by reducing or eliminating use of the regulated component or material in its manufacturing process. The Companymay 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 regulatedmaterials or that involve the use of such materials in the manufacturing process. If applicable laws and governmental standards become more stringent, theCompany’s results of operations, liquidity and financial condition could be materially adversely affected.The Company maintains a workforce based upon current and anticipated workload. If the Company does not receive future contract awards or if theseawards are delayed, significant cost may result that could have a material adverse effect on results of operations, financial condition, liquidity and cashflows.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 availableinformation. In the case of large-scale domestic and international projects where timing is often uncertain, it is particularly difficult to predict whether andwhen the Company will receive a contract award. The uncertainty of contract award timing can present difficulties in matching the Company's workforce sizewith contract needs. If an expected contract award is delayed or not received, the Company could incur cost resulting from reductions in staff or redundancyof facilities or equipment that could have a material adverse effect on results of operations, financial condition, liquidity and cash flows.Increased information technology security threats and more sophisticated computer crime pose a risk to the Company's systems, networks, products andservices.The Company relies upon information technology systems and networks in connection with a variety of business activities, some of which are managed bythird parties. Additionally, the Company collects and stores data that is of a sensitive nature. The secure operation of these information technology systemsand networks, and the processing and maintenance of this data is critical to the Company's business operations and strategy. Information technology securitythreats - from user error to attacks designed to gain unauthorized access to the Company's systems, networks and data - are increasing in frequency andsophistication. These threats pose a risk to the security of the Company's systems and networks and the confidentiality, availability and integrity of theCompany's data. Should an attack on the Company's information technology systems and networks succeed, it could expose the Company and theCompany's employees, customers, dealers and suppliers to misuse of information or systems, the compromising of confidential information, manipulation anddestruction of data, production10Table of Contentsdowntimes 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 insecurity could result in litigation, regulatory action, potential liability and the costs and operational consequences of implementing further data protectionmeasures. For example, the EU’s GDPR extends the scope of the EU data protection laws to all companies processing data of EU residents, regardless of thecompany’s location.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 productsand services, and there can be no assurance that the resources invested by the Company to protect the Company's intellectual property will be sufficient orthat the Company's intellectual property portfolio will adequately deter misappropriation or improper use of the Company's technology. The Company couldalso face competition in some countries where the Company has not protected its intellectual property portfolio. The Company may also face attempts togain unauthorized access to the Company's information technology systems or products for the purpose of improperly acquiring trade secrets or confidentialbusiness information. The theft or unauthorized use or publication of the Company's trade secrets and other confidential business information as a result ofsuch an incident could adversely affect the Company's competitive position and the value of the Company's investment in research and development. TheCompany may be unable to secure or retain ownership or rights to use data in certain software analytics or services offerings. In addition, the Company maybe 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 Company is found to infringe any third-party rights, the Company could berequired to pay substantial damages or could be enjoined from offering some of the Company's products and services. Also, there can be no assurances thatthe 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 obtainedon reasonable terms.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 agreementswith varying durations and expiration dates. There can be no assurance that any current or future issues with the Company's employees will be resolved orthat the Company will not encounter future strikes, work stoppages or other types of conflicts with labor unions or the Company's employees. The Companymay not be able to satisfactorily renegotiate collective bargaining agreements in the U.S. and other countries when they expire. If the Company fails torenegotiate 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 mayalso be subject to general country strikes or work stoppages unrelated to the Company's business or collective bargaining agreements. A work stoppage orother 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 stoppagesexperienced by the Company's customers or suppliers could have an adverse effect on the Company's business, results of operations and financial condition.Item 1B. Unresolved Staff Comments.None.11Table of ContentsItem 2. Properties.Operations of the Company and its subsidiaries are conducted at both owned and leased properties in domestic and international locations. The Company'sexecutive offices are located at 350 Poplar Church Road, Camp Hill, Pennsylvania 17011 and are owned. The following table describes the location andprincipal use of the Company's more significant properties.Location Principal Products InterestHarsco Metals & Minerals Segment Taiyuan City, China Minerals and Resource Recovery Technologies LeasedTangshan, China Minerals and Resource Recovery Technologies LeasedRotherham, U.K. Minerals and Resource Recovery Technologies OwnedDrakesboro, Kentucky, U.S. Roofing Granules/Abrasives OwnedSarver, Pennsylvania, U.S. Minerals and Resource Recovery Technologies OwnedChesterfield, U.K. Aluminum Dross and Scrap Processing Systems OwnedHarsco Rail Segment Columbia, South Carolina, U.S. Rail Maintenance Equipment OwnedHarsco Industrial Segment Broken Arrow, Oklahoma, U.S. Heat Exchangers LeasedEast Stroudsburg, Pennsylvania, U.S. Heat Transfer Products OwnedChannelview, Texas, U.S. Industrial Grating Products OwnedGarrett, Indiana, U.S. Industrial Grating Products LeasedLeeds, Alabama, U.S. Industrial Grating Products OwnedQueretaro, Mexico Industrial Grating Products LeasedThe Harsco Metals business, which is part of the Harsco Metals & Minerals Segment, principally operates on customer-owned sites and has administrativeoffices throughout the world, including Camp Hill, Pennsylvania and Leatherhead, U.K. The above table includes the principal properties owned or leased bythe Company. The Company also operates from a number of other smaller plants, warehouses and offices in addition to the above. The Company considers allof 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 andSupplementary Data."Item 4. Mine Safety Disclosures.Not applicable.Supplementary Item. Executive Officers of the Registrant.Set forth below, at February 21, 2019, are the executive officers of the Company and certain information with respect to each of them. There are no familyrelationships among any of the executive officers.Name Age Position with the CompanyExecutive Officers: F. Nicholas Grasberger, III 55 Chairman, President and Chief Executive OfficerPeter F. Minan 57 Senior Vice President and Chief Financial OfficerSamuel C. Fenice 44 Vice President and Corporate ControllerScott H. Gerson 48 Senior Vice President and Group President - Harsco IndustrialJeswant Gill 56 Senior Vice President and Group President - Harsco RailRussell C. Hochman 54 Senior Vice President and General Counsel, Chief Compliance Officer & Corporate SecretaryTracey L. McKenzie 51 Senior Vice President and Chief Human Resources Officer12Table of ContentsF. 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 Presidentand Chief Operating Officer from April 2014 toAugust 2014. Prior to joining Harsco in 2013, Mr. Grasberger served as the Managing Director of the multinational Precision Polymers division of Fenner Plcfrom March 2011 to April 2013. From April 2009 to November 2009 he served as Executive Vice President and Chief Executive Officer of ArmstrongBuilding 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 CorporateTreasurer and Director of the corporate planning process at H.J. Heinz Company. He started his career with USX Corporation.Peter F. Minan - Senior Vice President and Chief Financial Officer since November 11, 2014. Mr. Minan has an extensive background in global financialmanagement 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 leadpartner for several multi-national Fortune 500 industrial and consumer audits. His roles included National Managing Partner, U.S. Audit practice, and Partnerin Charge, Washington/Baltimore Audit practice. His most recent role was with Computer Sciences Corporation, where he served as Vice President ofEnterprise Risk Management and Internal Audit from 2012 to 2013.Samuel C. Fenice - Vice President and Corporate Controller since August 16, 2016. Mr. Fenice oversees the administration of all corporate accountingpolicies and procedures, including internal and external corporate reporting. Mr. Fenice joined Harsco’s Internal Audit team in 2002 and has since heldprogressively responsible roles in Finance, including two terms as Interim Corporate Controller. Mr. Fenice is a graduate of Penn State University and aCertified Public Accountant.Scott H. Gerson - Senior Vice President and Group President–Harsco Industrial since April 29, 2015. Served as Vice President and Group President– HarscoIndustrial from July 2010 to April 2015. Served as Chief Information Officer from April 2005 to January 2011. Prior to joining the Company in April 2005,Mr. Gerson was with Kulicke & Soffa Industries, Inc., where he served as IT director of their worldwide application services. He has also served in ITmanagement capacities with Compaq Computers and TRW Inc.Jeswant Gill - Senior Vice President and Group President - Harsco Rail since November 2016. Prior to joining the Company, Mr. Gill served as SeniorExecutive/Managing Director, Global Solutions of The Arcadia Group International, LLC from October 2015 to November 2016. From June 2014 toSeptember 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, andas 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'sUniversity in Ontario, Canada.Russell C. Hochman - Senior Vice President and General Counsel, Chief Compliance Officer and Corporate Secretary since May 2015. Served as VicePresident, Interim General Counsel, Chief Compliance Officer and Corporate Secretary fromMarch 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 seniorlegal 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 aB.A. from Cornell University.Tracey L. McKenzie - Senior Vice President and Chief Human Resources Officer since September 2014. Prior to joining the Company, Ms. McKenzie servedas Global HR Vice President for JLG Industries, a leader in the manufacturing sector for advanced aerial lift systems. Ms. McKenzie previously heldexecutive level HR positions in her native Australia and worked at Pacific Scientific Aerospace (a division of Danaher). She moved to the U.S. in 2003 andholds an MBA from the University of New England and a bachelor's in business administration from Royal Melbourne Institute of Technology (RMIT). 13Table of ContentsPART IIItem 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, 2018, there were 79,545,023shares outstanding. In 2018, the Company's common stock traded in a range of $15.55 to $30.05 and closed at $19.86 at year-end. At December 31, 2018,there were approximately 18,655 stockholders. For additional information regarding the Company's equity compensation plans see Note 14, Stock-BasedCompensation, in Part II, Item 8, "Financial Statements and Supplementary Data," and Part III, Item 11, "Executive Compensation."Stock Performance Graph*$100 invested on December 31, 2013 in stock or index, including reinvestment of dividends. Fiscal year endingDecember 31.Copyright© 2019 Standard & Poor's, a division of S&P Global. All rights reserved.Copyright© 2019 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. December2013December2014December2015December2016December2017December2018Harsco Corporation100.0069.8130.8853.7373.6778.45S&P Smallcap 600100.00105.76103.67131.20148.56135.96Dow Jones US Diversified Industrials100.00101.05114.02126.52118.1888.5314Table of ContentsIssuer Purchases of Equity SecuritiesOn May 2, 2018, the Company announced that the Board of Directors (the "Board") adopted a share repurchase program authorizing the Company torepurchase up to $75,000,000 of outstanding shares of the Company’s common stock through April 24, 2021. Below is a table showing the share repurchaseactivity during the fourth quarter of 2018:Period Total Number ofShares Purchased Average Price Paidper Share Total Number ofShares Purchased asPart of PubliclyAnnounced Plans orPrograms Maximum Number(or ApproximateDollar Value) ofShares that May YetBe Purchased Underthe Plans orProgramsOctober 1, 2018 - October 31, 2018 550,508 $23.95 550,508 $61,813,516November 1, 2018 - November 30, 2018 238,591 25.15 238,591 55,812,773December 1, 2018 - December 31, 2018 531,973 20.35 531,973 44,989,369Total 1,321,072 $22.72 1,321,072 15Table of ContentsItem 6. Selected Financial Data.Five-Year Statistical Summary(In thousands, except per share, employeeinformation and percentages) 2018 (b) 2017 2016 2015 2014 Statement of operations information Revenues from continuing operations (a) $1,722,380 $1,607,062 $1,451,223 $1,723,092 $2,066,288 Amounts attributable to Harsco Corporation common stockholders (a) Income (loss) from continuing operations $136,783 $7,626 $(86,336) $7,168 $(22,281) Income (loss) from discontinued operations 274 196 669 (980) 110 Net income (loss) 137,057 7,822 (85,667) 6,188 (22,171) Financial position and cash flow information Working capital (c) $188,038 $117,964 $122,602 $120,267 $80,036 Total assets (d) 1,632,867 1,578,685 1,581,338 2,051,887 2,263,664 Long-term debt (d) 585,662 566,794 629,239 845,621 827,428 Total debt (d) 602,229 586,623 659,072 900,934 869,364 Depreciation and amortization 132,785 129,937 141,486 156,475 176,326 Capital expenditures (132,168) (98,314) (69,340) (123,552) (208,859) Cash provided by operating activities (e) 192,022 176,892 159,876 121,772 227,442 Cash provided (used) by investing activities (161,143) (103,325) 122,887 (130,373) (229,561) Cash provided (used) by financingactivities (e) (25,538) (83,715) (292,364) 22,189 (22,509) Ratios Return on average equity (f) 50.7% 4.1% (29.5)% 2.3% (4.0)% Current ratio (c) (g) 1.5:1 1.2:1 1.3:1 1.2:1 1.1:1 Per share information attributable to Harsco Corporation common stockholders Basic—Income (loss) from continuingoperations $1.69 $0.09 $(1.07) $0.09 $(0.28) Income (loss) from discontinuedoperations — — 0.01 (0.01) — Net income (loss) $1.70(h)$0.10(h)$(1.07)(h)$0.08 $(0.27)(h)Diluted—Income (loss) from continuingoperations $1.64 $0.09 $(1.07) $0.09 $(0.28) Income (loss) from discontinuedoperations — — 0.01 (0.01) — Net income (loss) $1.64 $0.09 $(1.07)(h)$0.08 $(0.27)(h)Other information Book value per share (i) $3.94 $2.67 $1.72 $3.88 $4.36 Cash dividends declared per share — — — 0.666 0.820 Diluted weighted-average number of sharesoutstanding 83,595 82,840 80,333 80,365 80,884 Number of employees 9,900 9,400 9,400 10,800 12,200 (a)The Company has adopted the new revenue recognition standard utilizing the modified retrospective transition method, including the use of practical expedients. Comparativeinformation has not been restated and continues to be reported under accounting principles generally accepted in the U.S. in effect for those periods. See Note 2, RecentlyAdopted and Recently Issued Accounting Standards, in Part II, Item 8, "Financial Statements and Supplementary Data" for additional information.(b)Includes the effects of the acquisition of Altek Europe Holdings Limited and its affiliated entities. See Note 3, Acquisition, in Part II, Item 8, "Financial Statements andSupplementary Data" for additional information.(c)On January 1, 2017, the Company adopted changes issued by the Financial Accounting Standards Board ("FASB") related to the reclassification of current deferred tax assets andliabilities 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 capitalby $27.1 million, $38.1 million and $37.9 million at December 31, 2016, 2015 and 2014, respectively.(d)On January 1, 2016, the Company adopted changes issued by the FASB related to simplifying the presentation of debt issuance costs. The changes required that debt issuancecosts related to a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying amount of that debt liability. The Company reclassified debtissuance costs in the amount of $10.1 million and $2.3 million at December 31, 2015 and 2014, respectively.(e)On January 1, 2017, the Company adopted changes issued by the FASB to the accounting for stock-based compensation. The Company reclassified employee taxes paid on stockcompensation in the amount of $0.1 million, $0.3 million and $0.7 million for the year ended December 31, 2016, 2015 and 2014, respectively, from Cash provided byoperating activities to Cash provided (used by) financing activities on its Consolidated Statement of Cash Flows.(f)Return on average equity is calculated by dividing income (loss) from continuing operations by average Harsco Corporation stockholders' equity throughout the year.(g)Current ratio is calculated by dividing total current assets by total current liabilities.(h)Does not total due to rounding.(i)Book value per share is calculated by dividing total equity by shares outstanding.16Table of ContentsItem 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 (the "Company") provided underPart 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. Asa result, minor differences may exist due to rounding.Forward-Looking StatementsThe nature of the Company's business, together with the number of countries in which it operates, subject it to changing economic, competitive, regulatoryand technological conditions, risks and uncertainties. In accordance with the "safe harbor" provisions of Section 27A of the Securities Act of 1933 andSection 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 assumptionsexpressed or implied herein. Forward-looking statements contained herein could include, among other things, statements about management's confidence inand strategies for performance; expectations for new and existing products, technologies and opportunities; and expectations regarding growth, sales, cashflows, and earnings. Forward-looking statements can be identified by the use of such terms as "may," "could," "expect," "anticipate," "intend," "believe,""likely," "estimate," "outlook," "plan" or other comparable terms.Factors that could cause actual results to differ, perhaps materially, from those implied by forward-looking statements include, but are not limited to:(1) changes in the worldwide business environment in which the Company operates, including general economic conditions; (2) changes in currencyexchange rates, interest rates, commodity and fuel costs and capital costs;(3) changes in the performance of equity and bond markets that could affect, amongother things, the valuation of the assets in the Company's pension plans and the accounting for pension assets, liabilities and expenses; (4) changes ingovernmental laws and regulations, including environmental, occupational health and safety, tax and import tariff standards; (5) market and competitivechanges, including pricing pressures, market demand and acceptance for new products, services and technologies; (6) the Company's inability or failure toprotect its intellectual property rights from infringement in one or more of the many countries in which the Company operates; (7) failure to effectivelyprevent, detect or recover from breaches in the Company's cybersecurity infrastructure; (8) unforeseen business disruptions in one or more of the manycountries 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'sbusiness; (11) the Company's ability to successfully enter into new contracts and complete new acquisitions or strategic ventures in the time-framecontemplated, or at all; (12) the integration of the Company's strategic acquisitions; (13) the amount and timing of repurchases of the Company's commonstock, if any; (14) the outcome of any disputes with customers, contractors and subcontractors; (15) the financial condition of the Company's customers,including the ability of customers (especially those that may be highly leveraged and those with inadequate liquidity) to maintain their credit availability;(16) implementation of environmental remediation matters; (17) risk and uncertainty associated with intangible assets; and (18) other risk factors listed fromtime 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, "RiskFactors," 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 theCompany's ability to control or predict. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. The Companyundertakes no duty to update forward-looking statements except as may be required by law.17Table of ContentsExecutive OverviewThe Company is a diversified, multinational provider of industrial environmental services and engineered products serving global industries that arefundamental to worldwide economic growth and infrastructure development. The Company's operations consist of three reportable segments: HarscoMetals & Minerals, Harsco Industrial and Harsco Rail. In general, the Company believes each of the segments are among the global market leaders in theirrespective sectors. The Harsco Metals & Minerals Segment provides on-site services for product quality improvement; resource recovery from steel andmetals manufacturing; and material logistics; value added environmental solutions for industrial co-products; as well as aluminum dross and scrap processsystems. The Harsco Industrial Segment is a supplier of custom-engineered and manufactured air-cooled heat exchangers that support the processing anddistribution of natural gas and downstream refined products; manufactures a full range of metal bar grating configurations, used mainly in industrial flooring,as well as safety and security applications; and also manufactures energy-efficient heat transfer products such as boilers and water heaters, for variouscommercial and industrial applications. The Harsco Rail Segment is a provider of highly engineered maintenance equipment, after-market parts and safetyand diagnostic systems which support railroad and transit customers worldwide. The Company has locations in approximately 30 countries, including theU.S. The Company was incorporated in 1956.Highlights for 2018 included (Refer to the discussion of segment and consolidated results included within Results of Operations below, as well as Liquidityand Capital Resources, for additional information pertaining to the key drivers impacting these highlights):•Revenues for 2018 increased approximately 7% compared with 2017. The primary drivers for this increase were higher demand and volumes in theHarsco Metals & Minerals Segment and the Harsco Industrial Segment's air-cooled heat exchanger business, partially offset by decreased revenues inthe Harsco Rail Segment related to the contract with the federal railway system of Switzerland ("SBB").•Operating income from continuing operations for 2018 increased approximately 31% compared with 2017. The primary driver for this increase wasimproved operating results across all businesses, including a decrease in Corporate spending.•Diluted earnings per common share from continuing operations attributable to Harsco Corporation for 2018 were $1.64 compared to $0.09 in 2017.The primary drivers for the increase were lower income tax expense, improved operating results and a decrease in interest expense. The decrease inincome tax expense is due to the finalization of accounting for the Tax Cuts and Jobs Act (the "Tax Act") which included a provisional charge of$48.7 million recorded in 2017 that did not repeat in 2018 and a favorable adjustment to this provision in 2018 of $15.4 million, an $8.3 million taxbenefit arising from the adjustment to certain existing deferred tax asset valuation allowances as the result of the acquisition of Altek EuropeHoldings Limited and its affiliated entities (collectively, "Altek"); and a lower effective income tax rate. The decrease in interest expense is due tothe repricing of the Company’s senior secured credit facility (the "Senior Secured Credit Facility") in both December 2017 and June 2018.•Cash flows from operating activities for 2018 was $192 million, an increase of approximately 9% compared with 2017. The primary driver for thisincrease was higher net cash income.•In May 2018, the Company acquired Altek, a U.K.-based manufacturer of market leading products that enable aluminum producers and recyclers tomanage and efficiently extract value from critical byproduct streams, reduce byproduct generation and improve operating productivity. See Note 3,Acquisition in Part II, Item 8, Financial Statements and Supplementary Data. The Company incurred acquisition related costs of approximately $1million related to Altek.•On May 2, 2018 the Company announced that the Board of Directors (the "Board") authorized a share repurchase program pursuant to which theCompany could repurchase shares in an amount up to $75 million. During 2018, the Company purchased 1.3 million shares of common stock underthis program at an average price of $22.72 per share, or a total cost of approximately $30 million.18Table of ContentsThere has been gradual and steady improvement in the Company's end markets. These trends have benefited the Company although some volatility isexpected to persist in the future. Given these expectations, the Company believes it is well positioned to execute actions through a disciplined focus onreturn-based capital allocations and business portfolio strategies. The Company believes these actions will enable it to generate returns above its cost ofcapital, with a balanced business portfolio, without jeopardizing its financial profile with unreasonable leverage. Looking forward, the Company maintains apositive outlook across all businesses.•Markets served by the Harsco Metals & Minerals Segment maintained recent improvements in customer steel production and higher commodityvolumes and prices. Additionally, increased short-cycle ad-hoc services provided to existing steel mill customers; new sites (or contracts); loweroperating costs achieved through improvement initiatives; and increased contributions from the Company’s industrial abrasives, metal additivesand roofing granules business also positively impacted results in 2018. For 2019, (i) global growth in steel production and consumption areexpected to increase demand for mill services; (ii) new sites (or contracts) are expected to outpace site exits;(iii) continued increased contributions from the industrial abrasives, metal additives and roofing granules business; and (iv) continued operationalsavings are expected to improve operating results compared to 2018. Additionally, revenues for 2019 will be positively impacted by strong demandfor aluminum dross and scrap processing systems and the inclusion of a full year of results for Altek.•The Harsco Industrial Segment’s air-cooled heat exchangers business continues to be positively impacted by fundamental improvements withinenergy markets. Bookings for this business have increased significantly in recent quarters. Additionally, increased demand for metal grating andheat transfer products, new product innovations and manufacturing efficiencies have positively impacted this Segment during 2018. For 2019, (i)the air-cooled heat exchangers business starts with a robust backlog, (ii) improved demand is anticipated across this Segment's product offerings asthe result of increased capital spending in end markets; and (iii) new product offerings are expected to positively impact operating results comparedto 2018.•The Harsco Rail Segment has experienced continued improvement in demand for maintenance equipment from North American railroads followinga period of decreased demand in recent years along with continued growth, market penetration and investment within after-market parts and ProtranTechnology which have improved operating results during 2018. As a result, this Segment begins 2019 with strong backlogs. This fact along withincreased demand for maintenance of way equipment, primarily in North America although also in other geographies, and for safety andmeasurement products are anticipated to improve operating results compared to 2018. Additionally, the Harsco Rail Segment has undertaken anumber of strategic actions over the past two years to improve manufacturing processes. Recently, the Company decided to consolidate andcentralize North American manufacturing and distribution into one facility, allowing for improved efficiency and better service to customers. Thecapital investment to complete this program and other expenditures began in the second-half of 2018 and will continue through 2019. Theannualized savings anticipated from this latest action are approximately $7 million, with a portion of these benefits expected to materialize in thesecond-half of 2019. The net impact of such costs and savings will not have a significant impact on 2019 operating results.•The Company anticipates higher selling, general and administrative costs across all Segments as well as increased research and developmentspending in the Harsco Rail Segment, necessary to support anticipated volume increases and the Company's strategic growth initiatives.•The Company anticipates net periodic pension cost ("NPPC") will increase by approximately $9 million during 2019, which will primarily bereflected in the caption Defined benefit pension (income) expense on the consolidated statement of operations. The increase is primarily the result oflower plan assets at December 31, 2018.•The Company anticipates that corporate spending will increase in 2019 in order to support the Company's strategic growth initiatives.19Table of ContentsResults of OperationsRevenues by Segment(Dollars in millions) 2018 2017 Change %Harsco Metals & Minerals $1,068.3 $1,011.3 $57.0 5.6 %Harsco Industrial 374.7 299.6 75.1 25.1Harsco Rail 279.3 296.0 (16.7) (5.6)Corporate 0.1 0.1 (0.1) (48.3)Total Revenues $1,722.4 $1,607.1 $115.3 7.2 %Revenues by Region(Dollars in millions) 2018 2017 Change %North America $862.1 $745.0 $117.1 15.7 %Western Europe 438.9 448.5 (9.6) (2.1)Latin America (a) 176.0 183.3 (7.3) (4.0)Asia-Pacific 167.9 160.7 7.2 4.5Middle East and Africa 50.0 42.7 7.3 17.1Eastern Europe 27.6 26.9 0.6 2.3Total Revenues $1,722.4 $1,607.1 $115.3 7.2 %(a)Includes Mexico.Operating Income (Loss) and Operating Margins by Segment(Dollars in millions) 2018 2017 Change %Harsco Metals & Minerals $121.2 $102.4 $18.8 18.4%Harsco Industrial 54.7 35.5 19.1 53.8Harsco Rail 37.3 33.0 4.4 13.3Corporate (22.3) (25.5) 3.2 12.5Total Operating Income $190.9 $145.4 $45.5 31.3% 2018 2017Harsco Metals & Minerals 11.3% 10.1%Harsco Industrial 14.6 11.9Harsco Rail 13.4 11.1Consolidated Operating Margin 11.1% 9.0%Harsco Metals & Minerals Segment:Significant Effects on Revenues (In millions) Revenues—2017 $1,011.3Net effects of price/volume changes, primarily attributable to volume changes. 48.6Effect of Altek acquisition. 11.8Net impact of new contracts and lost contracts. (2.3)Foreign currency translation. (1.8)Other. 0.7Revenues—2018 $1,068.3Factors Positively Affecting Operating Income:•Overall steel production by customers under services contracts for 2018 increased modestly. Also, operating income was positively affected byincreased short-cycle ad-hoc services provided to steel mill customers under existing contracts.•The net effect of new and lost contracts increased operating income by approximately $2 million during 2018 compared with prior year.•Operating results for 2018 were positively affected by improved profitability in the Company's nickel-related sites due partially to increased nickelprices; and the industrial abrasives and metal additives businesses. Nickel prices increased 28% for 2018 compared with prior year.•Operating results for 2018 were positively affected by a $3.2 million reduction to previously accrued amounts related to the disposal of certain slagmaterial in Latin America due to obtaining the necessary permits.20Table of Contents•Operating results for 2018 were positively affected by a net positive contingent consideration adjustment related to the Altek acquisition of $2.9million.•Operating results for 2018 were positively affected by $4.6 million in bad debt expense, related to an Australian customer in voluntaryadministration, which occurred in the prior year and did not repeat during 2018.Factors Negatively Impacting Operating Income:•Increased raw material costs for the industrial abrasives business.•Higher selling, general and administrative costs due to compensation expense and higher professional fees to support and execute the Company'sgrowth strategies.•Incremental amortization expenses associated with intangible assets acquired as part of the Altek acquisition.•Costs associated with the Altek acquisition of approximately $1 million for 2018.Harsco Industrial Segment:Significant Effects on Revenues (In millions) Revenues—2017 $299.6Net effects of price/volume changes, primarily attributable to volume changes. 75.3Foreign currency translation. (0.2)Revenues—2018 $374.7Factors Positively Affecting Operating Income:•Higher overall volumes in the air-cooled heat exchanger business and a favorable product mix, resulting in increased operating income during 2018compared with prior year.•A favorable sales mix and higher prices led to increased operating income in the industrial grating businesses during 2018 compared with prior year.Factors Negatively Impacting Operating Income:•Moderately higher selling, general and administrative costs for 2018 resulting primarily from increased commissions due to increased volumes inthe air-cooled heat exchanger business.•Operating income was negatively impacted by a gain on sale of property of approximately $4 million in 2017 which did not repeat during 2018.Harsco Rail Segment:Significant Impacts on Revenues (In millions) Revenues—2017 $296.0Revenues under the contracts with SBB. (18.3)Foreign currency translation. (1.1)Net effects of price/volume changes (exclusive of revenues under the SBB contracts), primarily attributable to volume changes. 2.6Other. 0.1Revenues—2018 $279.3Factors Positively Affecting Operating Income:•A favorable mix and increased demand for after-market part sales increased operating income during 2018 compared with prior year.•Lower selling, general and administrative expenses for 2018 primarily related to lower professional fees.Factors Negatively Impacting Operating Income:•A less favorable mix of machine sales decreased operating income during 2018.•Lost service contracts and lower contract service volumes decreased operating income in 2018 compared with prior year.•Operating income was negatively impacted by $0.6 million of costs associated with initiatives to improve manufacturing efficiency, including therecently announced consolidation of U.S. manufacturing and distribution into a single facility, during 2018.21Table of ContentsConsolidated Results(In millions, except per share information and percentages) 2018 2017 2016Total revenues $1,722.4 $1,607.1 $1,451.2Cost of services and products sold 1,288.7 1,223.0 1,172.6Selling, general and administrative expenses 238.7 229.8 196.9Research and development expenses 5.5 4.2 4.3Other (income) expenses, net (1.5) 4.6 12.6Operating income from continuing operations 190.9 145.4 64.9Interest income 2.2 2.5 2.5Interest expense (38.1) (47.6) (51.6)Defined benefit pension income (expense) 3.4 (2.6) (1.4)Loss on early extinguishment of debt (1.1) (2.3) (35.3)Change in fair value to the unit adjustment liability and loss on dilution and sale ofequity method investment — — (58.5)Income tax expense from continuing operations (12.9) (83.8) (6.6)Equity in income of unconsolidated entities, net 0.4 — 5.7Income (loss) from continuing operations 144.7 11.6 (80.4)Income from discontinued operations 0.3 0.2 0.7Net income (loss) 145.0 11.8 (79.8)Total other comprehensive income (loss) (21.5) 63.2 (93.6)Total comprehensive income (loss) 123.5 75.0 (173.4)Diluted income (loss) per common share from continuing operations attributable toHarsco Corporation common stockholders 1.64 0.09 (1.07)Effective income tax rate for continuing operations 8.2% 87.8% (8.4)%Comparative Analysis of Consolidated ResultsTotal RevenuesRevenues for 2018 increased $115.3 million or 7% from 2017. Revenues for 2017 increased $155.8 million or 11% from 2016. These increases wereattributable to the following significant items:Changes in Revenues (In millions) 2018 vs. 2017 2017 vs. 2016Net effect of price/volume changes in the Harsco Industrial Segment, primarily attributable to volume changes. $75.3 $52.0Net effect of price/volume changes in the Harsco Metals & Minerals Segment, primarily attributable to volumechanges. 48.6 55.9Effect of Altek acquisition in the Harsco Metals & Minerals Segment. 11.8 —Net effect of price/volume changes (exclusive of revenues under the SBB contracts for 2018), primarilyattributable to volume changes in the Harsco Rail Segment. 2.6 16.4Timing of revenues under the contracts with SBB in the Harsco Rail Segment. (18.3) 42.5Foreign currency translation. (3.1) 8.0Net impact of new contracts and lost contracts (including exited underperforming contracts) in the Harsco Metals& Minerals Segment. (2.3) (18.4)Other. 0.7 (0.6)Total change in revenues $115.3 $155.8Cost of Services and Products SoldCost of services and products sold for 2018 increased $65.7 million or 5% from 2017. Cost of services and products sold for 2017 increased $50.4 million or4% from 2016. These increases were attributable to the following significant items:Change in Cost of Services and Products Sold (In millions) 2018 vs. 2017 2017 vs. 2016Increased costs due to changes in revenues; and product and service mix (exclusive of foreign currencytranslation and fluctuations in commodity costs included in selling prices). $65.2 $96.4Foreign currency translation. (1.5) 7.5Decreased costs due to estimated forward loss provision in the Harsco Rail Segment during the prior year (a). — (45.1)Other. 2.0 (8.4)Total change in cost of services and products sold $65.7 $50.4(a)See Note 4, Accounts Receivable and Inventories, in Part II, Item 8, "Financial Statements and Supplementary Data" for additional information.22Table of ContentsSelling, General and Administrative ExpensesSelling, general and administrative expenses for 2018 increased $8.9 million or 4% from 2017. This increase was primarily related to the Altek acquisitionand increased compensation expense; partially offset by a decrease in bad debt expense in the Harsco Metals & Minerals Segment.Selling, general and administrative expenses for 2017 increased $32.9 million or 17% from 2016. This increase was primarily related to higher compensationexpense related to the timing of stock-based compensation issuances and higher incentive compensation earned; higher bad debt expense in the Metals &Minerals Segment; increased agent commissions in the Harsco Industrial Segment; and increased professional fees.Other (Income) Expenses, NetThe major components of this Statement of operations caption are detailed below. See Note 18, Other (Income) Expenses, Net, in Part II, Item 8, "FinancialStatements and Supplementary Data" for additional information. Other Expenses(In thousands) 2018 2017 2016Net gains $(3,868) $(5,136) $(1,764)Employee termination benefits costs 4,983 7,350 10,777Other costs to exit activities 428 1,633 440Impaired asset write-downs 113 1,025 399Contingent consideration adjustments (2,939) — —Harsco Metals & Minerals Segment separation costs — — 3,235Other income (239) (231) (467)Total other (income) expenses, net $(1,522) $4,641 $12,620Interest ExpenseInterest expense in 2018 was $38.1 million, a decrease of $9.4 million or 20% compared with 2017. The decrease primarily relates to reduced interest rates forthe Senior Secured Credit Facility, which was amended in December 2017 and June 2018.Interest expense in 2017 was $47.6 million, a decrease of $4.0 million or 8% compared with 2016. The decrease primarily relates to the Company's overallreduction in debt levels, partially offset by an increase in interest rates associated with the Company's debt.See Note 8, Debt and Credit Agreements, in Part II, Item 8, "Financial Statements and Supplementary Data" for additional information.Loss on Early Extinguishment of DebtIn June 2018, the Company amended the Senior Secured Credit Facility in order to, among other things, reduce the interest rate applicable to the Company'sterm loan facility (the "Term Loan Facility") and to increase the limit of the Company's revolving credit facility (the "Revolving Credit Facility"). As a result,charges of $1.1 million were recorded during 2018 consisting principally of fees associated with the transaction and the write-off of unamortized deferredfinancing costs.In December 2017, the Company amended the Senior Secured Credit Facility in order to, among other things, reduce the interest rate applicable to the TermLoan Facility, improve certain covenants and extend the maturity date by a year until December 2024. As a result, a charge of $2.3 million was recordedduring the fourth quarter of 2017 consisting principally of fees associated with the transaction and the write-off of unamortized deferred financing costs.See Note 8, Debt and Credit Agreements, in Part II, Item 8, "Financial Statements and Supplementary Data" for additional information.Income Tax Expense from Continuing OperationsIncome tax expense from continuing operations in 2018 was $12.9 million, a decrease of $70.9 million compared with 2017. The effective income tax raterelating to continued operations for 2018 was 8.2% versus 87.8% for 2017. The decrease in income tax expense and the effective income tax rate related tocontinuing operations was primarily due to the impact of the Tax Act. The Company recognized a provisional $48.7 million income tax charge as a result ofrevaluing the U.S. ending net deferred tax assets and liabilities for the year ended December 31, 2017 and made a favorable adjustment of a $15.4 million tothe provisional amount during the fourth quarter 2018. Additionally, as a result of the Altek acquisition, an $8.3 million income tax benefit arising from theadjustment to certain existing deferred tax asset valuation allowances was realized.23Table of ContentsIncome tax expense from continuing operations in 2017 was $83.8 million, an increase of $77.2 million compared with 2016. The effective income tax raterelating to continued operations for 2017 was 87.8% versus (8.4)% for 2016. The increase in income tax expense and the change in the effective income taxrate related to continuing operations was primarily due to the impact of the Tax Act as well as an increase in income. The Company recognized a provisionalincome tax charge of$48.7 million as a result of revaluing the U.S. ending net deferred tax asset from 35% to the newly enacted U.S. corporate income tax rate of 21% andestablishing a valuation allowance on the full amount of foreign tax credit carryforwards of$27.3 million.See Note 11, Income Taxes, in Part II, Item 8, “Financial Statements and Supplementary Data" for additional information.Total Other Comprehensive Income (Loss)Total other comprehensive loss was $21.5 million in 2018, compared with total other comprehensive income of $63.2 million in 2017. The primary driver forthis decrease was the net unfavorable impact of foreign currency translation due to the strengthening of the U.S. dollar against multiple currencies during2018, partially offset by higher discount rates for the U.S. and U.K. pension plans.Total other comprehensive income was $63.2 million in 2017, compared with total other comprehensive loss of $93.6 million in 2016. The major drivers forthis change were pension liability adjustments and foreign currency translation adjustments. The pension liability adjustments were favorably impacted byactual returns on plan assets that were significantly higher than expected returns, partially offset by lower discount rates for the U.S. and U.K. defined benefitplans. The foreign currency translation adjustments were positively impacted by the weakening of the U.S. dollar, particularly against the Euro and BritishPound Sterling.Liquidity and Capital ResourcesCash Flow SummaryThe Company has sufficient financial liquidity and borrowing capacity to support the strategies within each of its businesses. The Company currentlyexpects operational and business needs to be met by cash provided by operations supplemented with borrowings from time to time due to historical patternsof seasonal cash flow and for the funding of various projects. The Company regularly assesses capital needs in the context of operational trends and strategicinitiatives.The Company's cash flows from operating, investing and financing activities, as reflected on the Consolidated Statements of Cash Flows, are summarized inthe following table:(In millions) 2018 2017 2016Net cash provided (used) by: Operating activities $192.0 $176.9 $159.9Investing activities (161.1) (103.3) 122.9Financing activities (25.5) (83.7) (292.4)Impact of exchange rate changes on cash (4.4) 4.5 1.7Net change in cash and cash equivalents $0.9 $(5.7) $(7.9)Cash provided by operating activities — Net cash provided by operating activities in 2018 was $192.0 million, an increase of $15.1 million from 2017. Theincrease is primarily attributable to increased cash net income, partially offset by increased net working capital and the timing of payment of income taxesand other accruals. Net cash provided by operating activities in 2017 was $176.9 million, an increase of $17.0 million from 2016. The increase is primarilyattributable to the timing of accounts payable, lower inventories and an increase in cash net income. This increase was partially offset by timing of sales andcollections of accounts receivable and a net decrease in advances on contracts and other customer advances received and utilized. Also included in the Cashflows from operating activities section of the Consolidated Statements of Cash Flows is the caption, Other assets and liabilities. A summary of the majorcomponents of this caption for the periods presented is as follows:(In millions) 2018 2017 2016Net cash provided (used) by: Change in income taxes $(15.3) $0.9 $0.8 Change in prepaid expenses 2.1 (3.7) 6.7 Change in non-current insurance accruals (2.7) (3.0) (5.0) Other (a) (17.6) 9.2 (15.8) Total change in other assets and liabilities $(33.5) $3.4 $(13.3)(a)Other relates primarily to other accruals that are individually not significant.24Table of ContentsCash provided (used) by investing activities — Net cash used by investing activities in 2018 was $161.1 million, an increase of $57.8 million from 2017. Theincrease was primarily due to the Altek acquisition and an increase in capital expenditures, primarily in the Company's Harsco Metals & Minerals Segment in2018, compared with 2017; partially offset by net foreign currency hedge settlement receipts. Net cash used by investing activities in 2017 was $103.3million compared to a net cash provided by investing activities of $122.9 million in 2016. The change was primarily due to the gross proceeds received fromthe sale of the Company's investment in Brand which occurred in September 2016 and an increase in capital expenditures, primarily in the Company's HarscoMetals & Minerals Segment, in 2017, compared with 2016 and higher net foreign currency hedge settlement payments.Cash used by financing activities — Net cash used by financing activities in 2018 was $25.5 million, a decrease of $58.2 million from 2017. The change wasprimarily due to net cash borrowings of $13.8 million in 2018 compared with net cash borrowing repayments of $75.2 million in 2017, partially offset bycommon stock repurchases of $30 million. The increased borrowings were used to fund the Altek acquisition and the increased capital expenditures in theHarsco Metals & Minerals Segment. In 2017, net cash used by financing activities was $83.7 million, a decrease of $208.6 million from 2016. The changewas primarily due to lower repayments of the Company's borrowings in 2017; a deferred pension underfunding payment related to the Company's equityinterest in Brand and payment of deferred financing costs which occurred in 2016 and did not repeat in 2017. This increase was partially offset by proceedsfrom the termination of cross-currency interest rate swaps which occurred in 2016 but did not repeat in 2017.Cash RequirementsThe following summarizes the Company's expected future payments related to contractual obligations and commercial commitments at December 31, 2018:Contractual Obligations and Commercial Commitments at December 31, 2018 (b) Payments Due by Period(In millions) Total Less than1 year 1-3years 3-5years After 5yearsShort-term borrowings $10.1 $10.1 $— $— $—Long-term debt (including current maturitiesand capital leases) 605.4 6.5 73.5 10.9 514.5Projected interest payments on long-term debt(c) 161.2 27.7 57.1 51.6 24.8Purchase obligations (d) 184.4 138.1 28.3 18.0 —Operating leases (non-cancellable) 78.0 14.0 21.7 13.9 28.4Pension obligations (e) 29.5 29.5 — — —Contingent consideration (f) 8.4 — 8.4 — —Total contractual obligations (g) (h) $1,077.0 $225.9 $189.0 $94.4 $567.7(b) See Note 3, Acquisition; Note 8, Debt and Credit Agreements; Note 9, Operating Leases; Note 10, Employee Benefit Plans; Note 11, Income Taxes; and Note 15, FinancialInstruments, in Part II, Item 8, "Financial Statements and Supplementary Data," for additional information on short-term borrowings and long-term debt (including capital 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 atDecember 31, 2018, including interest rate swaps currently in effect. The interest rates on variable-rate debt and the foreign currency exchange rates are subject tochanges 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 tomeet operations requirements.(e) Amounts represent expected employer contributions to defined benefit pension plans for the next year.(f) The Company acquired Altek, on a debt and cash free basis, for a purchase price of £45 million (approximately $60 million) in cash, with the potential for up to £25 million(approximately $33 million) in additional contingent consideration through 2021 subject to the future financial performance of Altek. This amount represents the Company'sestimate of contingent consideration payable at December 31, 2018.(g) At December 31, 2018, in addition to the above contractual obligations, the Company had $3.4 million of potential long-term tax liabilities, including interest and penalties, relatedto 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 unableto estimate the years in which settlement will occur with the respective taxing authorities.(h)Total does not include the fair value of foreign currency exchange contracts outstanding at December 31, 2018. Due to the nature of these contracts, based on fair values atDecember 31, 2017 there will be a net cash receivable of $0.6 million comprised of cash receipts of $424.5 million and cash payments of $423.9 million. The foreign currencyexchange contracts are recorded on the Consolidated Balance sheets at fair value.25Table of ContentsOff-Balance Sheet ArrangementsThe following table summarizes the Company's contingent commercial commitments at December 31, 2018. These amounts are not included on theConsolidated Balance Sheets since there are no current circumstances known to management indicating that the Company will be required to make paymentson these contingent commercial commitments.Commercial Commitments at December 31, 2018 Amount of Commercial Commitment Expiration Per Period(In millions) Total Less than1 Year 1-3Years 3-5Years Over 5Years IndefiniteExpirationPerformance bonds $151.4 $123.4 $26.3 $— $— $1.7Standby letters of credit 73.4 62.4 9.1 1.9 — —Guarantees 66.5 5.9 2.9 4.3 — 53.4Other commercialcommitments 11.2 0.1 — — — 11.1Total commercialcommitments $302.5 $191.8 $38.3 $6.2 $— $66.2Certain commercial commitments that are of a continuous nature do not have an expiration date and are therefore considered to be indefinite in nature. SeeNote 15, Financial Instruments, in Part II, Item 8, "Financial Statements and Supplementary Data," for additional information.Sources and Uses of CashThe Company’s principal sources of liquidity are cash provided by operations and borrowings under the Senior Secured Credit Facility, augmented by cashproceeds from asset sales. In addition, the Company has other bank credit facilities available throughout the world. The Company expects to continue toutilize all of these sources to meet future cash requirements for operations and growth initiatives.In June 2018, the Company amended the Senior Secured Credit Facility in order to, among other things, reduce the interest rate applicable to the Term LoanFacility and to increase the limit of the Revolving Credit Facility to $500 million. A charge of $1.1 million was recorded during 2018 consisting principallyof fees associated with the transaction and the write-off of unamortized deferred financing costs. See Note 8, Debt and Credit Agreements, in Part II, Item 8,"Financial Statements and Supplementary Data" for additional information.Borrowings under the $500 million Revolving Credit Facility bear interest at a rate per annum ranging from 87.5 to 200 basis points over the base rate or187.5 to 300 basis points over the adjusted London Interbank Offered Rate ("LIBOR") as defined in the credit agreement governing the Senior Secured CreditFacility (the "Credit Agreement"). Any principal amount outstanding under the Revolving Credit Facility is due and payable on the maturity of theRevolving Credit Facility. The Revolving Credit Facility matures on November 2, 2021.As a result of the amendments, borrowings under the Term Loan Facility now bear interest at a rate per annum of 225 basis points over the adjusted LIBORrate. The Term Loan Facility requires scheduled quarterly payments, each equal to 0.25% of the original principal amount of the loans under the Term LoanFacility. These payments are reduced by the application of any prepayments and any remaining balance is due and payable on the maturity of the Term LoanFacility. The Term Loan Facility matures on December 8, 2024.The Senior Secured Credit Facility imposes certain restrictions including, but not limited to, restrictions as to types and amounts of debt and liens that maybe incurred by the Company; limitations on increases in dividend payments; limitations on repurchases of the Company's stock and limitations on certainacquisitions by the Company.The obligations of the Company are guaranteed by substantially all of the Company’s current and future wholly-owned domestic subsidiaries (“Guarantors”).All obligations under the Senior Credit Facility, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all of theCompany’s assets and the assets of the Guarantors.In January 2017 and February 2018, the Company entered into a series of interest rate swaps that cover the period from 2018 through 2022 and had the effectof converting $300.0 million of the Term Loan Facility from floating-rate to fixed-rate beginning in 2018. The fixed rates provided by the swaps replace theadjusted LIBOR rate in the interest calculation, ranging from 1.65% for 2018 to 3.12% for 2022. The total notional of the Company's interest rate swaps was$300.0 million as of December 31, 2018.26Table of ContentsSummary of Senior Secured Credit Facility Borrowings:(In millions) December 31 2018 December 31 2017By type: Revolving Credit Facility $62.0 $41.0 Term Loan Facility 541.8 545.9 Total $603.8 $586.9By classification: Current $5.4 $5.5 Long-term 598.3 581.4 Total $603.8 $586.9The following table illustrates available credit at December 31, 2018:(In millions) Facility Limit OutstandingBalance Outstanding Letters ofCredit AvailableCreditMulti-year revolving credit facility $500.0 $62.0 $30.4 $407.6On May 2, 2018 the Company announced that the Board authorized a share repurchase program pursuant to which the Company could repurchase shares inan 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 factorsincluding market conditions and other corporate considerations as determined by the Company’s management. The repurchase program may be suspended ordiscontinued at any time. During 2018, the Company purchased 1.3 million shares of common stock under this program at an average price of $22.72 pershare or a total of approximately $30 million.Certainty of Cash FlowsThe majority of the Company's cash flows provided by operations has historically been generated in the second half of the year. The certainty of theCompany's future cash flows is underpinned by the long-term nature of the Company's metals services contracts, the order backlog for the Company's railwaytrack maintenance services and equipment and overall discretionary cash flows (operating cash flows plus cash from asset sales in excess of the amountsnecessary for capital expenditures to maintain current revenue levels) generated by the Company. Historically, the Company has utilized these discretionarycash flows for growth-related capital expenditures, strategic acquisitions, debt repayment and dividend payments.The types of products and services that the Company provides are not subject to rapid technological change, which increases the stability of related cashflows. Additionally, the Company believes each business in its portfolio is a leader in the industries and major markets the Company serves. Due to thesefactors, the Company is confident in the Company's future ability to generate positive cash flows from operations.Debt CovenantsThe Credit Agreement contains a consolidated net debt to consolidated adjusted earnings before interest, tax, depreciation and amortization ("EBITDA")ratio covenant, which is not to exceed 3.75 to 1.0 and a minimum consolidated adjusted EBITDA to consolidated interest charges ratio covenant, which isnot to be less than 3.0 to 1.0. The consolidated net debt to consolidated adjusted EBITDA ratio covenant is reduced to 3.5 to 1.0 after December 31, 2018. AtDecember 31, 2018, the Company was in compliance with these covenants as the net leverage ratio was 1.7 to 1.0 and interest coverage ratio was 8.6 to 1.0.Based on balances and covenants in effect at December 31, 2018, the Company could increase net debt by $681.1 million and still be in compliance withthese debt covenants. Alternatively, keeping all other factors constant, the Company's adjusted EBITDA could decrease by $181.6 million and the Companywould still be within these debt covenants. The Company expects to continue to be in compliance with these debt covenants for at least the next twelvemonths.Cash ManagementThe Company has various cash management systems throughout the world that centralize cash in various bank accounts where it is economically justifiableand legally permissible to do so. These centralized cash balances are then redeployed to other operations to reduce short-term borrowings and to financeworking capital needs or capital expenditures. Due to the transitory nature of cash balances, they are normally invested in bank deposits that can bewithdrawn 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 variouscountries in which the Company operates. The Company monitors the creditworthiness of banks and, when appropriate, will adjust banking operations toreduce or eliminate exposure to less creditworthy banks. The Company plans to continue the strategy of targeted, prudent investing for strategic purposes forthe foreseeable future and to make more efficient use of existing investments.27Table of ContentsAt December 31, 2018, the Company's consolidated cash and cash equivalents included $61.5 million held by non-U.S. subsidiaries. At December 31, 2018,less than 5% of the Company's consolidated cash and cash equivalents had regulatory restrictions that would preclude the transfer of funds with and amongsubsidiaries. Non-U.S. subsidiaries also held $19.1 million of cash and cash equivalents in consolidated strategic ventures. The strategic venture agreementsmay require strategic venture partner approval to transfer funds with and among subsidiaries. While the Company's remaining non-U.S. cash and cashequivalents can be transferred with and among subsidiaries, the majority of these non-U.S. cash balances will be used to support the ongoing working capitalneeds and continued growth of the Company's non-U.S. operations.Application of Critical Accounting PoliciesThe Company's discussion and analysis of its financial condition and results of operations are based upon the consolidated financial statements, which havebeen prepared in accordance with generally accepted accounting principles in the U.S. ("U.S. GAAP"). The preparation of these consolidated financialstatements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On anongoing basis, the Company evaluates the estimates, including those related to defined benefit pension benefits, notes and accounts receivable, goodwill,long-lived asset impairment, inventories, revenue recognition - cost-to-cost method, insurance reserves and income taxes. The impact of changes in theseestimates, as necessary, is reflected in the respective segment's results of operations in the period of the change. The Company bases estimates on historicalexperience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for makingjudgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimatesunder 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 thepreparation of the consolidated financial statements. Management has discussed the development and selection of the critical accounting estimates describedbelow with the Audit Committee of the Board and they have reviewed the Company's disclosures relating to these estimates in this Management's Discussionand Analysis of Financial Condition. These items should be read in conjunction with Note 1, Summary of Significant Accounting Policies, in Part II, Item 8,"Financial Statements and Supplementary Data."Defined Benefit Pension BenefitsThe 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 forthese plans is to contribute amounts sufficient to meet the minimum funding pursuant to U.K. and U.S. statutory requirements, plus any additional amountsthat 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 theprimary drivers in the change in funded status of the Company's defined benefit pension plans. These factors are components of actuarial loss (gain) andimpact the amount recognized in Other comprehensive income (loss), as such actuarial changes are not reflected directly on the Consolidated Statements ofOperations but amortized over time in accordance with U.S. GAAP.Critical Estimate—Defined Benefit Pension BenefitsAccounting for defined benefit pension plans requires the use of actuarial assumptions. The principal assumptions used include the discount rate and theexpected long-term rate of return on plan assets. Each assumption is reviewed annually and represents management's best estimate at that time. Theassumptions are selected to represent the average expected experience over time and may differ, in any one year, from actual experience due to changes incapital 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, 2018 measurement date for the U.K. and U.S. definedbenefit pension plans were 2.9% and 4.2%, respectively, and the global weighted-average discount rate was 3.2%. 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. AnnualNPPC is determined using the discount rates at the beginning of the year. The discount rates for 2018 expense were 2.5% for the U.K. plan, 3.5% for the U.S.plans and 2.8% 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 2019 and 2018, the global weighted-average expected long-term rate of return on asset assumption is 5.9% and 6.0%, respectively. This rate wasdetermined based on a model of expected asset returns for an actively managed portfolio.28Table of ContentsChanges in NPPC may occur in the future due to changes in actuarial assumptions and due to changes in returns on plan assets resulting from financialmarket conditions. Holding all other assumptions constant, using December 31, 2018 plan data, a one-quarter percent increase or decrease in the discount rateand the expected long-term rate of return on plan assets would increase or decrease annual 2018 pre-tax defined benefit NPPC as follows:Approximate Changes in Pre-tax Defined Benefit Net Periodic Pension Cost U.S. Plans U.K. PlanDiscount rate One-quarter percent increase Increase of $0.1 million Decrease of $0.2 millionOne-quarter percent decrease Decrease of $0.1 million Increase of $0.2 millionExpected long-term rate of return on plan assets One-quarter percent increase Decrease of $0.5 million Decrease of $1.7 millionOne-quarter percent decrease Increase of $0.5 million Increase of $1.7 millionIncreases or decreases to the net pension obligations may be required should circumstances that affect these estimates change. Additionally, certain eventscould 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 whenplan 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 ReceivableNotes and accounts receivable are stated at net realizable value through the use of an allowance for doubtful accounts. The allowance for doubtful accounts ismaintained for estimated losses resulting from the inability or unwillingness of customers to make required payments. The Company has policies andprocedures in place requiring customers to be evaluated for creditworthiness prior to the execution of new service contracts or shipments of products. Thesereviews are structured to minimize the Company's risk related to realizability of receivables. Despite these policies and procedures, the Company may attimes still experience collection problems and potential bad debts due to economic conditions within certain industries (e.g., steel industry), countries orregions in which the Company operates. At December 31, 2018 and 2017, trade accounts receivable of $291.2 million and $288.0 million, respectively, werenet of reserves of $4.6 million and $4.7 million, respectively.Critical Estimate—Notes and Accounts ReceivableA considerable amount of judgment is required to assess the realizability of receivables, including the current creditworthiness of each customer, relatedaging of past due balances and the facts and circumstances surrounding any non-payment. The Company's provisions for bad debts during 2018 and 2017were $0.4 million and $5.3 million, respectively. The Company did not make any significant provisions for bad debts during 2016.On a monthly basis, customer accounts are analyzed for collectability. Reserves are established based upon a specific-identification method as well ashistorical collection experience, as appropriate. The Company also evaluates specific accounts when it becomes aware of a situation in which a customer maynot be able to meet its financial obligations due to a deterioration in financial condition, credit ratings, bankruptcy or receivership. The reserves are based onthe facts available to the Company and are re-evaluated and adjusted as additional information becomes available. Reserves are also determined by usingpercentages (based upon experience) applied to certain aged receivable categories. Specific issues are discussed with corporate management and anysignificant changes in reserve amounts or the write-off of balances must be approved by specifically designated corporate personnel. All approved items aremonitored to ensure they are recorded in the proper period. Additionally, any significant changes in reserve balances are reviewed to ensure the propercorporate 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 berequired. Conversely, an improvement in a customer's ability to make payments could result in a decrease of the allowance for doubtful accounts. Changes inthe allowance for doubtful accounts related to both of these situations would be recorded through Operating income from continuing operations in the periodthe change was determined. As previously disclosed, one of the Company's customers for the Harsco Metals & Minerals Segment in Australia had entered intothe process of voluntary administration under Australian law, the purpose of which was to focus on long-term solvency. The result of this administrationprocess was that the customer's operations were sold to a new owner in August 2017. In September 2017, the administrators informed the Company that mostof the pre-administration accounts receivable balance would not be paid, and as a result the Company recorded a bad debt expense of $4.6 million during thethird quarter of 2017. The Company continues to provide services for the new owner pending a formalization of a new contract.29Table of ContentsThe Company has not materially changed the methodology for calculating allowances for doubtful accounts for the years presented. See Note 4, AccountsReceivable and Inventories, in Part II, Item 8, "Financial Statements and Supplementary Data," for additional information.GoodwillThe Company's goodwill balances were $411.6 million and $401.8 million at December 31, 2018 and 2017, respectively. The Company performs the annualgoodwill impairment test as of October 1. The Company has five reporting units (only three of which have goodwill associated with them as of December 31,2018). The Company's reporting units with goodwill are the Harsco Metals & Minerals Segment, the Harsco Rail Segment and the air-cooled heat exchangerbusiness of the Harsco Industrial Segment. Almost all of the Company's goodwill is allocated to the Harsco Metals & Minerals Segment.Critical Estimate—GoodwillIn 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 orif 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 anoperating segment or one level below an operating segment for which discrete financial information is available. A significant amount of judgment isinvolved in determining if an indicator of impairment has occurred. Such indicators may include declining cash flows or operating losses at the reporting unitlevel, a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a lossof 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.The evaluation of potential 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 forecastedoperating cash flows are the best indicator of current fair value. A number of significant assumptions and estimates are involved in the preparation of DCFmodels, including future revenues and operating margin growth, the weighted-average cost of capital (“WACC”), tax rates, capital spending, pensionfunding, the impact of strategic business initiatives and working capital projections. These assumptions and estimates may vary significantly amongreporting units. DCF models are based on approved long-range plans for the early years and historical relationships and projections for later years. WACCrates are derived from internal and external factors including, but not limited to, the average market price of the Company's stock, shares outstanding, bookvalue 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 aboveand the relative size of the Company's goodwill, differences in assumptions may have a material impact on the results of the Company's annual goodwillimpairment testing. If the net book value of a reporting unit were to exceed the current fair value, the second step of the goodwill impairment test wouldcurrently be required to determine if an impairment existed and the amount of goodwill impairment to record, if any. The second step of the goodwillimpairment test compares the net book value of a reporting unit's goodwill with the implied fair value of that goodwill. The implied fair value of goodwillrepresents the excess of fair value of the reporting unit over the fair value amounts assigned to all of the assets and liabilities of the reporting unit if it were tobe acquired in a hypothetical business combination and the current fair value of the reporting unit represented the purchase price. The second step of thegoodwill impairment test may require the utilization of valuation experts.The performance of the Company’s 2018 annual impairment tests did not result in any impairment of the Company’s goodwill.For the Company's 2018 annual goodwill impairment test, the average annual revenue growth rates over the duration of the DCF models ranged from (0.5)%to 2.0%. The WACCs used in the 2018 annual goodwill impairment test ranged from 8.50% to 10.75%.See Note 1, Summary of Significant Accounting Policies and Note 7, Goodwill and Other Intangible Assets, in Part II, Item 8, “Financial Statements andSupplementary 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) maybe impaired. The amounts charged against pre-tax income from continuing operations related to impaired long-lived assets (or asset groups) included inOther (income) expenses, net on the Consolidated Statements of Operations were $0.1 million, $1.0 million and $0.4 million in 2018, 2017 and 2016,respectively.30Table of ContentsCritical Estimate—Asset ImpairmentThe determination of a long-lived asset (or asset group) impairment involves significant judgments based upon short-term and long-term projections of futureasset (or asset group) performance. If the undiscounted cash flows associated with an asset (or asset group) do not exceed the asset's book value, impairmentloss 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 uponthe 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 marketprices for the asset (or asset group) or similar assets are unavailable, the fair value estimate is generally calculated using a DCF model. Should circumstanceschange that affect these estimates, additional impairment charges may be required and would be recorded through income in the period the change wasdetermined.The Company has not materially changed the methodology for calculating long-lived asset impairments for the years presented. U.S. GAAP requiresconsideration of all valuation techniques for which market participant inputs can be obtained without undue cost and effort. The use of a DCF modelcontinues to be an appropriate method for determining fair value; however, methodologies such as quoted market prices must also be evaluated. See Note 18,Other (Income) Expenses, Net in Part II, Item 8, "Financial Statements and Supplementary Data," for additional information.InventoriesInventories are stated at the lower of cost or net realizable value. Inventory balances are adjusted for estimated obsolete or unmarketable inventory equal tothe difference between the cost of inventory and its net realizable value or estimated market value, as applicable. At December 31, 2018 and 2017,inventories of $133.1 million and $178.3 million, respectively, are net of reserves of $10.0 million and $14.1 million, respectively.Critical Estimate—InventoriesIn assessing the realization of inventory balances, the Company is required to make judgments as to future demand and compare these with current orcommitted 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 thesereserves throughout the year, the Company estimates its year-end inventory costs and quantities. At December 31 of each year, the reserves are adjusted toreflect actual year-end inventory costs and quantities. During periods of inflation, LIFO expense usually increases and during periods of deflation itdecreases. These year-end adjustments resulted in pre-tax expense of $1.0 million in 2018 and pre-tax income of $2.0 million and $1.2 million in 2017 and2016, respectively.The Company has not materially changed the methodology for calculating inventory reserves for the years presented. See Note 4, Accounts Receivable andInventories, in Part II, Item 8, "Financial Statements and Supplementary Data," for additional information.Revenue Recognition - Cost-to-cost MethodFor certain contracts with customers, which meet specific criteria established in U.S. GAAP, the Company recognizes revenue on an over time basis utilizingan input method based on costs incurred (“cost-to-cost method”) to measure progress, which requires the Company to make estimates regarding the revenuesand costs associated with design, manufacturing and delivery of products.Critical Estimate—Revenue Recognition - Cost-to-cost MethodAccounting for contracts with customers using the cost-to-cost method requires significant judgment relative to assessing risks, estimating contract revenues(including estimates of variable consideration, if applicable), estimating contract costs (including estimating any liquidating damages or penalties related toperformance); making assumptions for schedule and technical items; and evaluating whether a significant financing component is present. Due to the numberof 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 HarscoRail Segment, estimating total revenues and costs at completion is inherently complicated and subject to many variables. Accordingly, estimates are subjectto 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. Whenadjustments in estimated total contract sales or estimated total costs are required, any changes from prior estimates are recognized in current period earningsfor 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 oftotal sales to be earned, a provision for the entire loss on the contract is recorded in current period earnings when the loss is determined.31Table of ContentsThe Company recognized an initial estimated forward loss provision related to the contracts with the federal railway system of Switzerland ("SBB") of $45.1million for the year ended December 31, 2016. The Company recorded an additional forward loss provision of $1.8 million for the year ended December 31,2018. At December 31, 2018, the entire remaining estimated forward loss provision of $9.6 million is included in the caption Other current liabilities on theConsolidated Balance Sheets. The estimated forward loss provision represents the Company's best estimate based on currently available information. It ispossible that the Company's overall estimate of costs to complete these contracts may increase, which would result in an additional estimated forward lossprovision at such time.As of December 31, 2018, the Company has substantially completed the first SBB contract and the second SBB contract is approximately 26% complete.Based on all information currently available, the Company is unable to estimate any further possible loss or range of loss at this time. There are a number ofkey events expected to occur in 2019, including the finalization of the manufacturing designs for certain of the vehicles, and which could affect the costestimates. Any adjustment to the cost estimates would be recorded when new information becomes available and could have a material impact on theCompany’s results of operations in that period.On January 1, 2018, the Company adopted changes, with subsequent amendments, issued by the FASB related to the recognition of revenue from contractswith customers. See Note 1, Summary of Significant Accounting Policies; Note 2, Recently Issued and Recently Adopted Accounting Standards; and Note17, Revenue Recognition, in Part II, Item 8, “Financial Statements and Supplementary Data,” for additional information.Insurance ReservesThe Company retains a significant portion of the risk for U.S. workers' compensation, U.K. employers' liability, automobile, general and product liabilitylosses. At December 31, 2018 and 2017, the Company recorded liabilities of $60.3 million and $33.6 million, respectively, related to both asserted andunasserted insurance claims. At December 31, 2018 and 2017,$34.2 million and $4.1 million, respectively, was included in insurance liabilities related to claims covered by insurance carriers for which a correspondingreceivable has been recorded.Critical Estimate—Insurance ReservesInsurance reserves have been recorded based upon actuarial calculations that reflect the undiscounted estimated liabilities for ultimate losses, includingclaims incurred but not reported. Inherent in these estimates are assumptions that are based on the Company's history of claims and losses, a detailed analysisof existing claims with respect to potential value, and current legal and legislative trends. If actual claims differ from those projected by management,changes (either increases or decreases) to insurance reserves may be required and would be recorded through Operating income from continuing operations inthe period the change was determined. During 2018, 2017 and 2016, the Company recorded a retrospective insurance reserve adjustment that decreased pre-tax insurance expense from continuing operations for self-insured programs by $2.7 million,$2.6 million and $5.4 million, respectively. The Company has programs in place to improve claims experience, such as disciplined claim and insurancelitigation management and a focused approach to workplace safety.The Company has not materially changed the methodology for calculating insurance reserves for the years presented. There are currently no known trends,demands, commitments, events or uncertainties that are reasonably likely to occur that would materially affect the methodology or assumptions describedabove. See Note 1, Summary of Significant Accounting Policies, in Part II, Item 8, "Financial Statements and Supplementary Data," for additionalinformation.Income TaxesThe Company's income tax expense, deferred tax assets and liabilities and reserves for uncertain tax positions reflect management's best estimate of taxes tobe paid. The Company is subject to various international, federal, state and local income taxes in jurisdictions where the Company operates. In determiningincome 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 realizablewith any discrete tax items recorded separately). At December 31, 2018, 2017 and 2016, the Company's annual effective income tax rate on income fromcontinuing operations was 8.2%, 87.8% and (8.4)%, respectively.Critical Estimate—Income TaxesAnnual effective income tax rates are estimated by giving recognition to currently enacted tax rates, tax holidays, tax credits, capital losses and taxdeductions as well as certain exempt income and non-deductible expenses for all jurisdictions where the Company operates. Quarterly income tax provisionsincorporate any change in the year-to-date provision from the previous quarterly periods.32Table of ContentsThe Company records deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making suchdeterminations, 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 realizedeferred tax assets in the future in excess of their net recorded amount, an adjustment to the valuation allowance would be made that would reduce theprovision for income taxes.Valuation allowances of $138.9 million and $174.2 million at December 31, 2018 and 2017, respectively, related principally to deferred tax assets forpension liabilities, NOLs, foreign tax credit carryforwards, capital loss carryforwards and foreign currency translation that are uncertain as to realizability. In2018, the Company finalized the impact of the Tax Act and reduced the provisional valuation allowance by $15.2 million because of the expectedrealization of foreign tax credit and state net operating loss carryforward. In addition, the U.K. valuation allowance was reduced by $13.6 million as a resultof the Altek acquisition and change in estimates of interest deductions. The Company recorded a valuation allowance reduction of$8.7 million from the effects of foreign currency translation adjustments, partially offset by the net increase related to losses in certain jurisdictions where theCompany determined that it is more likely than not that these assets will not be realized. In 2017, the Company recorded a valuation allowance of $27.3million related to foreign tax credit carryforwards due to the impact of the Tax Act, an increase from foreign currency translation in the amount of $10.1million and a net increase of $6.9 million related to losses in certain jurisdictions where the Company determined that it is more likely than not that theseassets will not be realized. This was partially offset by a reduction related to current year pension adjustments recorded through Accumulated othercomprehensive loss and a decrease related to U.S., Argentina and Belgium tax rate changes.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, 2018 and2017 were $2.4 million and $3.6 million, respectively, excluding accrued interest and penalties. The unrecognized income tax benefit may decrease as aresult of the lapse of statute of limitations or as a result of final settlement and resolution of outstanding tax matters in various state and internationaljurisdictions.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 incometax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Actpermanently 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 StaffAccounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations when a registrant did not have the necessary informationavailable, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. TheCompany recognized provisional tax impacts related to the deemed repatriated earnings and the revaluation of deferred tax assets and liabilities in itsconsolidated financial statements for the year ended December 31, 2017. Based on an analysis of the earnings and profits ("E&P") for the Company's foreignsubsidiaries, 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 tollcharge related to the Tax Act. Adjustments made to the provisional amounts allowed under SAB 118 were identified and recorded as discrete adjustmentsduring 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 uncertaintax 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.33Table of ContentsResearch and DevelopmentInternal funding for research and development was as follows: Research and Development Expenses(In millions) 2018 2017 2016Harsco Metals & Minerals $1.6 $1.3 $0.9Harsco Industrial 1.6 1.5 1.5Harsco Rail 2.3 1.4 1.9Total research and development expenses $5.5 $4.2 $4.3The amounts shown exclude technology development and engineering costs classified in cost of services sold; cost of products sold; or selling, general andadministrative expenses.Recently Adopted and Recently Issued Accounting StandardsInformation on recently adopted and recently issued accounting standards is included in Note 2, Recently Adopted and Recently Issued AccountingStandards, in Part II, Item 8, "Financial Statements and Supplementary Data."Item 7A. Quantitative and Qualitative Disclosures about Market Risk.See Part I, Item 1A, "Risk Factors," for quantitative and qualitative disclosures about market risk.34Table of ContentsItem 8. Financial Statements and Supplementary Data.Index to Consolidated Financial Statements and Supplementary Data PageConsolidated Financial Statements of Harsco Corporation: Management's Report on Internal Control Over Financial Reporting36Report of Independent Registered Public Accounting Firm37Consolidated Balance Sheets39Consolidated Statements of Operations40Consolidated Statements of Comprehensive Income (Loss)41Consolidated Statements of Cash Flows42Consolidated Statements of Changes in Equity44Notes to Consolidated Financial Statements45 Supplementary Data (Unaudited): Two-Year Summary of Quarterly Results9035Table of ContentsManagement's Report on Internal Control Over Financial ReportingManagement of Harsco Corporation, together with its consolidated subsidiaries (the "Company"), is responsible for establishing and maintaining adequateinternal control over financial reporting, as defined in Securities Exchange Act Rule 13a-15(f) or 15d-15(e). The Company's internal control over financialreporting is a process designed under the supervision of the Company's principal executive and principal financial officers to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of the Company's consolidated financial statements for external reporting purposes inaccordance 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 theCompany;•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements inaccordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Companyare 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'sassets 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 ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies and procedures may deteriorate.Management has assessed the effectiveness of its internal control over financial reporting at December 31, 2018 based on the framework established inInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on thisassessment, management has determined that the Company's internal control over financial reporting was effective at December 31, 2018.The effectiveness of the Company's internal control over financial reporting at December 31, 2018 has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, as stated in their report appearing in this Annual Report on Form 10-K, which expresses an unqualifiedopinion on the effectiveness of the Company's internal control over financial reporting at December 31, 2018./s/ F. NICHOLAS GRASBERGER III /s/ PETER F. MINANF. Nicholas Grasberger IIIChairman, President and Chief Executive Officer Peter F. MinanSenior Vice President and Chief Financial OfficerFebruary 21, 2019 February 21, 201936Table of ContentsReport of Independent Registered Public Accounting FirmTo the Stockholders and Board of Directors of Harsco CorporationOpinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheets of Harsco Corporation and its subsidiaries (the “Company”) as of December 31, 2018 and2017 and the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for each of the three years in theperiod ended December 31, 2018, including the related notes and financial statement schedule listed in the index appearing under Item15(a)(2) (collectivelyreferred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31,2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO).In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofDecember 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 inconformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all materialrespects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework(2013) issued by the COSO.Change in Accounting PrinciplesAs discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for revenue from contracts withcustomers in 2018.Basis for OpinionsThe Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, andfor its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Controlover Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internalcontrol 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 theapplicable 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 reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internalcontrol 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 financialstatements, 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 usedand significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internalcontrol over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.37Table of ContentsDefinition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention ortimely 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 ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ PricewaterhouseCoopers LLP Philadelphia, Pennsylvania February 21, 2019We have served as the Company's auditor since at least 1933. We have not determined the specific year we began serving as the auditor of the Company. 38Table of ContentsHARSCO CORPORATIONCONSOLIDATED BALANCE SHEETS(In thousands, except share amounts) December 31 2018 December 31 2017ASSETS Current assets: Cash and cash equivalents $64,260 $62,098Restricted cash 2,886 4,111Trade accounts receivable, net 291,213 288,034Other receivables 54,182 20,224Inventories 133,111 178,293Current portion of contract assets 24,254 —Other current assets 35,128 39,332Total current assets 605,034 592,092Property, plant and equipment, net 469,900 479,747Goodwill 411,552 401,758Intangible assets, net 79,825 38,251Deferred income tax assets 49,114 51,574Other assets 17,442 15,263Total assets $1,632,867 $1,578,685LIABILITIES Current liabilities: Short-term borrowings $10,078 $8,621Current maturities of long-term debt 6,489 11,208Accounts payable 149,410 126,249Accrued compensation 57,586 60,451Income taxes payable 2,634 5,106Insurance liabilities 40,774 11,167Current portion of advances on contracts 31,317 117,958Other current liabilities 118,708 133,368Total current liabilities 416,996 474,128Long-term debt 585,662 566,794Insurance liabilities 19,575 22,385Retirement plan liabilities 213,578 259,367Advances on contracts 37,675 —Other liabilities 46,005 40,846Total liabilities 1,319,491 1,363,520COMMITMENTS AND CONTINGENCIES HARSCO CORPORATION STOCKHOLDERS' EQUITY Preferred stock, Series A junior participating cumulative preferred stock — —Common stock, par value $1.25 (issued 113,473,951 and 112,888,126 shares at December 31, 2018 and 2017, respectively) 141,842 141,110Additional paid-in capital 190,597 180,201Accumulated other comprehensive loss (567,107) (546,582)Retained earnings 1,298,752 1,157,801Treasury stock, at cost (33,928,928 and 32,434,274 shares at December 31, 2018 and 2017, respectively) (795,821) (762,079)Total Harsco Corporation stockholders' equity 268,263 170,451Noncontrolling interests 45,113 44,714Total equity 313,376 215,165Total liabilities and equity $1,632,867 $1,578,685See accompanying notes to consolidated financial statements.39Table of ContentsHARSCO CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS Years ended December 31 (In thousands, except per share amounts) 2018 2017 2016 Revenues from continuing operations: Service revenues $1,007,239 $981,672 $939,129 Product revenues 715,141 625,390 512,094 Total revenues 1,722,380 1,607,062 1,451,223 Costs and expenses from continuing operations: Cost of services sold 780,930 770,268 762,431 Cost of products sold 507,807 452,740 410,138 Selling, general and administrative expenses 238,690 229,792 196,871 Research and development expenses 5,548 4,227 4,280 Other (income) expenses, net (1,522) 4,641 12,620 Total costs and expenses 1,531,453 1,461,668 1,386,340 Operating income from continuing operations 190,927 145,394 64,883 Interest income 2,155 2,469 2,475 Interest expense (38,148) (47,552) (51,584) Defined benefit pension income (expense) 3,447 (2,595) (1,414) Loss on early extinguishment of debt (1,127) (2,265) (35,337) Change in fair value to the unit adjustment liability and loss on dilution and sale of equity methodinvestment — — (58,494) Income (loss) from continuing operations before income taxes and equity income 157,254 95,451 (79,471) Income tax expense (12,899) (83,803) (6,637) Equity in income of unconsolidated entities, net 384 — 5,686 Income (loss) from continuing operations 144,739 11,648 (80,422) Discontinued operations: Income on disposal of discontinued business 358 306 1,061 Income tax expense related to discontinued business (84) (110) (392) Income from discontinued operations 274 196 669 Net income (loss) 145,013 11,844 (79,753) Less: Net income attributable to noncontrolling interests (7,956) (4,022) (5,914) Net income (loss) attributable to Harsco Corporation $137,057 $7,822 $(85,667) Amounts attributable to Harsco Corporation common stockholders: Income (loss) from continuing operations, net of tax $136,783 $7,626 $(86,336) Income from discontinued operations, net of tax 274 196 669 Net income (loss) attributable to Harsco Corporation common stockholders $137,057 $7,822 $(85,667) Weighted average shares of common stock outstanding 80,716 80,553 80,333 Basic earnings (loss) per share attributable to Harsco Corporation common stockholders:Continuing operations $1.69 $0.09 $(1.07) Discontinued operations — — 0.01 Basic earnings (loss) per share attributable to Harsco Corporation common stockholders $1.70(a)$0.10(a)$(1.07)(a) Diluted weighted average shares of common stock outstanding 83,595 82,840 80,333 Diluted earnings (loss) per share attributable to Harsco Corporation common stockholders:Continuing operations $1.64 $0.09 $(1.07) Discontinued operations — — 0.01 Diluted earnings (loss) per share attributable to Harsco Corporation common stockholders $1.64 $0.09 $(1.07)(a)(a)Does not total due to rounding.See accompanying notes to consolidated financial statements.40Table of ContentsHARSCO CORPORATIONCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Years ended December 31(In thousands) 2018 2017 2016Net income (loss) $145,013 $11,844 $(79,753)Other comprehensive income (loss): Foreign currency translation adjustments, net of deferred income taxes of $(2,167), $3,471 and$(13,670) in 2018, 2017 and 2016, respectively (50,743) 36,011 (21,560)Net gain (loss) on cash flow hedging instruments, net of deferred income taxes of $(1,130), $(759)and $(544) in 2018, 2017 and 2016, respectively 2,101 1,897 (682)Pension liability adjustments, net of deferred income taxes of $854, $(4,084) and $34 in 2018, 2017and 2016, respectively 27,185 25,254 (71,398)Unrealized gain (loss) on marketable securities, net of deferred income taxes of $16, $(12) and $(16)in 2018, 2017 and 2016, respectively (48) 22 26Total other comprehensive income (loss) (21,505) 63,184 (93,614)Total comprehensive income (loss) 123,508 75,028 (173,367)Less: Comprehensive income attributable to noncontrolling interests (5,454) (7,068) (3,334)Comprehensive income (loss) attributable to Harsco Corporation $118,054 $67,960 $(176,701)See accompanying notes to consolidated financial statements.41Table of ContentsHARSCO CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31(In thousands) 2018 2017 2016Cash flows from operating activities: Net income (loss) $145,013 $11,844 $(79,753)Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation 122,135 121,839 129,083Amortization 10,650 8,098 12,403Change in fair value to the unit adjustment liability and loss on dilution and sale of equitymethod investment — — 58,494Contract estimated forward loss provision for Harsco Rail Segment — — 45,050Loss on early extinguishment of debt — — 35,337Deferred income tax expense (benefit) (6,522) 57,349 (7,654)Equity income of unconsolidated entities, net (384) — (5,686)Dividends from unconsolidated entities 88 93 16Other, net 2,666 749 2,633Changes in assets and liabilities, net of acquisitions and dispositions of businesses:Accounts receivable (16,881) (32,012) 16,041Inventories (14,706) 19,557 (12,313)Contract assets (3,312) — —Accounts payable 18,347 12,554 (20,194)Accrued interest payable (154) 438 (3,197)Accrued compensation (1,127) 11,126 8,865Advances on contracts and other customer advances 3,057 (16,811) 14,485Retirement plan liabilities, net (33,321) (21,300) (20,420)Other assets and liabilities (33,527) 3,368 (13,314)Net cash provided by operating activities 192,022 176,892 159,876Cash flows from investing activities: Purchases of property, plant and equipment (132,168) (98,314) (69,340)Purchase of businesses, net of cash acquired* (56,389) — (26)Proceeds from sales of assets 11,887 13,418 9,305Proceeds from sale of equity investment — — 165,640Net proceeds (payments) from settlement of foreign currency forward exchange contracts 15,527 (18,429) 17,238Other investing activities, net — — 70Net cash provided (used) by investing activities (161,143) (103,325) 122,887Cash flows from financing activities: Short-term borrowings, net 1,932 5,061 (2,350)Current maturities and long-term debt: Additions 128,858 27,985 720,727Reductions (116,988) (108,280) (979,567)Cash dividends paid on common stock — — (4,105)Dividends paid to noncontrolling interests (5,480) (2,445) (1,702)Sale (purchase) of noncontrolling interests 477 (3,412) (4,731)Stock-based compensation - Employee taxes paid (3,730) (1,688) (91)Common stock acquired for treasury (30,011) — —Proceeds from cross-currency interest rate swap termination — — 16,625Deferred pension underfunding payment to unconsolidated affiliate — — (20,640)Deferred financing costs (596) (42) (16,530)Other investing activities, net — (894) —Net cash used by financing activities (25,538) (83,715) (292,364)Effect of exchange rate changes on cash, including restricted cash (4,404) 4,478 1,724Net increase (decrease) in cash and cash equivalents, including restricted cash 937 (5,670) (7,877)Cash and cash equivalents, including restricted cash, at beginning of period 66,209 71,879 79,756Cash and cash equivalents, including restricted cash, at end of period $67,146 $66,209 $71,879 42Table of ContentsHARSCO CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Years ended December 31(In thousands) 2018 2017 2016*Purchase of businesses, net of cash acquired Working capital $1,295 $— $—Property, plant and equipment (3,327) — —Goodwill (22,518) — —Long-term debt acquired 335 — —Other noncurrent assets and liabilities, net (32,174) — (26)Net cash used to acquire businesses $(56,389) $— $(26)See accompanying notes to consolidated financial statements.43Table of ContentsHARSCO CORPORATIONCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(In thousands, except share and per shareamounts) Common Stock AdditionalPaid-inCapital RetainedEarnings Accumulated OtherComprehensiveIncome (Loss) NoncontrollingInterests Issued Treasury TotalBalances, January 1, 2016 $140,503 $(760,299) $170,699 $1,236,355 $(515,688) $39,233 $310,803Net income (loss) (85,667) 5,914 (79,753)Cash dividends declared: Noncontrolling interests (1,702) (1,702)Total other comprehensive loss, net ofdeferred income taxes of $(14,196) (91,034) (2,580) (93,614)Purchase of subsidiary shares fromnoncontrolling interest (5,128) 397 (4,731)Vesting of restricted stock units and otherstock grants, net 80,598 shares 122 (92) (1,194) (1,164)Amortization of unearned stock-based,compensation, net of forfeitures 7,724 7,724Balances, December 31, 2016 140,625(760,391)172,1011,150,688(606,722)41,262137,563Adoption of new accounting standard (SeeNote 2) 1,106 (709) 397Net income 7,822 4,022 11,844Cash dividends declared: Noncontrolling interests (2,445) (2,445)Total other comprehensive income, net ofdeferred income taxes of $(1,384) 60,140 3,044 63,184Purchase of subsidiary shares fromnoncontrolling interest (2,242) (1,194) (3,436)Sale of investment in consolidated subsidiary 25 25Stock appreciation rights exercise, net 8,965shares 16 (63) (16) (63)Vesting of restricted stock units and otherstock grants, net 269,924 shares 469 (1,625) (469) (1,625)Amortization of unearned stock-basedcompensation, net of forfeitures 9,721 9,721Balances, December 31, 2017 141,110 (762,079)180,2011,157,801(546,582)44,714215,165Adoption of new accounting standard (SeeNote 2) 3,894 (1,520) 2,374Net income 137,057 7,956 145,013Cash dividends declared: Noncontrolling interests (5,534) (5,534)Total other comprehensive loss, net ofdeferred income taxes of $(2,427) (19,005) (2,500) (21,505)Purchase of subsidiary shares fromnoncontrolling interest 477 477Stock appreciation rights exercised, net 28,109shares 50 (282) (50) (282)Vesting of restricted stock units and otherstock grants, net 384,134 shares 682 (3,449) (682) (3,449)Treasury shares repurchased, 1,321,072 shares (30,011) (30,011)Amortization of unearned stock-basedcompensation, net of forfeitures 11,128 11,128Balances, December 31, 2018 $141,842 $(795,821)$190,597$1,298,752$(567,107)$45,113$313,376See accompanying notes to consolidated financial statements.44Table of ContentsHARSCO CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Summary of Significant Accounting PoliciesConsolidationThe consolidated financial statements include all accounts of Harsco Corporation (the "Company"), all entities in which the Company has a controllingvoting interest and variable interest entities required to be consolidated in accordance with generally accepted accounting principles in the U.S.("U.S. GAAP"). Intercompany accounts and transactions have been eliminated among consolidated entities. The Company's management has evaluated allactivity of the Company and concluded that subsequent events are properly reflected in the Company's consolidated financial statements and notes asrequired by U.S. GAAP.ReclassificationsCertain reclassifications have been made to prior year amounts to conform with current year classifications.Cash and Cash EquivalentsCash and cash equivalents include cash on hand, demand deposits and short-term investments that are highly liquid in nature and have an original maturityof three months or less.Restricted CashThe Company had restricted cash of $2.9 million and $4.1 million at December 31, 2018 and December 31, 2017, respectively, and the restrictions areprimarily related to collateral provided for certain guarantees of the Company’s performance.InventoriesInventories in the U.S. are principally accounted for using the last-in, first-out ("LIFO") method and are stated at the lower of cost or net realizable value. TheCompany's remaining inventories are accounted for using the first-in, first-out ("FIFO") or average cost methods and are stated at the lower of cost or netrealizable value. See Note 4, Accounts Receivable and Inventories, for additional information.DepreciationProperty, plant and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using, principally, the straight-line method.When property, plant and equipment is retired from service, the cost of the retirement is charged to the allowance for depreciation to the extent of theaccumulated depreciation and the balance is charged to income. Long-lived assets to be disposed of by sale are not depreciated while they are classified asheld-for-sale.LeasesThe Company leases certain property and equipment under noncancelable lease agreements. All lease agreements are evaluated and classified as either anoperating or capital lease in accordance with U.S. GAAP. A lease is classified as a capital lease if any of the following criteria are met: transfer of ownership tothe Company by the end of the lease term; the lease contains a bargain purchase option; the lease term is equal to or greater than 75% of the asset's economiclife; or the present value of future minimum lease payments is equal to or greater than 90% of the asset's fair market value. Operating lease expense isrecognized ratably over the lease term, including rent abatement periods and rent holidays. See Note 2, Recently Adopted and Recently Issued AccountingStandards; Note 6, Property, Plant and Equipment; Note 8, Debt and Credit Agreements; and Note 9, Operating Leases, for additional information on leases.Goodwill and Other Intangible AssetsIn accordance with U.S. GAAP, goodwill is not amortized and is tested for impairment annually, or more frequently, if indicators of impairment exist, or if adecision is made to dispose of a business. Goodwill is allocated among and evaluated for impairment at the reporting unit level, which is defined as anoperating segment or one level below for which discrete financial information is available. A significant amount of judgment is involved in determining if anindicator of impairment has occurred. Such indicators may include declining cash flows or operating losses at the reporting unit level, a significant adversechange in legal factors or business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, or a morelikely than not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed of, among others.45Table of ContentsThe Company performs the annual goodwill impairment test as of October 1. The Company has five reporting units, only three of which have goodwillassociated with them as of December 31, 2018. Almost all of the Company's goodwill is included in the Harsco Metals & Minerals Segment.The evaluation of potential 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 forecastedoperating cash flows are the best indicator of current fair value. A number of significant assumptions and estimates are involved in the preparation of DCFmodels 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. DCFmodels are based on approved long-range plans for the early years and historical relationships and projections for later years. WACC rates are derived frominternal and external factors including, but not limited to, the average market price of the Company's stock, shares outstanding, book value of the Company'sdebt, 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 theCompany's goodwill, differences in assumptions may have a material impact on the results of the Company's annual goodwill impairment testing. If the netbook value of a reporting unit were to exceed the current fair value, the second step of the goodwill impairment test would currently be required to determineif an impairment existed and the amount of goodwill impairment to record, if any. The second step of the goodwill impairment test compares the net bookvalue of a reporting unit's goodwill with the implied fair value of that goodwill. The implied fair value of goodwill represents the excess of fair value of thereporting unit over the fair value amounts assigned to all of the assets and liabilities of the reporting unit if it were to be acquired in a hypothetical businesscombination and the current fair value of the reporting unit represented the purchase price. As necessary, the Company may use valuation experts to assistwith the second step of the goodwill impairment test. See Note 7, Goodwill and Other Intangible Assets, for additional information.Long-Lived Assets Impairments (Other than Goodwill)Long-lived assets (or asset groups) are reviewed for impairment when events and circumstances indicate that the carrying amount of an asset (or asset group)may not be recoverable. Long-lived assets (or asset groups) are reviewed for impairment when events and circumstances indicate the book value of an asset(or asset group) may be impaired. The Company's policy is to determine if an impairment loss exists when it is determined that the carrying amount of theasset (or asset group) exceeds the sum of the expected undiscounted future cash flows resulting from use of the asset (or asset group) and its eventualdisposition. Impairment losses are measured as the amount by which the carrying amount of the asset (or asset group) exceeds its fair value, normally asdetermined in either open market transactions or through the use of a DCF model. Long-lived assets (or asset groups) to be disposed of are reported at thelower of the carrying amount or fair value less cost to sell. See Note 18, Other (Income) Expenses, Net for additional information.Deferred Financing CostsThe Company has incurred debt issuance costs which are recognized as a reduction of Long-term debt on the Consolidated Balance Sheets. Debt issuancecosts are amortized and recognized as interest expense over the contractual term of the related indebtedness or shorter period if appropriate based uponcontractual terms. Whenever indebtedness is modified from its original terms, an evaluation is made whether an accounting modification or extinguishmenthas occurred in order to determine the accounting treatment for debt issuance costs related to the debt modification.Revenue RecognitionThe Company recognizes revenues to depict the transfer of promised services and products to customers in an amount that reflects the consideration theCompany expects to receive in exchange for those services or products. Service revenues include the service components of the Harsco Metals & Mineralsand Harsco Rail Segments. Product revenues include the Harsco Industrial Segment and the product revenues of the Harsco Metals & Minerals and HarscoRail Segments.Harsco Metals & Minerals - This Segment provides on-site services, under long-term contracts, for material logistics; product quality improvement andresource recovery from iron, steel and metals manufacturing; manufactures and sells industrial abrasives and roofing granule products; and manufacturesaluminum dross and scrap processing systems.•Service revenues are recognized over time as the customer simultaneously receives the benefits provided by the Company's performance. TheCompany utilizes an output method based on work performed (liquid steel tons processed, weight of material handled, etc.) to measure progress,which is deemed to best depict the transfer of value to the customer and revenue earned by the Company. Transaction prices are based on contractualterms, which may include both fixed and variable portions. The fixed portion is recognized as earned (normally monthly) over the contractualperiod. The variable portion is recognized as services are performed and differs based on the volume of46Table of Contentsservices performed. Given the long-term nature of these arrangements, most contracts permit periodic adjustment of either the variable or both thefixed and variable portions based on the changes in macroeconomic indicators, including changes in commodity prices. Transaction prices, whenthe standalone selling price is not directly observable, are allocated to performance obligations utilizing an expected cost plus a margin approach.Amounts are typically billed and payable on a monthly basis as services are performed.•Product revenues in the applied products business are recognized at the point when control transfers to the customer. Control generally transfers atthe point of shipment for domestic orders and in accordance with the international commercial terms included in contracts for export sales.Transaction prices are based on contractual terms, which are generally fixed and when the standalone selling price is not directly observable,allocated to performance obligations utilizing an adjusted market assessment approach. Amounts are billed and payable upon completion of eachtransaction.•Product revenues in the aluminum dross and scrap process systems business are generally recognized over time as control is transferred to thecustomer. Control transfers over time because aluminum dross and scrap systems are customized, have no alternate use and the Company has anenforceable right to payment. The Company utilizes an input method based on costs incurred ("cost-to-cost method") to measure progress, which isdeemed to best depict the transfer of value to the customer and revenue earned by the Company. Transaction prices are based on contractual terms,which are generally fixed, and when the standalone selling price is not directly observable, allocated to performance obligations utilizing anadjusted market assessment approach. The Company may receive periodic payments associated with key milestones with any remainingconsideration billed and payable upon completion of the transaction.Harsco Industrial - This Segment sells air-cooled heat exchangers, metal bar grating configurations and energy-efficient heat transfer products.•For air-cooled heat exchangers, revenue is recognized over time as control is transferred to the customer. Control transfers over time because the air-cooled heat exchangers are customized, have no alternate use and the Company has an enforceable right to payment. The Company utilizes a cost-to-cost method to measure progress, which is deemed to best depict the transfer of value to the customer and revenue earned by the Company.Transaction prices are based on contractual terms, which are generally fixed, and when the standalone selling price is not directly observable,allocated to performance obligations utilizing an adjusted market assessment approach. The Company may receive periodic payments associatedwith key milestones with any remaining consideration billed and payable upon completion of the transaction.•For metal bar grating configurations and energy-efficient heat transfer products, revenue is recognized at the point when control transfers to thecustomer. Control generally transfers at the point of shipment for domestic orders and in accordance with the international commercial termsincluded in contracts for export sales. Transaction prices are based on contractual terms, which are generally fixed, and when the standalone sellingprice is not directly observable, allocated to performance obligations utilizing an adjusted market assessment approach. Amounts are billed andpayable upon completion of each transaction though advance payments are required in limited circumstances.Harsco Rail - This Segment sells railway track maintenance equipment, after-market parts and provides railway track maintenance services.•For the majority of railway track maintenance equipment sales, revenue is recognized at the point when control transfers to the customer. Controlgenerally transfers at the point of shipment for domestic orders and in accordance with the international commercial terms included in contracts forexport sales. In certain railway track maintenance equipment sales, revenue is recognized over time because such equipment is highly customized,has no alternate use and the Company has an enforceable right to payment. In such instances, the Company utilizes a cost-to-cost method to measureprogress, which is deemed to best depict the transfer of value to the customer and revenue earned by the Company. Transaction prices are based oncontracted terms, which are generally fixed, and when the standalone selling price is not directly observable, allocated to performance obligationsutilizing either the adjusted market assessment or expected cost plus a margin approach. For certain transactions, the Company receives periodicpayments associated with key milestones. In limited instances, those payments are intended to provide financing with such transactions beingtreated as including a significant financing component. Any remaining consideration is billed and payable upon completion of the transaction.•For after-market parts sales, revenue is recognized at the point when control transfers to the customer. Control generally transfer to the customer atthe point of shipment for domestic orders and in accordance with the international commercial terms included in contracts for export sales.Transaction prices are based on contracted terms, which are47Table of Contentsgenerally fixed, and when the standalone selling price is not directly observable, allocated to performance obligations utilizing an adjusted marketassessment approach. Amounts are billed and payable upon completion of each contract.•For railway track maintenance services, revenue is recognized over time as the customer simultaneously receives the benefits provided by theCompany's performance. The Company utilizes an appropriate output method based on work performed (feet, miles, shifts worked, etc.) to measureprogress, which is deemed to best depict the transfer of value to the customer and revenue earned by the Company. Transaction prices are based oncontracted terms, which are generally variable. The variable portion is recognized as services are performed and differs based on the value ofservices. Given the long-term nature of these arrangements, most contracts permit periodic adjustment based on the changes in macroeconomicindicators. Transaction prices, when the standalone selling price is not directly observable, are allocated to performance obligations utilizing anexpected cost plus a margin approach. Amounts are typically billed and payable on a monthly basis as services are performed.Income TaxesThe Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for theexpected future tax consequences of the events that have been included in the consolidated financial statements. Under this method, deferred tax assets andliabilities are determined based on the differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect forthe year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in theperiod that includes the enactment date.The Company records deferred tax assets to the extent that the Company believes that these assets will more likely than not be realized. In making suchdeterminations, the Company considers all available positive and negative evidence, including future reversals of existing deferred tax liabilities, projectedfuture taxable income, tax planning strategies and recent financial results. In the event the Company was to determine that it would be able to realize deferredincome tax assets in the future in excess of their net recorded amount, an adjustment to the valuation allowance would be made that would reduce theprovision for income taxes.The Company prepares and files tax returns based on interpretation of tax laws and regulations and records its provision for income taxes based on theseinterpretations. Uncertainties may exist in estimating the Company's tax provisions and in filing tax returns in the many jurisdictions in which the Companyoperates, and as a result these interpretations may give rise to an uncertain tax position. The tax benefit from an uncertain tax position is recognized when itis more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on itstechnical merits. Each subsequent period the Company determines if existing or new uncertain tax positions meet a more likely than not recognitionthreshold and adjust accordingly.The Company recognizes interest and penalties related to unrecognized tax benefits within Income tax expense in the accompanying ConsolidatedStatements of Operations. Accrued interest and penalties are included in Other liabilities on the Consolidated Balance Sheets.The significant assumptions and estimates described in the preceding paragraphs are important contributors to the effective tax rate each year.See Note 11, Income Taxes, for additional information.Accrued Insurance and Loss ReservesThe Company retains a significant portion of the risk for U.S. workers' compensation, U.K. employers' liability, automobile, general and product liabilitylosses. During 2018, 2017 and 2016, the Company recorded insurance expense from continuing operations related to these lines of coverage of $14.3million, $16.4 million and $15.0 million, respectively. Reserves have been recorded that reflect the undiscounted estimated liabilities including claimsincurred but not reported. When a recognized liability is covered by third-party insurance, the Company records an insurance claim receivable to reflect thecovered liability. Changes in the estimates of the reserves are included in net income (loss) in the period determined. During 2018, 2017 and 2016, theCompany recorded retrospective insurance reserve adjustments that decreased pre-tax insurance expense from continuing operations for self-insuredprograms by $2.7 million, $2.6 million and $5.4 million, respectively. AtDecember 31, 2018 and 2017, the Company has recorded liabilities of $60.3 million and $33.6 million, respectively, related to both asserted as well asunasserted insurance claims. Included in the balances at December 31, 2018 and 2017 were $34.2 million and $4.1 million, respectively, of recognizedliabilities covered by insurance carriers. Amounts estimated to be paid within one year have been included in current caption, Insurance liabilities, with theremainder included in non-current caption, Insurance liabilities, on the Consolidated Balance Sheets.48Table of ContentsWarrantiesThe Company has recorded product warranty reserves of $5.7 million, $6.0 million and $6.3 million at December 31, 2018, 2017 and 2016, respectively. TheCompany provides for warranties of certain products as they are sold. The following table summarizes the warranty activity for 2018, 2017 and 2016:(In thousands) 2018 2017 2016Warranty reserves, beginning of the year $5,956 $6,281 $7,844Accruals for warranties issued during the year 4,596 5,528 6,439Reductions related to pre-existing warranties (3,730) (3,792) (5,611)Acquisitions (See Note 3) 249 — —Warranties paid (1,293) (2,078) (2,372)Other (principally foreign currency translation) (67) 17 (19)Warranty reserves, end of the year $5,711 $5,956 $6,281Warranty expense and payments are incurred principally in the Harsco Industrial and Harsco Rail Segments. Warranty activity may vary from year to yeardepending upon the mix of revenues and contractual terms related to product warranties.Foreign Currency TranslationThe financial statements of the Company's subsidiaries outside the U.S., except for those subsidiaries located in highly inflationary economies and thoseentities for which the U.S. dollar is the currency of the primary economic environment in which the entity operates, are measured using the local currency asthe functional currency. Assets and liabilities of these subsidiaries are translated at the exchange rates at the balance sheet date. Resulting translationadjustments are recorded in the cumulative translation adjustment account, a separate component of Accumulated other comprehensive loss on theConsolidated Balance Sheets. Income and expense items are translated at average monthly exchange rates. Gains and losses from foreign currencytransactions are included in Operating income from continuing operations. For subsidiaries operating in highly inflationary economies, and those entities forwhich the U.S. dollar is the currency of the primary economic environment in which the entity operates, gains and losses on foreign currency transactions andbalance sheet translation adjustments are included in Operating income from continuing operations.Financial Instruments and HedgingThe Company has operations throughout the world that are exposed to fluctuations in related foreign currencies in the normal course of business. TheCompany seeks to reduce exposure to foreign currency fluctuations through the use of forward exchange contracts. The Company does not hold or issuefinancial instruments for trading purposes and it is the Company's policy to prohibit the use of derivatives for speculative purposes. The Company has aForeign Currency Risk Management Committee that meets periodically to monitor foreign currency risks.The Company executes foreign currency exchange forward contracts to hedge transactions for firm purchase commitments, to hedge variable cash flows offorecasted transactions and for export sales denominated in foreign currencies. These contracts are generally for 90 days or less; however, where appropriate,longer-term contracts may be utilized. For those contracts that are designated as qualified cash flow hedges, gains or losses are recorded in Accumulated othercomprehensive loss on the Consolidated Balance Sheets.The Company uses interest rate swaps in conjunction with certain debt issuances in order to secure a fixed interest rate. The interest rate swaps are recordedon the Consolidated Balance Sheets at fair value, with changes in value attributed to the effect of the swaps’ interest spread and changes in the creditworthiness of the counter-parties recorded in Accumulated other comprehensive loss. Amounts recorded in Accumulated other comprehensive loss on the Consolidated Balance Sheets are reclassified into operations in the same period orperiods during which the hedged forecasted transaction affects income. The cash flows from these contracts are classified consistent with the cash flows fromthe transaction being hedged (e.g., the cash flows related to contracts to hedge the purchase of fixed assets are included in cash flows from investingactivities, etc.). The Company also enters into certain forward exchange contracts that are not designated as hedges. Gains and losses on these contracts arerecognized in operations based on changes in fair market value. For fair value hedges of a firm commitment, the gain or loss on the derivative and theoffsetting gain or loss on the hedged firm commitment are recognized currently in operations.See Note 15, Financial Instruments, for additional information.49Table of ContentsEarnings Per ShareBasic earnings per share are calculated using the weighted-average shares of common stock outstanding, while diluted earnings per share reflect the dilutiveeffects of stock-based compensation. Dilutive securities are not included in the computation of loss per share when the Company reports a net loss fromcontinuing operations as the impact would be anti-dilutive. All share and per share amounts are restated for any stock splits and stock dividends that occurprior to the issuance of the financial statements.See Note 13, Capital Stock, for additional information.Use of Estimates in the Preparation of Financial StatementsThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts ofrevenues and expenses. Actual results could differ from those estimates.2. Recently Adopted and Recently Issued Accounting StandardsThe following accounting standards have been adopted in 2018:On January 1, 2018, the Company adopted changes, with subsequent amendments, issued by the Financial Accounting Standards Board ("FASB") related tothe recognition of revenue from contracts with customers. The changes clarify the principles for recognizing revenue and develop a common revenuestandard. The core principle of the changes is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in anamount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The adoption of these changesresulted in the following modifications to the Company's revenue recognition process:•Harsco Industrial Segment - The timing of revenue recognition for air-cooled heat exchanger sales, which the Company historically recognizedupon the completion of the efforts associated with these arrangements, is now recognized over time with the impact of increasing revenue in earlierperiods. This change also impacted the Company's Consolidated Balance Sheets by decreasing both Inventories and Advances on contracts; andcreating a new caption and establishing a balance related to Contract assets.•Harsco Rail Segment - The timing of revenue recognition for certain railway track maintenance equipment sales, which the Company historicallyrecognized upon the completion of the efforts associated with these arrangements, is now recognized over time with the impact of increasingrevenue in earlier periods. This change also impacted the Company's Consolidated Balance Sheets by decreasing both Inventories and Advances oncontracts; and creating a new caption and establishing a balance related to Contract assets. In addition, certain advance payments received fromcustomers, which provide a significant benefit of financing and are expected to be outstanding longer than twelve months, are treated as significantfinancing components to the related transactions and the Company will increase the overall transaction price with a corresponding increase ininterest expense.Additionally, the Company's disclosure related to revenue recognition has been expanded in accordance with the FASB changes. See Note 17, RevenueRecognition for additional information.The Company chose to implement the impact of the FASB changes utilizing the modified retrospective transition method, using the following practicalexpedients:•The Company has elected to apply the changes only to revenue arrangements that were not completed as of January 1, 2018; and•The Company has elected to reflect the aggregate effect of all contract modifications that occurred prior to the beginning of the earliest reportedperiod when (i) identifying the satisfied and unsatisfied performance obligations;(ii) determining the transaction price; and (iii) allocating the transaction price to the satisfied and unsatisfied performance obligations.50Table of ContentsComparative information has not been restated and continues to be reported under U.S. GAAP in effect for those periods.The cumulative effect of the changes made to the Consolidated Balance Sheet at January 1, 2018 was as follows:(In thousands) Balance atDecember 31, 2017 Impact of Adoption Balance at January1,2018ASSETS Current assets: Trade accounts receivable, net $288,034 $532 $288,566 Inventories 178,293 (59,793) 118,500 Current portion of contract assets — 18,248 18,248 Other current assets 39,332 179 39,511 Total current assets 592,092 (40,834) 551,258Contract assets — 3,566 3,566Other assets 15,263 1,337 16,600 Total assets 1,578,685 (35,931) 1,542,754LIABILITIES Current liabilities: Current portion of advances on contracts 117,958 (78,507) 39,451 Other current liabilities 133,368 13,995 147,363 Total current liabilities 474,128 (64,512) 409,616Advances on contracts — 24,564 24,564Other liabilities 40,846 1,580 42,426 Total liabilities 1,363,520 (38,368) 1,325,152HARSCO CORPORATION STOCKHOLDERS' EQUITY Accumulated other comprehensive loss (546,582) (1,520) (548,102)Retained earnings 1,157,801 3,957 1,161,758 Total Harsco Corporation stockholders' equity 170,451 2,437 172,888 Total equity 215,165 2,437 217,602 Total liabilities and equity 1,578,685 (35,931) 1,542,754The impact of modifying the Company's Consolidated Balance Sheet at December 31, 2018 is as follows: December 31, 2018(In thousands) As Reported Impact of Adoption As Reported - LessImpact of AdoptionASSETS Current assets: Trade accounts receivable, net $291,213 $12,767 $303,980 Inventories 133,111 44,510 177,621 Current portion of contract assets 24,254 (24,254) — Other current assets 35,128 (620) 34,508 Total current assets 605,034 32,403 637,437Deferred income tax assets 49,114 2,401 51,515Other assets 17,442 (1,681) 15,761 Total assets 1,632,867 33,123 1,665,99051Table of Contents December 31, 2018(In thousands) As Reported Impact of Adoption As Reported - LessImpact of AdoptionLIABILITIES Current liabilities: Current portion of advances on contracts 31,317 86,011 117,328 Other current liabilities 118,708 (9,449) 109,259 Total current liabilities 416,996 76,562 493,558Advances on contracts 37,675 (37,675) —Other liabilities 46,005 (253) 45,752 Total liabilities 1,319,491 38,634 1,358,125HARSCO CORPORATION STOCKHOLDERS' EQUITY Accumulated other comprehensive loss (567,107) 1,104 (566,003)Retained earnings 1,298,752 (6,636) 1,292,116 Total Harsco Corporation stockholders' equity 268,263 (5,532) 262,731Noncontrolling interests 45,113 21 45,134 Total equity 313,376 (5,511) 307,865 Total liabilities and equity 1,632,867 33,123 1,665,990The impact of modifying the Company's Consolidated Statements of Operation for the twelve months ended December 31, 2018 is as follows: Twelve Months Ended December 31, 2018(In thousands, except per share amounts) As Reported Impact of Adoption As Reported - LessImpact of AdoptionRevenues from continuing operations: Services revenues $1,007,239 $4,921 $1,012,160 Product revenues 715,141 6,084 721,225 Total revenues 1,722,380 11,005 1,733,385Costs and expenses from continuing operations: Costs of services sold 780,930 5,300 786,230 Costs of products sold 507,807 11,642 519,449 Selling, general and administrative costs 238,690 117 238,807 Total costs and expenses 1,531,453 17,059 1,548,512 Operating income from continuing operations 190,927 (6,054) 184,873Interest expense (38,148) 1,929 (36,219) Income from continuing operations before income taxes 157,254 (4,125) 153,129Income tax expense (12,899) 1,446 (11,453) Income from continuing operations 144,739 (2,679) 142,060Net income 145,013 (2,679) 142,334 Less: Net income attributable to noncontrolling interests (7,956) (21) (7,977)Net income attributable to Harsco Corporation 137,057 (2,700) 134,357Amounts attributable to Harsco Corporation common stockholders: Income from continuing operations, net of tax 136,783 (2,700) 134,083Net income attributable to Harsco Corporation common stockholders 137,057 (2,700) 134,357Basic earnings per share attributable to Harsco Corporation common stockholders (a): Continuing operations 1.69 (0.03) $1.66Basic earnings per share attributable to Harsco Corporation common stockholders 1.70 (0.03) $1.66Diluted earnings per share attributable to Harsco Corporation common stockholders (a): Continuing operations 1.64 (0.03) $1.60Diluted earnings per share attributable to Harsco Corporation common stockholders 1.64 (0.03) $1.61(a)The total of As Reported and Impact of Adoption may not equal As Reported - Less Impact of Adoption due to rounding.52Table of ContentsThe impact of modifying the Company's Consolidated Statements of Cash Flows for the twelve months ended December 31, 2018 is as follows: Twelve Months Ended December 31, 2018(In thousands) As Reported Impact of Adoption As Reported - LessImpact of AdoptionCash flows from operating activities: Net income $145,013 $(2,679) $142,334Adjustments to reconcile net income to net cash used by operating activities:Deferred income tax benefit (6,522) (1,446) (7,968)Changes in assets and liabilities: Accounts receivable (16,881) (13,143) (30,024)Inventories (14,706) 10,330 (4,376)Contract assets (3,312) 3,312 —Advances on contracts 3,057 (1,378) 1,679Other assets and liabilities (33,527) 5,004 (28,523) Net cash used by operating activities 192,022 — 192,022On January 1, 2018, the Company adopted changes issued by the FASB related to how employers that sponsor defined benefit pension plans and otherpostretirement plans present the net periodic pension cost ("NPPC") in the statement of operations. Employers are required to report the service costcomponent in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. Othercomponents of NPPC are required to be presented in the statement of operations separately from the service cost component and outside of the subtotal ofincome from operations. The changes also allow only the service cost component to be eligible for capitalization. The adoption of these changes resulted inthe Company reclassifying $2.6 million and $1.4 million of NPPC expense for the year ended December 31, 2017 and December 31, 2016, respectively, fromthe captions Cost of services sold; Cost of products sold; and Selling, general and administrative expenses to the new caption, Defined benefit pensionincome (expense) in the Company's Consolidated Statements of Operations.On January 1, 2018, the Company adopted changes issued by the FASB clarifying when revisions to the terms or conditions of a share-based payment awardrequire an entity to apply modification accounting. The changes require modification accounting only in circumstances when the terms or conditions resultin changes to the fair value, vesting conditions or classification of the award as an equity instrument or a liability. The adoption of these changes did nothave an impact on the Company's consolidated financial statements.On January 1, 2018, the Company adopted changes issued by FASB which eliminate the requirement to defer the recognition of current and deferred incometaxes for an intra-entity asset transfer until the asset has been sold to an outside party. Under the new guidance, an entity should recognize the income taxconsequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The changes resulted in an adjustment to opening retainedearnings of less than$0.1 million.In October 2018, the Company adopted changes issued by FASB that require entities that are customers in cloud computing arrangements to deferimplementation costs if they would be capitalized by the entity in software licensing arrangements under the internal-use software guidance. The adoption ofthese changes did not have an impact on the Company's consolidated financial statements.The following accounting standards have been issued and become effective for the Company at a future date:In February 2016, the FASB issued changes, with subsequent amendments, in accounting for leases, which become effective for the Company on January 1,2019. The changes introduce a lessee model that brings most leases onto the balance sheet, which will result in an increase in lease-related assets andliabilities. The changes also align many of the underlying principles of the new lessor model with those in the FASB’s new revenue recognition standard.Furthermore, the changes address other concerns related to the current lease model such as eliminating the requirement in current guidance for an entity touse bright-line tests in determining lease classification. The changes also require lessors to increase the transparency of their exposure to changes in value oftheir residual assets and how they manage that exposure. The changes allow for a modified retrospective transition approach, applying the new standard to allleases existing at the date of initial application. Entities may choose to use either (1) its effective date or (2) the beginning of the earliest comparative periodpresented in the financial statement as the date of initial application. The Company has elected to apply the transition requirements at the January 1, 2019effective date53Table of Contentsrather than at the beginning of the earliest comparative period presented, which allows for a cumulative effect adjustment in the period of adoption. Priorperiods will not be restated. In addition, the Company has also elected to utilize certain practical expedients upon adoption. The Company is in the processof finalizing changes to current business processes and internal controls to support the reporting and disclosure requirements of the new standard. TheCompany has completed an assessment of existing leasing agreements and is in the process of finalizing the quantification of the impact on the Company’sconsolidated financial statements.In June 2016, the FASB issued changes which amends the impairment model by requiring entities to use a forward-looking approach based on expectedlosses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlierrecognition of allowances for losses. The changes become effective for the Company on January 1, 2020, with early adoption permitted. Management has notyet completed the assessment of the impact of the new standard on the Company’s Consolidated Financial Statements.In January 2017, the FASB issued changes that remove the second step of the annual goodwill impairment test, which requires a hypothetical purchase priceallocation. The changes provide that the amount of goodwill impairment will be equal to the amount by which a reporting unit’s carrying value exceeds itsfair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance remains largely unchanged. The same one-stepimpairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose theamount of goodwill at reporting units with zero or negative carrying amounts. The changes become effective for the Company on January 1, 2020.Management has determined that these changes will not have a material impact on the Company's consolidated financial statements. However, should theCompany be required to record a goodwill impairment charge in future periods, the amount recorded may differ compared to any amounts that might berecorded under current practice.In August 2017, the FASB issued changes which expand and refine hedge accounting for both financial and non-financial risk components, aligns therecognition and presentation of the effects of hedging instruments and hedged items in the financial statements and includes certain targeted improvementsto ease the application of current guidance related to the assessment of hedge effectiveness. The amendments in this update should be applied to hedgingrelationships existing on the date of adoption, which includes a cumulative-effect adjustment to eliminate any ineffectiveness recorded to accumulated othercomprehensive income or loss with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year in whichadoption occurred. Presentation and disclosure amendments are required to be applied prospectively. The changes become effective for the Company onJanuary 1, 2019. Management has determined that these changes will not have a material impact on the Company's consolidated financial statements.In February 2018, the FASB issued changes which allow entities to reclassify stranded income tax effects resulting from the Tax Cuts and Jobs Act (the “TaxAct”) from accumulated other comprehensive income to retained earnings in their consolidated financial statements. Under the Tax Act, deferred taxes wereadjusted to reflect the reduction of the historical corporate incometax rate to the newly enacted corporate income tax rate, which left the tax effects on items within accumulated other comprehensive income stranded athistorical tax rates. The changes become effective for the Company on January 1, 2019. The Company had approximately $21 million of stranded income taxeffects in accumulated other comprehensive income at both December 31, 2017 and 2018 resulting from the Tax Act which the Company plans to reclassifyupon initial adoption of these changes.In August 2018, the FASB issued changes which modify the disclosure requirements for fair value measurements. The amendments in this update remove therequirement to disclose the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfersbetween levels; and the valuation processes for Level 3 fair value measurements. The changes require disclosure of changes in unrealized gains and losses forthe period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and the rangeand weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The changes become effective for the Companyon January 1, 2020. Management is currently evaluating the impact of these changes on its consolidated financial statements.In August 2018, the FASB issued changes which modify the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The changes remove the requirements to disclose: amounts in accumulated other comprehensive income (loss) expected to be recognized ascomponents of net periodic benefit cost over the next fiscal year; the amount and timing of plan assets expected to be returned to the employer; and theeffects of a one-percentage point change in assumed health care cost trend rates. The update also requires disclosure of an explanation of the reasons forsignificant gains and losses related to changes in the benefit obligation for the period. The changes become effective for the Company on January 1, 2021.Management does not believe these changes will have a material impact on its consolidated financial statements.54Table of Contents3. AcquisitionIn May 2018, the Company acquired Altek Europe Holdings Limited and its affiliated entities (collectively, "Altek"), a U.K.-based manufacturer of marketleading products that enable aluminum producers and recyclers to manage and efficiently extract value from critical byproduct streams, reduce byproductgeneration and improve operating productivity. The Company acquired Altek, on a debt and cash free basis, for a purchase price of £45 million(approximately $60 million) in cash, with the potential for up to £25 million (approximately $33 million) in additional contingent consideration through2021 subject to the future financial performance of Altek. The preliminary purchase price included an upfront payment of $60.1 million, subject to workingcapital adjustments and net of cash acquired, as well as contingent consideration with an estimated preliminary fair value of $12.1 million as of theacquisition date. Altek's revenues and operating results have been included in the results of the Harsco Metals & Minerals Segment and were not material tothe Company's consolidated results for the year endedDecember 31, 2018. The Company incurred approximately $1 million of costs associated with the Altek acquisition in the caption Selling, general andadministrative expenses in the Consolidated Statements of Operations.The fair value recorded for the assets acquired and liabilities assumed for Altek is as follows: Preliminary Valuation(In millions) June 302018 Measurement PeriodAdjustments (a) December 31 2018Cash and cash equivalents $1.7 $— $1.7Net working capital (1.5) 0.2 (1.3)Property, plant and equipment 3.3 — 3.3Intangible assets 52.5 0.2 52.7Goodwill 20.9 1.6 22.5Net deferred tax liabilities (8.5) — (8.5)Other liabilities (0.3) — (0.3)Total identifiable net assets of Altek $68.1 $2.0 $70.1(a) The measurement period adjustments did not have a material impact on the Company's previously reported operating results.The goodwill is attributable to strategic benefits, including enhanced operational and financial scale and product and market diversification that theCompany expects to realize. The Company expects less than $1.0 million of goodwill to be deductible for income tax purposes.The following table details the preliminary valuation of identifiable intangible assets and amortization periods for Altek: Amortization Period Preliminary Valuation(Dollars in millions) June 302018 Measurement PeriodAdjustments (a) December 31 2018Customer related 14.2 years $11.5 $0.1 $11.6Technology related 10.3 years 36.5 0.1 36.6Trade names 15.0 years 4.5 — 4.5Total identifiable intangible assets of Altek $52.5 $0.2 $52.7(a) The measurement period adjustments did not have a material impact on the Company's previously reported operating results.The Company valued the customer related assets, technology related assets, and trade names using an income-based approach that utilized either the multi-period excess earnings method or the relief from royalty method.The preliminary fair value of contingent consideration was estimated using a probability simulation model, which uses assumptions and estimates to forecasta range of outcomes for the contingent consideration. Key inputs to the model include projected earnings before interest, tax, depreciation and amortization;the discount rate; the projection risk neutralization rate; and volatility, which are Level 3 data. The Company will assess these assumptions and estimates ona quarterly basis as additional data impacting the assumptions is obtained. Any changes in the fair value of contingent consideration related to updatedassumptions and estimates will be recognized in the Consolidated Statements of Operations during the period in which the change occurs.55Table of ContentsThe following table reflects the changes in the fair value of contingent consideration:(In thousands) ContingentConsiderationBalance, June 30, 2018 $10,097Measurement period adjustment (b) 1,958Fair value adjustment (c) (2,939)Foreign currency translation (c) (696)Balance, December 31, 2018 $8,420(b) Measurement period adjustment was recorded to goodwill on the Consolidated Balance Sheet.(c) These amounts are recorded in the caption Other (income) expenses, net on the Consolidated Statements of Operations.The purchase price allocation for this transaction is not final and the fair value of intangible assets, goodwill and contingent consideration may vary fromthose reflected in the consolidated financial statements at December 31, 2018. Inclusion of pro forma financial information for this transaction is notnecessary as the acquisition is immaterial to the Company's results of operations.4. Accounts Receivable and InventoriesAccounts receivable consist of the following:(In thousands) December 31 2018 December 31 2017Trade accounts receivable $295,847 $292,765Less: Allowance for doubtful accounts (4,634) (4,731)Trade accounts receivable, net $291,213 $288,034Other receivables (a) (b) $54,182 $20,224(a)Other receivables include insurance claim receivables, employee receivables, tax claim receivables and other miscellaneous receivables not included in Trade accounts receivable,net(b)From time to time, based on developments including ongoing negotiations, the Company adjusts insured liabilities with offsetting insurance receivables, with no impact to theConsolidated Statements of Operations. The provision (benefit) for doubtful accounts related to trade accounts receivable was as follows: Years Ended December 31(In thousands) 2018 2017 2016Provision (benefit) for doubtful accounts related to trade accounts receivable $372 $5,346 $(38)The increase in the provision for doubtful accounts for the year ended 2017 is due principally to the write-off of certain pre-administration receivablebalances for one of the Company's customers in Australia.Inventories consist of the following:(In thousands) December 31 2018 December 31 2017Finished goods $17,223 $26,415Work-in-process 21,787 24,367Contracts-in-process (c) — 45,599Raw materials and purchased parts 72,194 58,943Stores and supplies 21,907 22,969Total inventories $133,111 $178,293Valued at lower of cost or market: LIFO basis $80,590 $80,644FIFO basis 8,611 52,832Average cost basis 43,910 44,817Total inventories $133,111 $178,293Inventories valued on the LIFO basis at December 31, 2018 and 2017 were approximately $36 million and $33 million, respectively, less than the amounts ofsuch inventories valued at current costs. During 2018, 2017 and 2016 as a result of reducing certain inventory quantities valued on a LIFO basis, net income(loss) was favorably impacted compared to that which would have been recorded under the FIFO basis of valuation by $0.6 million, $0.4 million and $1.3million, respectively.56Table of ContentsContracts-in-process consist of the following:(In thousands) December 31 2017Contract costs accumulated to date $73,740Estimated forward loss provisions for contracts-in-process (d) (28,141)Contracts-in-process (c)(e) $45,599(c)The Company has adopted the new revenue recognition standard utilizing the modified retrospective transition method, including use of practical expedients. Amounts previouslyreported as Contracts-in-progress have been recognized through the related cumulative catch-up adjustment. See Note 2, Recently Adopted and Recently Issued AccountingStandards for additional information.(d) For periods prior to January 1, 2018, to the extent that the estimated forward loss provision exceeds accumulated contract costs it is included in the caption Other current liabilitieson the Consolidated Balance Sheets and amounted to $3.0 million at December 31, 2017.(e) At December 31, 2017, the Company had $97.9 million of net customer advances related to SBB contracts. These amounts are included in the caption Current portion of advanceson contracts on the Consolidated Balance Sheets.The Company recognized an initial estimated forward loss provision related to the contracts with the federal railway system of Switzerland ("SBB") of $45.1million for the year ended December 31, 2016. The Company recorded an additional forward loss provision of $1.8 million for the year ended December 31,2018. At December 31, 2018, the entire remaining estimated forward loss provision of $9.6 million is included in the caption Other current liabilities on theConsolidated Balance Sheets. The estimated forward loss provision represents the Company's best estimate based on currently available information. It ispossible that the Company's overall estimate of costs to complete these contracts may increase, which would result in an additional estimated forward lossprovision at such time.The Company recognized $24.2 million of revenues for the contracts with SBB, on an over time basis, utilizing a cost-to-cost method for the year endedDecember 31, 2018. In addition, for the years ended December 31, 2017 and 2016, the Company recognized $42.5 million and $0.2 million, respectively, ofrevenue based on the percentage-of-completion (units-of-delivery) method of accounting, whereby revenues and estimated average costs of the units to beproduced under the contracts are recognized as deliveries are made or accepted. For 2016, consolidated product revenue gross margins were not significantlyimpacted by the revenue recognized under the SBB contracts. For 2018 and 2017, product gross margins would have been 100 basis points and 200 basispoints higher, respectively, excluding the revenue recognized under the SBB contract. The Company is approximately 99% complete on the first contractand 26% complete on the second contract with SBB as of December 31, 2018.5. Equity Method InvestmentsIn November 2013, the Company sold the Company's Harsco Infrastructure Segment into a strategic venture with Clayton, Dubilier & Rice ("CD&R") as partof a transaction that combined the Harsco Infrastructure Segment with Brand Energy & Infrastructure Services, Inc., which CD&R simultaneously acquired(the "Infrastructure Transaction"). As a result of the Infrastructure Transaction, the Company retained an equity interest in Brand Energy & InfrastructureService, Inc. and Subsidiaries ("Brand" or the "Infrastructure strategic venture") which was accounted for as an equity method investment in accordance withU.S. GAAP.As part of the Infrastructure Transaction, the Company was required to make a quarterly payment to the Company's partner in the Infrastructure strategicventure, either (at the Company's election) (i) in cash, with total payments to equal approximately $22 million per year on a pre-tax basis (approximately $15million per year after-tax), or (ii) in kind, through the transfer of approximately 3% of the Company's ownership interest in the Infrastructure strategic ventureon an annual basis (the "unit adjustment liability"). The Company recognized the change in fair value to the unit adjustment liability each period until theCompany was no longer required to make these payments or chose not to make these payments. The change in fair value to the unit adjustment liability was anon-cash expense.In March 2016, the Company elected not to make the quarterly cash payments to the Company's partner in the Infrastructure strategic venture for theremainder of 2016. Instead, the Company transferred approximately 3% of its ownership interest in satisfaction of the Company's 2016 obligation related tothe unit adjustment liability. The resulting net loss of $10.3 million was recognized in Change in fair value to the unit adjustment liability and loss ondilution and sale of equity method investment on the Consolidated Statement of Operations. This net loss was a non-cash expense.In September 2016, the Company entered into an Omnibus Agreement with CDR Bullseye Holdings, L.P., Bullseye G.P., LLC, Bullseye Partnership, L.P.,Bullseye Holdings, L.P. and Brand Energy & Infrastructure Holdings, Inc. (the “Brand Entities”), pursuant to which the Brand Entities repurchased theCompany's remaining approximate 26% interest in Brand.57Table of ContentsIn exchange for the Company's interest, (i) the Company received $145 million in cash, net, and (ii) the requirement for the Company to fund certainobligations to Brand through 2018 were satisfied, the present value of which equaled $20.6 million. In addition, the Company received $1.4 million inaccrued but unpaid fees, rent and expenses from the Brand Entities. As a result of the sale, the Company’s obligation to make quarterly payments related tothe unit adjustment liability under the terms of a limited partnership agreement that governed the operation of the strategic venture terminated. The Companyrecognized a loss on the sale of its equity interest in Brand in the amount of $43.5 million which was reflected in Change in fair value to unit adjustmentliability and loss on dilution and sale of equity method investment on the Consolidated Statement of Operations.The Company's proportionate share of Brand's net income or loss is recorded one quarter in arrears. Brand's summarized statement of operations informationfor the period from October 1, 2015 through June 30, 2016 is summarized as follows:(In thousands) Period From October1, 2015 ThroughJune 30 2016 (a)Summarized Statement of Operations Information of Brand: Net revenues $2,333,561Gross profit 499,005Net income attributable to Brand Energy & Infrastructure Services, Inc. and Subsidiaries 20,756Harsco's equity in income of Brand 5,686(a)The Company's equity method investment in Brand was sold in September 2016; accordingly, equity income was recorded for the period from October 1, 2015 through June 30,2016.There was no change in fair value to the unit adjustment liability for the years ended 2018 and 2017 due to the sale of the interest in Brand. For the yearended 2016, the Company recognized $4.7 million of change in fair value to the unit adjustment liability, exclusive of the fair value adjustment resultingfrom the decision not to make the quarterly payments in 2016 and the loss related to the sale of the Company's interest, in Change in fair value to the unitadjustment liability and loss on dilution and sale of equity method investment on the Consolidated Statement of Operations.6. Property, Plant and EquipmentProperty, plant and equipment consist of the following:(In thousands) EstimatedUseful Lives December 31 2018 December 31 2017Land — $10,621 $10,840Land improvements 5-20 years 16,156 14,996Buildings and improvements (a) 5-40 years 191,072 198,582Machinery and equipment 3-20 years 1,538,166 1,599,713Uncompleted construction — 37,713 24,387Gross property, plant and equipment 1,793,728 1,848,518Less: Accumulated depreciation (1,323,828) (1,368,771)Property, plant and equipment, net $469,900 $479,747(a) Buildings and improvements include leasehold improvements that are amortized over the shorter of their useful lives or the initial term of the lease.Included in the amounts are $1.7 million and $5.5 million of property, plant and equipment under capital leases at December 31, 2018 and 2017,respectively.58Table of Contents7. Goodwill and Other Intangible AssetsGoodwill by SegmentThe following table reflects the changes in carrying amounts of goodwill by segment for the years ended December 31, 2018 and 2017:(In thousands) Harsco Metals& MineralsSegment HarscoIndustrialSegment HarscoRailSegment ConsolidatedTotalsBalance at December 31, 2016 $362,386 $6,839 $13,026 $382,251Foreign currency translation 19,507 — — 19,507Balance at December 31, 2017 381,893 6,839 13,026 401,758Changes to goodwill (a) 22,518 — — 22,518Foreign currency translation (12,724) — — (12,724)Balance at December 31, 2018 $391,687 $6,839 $13,026 $411,552(a) Changes to goodwill in the Harsco Metals & Minerals Segment relate to the acquisition of Altek. The purchase price allocation is not yet final for this acquisition. See Note 3,Acquisition.The Company's methodology for determining reporting unit fair value is described in Note 1, Summary of Significant Accounting Policies. Performance ofthe Company's 2018 annual impairment test did not result in impairment of any of the Company's reporting units.Intangible AssetsIntangible assets totaled $79.8 million, net of accumulated amortization of $110.0 million at December 31, 2018 and$38.3 million, net of accumulated amortization of $163.9 million at December 31, 2017. The following table reflects these intangible assets by majorcategory: December 31, 2018 December 31, 2017(In thousands) Gross CarryingAmount AccumulatedAmortization Gross CarryingAmount AccumulatedAmortizationCustomer related $136,307 $99,383 $153,014 $121,385Patents 2,598 2,503 5,825 5,700Technology related 35,831 2,681 26,131 26,131Trade names 9,212 1,897 8,317 4,845Other 5,865 3,524 8,875 5,850Total $189,813 $109,988 $202,162 $163,911Amortization expense for intangible assets was $7.7 million, $5.1 million and $7.9 million for 2018, 2017 and 2016, respectively. The following table showsthe estimated amortization expense for the next five fiscal years based on current intangible assets.(In thousands) 2019 2020 2021 2022 2023Estimated amortization expense (a) $9,000 $8,750 $8,500 $8,250 $8,250(a)These estimated amortization expense amounts do not reflect the potential effect of future foreign currency exchange rate fluctuations.8. Debt and Credit AgreementsIn November 2016, the Company entered into a senior secured credit facility (the “Senior Secured Credit Facility”), consisting of a $400 million revolvingcredit facility (the "Revolving Credit Facility") and a $550 million term loan facility (the "Term Loan Facility"). Upon closing of the Senior Secured CreditFacility, the Company amended and extended the existing Revolving Credit Facility, repaid the existing term loan A facility and redeemed, satisfied anddischarged its 5.75% notes (the "Notes") in accordance with the indenture governing the Notes. As a result, a charge of $35.3 million was recorded during thefourth quarter of 2016 consisting principally of the cost of early extinguishment of the Notes and the write-off of unamortized deferred financing costsassociated with the Company’s then existing financing agreements and the Notes and is reflected in the financing activities section of the ConsolidatedStatements of Cash Flows as a reduction of long-term debt.59Table of ContentsIn December 2017, the Company amended its Senior Secured Credit Facility in order to, among other things, reduce the interest rate applicable to the TermLoan Facility, improve certain covenants and extend the maturity date by a year until December 2024. As a result of this amendment, a charge of $2.3 millionwas recorded during the fourth quarter of 2017 consisting principally of fees associated with the transaction and the write-off of unamortized deferredfinancing costs and is reflected in the operating activities section of the Consolidated Statements of Cash Flows as part of Net income.In June 2018, the Company amended the Senior Secured Credit Facility in order to, among other things, reduce the interest rate applicable to the Term LoanFacility and to increase the limit of the Revolving Credit Facility. A charge of $1.1 million was recorded during 2018 consisting principally of feesassociated with the transaction and the write-off of unamortized deferred financing costs.Borrowings under the $500 million Revolving Credit Facility bear interest at a rate per annum ranging from 87.5 to 200 basis points over the base rate or187.5 to 300 basis points over the adjusted London Interbank Offered Rate ("LIBOR") as defined in the credit agreement governing the Senior Secured CreditFacility (the "Credit Agreement"). Any principal amount outstanding under the Revolving Credit Facility is due and payable on the maturity of theRevolving Credit Facility. The Revolving Credit Facility matures on November 2, 2021.Borrowings under the Term Loan Facility bear interest at a rate per annum of 225 basis points over the adjusted LIBOR rate, subject to a 1% floor, as definedin the Credit Agreement. The Term Loan Facility requires scheduled quarterly payments, each equal to 0.25% of the original principal amount of the loansunder the Term Loan Facility. These payments are reduced by the application of any prepayments and any remaining balance is due and payable on thematurity of the Term Loan Facility. The Term Loan Facility matures on December 8, 2024.The Credit Agreement requires certain mandatory prepayments of the Term Loan Facility, subject to certain exceptions, based on net cash proceeds of certainsales or distributions of assets, as well as certain casualty and condemnation events, in some cases subject to reinvestment rights and certain other exceptions;net cash proceeds of any issuance of debt, excluded permitted debt issuances; and a percentage of excess cash flow, as defined by the Credit Agreement,during a fiscal year.The Senior Secured Credit Facility imposes certain restrictions including, but not limited to, restrictions as to types and amounts of debt of liens that may beincurred by the Company; limitations on increases in dividend payments; limitations on repurchases of the Company's stock and limitations on certainacquisitions by the Company.With respect to the Senior Secured Credit Facility, the obligations of the Company are guaranteed by substantially all of the Company’s current and futurewholly-owned domestic subsidiaries (“Guarantors”). All obligations under the Senior Credit Facility, and the guarantees of those obligations, are secured,subject to certain exceptions, by substantially all of the Company’s assets and the assets of the Guarantors.Summary of Senior Secured Credit Facility Borrowings:(In thousands) December 31 2018 December 31 2017By type: Revolving Credit Facility $62,000 $41,000 Term Loan Facility 541,788 545,875 Total $603,788 $586,875By classification: Current $5,445 $5,459 Long-term 598,343 581,416 Total $603,788 $586,875The following table illustrates the amount outstanding under the Revolving Credit Facility and available credit at December 31, 2018. December 31, 2018(In thousands) FacilityLimit OutstandingBalance OutstandingLetters of Credit AvailableCreditRevolving Credit Facility (a U.S.-based program) $500,000 $62,000 $30,352 $407,648Short-term borrowings amounted to $10.1 million and $8.6 million at December 31, 2018 and 2017, respectively. At December 31, 2018 and 2017, Short-term borrowings consist primarily of bank overdrafts and other third-party debt. The weighted-average interest rate for short-term borrowings at December 31,2018 and 2017 was 3.0% and 4.3%, respectively.60Table of ContentsLong-term debt consists of the following:(In thousands) December 31 2018 December 31 2017Senior Secured Credit Facilities: Term Loan Facility with an interest rate of 4.8% and 4.6% at December 31, 2018 and 2017, respectively $541,788 $545,875Revolving Credit Facility with an average interest rate of 4.6% and 4.2% at December 31, 2018 and 2017,respectively 62,000 41,000Other financing payable (including capital leases) in varying amounts due principally through 2019 with aweighted-average interest rate of 3.9% and 5.0% at December 31, 2018 and 2017, respectively 1,606 6,784Total debt obligations 605,394 593,659Less: deferred financing costs (13,243) (15,657)Total debt obligations, net of deferred financing costs 592,151 578,002Less: current maturities of long-term debt (6,489) (11,208)Long-term debt $585,662 $566,794The maturities of long-term debt for the four years following December 31, 2019 are as follows:(In thousands) 2020 $5,9532021 67,5072022 5,4452023 5,445Cash payments for interest on debt were $34.2 million, $44.3 million and $49.6 million in 2018, 2017 and 2016, respectively.The Credit Agreement contains a consolidated net debt to consolidated adjusted earnings before interest, tax, depreciation and amortization ("EBITDA")ratio covenant, which is not to exceed 3.75 to 1.0 and a minimum consolidated adjusted EBITDA to consolidated interest charges ratio covenant, which isnot to be less than 3.0 to 1.0. The consolidated net debt to consolidated adjusted EBITDA ratio covenant is reduced to 3.5 to 1.0 after December 31, 2018. AtDecember 31, 2018, the Company was in compliance with these and all other covenants.9. Operating LeasesThe Company leases certain property and equipment under operating leases. Rental expense under such operating leases was $16.2 million, $16.5 millionand $16.9 million in 2018, 2017 and 2016, respectively.Future minimum payments under operating leases with noncancelable terms are as follows:(In thousands) 2019 $13,9852020 12,2042021 9,4482022 7,7062023 6,201After 2023 28,442Total minimum rentals to be received in the future under noncancelable subleases at December 31, 2018 are $0.5 million.61Table of Contents10. Employee Benefit PlansPension BenefitsThe Company has defined benefit pension plans covering a substantial number of employees. The defined benefits for salaried employees generally are basedon years of service and the employee's level of compensation during specified periods of employment. Defined benefit pension plans covering hourlyemployees generally provide benefits of stated amounts for each year of service. The multiemployer pension plans ("MEPPs"), in which the Companyparticipates, provide benefits to certain unionized employees. The Company's funding policy for qualified plans is consistent with statutory regulations andcustomarily equals the amount deducted for income tax purposes. Periodic voluntary contributions are made, as recommended, by the Company's PensionCommittee.For most U.S. defined benefit pension plans and a majority of international defined benefit pension plans, accrued service is no longer granted. In place ofthese plans, the Company has established defined contribution plans providing for the Company to contribute a specified matching amount for participatingemployees' contributions to the plan. For U.S. employees, this match is made on employee contributions up to 4% of eligible compensation. Additionally,the Company may provide a discretionary contribution for eligible employees. There have been no discretionary contributions provided for the years 2018,2017 and 2016. For non-U.S. employees, this match is up to 6% of eligible compensation with an additional 2% going towards insurance and administrativecosts.NPPC for U.S. and international plans for 2018, 2017 and 2016 is as follows: U.S. Plans International Plans(In thousands) 2018 2017 2016 2018 2017 2016Defined benefit pension plans: Service cost $42 $43 $102 $1,669 $1,724 $1,585Interest cost 9,562 9,878 10,165 21,589 21,459 26,822Expected return onplan assets (12,068) (10,485) (10,721) (42,685) (40,469) (42,979)Recognized priorservice costs 1 33 63 (140) 186 189Recognized losses 5,207 5,701 5,493 14,807 16,283 12,002Settlement/curtailmentloss (gain) 285 — 276 (36) (20) 79Defined benefit pensionplan cost (income) 3,029 5,170 5,378 (4,796) (837) (2,302)Multiemployer pensionplans 686 650 636 1,313 1,306 1,368Defined contributionplans 5,034 4,239 3,833 5,608 5,905 5,807Net periodic pensioncost $8,749 $10,059 $9,847 $2,125 $6,374 $4,873The change in the financial status of the defined benefit pension plans and amounts recognized on the Consolidated Balance Sheets at December 31, 2018and 2017 are as follows: U.S. Plans International Plans(In thousands) 2018 2017 2018 2017Change in benefit obligation: Benefit obligation at beginning of year $314,861 $305,652 $1,015,586 $952,360Service cost 42 43 1,669 1,724Interest cost 9,562 9,878 21,589 21,459Plan participants' contributions — — 49 61Amendments — — 11,238 (4,459)Actuarial (gain) loss (21,474) 14,459 (78,658) (3,613)Settlements/curtailments — — (313) (3,362)Benefits paid (16,964) (15,171) (37,721) (40,379)Effect of foreign currency — — (58,760) 91,795Benefit obligation at end of year $286,027 $314,861 $874,679 $1,015,586 62Table of Contents U.S. Plans International Plans(In thousands) 2018 2017 2018 2017Change in plan assets: Fair value of plan assets at beginning of year $229,941 $205,271 $842,717 $732,743Actual return on plan assets (17,883) 33,942 (30,004) 67,136Employer contributions 10,294 5,899 18,415 18,187Plan participants' contributions — — 49 61Settlements/curtailments — — (313) (3,241)Benefits paid (16,964) (15,171) (37,570) (39,800)Effect of foreign currency — — (48,756) 67,631Fair value of plan assets at end of year $205,388 $229,941 $744,538 $842,717Funded status at end of year $(80,639) $(84,920) $(130,141) $(172,869)Amounts recognized on the Consolidated Balance Sheets for defined benefit pension plans consist of the following at December 31, 2018 and 2017: U.S. Plans International Plans December 31 December 31(In thousands) 2018 2017 2018 2017Noncurrent assets $1,953 $1,860 $2,379 $1,820Current liabilities 1,954 2,237 643 625Noncurrent liabilities 80,638 84,543 131,876 174,064Accumulated other comprehensive loss before tax 149,326 146,341 391,849 427,127Amounts recognized in Accumulated other comprehensive loss, before tax, for defined benefit pension plans consist of the following at December 31, 2018and 2017: U.S. Plans International Plans(In thousands) 2018 2017 2018 2017Net actuarial loss $149,326 $146,340 $384,666 $430,377Prior service cost — 1 7,183 (3,250)Total $149,326 $146,341 $391,849 $427,127The estimated amounts that will be amortized from Accumulated other comprehensive loss into defined benefit pension plan NPPC in 2019 are as follows:(In thousands) U.S. Plans International PlansNet actuarial loss $5,621 $14,480Prior service cost — 324Total $5,621 $14,804The Company's estimate of expected contributions to be paid in 2019 for the U.S. and international defined benefit plans are $9.1 million and $20.4 million,respectively.Future Benefit PaymentsThe expected benefit payments for defined benefit pension plans over the next ten years are as follows:(In millions) 2019 2020 2021 2022 2023 2024-2028U.S. Plans $20.0 $19.5 $19.3 $19.4 $19.3 $94.1International Plans 38.5 39.4 41.0 41.4 42.5 228.2Net Periodic Pension Cost and Defined Benefit Pension Obligation AssumptionsThe weighted-average actuarial assumptions used to determine the defined benefit pension plan NPPC for 2018, 2017 and 2016 were as follows: U.S. PlansDecember 31 International PlansDecember 31 Global Weighted-AverageDecember 31 2018 2017 2016 2018 2017 2016 2018 2017 2016Discount rates 3.5% 4.0% 4.2% 2.6% 2.8% 3.8% 2.8% 3.1% 3.9%Expected long-term ratesof return on plan assets 7.3% 7.3% 7.3% 5.6% 5.9% 6.5% 6.0% 6.2% 6.7%63Table of ContentsThe expected long-term rates of return on defined benefit pension plan assets for the 2019 NPPC are 7.3% for the U.S. plans and 5.5% for the internationalplans. The expected global long-term rate of return on assets for 2019 is 5.9%.The weighted-average actuarial assumptions used to determine the defined benefit pension plan obligations atDecember 31, 2018 and 2017 were as follows: U.S. Plans International Plans Global Weighted-Average December 31 December 31 December 31 2018 2017 2018 2017 2018 2017Discount rates 4.2% 3.5% 2.9% 2.6% 3.2% 2.8%Since accrued service is no longer granted to the U.S. defined benefit plans and the majority of the international defined benefit pension plans, the rate ofcompensation increase did not have a significant impact on the defined benefit pension obligation at December 31, 2018 and 2017 or the defined benefitpension plan NPPC for the years ended 2018, 2017 and 2016.The U.S. discount rate was determined using a yield curve that was produced from a universe containing approximately 1,100 U.S. dollar-denominated, AA-graded corporate bonds, all of which were noncallable (or callable with make-whole provisions) and excluding the 10% of the bonds with the highestdeviation from the expected yield and the 10% with the lowest deviation from the expected yield within each duration group. The discount rate was thendeveloped as the level-equivalent rate that would produce the same present value as that using spot rates to discount the projected benefit payments. Forinternational plans, the discount rate is aligned to corporate bond yields in the local markets, normally AA-rated corporations. The process and selection seekto approximate the cash inflows with the timing and amounts of the expected benefit payments.Accumulated Benefit ObligationThe accumulated benefit obligation for all defined benefit pension plans at December 31, 2018 and 2017 was as follows: U.S. Plans International Plans December 31 December 31(In millions) 2018 2017 2018 2017Accumulated benefit obligation $286.0 $314.9 $869.4 $1,010.6Defined Benefit Pension Plans with Accumulated Benefit Obligation in Excess of Plan AssetsThe projected benefit obligation, accumulated benefit obligation and fair value of plan assets for defined benefit pension plans with accumulated benefitobligations in excess of plan assets at December 31, 2018 and 2017 were as follows: U.S. Plans International Plans December 31 December 31(In millions) 2018 2017 2018 2017Projected benefit obligation $279.2 $306.0 $831.7 $986.6Accumulated benefit obligation 279.2 306.0 828.9 981.9Fair value of plan assets 196.6 219.2 701.4 812.0The asset allocations attributable to the Company's U.S. defined benefit pension plans at December 31, 2018 and 2017, and the long-term target allocation ofplan assets, by asset category, are as follows: Target Long-TermAllocation Percentage of Plan AssetsDecember 31U.S. Plans Asset Category 2018 2017Domestic equity securities 27%-37% 30.6% 38.6%International equity securities 20%-30% 22.0% 24.5%Fixed income securities 35%-45% 42.9% 30.9%Cash and cash equivalents Less than 5% 0.7% 1.0%Other (a) 0%-10% 3.8% 5.0%(a)Investments within this caption include diversified global asset allocation funds.Defined benefit pension plan assets are allocated among various categories of equities, fixed income securities and cash and cash equivalents withprofessional investment managers whose performance is actively monitored. The primary investment objective is long-term growth of assets in order to meetpresent and future benefit obligations. The Company periodically conducts an asset/liability modeling study and accordingly adjusts investments amongand within asset categories to ensure the long-term investment strategy is aligned with the profile of benefit obligations.64Table of ContentsThe Company reviews the long-term expected return on asset assumption on a periodic basis taking considering variety of factors including the historicalinvestment returns achieved over a long-term period, the targeted allocation of plan assets and future expectations based on a model of asset returns for anactively managed portfolio. The model simulates 1,000 different capital market results over 20 years. For both 2019 and 2018, the expected return-on-assetassumption for U.S. defined benefit pension plans was 7.3%.The U.S. defined benefit pension plans' assets include 450,000 shares of the Company's common stock at bothDecember 31, 2018 and 2017, valued at $8.9 million and $8.4 million, respectively. These shares represented 4.4% and 3.7% of total U.S. plan assets atDecember 31, 2018 and 2017, respectively.The asset allocations attributable to the Company's international defined benefit pension plans at December 31, 2018 and 2017 and the long-term targetallocation of plan assets, by asset category, are as follows:International Plans Asset Category Target Long-TermAllocation Percentage of Plan AssetsDecember 31 2018 2017Equity securities 29.0% 29.2% 31.5%Fixed income securities 50.0% 50.7% 44.6%Cash and cash equivalents — 0.3% 0.3%Other (b) 21.0% 19.8% 23.6%(b) Investments within this caption include diversified growth funds and real estate funds.International defined benefit pension plan assets at December 31, 2018 in the U.K. defined benefit pension plan amounted to approximately 94% of theinternational defined benefit pension plan assets. The U.K. plan assets are allocated among various categories of equities, fixed income securities and cashand cash equivalents with professional investment managers whose performance is actively monitored. The primary investment objective is long-term growthof assets in order to meet present and future benefit obligations. The Company periodically conducts asset/liability modeling studies and accordingly adjustsinvestment amounts within asset categories to ensure the long-term investment strategy is aligned with the profile of benefit obligations.For the international long-term rate of return assumption, the Company considered the current level of expected returns in risk-free investments (primarilygovernment bonds); the historical level of the risk premium associated with other asset classes in which the portfolio is invested; and the expectations forfuture returns of each asset class and plan expenses. The expected return for each asset class was then weighted based on the target asset allocation to developthe expected long-term rate of return on assets. For both 2019 and 2018, the expected return on asset assumption for the U.K. plan is 5.5%. The remaininginternational defined benefit pension plans, with plan assets representing approximately 6% of the international defined benefit pension plan assets, areunder the guidance of professional investment managers and have similar investment objectives.The fair values of the Company's U.S. defined benefit pension plans' assets at December 31, 2018 by asset class are as follows:(In thousands) Total Level 1 Level 2Domestic equities: Common stocks $8,937 $8,937 $—Mutual funds—equities 54,002 54,002 —International equities: Mutual funds—equities 45,195 45,195 —Fixed income investments: Mutual funds—bonds 88,107 88,107 —Other—mutual funds 7,703 7,703 —Cash and money market accounts 1,444 1,444 —Total $205,388 $205,388 $—65Table of ContentsThe fair values of the Company's U.S. defined benefit pension plans' assets at December 31, 2017 by asset class are as follows:(In thousands) Total Level 1 Level 2Domestic equities: Common stocks $28,200 $28,200 $—Mutual funds—equities 60,785 11,062 49,723International equities: Common stocks 1,429 1,429 —Mutual funds—equities 54,879 54,879 —Fixed income investments: U.S. Treasuries and collateralized securities 18,407 — 18,407Corporate bonds and notes 10,878 10,878 —Mutual funds—bonds 41,745 12,184 29,561Other—mutual funds 11,336 11,336 —Cash and money market accounts 2,282 2,282 —Total $229,941 $132,250 $97,691The fair values of the Company's international defined benefit pension plans' assets at December 31, 2018 by asset class are as follows:(In thousands) Total Level 1 Level 2Equity securities: Mutual funds—equities $217,321 $— $217,321Fixed income investments: Mutual funds—bonds 372,094 — 372,094Insurance contracts 5,620 — 5,620Other: Other mutual funds 147,313 — 147,313Cash and money market accounts 2,190 2,190 —Total $744,538 $2,190 $742,348The fair values of the Company's international defined benefit pension plans' assets at December 31, 2017 by asset class are as follows:(In thousands) Total Level 1 Level 2Equity securities: Mutual funds—equities $265,989 $— $265,989Fixed income investments: Mutual funds—bonds 369,291 — 369,291Insurance contracts 6,189 6,189Other: Other mutual funds 198,856 — 198,856Cash and money market accounts 2,392 2,392 —Total $842,717 $2,392 $840,325Following is a description of the valuation methodologies used for the defined benefit pension plans' investments measured at fair value:•Level 1 Fair Value Measurements—Investments in interest-bearing cash are stated at cost, which approximates fair value. The fair values of moneymarket accounts and certain mutual funds are based on quoted net asset values of the shares held by the plan at year-end. The fair values ofdomestic and international stocks and corporate bonds, notes and convertible debentures are valued at the closing price reported in the activemarket on which the individual securities are traded.•Level 2 Fair Value Measurements—The fair values of investments in mutual funds for which quoted net asset values in an active market are notavailable are valued by the investment advisor based on the current market values of the underlying assets of the mutual fund based oninformation reported by the investment consistent with audited financial statements of the mutual fund. Further information concerning thesemutual funds may be obtained from their separate audited financial statements. Investments in U.S. Treasury notes and collateralized securities arevalued based on yields currently available on comparable securities of issuers with similar credit ratings.66Table of ContentsMultiemployer Pension PlansThe Company, through the Harsco Metals & Minerals Segment, contributes to several MEPPs under the terms of collective-bargaining agreements that coverunion-represented employees, many of whom are temporary in nature. The Company's total contributions to MEPPs were $2.0 million, $2.0 million and $2.0million for the years ended December 31, 2018, 2017 and 2016, respectively.11. Income TaxesCurrent income tax expense represents the amounts expected to be reported on the Company's income tax returns, and deferred income tax expense or benefitrepresents the change in net deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on the difference between the financialstatement and tax bases of assets and liabilities as measured by the enacted income tax rates that will be in effect when these differences reverse. Valuationallowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized.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 incometax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Actpermanently reduced the U.S. Corporate income tax rate from a maximum of 35% to a 21% rate, effective January 1, 2018.The Tax Act provides for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary Earnings and Profits ("E&P") through2017. Based on the analysis of E&P, no income tax expense was recorded in the Company's Consolidated Statement of Operations for 2018 or 2017.While the Tax Act provides for a territorial system, beginning in 2018, it includes the global intangible low-taxed income ("GILTI") provision. The Companyelected to account for GILTI tax in the period in which it is incurred. The GILTI provisions require the Company to include in its U.S. income tax returnforeign subsidiary earnings in excess of an allowable return on the foreign subsidiary's tangible assets. The GILTI tax expense is primarily caused by a U.S.foreign tax credit limitation which requires an allocation of expenses to the GILTI income, which limits the ability to benefit from foreign tax credits. As aresult of the GILTI provisions, the Company's effective tax rate increased by 0.25% for 2018.On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations when aregistrant did not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accountingfor certain income tax effects of the Tax Act. The Company recognized a provisional $48.7 million income tax charge related to the revaluation of deferredtax assets and liabilities in its consolidated financial statements for the year ended December 31, 2017. Adjustments made to the provisional amountsallowed under SAB 118 were identified and recorded as discrete adjustments as described in the following paragraph.During the fourth quarter of 2018, the Company recognized a $15.4 million discrete income tax benefit for adjustments to the provisional income tax impactsof the Tax Act included in its consolidated financial statement for the year endedDecember 31, 2017. These adjustments resulted from changes in its revaluation of deferred tax assets and liabilities due to additional analysis, changes ininterpretations and assumptions the Company made, and additional regulatory guidance that was issued. The accounting for the Tax Act was completed inthe fourth quarter of 2018.Income (loss) from continuing operations before income taxes and equity income as reported on the Consolidated Statements of Operations consists of thefollowing:(In thousands) 2018 2017 2016U.S. $69,125 $5,694 $(99,939)International 88,129 89,757 20,468Total income (loss) from continuing operations before income taxes and equity income $157,254 $95,451 $(79,471)67Table of ContentsIncome tax expense as reported on the Consolidated Statements of Operations consists of the following:(In thousands) 2018 2017 2016Income tax expense (benefit): Currently payable: U.S. federal $281 $4,107 $(4,088)U.S. state 1,127 372 365International 18,014 21,975 18,014Total income taxes currently payable 19,422 26,454 14,291Deferred U.S. federal 7,164 46,470 (8,195)Deferred U.S. state (11,045) 1,142 2,238Deferred international (2,642) 9,737 (1,697)Total income tax expense $12,899 $83,803 $6,637Cash payments for income taxes were $26.8 million, $24.9 million and $14.6 million for 2018, 2017 and 2016, respectively.A reconciliation of the normal expected statutory U.S. federal income tax expense (benefit) to the actual Income tax expense as reported on the ConsolidatedStatements of Operations is as follows:(In thousands) 2018 2017 2016U.S. federal income tax expense (benefit) $33,023 $33,408 $(27,815)U.S. state income taxes, net of federal income tax benefit 1,614 786 (355)U.S. domestic deductions and credits (6,145) (1,210) (661)Capital loss on sale of equity interest in Brand with no realizable tax benefit — — 16,106Difference in effective tax rates on international earnings and remittances 5,399 675 2,006Uncertain tax position contingencies and settlements (1,180) (1,517) (1,886)Changes in realization on beginning of the year deferred tax assets (6,937) 2,758 1,978Forward Loss Provisions in SBB Contract with no realizable tax benefits — — 15,768Global Intangible Low-Taxed Income 400 — —U.S. non-deductible expenses 2,277 664 724Income related to the Infrastructure Transaction — — (644)Impact of U.S. tax reform (15,409) 48,680 —Cumulative effect of change in statutory tax rates/laws — (153) (388)Income from unconsolidated entities — — 2,098Other, net (143) (288) (294)Total income tax expense $12,899 $83,803 $6,637At December 31, 2018, 2017 and 2016, the Company's annual effective income tax rate on income from continuing operations was 8.2%, 87.8% and (8.4)%,respectively.The Company’s international income from continuing operations before income taxes and equity income (loss) was$88.1 million and $89.8 million for 2018 and 2017, respectively. In 2017, because of the reduction in the U.S. corporate income tax rate from 35% to 21%under the Tax Act, the Company revalued its ending net deferred tax asset related to the outside basis difference in its international branches and recognizeda provisional $6.5 million income tax expense in the Company’s Consolidated Statement of Operations for 2017. The decreased international income fromcontinuing operations, the$8.3 million income tax benefit recorded in the second quarter of 2018 arising from the adjustment to certain existing deferred tax asset valuation allowancesas the result of the Altek acquisition, and the provisional income tax expense because of the Tax Act not recurring in 2018 decreased the Company's totalinternational income tax expense to $15.4 million in 2018 from$31.7 million in 2017.The Company’s differences in effective income tax rates for 2018 and 2017 on international earnings and remittances was$5.4 million and $0.7 million, respectively, which included U.S income tax expense on international deemed remittances of $3.1 million and $6.4 million,respectively. This increase is primarily due to the reduction of U.S. Corporate income tax rate from a maximum 35% to a 21% rate.The Company's income from continuing operations before income taxes and equity income attributable to the U.S. was$69.1 million and $5.7 million for 2018 and 2017, respectively. In 2017, due to the impact of the Tax Act, the Company recognized a $14.9 millionprovisional income tax expense because of revaluing the U.S. ending net deferred tax assets from 35% to the newly enacted U.S. corporate income tax rate of21% and established a provisional valuation allowance on the full68Table of Contentsamount of foreign tax credit carryforward of $27.3 million due to the impact the Tax Act had on future foreign source income. In 2018, the Companyfinalized the impact of the Tax Act and recognized a $15.4 million income tax benefit because of the change in expected realization of foreign tax credit andstate net operating loss carryforwards. The Company's total U.S. income tax expense decreased from $52.1 million in 2017 to a $2.5 million income taxbenefit in 2018 due primarily to the impact of the Tax Act, including the lower tax rate.The income tax effects of the temporary differences giving rise to the Company's deferred tax assets and liabilities at December 31, 2018 and 2017 are asfollows: 2018 2017(In thousands) Asset Liability Asset LiabilityDepreciation and amortization $— $8,681 $6,616 $—Expense accruals 18,827 — 17,690 —Inventories 3,071 — 4,390 —Provision for receivables 690 — 649 —Deferred revenue — 3,122 — 979Operating loss carryforwards 83,168 — 90,193 —Foreign tax credit carryforwards 25,814 — 27,256 —Capital loss carryforwards 9,759 — 11,011 —Pensions 40,442 — 47,153 —Currency adjustments 3,795 — 7,160 —Deferred financing costs — 2,227 — 2,135Post-retirement benefits 471 — 403 —Stock based compensation 5,832 — 4,761 —Other 5,886 — 7,684 —Subtotal 197,755 14,030 224,966 3,114Valuation allowance (138,862) — (174,227) —Total deferred income taxes $58,893 $14,030 $50,739 $3,114The deferred tax asset and liability balances recognized on the Consolidated Balance Sheets at December 31, 2018 and 2017 are as follows:(In thousands) 2018 2017Deferred income tax assets $49,114 $51,574Other liabilities 4,251 3,949At December 31, 2018, the tax-effected amount of net operating loss carryforwards ("NOLs") totaled $83.2 million . Tax-effected NOLs from internationaloperations are $68.1 million. Of that amount, $56.6 million can be carried forward indefinitely and $11.5 million will expire at various times between 2019and 2039. Tax-effected U.S. state NOLs are $15.1 million. Of that amount, $4.3 million expire at various times between 2019 and 2023, $2.9 million expire atvarious times between 2024 and 2028, $3.4 million expire at various times between 2029 and 2033 and $4.5 million expire at various times between 2034and 2038. At December 31, 2018, the tax-effected amount of capital loss carryforwards totaled$9.8 million which expire in 2021.Valuation allowances of $138.9 million and $174.2 million at December 31, 2018 and 2017, respectively, related principally to deferred tax assets forpension liabilities, NOLs, foreign tax credit carryforwards, capital loss carryforwards and foreign currency translation that are uncertain as to realizability. In2018, the Company finalized the impact of the Tax Act and reduced the provisional valuation allowance by $15.2 million because of the expectedrealization of foreign tax credit and state net operating loss carryforward. In addition, the U.K. valuation allowance was reduced by $13.6 million as a resultof the Altek acquisition and a change in estimate of interest deductions. The Company recorded a valuation allowance reduction of$8.7 million from the effects of foreign currency translation adjustments, partially offset by the net increase related to losses in certain jurisdictions where theCompany determined that it is more likely than not that these assets will not be realized. In 2017, the Company recorded a valuation allowance of $27.3million related to foreign tax credit carryforwards due to the impact of the Tax Act, an increase from foreign currency translation in the amount of $10.1million and a net increase of $6.9 million related to losses in certain jurisdictions where the Company determined that it is more likely than not that theseassets will not be realized. This was partially offset by a reduction related to current year pension adjustments recorded through Accumulated othercomprehensive loss and a decrease related to U.S., Argentina and Belgium tax rate changes.69Table of ContentsThe Tax Act introduced a transition tax and a territorial tax system, which was effective beginning in 2018. The territorial tax system impacts the Company'soverall global capital and legal entity structure, working capital, and repatriation plan on a go-forward basis. Based on the Company's analysis of theterritorial tax system and other new international tax provisions, the Company continues to support the assertion to indefinitely reinvest $677 million ofaccumulated foreign earnings and profits in non-U.S. jurisdictions. Included in this amount is $628 million of deferred foreign income from foreign entities'deficit earnings and profits as of December 31, 2017 that remain untaxed as a result of the Tax Act and $49 million of untaxed earnings and profits generatedduring 2018. In addition, the Company recognized $4 million of GILTI included in the Tax Act which increases earnings previously taxed in the U.S.Further, it is impracticable for the Company to estimate any future tax costs for any unrecognized deferred tax liabilities associated with its indefinitereinvestment assertion, because the actual tax liability, if any, would be dependent on complex analysis and calculations considering various tax laws,exchange rates, circumstances existing when a repatriation, sale, or liquidation occurs, or other factors.The Company recognizes accrued interest and penalty expense related to unrecognized income tax benefits in income tax expense. During 2018 and 2016,the Company recognized an income tax benefit of $0.2 million and $1.7 million, respectively, for interest and penalties primarily due to the expiration ofstatutes of limitation and resolution of examinations. The Company did not recognize any income tax expense or benefit for interest and penalties during2017. The Company has accrued $0.9 million, $1.1 million and $1.1 million for the payment of interest and penalties at December 31, 2018, 2017 and 2016respectively.A reconciliation of the change in the unrecognized income tax benefits balance from January 1, 2016 to December 31, 2018 is as follows:(In thousands) UnrecognizedIncome TaxBenefits DeferredIncome TaxBenefits UnrecognizedIncome TaxBenefits, Net ofDeferred IncomeTax BenefitsBalances, January 1, 2016 $5,161 $(44) $5,117Additions for tax positions related to the current year (includes currency translationadjustment) 744 (1) 743Additions for tax positions related to prior years (includes currency translationadjustment) 358 (14) 344Other reductions for tax positions related to prior years (837) — (837)Statutes of limitation expirations (817) 27 (790)Settlements (27) 2 (25)Balance at December 31, 2016 4,582 (30) 4,552Additions for tax positions related to the current year (includes currency translationadjustment) 658 (2) 656Other reductions for tax positions related to prior years (321) — (321)Statutes of limitation expirations (1,296) 1 (1,295)Balance at December 31, 2017 3,623 (31) 3,592Additions for tax positions related to the current year (includes currency translationadjustment) 196 (1) 195Statutes of limitation expirations (1,397) 6 (1,391)Total unrecognized income tax benefits that, if recognized, would impact the effectiveincome tax rate at December 31, 2018 $2,422 $(26) $2,396Within the next twelve months, it is reasonably possible that up to $0.1 million of unrecognized income tax benefits will be recognized upon settlement ofincome tax examinations and the expiration of various statutes of limitations.The Company files income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. With few exceptions, the Company is no longersubject to U.S and international income tax examinations by tax authorities through 2012.70Table of Contents12. Commitments and ContingenciesEnvironmentalThe Company is involved in a number of environmental remediation investigations and cleanups and, along with other companies, has been identified as a"potentially responsible party" for certain byproduct disposal sites. While each of these matters is subject to various uncertainties, it is probable that theCompany will agree to make payments toward funding certain of these activities and it is possible that some of these matters will be decided unfavorably tothe Company. The Company has evaluated its potential liability, and its financial exposure is dependent upon such factors as the continuing evolution ofenvironmental laws and regulatory requirements, the availability and application of technology, the allocation of cost among potentially responsible parties,the years of remedial activity required and the remediation methods selected. The Company did not have any material accruals or record any materialexpenses related to environmental matters during the periods presented.The Company evaluates its liability for future environmental remediation costs on a quarterly basis. Although actual costs to be incurred at identified sites infuture periods may vary from the estimates (given inherent uncertainties in evaluating environmental exposures), the Company does not expect that any coststhat are reasonably possible to be incurred by the Company in connection with environmental matters in excess of the amounts accrued would have amaterial adverse effect on the Company's financial condition, results of operations or cash flows.Brazilian Tax DisputesThe Company is involved in a number of tax disputes with federal, state and municipal tax authorities in Brazil. These disputes are at various stages of thelegal process, including the administrative review phase and the collection action phase, and include assessments of fixed amounts of principal and penalties,plus interest charges that increase at statutorily determined amounts per month and are assessed on the aggregate amount of the principal and penalties. Inaddition, the losing party at the collection action or court of appeals phase could be subject to a charge to cover statutorily mandated legal fees, which aregenerally calculated as a percentage of the total assessed amounts due, inclusive of penalty and interest. Many of the claims relate to value-added ("ICMS"),services and social security tax disputes. The largest proportion of the assessed amounts relate to ICMS claims filed by the State Revenue Authorities fromthe State of São Paulo, Brazil (the "SPRA"), encompassing the period from January 2002 to May 2005.In October 2009, the Company received notification of the SPRA's final administrative decision regarding the levying of ICMS in the State of São Paulo inrelation to services provided to a customer in the State between January 2004 and May 2005. As of December 31, 2018, the principal amount of the taxassessment from the SPRA with regard to this case is approximately $2 million, with penalty, interest and fees assessed to date increasing such amount by anadditional $21 million. Any change in the aggregate amount since the Company's last Annual Report on Form 10-K for the year ended December 31, 2017 isdue to an increase in assessed interest and statutorily mandated legal fees for the period, as well as foreign currency translation. On June 4, 2018, theAppellate Court of the State of Sao Paulo ruled in favor of the SPRA, but ruled that the assessed penalty should be reduced to approximately $2 million. Aftercalculating the interest accrued on the penalty, the Company estimates that this ruling reduces the current overall liability for this case to approximately $9million. The Company has filed a series of motions for clarification on the ruling, one of which is still pending before the court. In the event the motion forclarification is unsuccessful, the Company plans to appeal both the liability ruling and the amount assessed. Due to multiple court precedents in theCompany's favor, as well as the Company's ability to seek clarification as well as appeal, the Company does not believe a loss is probable.Another ICMS tax case involving the SPRA refers to the tax period from January 2002 to December 2003. In December 2018, the administrative tribunalhearing the case upheld the Company's liability. The Company plans to appeal to the judicial phase. The aggregate amount assessed by the tax authorities inAugust 2005 was $6.5 million (the amounts with regard to this claim are valued as of the date of the assessment since it has not yet reached the collectionphase), composed of a principal amount of $1.5 million, with penalty and interest assessed through that date increasing such amount by an additional $5.0million. On December 6, 2018, the administrative tribunal reduced the applicable penalties to $1.2 million. After calculating the interest accrued on thecurrent penalty, the Company estimates that this ruling reduces the current overall liability for this case to approximately $10 million. All such amountsinclude the effect of foreign currency translation. Due to multiple court precedents in the Company's favor the Company does not believe a loss is probable.The Company continues to believe that sufficient coverage for these claims exists as a result of the indemnification obligations of the Company's customerand such customer's pledge of assets in connection with the October 2009 notice, as required by Brazilian law.The Company intends to continue its practice of vigorously defending itself against these tax claims under various alternatives, including judicial appeal.The Company will continue to evaluate its potential liability with regard to these claims on a quarterly basis; however, it is not possible to predict theultimate outcome of these tax-related disputes in Brazil. No loss provision has been recorded in the Company's consolidated financial statements for thedisputes described above because the71Table of Contentsloss contingency is not deemed probable, and the Company does not expect that any costs that are reasonably possible to be incurred by the Company inconnection with Brazilian tax disputes would have a material adverse effect on the Company's financial condition, results of operations or cash flows.Brazilian Labor DisputesThe Company is subject to ongoing collective bargaining and individual labor claims in Brazil through the Harsco Metals & Minerals Segment which allege,among other things, the Company's failure to pay required amounts for overtime and vacation at certain sites. The Company is vigorously defending itselfagainst these claims; however, litigation is inherently unpredictable, particularly in foreign jurisdictions. While the Company does not currently expect thatthe ultimate resolution of these claims will have a material adverse effect on the Company’s financial condition, results of operations or cash flows, it is notpossible to predict the ultimate outcome of these labor-related disputes. As of December 31, 2018 and 2017, the Company has established reserves of $7.1million and $9.6 million, respectively, on the Company's Consolidated Balance Sheets for amounts considered to be probable and estimable.Customer DisputesThe Company may, in the normal course of business, become involved in commercial disputes with subcontractors or customers. Although results ofoperations and cash flows for a given period could be adversely affected by a negative outcome in these or other lawsuits, claims or proceedings,management believes that the ultimate outcome of any ongoing matters will not have a material adverse effect on the Company's financial condition, resultsof operations or cash flows.Lima Refinery LitigationOn April 8, 2016, Lima Refining Company filed a lawsuit against the Company in the District Court of Harris County, Texas related to a January 2015explosion at an oil refinery operated by Lima Refining Company. The action seeks approximately $317 million plus interest in property damages and lostprofits and business interruption damages. The action alleges the explosion occurred because of a defect in a heat exchange cooler manufactured by HammcoCorporation ("Hammco") in 2009, prior to the Company’s acquisition of Hammco in 2014. The Company is vigorously contesting the allegations against it.The Company has both an indemnity right from the sellers of Hammco and liability insurance coverage under various primary and excess policies that theCompany believes will be available, if necessary, to cover substantially all of any such liability that might ultimately be incurred in the above action. As aresult, the Company believes the situation will not result in a net unreimbursed loss.Compliance MatterIn 2017, the Company undertook an internal investigation, with the assistance of outside counsel, after it became aware of allegations involving an employeeand an agent of the Harsco Rail subsidiary in China (“Harsco Rail China”). During this investigation the Company learned about certain payments thatpotentially violate the Foreign Corrupt Practices Act. Revenues attributed to Harsco Rail China were approximately 2% of the Company’s consolidatedrevenues for each of the prior three completed fiscal years. Based on information known to date, the Company believes the amount of the potential improperpayments are not material to the condensed consolidated financial statements. Any determination that the Company's operations or activities were not incompliance with existing laws or regulations could result in the imposition of fines and penalties. No provision with respect to this matter has been made inthe Company’s condensed consolidated financial statements. The Company had previously voluntarily self-reported its initial findings to the SEC and the U.S. Department of Justice (the “DOJ”). At this time, theCompany cannot predict any outcome or impact of the investigation or the reviews by the SEC and the DOJ. However, based on information available at thistime, the Company does not believe any potential liability would be material to the Company's condensed consolidated financial position, although anamount recorded, if any, could be material to the results of operations for the period in which it may be recorded. The Company has fully cooperated with theagencies in their review and the Company has not been advised that either agency intends to take any action against the Company. OtherThe Company is named as one of many defendants (approximately 90 or more in most cases) in legal actions in the U.S. alleging personal injury fromexposure to airborne asbestos over the past several decades. In their suits, the plaintiffs have named as defendants, among others, many manufacturers,distributors and installers of numerous types of equipment or products that allegedly contained asbestos.The Company believes that the claims against it are without merit. The Company has never been a producer, manufacturer or processor of asbestos fibers. Anyasbestos-containing part of a Company product used in the past was purchased from a supplier and the asbestos encapsulated in other materials such thatairborne exposure, if it occurred, was not harmful and is not associated with the types of injuries alleged in the pending actions.72Table of ContentsAt December 31, 2018, there were approximately 17,134 pending asbestos personal injury actions filed against the Company. Of those actions,approximately 16,592 were filed in the New York Supreme Court (New York County), approximately 116 were filed in other New York State Supreme CourtCounties and approximately 426 were filed in courts located in other states.The complaints in most of those actions generally follow a form that contains a standard damages demand of $20 million or $25 million, regardless of theindividual plaintiff's alleged medical condition, and without identifying any specific Company product.At December 31, 2018, approximately 16,550 of the actions filed in New York Supreme Court (New York County) were on the Deferred/Inactive Docketcreated by the court in December 2002 for all pending and future asbestos actions filed by persons who cannot demonstrate that they have a malignantcondition or discernible physical impairment. The remaining approximately 42 cases in New York County are pending on the Active or In Extremis Docketcreated for plaintiffs who can demonstrate a malignant condition or physical impairment.The Company has liability insurance coverage under various primary and excess policies that the Company believes will be available, if necessary, tosubstantially cover any liability that might ultimately be incurred in the asbestos actions referred to above. The costs and expenses of the asbestos actions arebeing paid by the Company’s insurers.In view of the persistence of asbestos litigation in the U.S., the Company expects to continue to receive additional claims in the future. The Company intendsto continue its practice of vigorously defending these claims and cases. At December 31, 2018, the Company has obtained dismissal in approximately 28,173cases by stipulation or summary judgment prior to trial.It is not possible to predict the ultimate outcome of asbestos-related actions in the U.S. due to the unpredictable nature of this litigation, and no lossprovision has been recorded in the Company's consolidated financial statements because a loss contingency is not deemed probable or estimable. Despitethis uncertainty, and although results of operations and cash flows for a given period could be adversely affected by asbestos-related actions, the Companydoes not expect that any costs that are reasonably possible to be incurred by the Company in connection with asbestos litigation would have a materialadverse effect on the Company's financial condition, results of operations or cash flows.As previously disclosed, the Company has had ongoing meetings with the Supreme Council for Environment in Bahrain (“SCE”) over processing abyproduct (“salt cakes”) stored at the Al Hafeerah site. The Company’s Bahrain operations that produced the salt cakes has ceased operations and are ownedunder a strategic venture for which its strategic venture partner owns a 35% minority interest. An Environmental Impact Assessment and Technical FeasibilityStudy were approved by the SCE during the first quarter of 2018. The Company has previously established a reserve of $7.0 million, which represents theCompany's best estimate of the ultimate costs to be incurred to resolve this matter. The Company continues to evaluate this reserve and any future change inestimated costs could be material to the Company’s results of operations in any one period.On July 27, 2018, Brazil’s Federal and Rio de Janeiro State Public Prosecution Offices (MPF and MPE) filed a Civil Public Action against one of theCompany's customers (CSN), the Company’s Brazilian subsidiary, the Municipality of Volta Redonda, Brazil, and the Instituto Estadual do Ambiente (localenvironmental protection agency) seeking the implementation of various measures to limit and reduce the accumulation of customer-owned slag at the site inBrazil. On August 6, 2018, the 3rd Federal Court in Volta Redonda granted the MPF and MPE an injunction against the same parties requiring, among otherthings, CSN and the Company’s Brazilian subsidiary to limit the volume of slag sent to the site. Because the customer owns the site and the slag located onthe site, the Company believes that complying with this injunction is the steel producer’s responsibility. Nevertheless, if the customer does not comply, theCompany’s Brazilian subsidiary, as a party to the injunction, could be assessed fines for non-compliance or could incur other losses related to the issue. Boththe Company and CSN continue to have discussions with the governmental authorities on the injunction. The Company does not believe that a loss relatingto this matter is probable or estimable at this point.On October 19, 2018, local environmental authorities issued an enforcement action against the Company concerning the Company’s operations at a customersite in Ijmuiden, Netherlands. The enforcement action alleges violations of the Company’s environmental permit at the site, which restricts the release of anyvisible dust emissions. The enforcement action ordered the Company to cease all violations of the permit by October 31, 2018. The authorities have issuedfines of approximately $0.3 million, with the possibility of additional fines for any future violations. The Company is vigorously contesting the enforcementaction and fines and is also working with its customer to ensure the control of emissions. The Company has contractual indemnity rights from its customer,should it be required to pay the assessed fines. The Company is subject to various other claims and legal proceedings covering a wide range of matters that arose in the ordinary course of business. In theopinion of management, all such matters are adequately covered by insurance or by established reserves, and, if not so covered, are without merit or are ofsuch kind, or involve such amounts, as would not have a material adverse effect on the financial position, results of operations or cash flows of the Company.73Table of ContentsInsurance liabilities are recorded when it is probable that a liability has been incurred for a particular event and the amount of loss associated with the eventcan be reasonably estimated. Insurance reserves have been estimated based primarily upon actuarial calculations and reflect the undiscounted estimatedliabilities for ultimate losses, including claims incurred but not reported. Inherent in these estimates are assumptions that are based on the Company's historyof claims and losses, a detailed analysis of existing claims with respect to potential value, and current legal and legislative trends. If actual claims differ fromthose projected by management, changes (either increases or decreases) to insurance reserves may be required and would be recorded through income in theperiod the change was determined. When a recognized liability is covered by third-party insurance, the Company records an insurance claim receivable toreflect the covered liability. Insurance claim receivables are included in Other receivables on the Company's Consolidated Balance Sheets. See Note 1,Summary of Significant Accounting Policies, for additional information on Accrued insurance and loss reserves.13. Capital StockThe authorized capital stock of the Company consists of 150,000,000 shares of common stock and 4,000,000 shares of preferred stock, both having a parvalue of $1.25 per share. The preferred stock is issuable in series with terms as fixed by the Board of Directors (the "Board"). No preferred stock has beenissued. The following table summarizes the Company's common stock: SharesIssued TreasuryShares (a) OutstandingSharesOutstanding, January 1, 2016 112,405,302 32,310,937 80,094,365Shares issued for vested restricted stock units 94,572 13,974 80,598Outstanding, December 31, 2016 112,499,874 32,324,911 80,174,963Shares issued for vested restricted stock units 375,355 105,431 269,924Stock appreciation rights exercised 12,897 3,932 8,965Outstanding, December 31, 2017 112,888,126 32,434,274 80,453,852Shares issued for vested restricted stock units 545,908 161,774 384,134Stock appreciation rights exercised 39,917 11,808 28,109Treasury shares purchased — 1,321,072 (1,321,072)Outstanding, December 31, 2018 113,473,951 33,928,928 79,545,023(a)The Company repurchases shares in connection with the issuance of shares under stock-based compensation programs and in accordance with Board authorized share repurchaseprograms.The following is a reconciliation of the average shares of common stock used to compute basic earnings per common share to the shares used to computediluted earnings per common share as shown on the Consolidated Statements of Operations:(In thousands, except per share data) 2018 2017 2016Income (loss) from continuing operations attributable to Harsco Corporation commonstockholders $136,783 $7,626 $(86,336)Weighted-average shares outstanding—basic 80,716 80,553 80,333Dilutive effect of stock-based compensation 2,879 2,287 —Weighted-average shares outstanding—diluted 83,595 82,840 80,333Income (loss) from continuing operations per common share, attributable to Harsco Corporation common stockholders:Basic $1.69 $0.09 $(1.07)Diluted $1.64 $0.09 $(1.07)The following average outstanding stock-based compensation units were not included in the computation of diluted earnings per share because the effect wasantidilutive:(In thousands) 2018 2017 2016Restricted stock units — — 810Stock options — 52 89Stock appreciation rights 306 811 1,458Performance share units — 201 68474Table of Contents14. Stock-Based CompensationThe 2013 Equity and Incentive Plan as amended (the "2013 Plan") authorizes the issuance of up to 7,800,000 shares of the Company's common stock for usein paying incentive compensation awards in the form of stock options or other equity awards such as restricted stock, restricted stock units ("RSUs"), stockappreciation rights ("SARs") or performance share units ("PSUs"). Of the 7,800,000 shares authorized, a maximum of 4,621,000 shares may be issued forawards other than option rights or SARs, as defined in the 2013 Plan. The 2016 Non-Employee Directors' Long-Term Equity Compensation Plan (the "2016Plan") authorizes the issuance of up to 400,000 shares of the Company's common stock for equity awards. Both plans have been approved by the Company'sstockholders. At December 31, 2018, there were 3,695,156 shares available for granting equity awards under the 2013 Plan, of which 2,374,533 shares wereavailable for awards other than option rights or SARs. At December 31, 2018, there were 194,370 shares available for granting equity awards under the 2016Plan.Restricted Stock UnitsThe Company's Board approves the granting of performance-based RSUs as the long-term equity component of director, officer and certain key employeecompensation. The RSUs require no payment from the recipient and compensation cost is measured based on the market price of the Company's commonstock on the grant date and is generally recorded over the vesting period. RSUs granted to officers and certain key employees in 2016, 2017 and 2018 eithervest on a pro-rata basis over three years or upon obtainment of specified retirement or years of service criteria. Upon vesting, each RSU is exchanged for anequal number of shares of the Company's common stock. The vesting period for RSUs granted to non-employee directors is one year and each RSU isexchanged for an equal number of shares of the Company's common stock upon vesting for awards issued under the 2016 Plan and following the terminationof the participant's service as a director under prior plans. RSUs do not have an option for cash payment.The following table summarizes RSUs issued and the compensation expense recorded for the years ended December 31, 2018, 2017 and 2016: RSUs (a) Weighted AverageFair Value Expense(Dollars in thousands, except per unit) 2018 2017 2016Directors: 2015 59,985 $15.69 — — 3142016 109,998 $7.00 — 257 5132017 56,203 $13.70 179 641 —2018 43,821 $20.54 511 — —Employees: 2013 170,582 $20.63 — — 662014 190,832 $25.21 — 316 6692015 239,679 $16.53 230 597 8802016 536,773 $7.09 935 1,011 9952017 286,251 $13.70 1,019 1,417 —2018 242,791 $19.93 1,656 — —Total $4,530 $4,239 $3,437(a)Represents number of awards originally issued.RSU activity for the year ended December 31, 2018 was as follows: Number of Shares Weighted AverageGrant-DateFair ValueNon-vested at December 31, 2017 801,939 $11.73Granted 286,612 20.03Vested (478,917) 12.48Forfeited (26,254) 14.11Non-vested at December 31, 2018 583,380 15.08At December 31, 2018, the total unrecognized compensation expense related to non-vested RSUs was $4.9 million, which will be recognized over aweighted-average period of 1.7 years. There was a $1.1 million decrease in excess tax benefits from RSUs recognized in equity in 2016. Upon the adoption ofchanges issued by the FASB amending the accounting for stock-based compensation, the Company records any excess tax benefits or shortfalls as acomponent of income tax expense. See Note 2, Recently Adopted and Recently Issued Accounting Standards, for additional information.75Table of ContentsStock Appreciation RightsThe Company's Board approves the granting of SARs to officers and certain key employees under the 2013 Plan. The SARs generally vest on a pro-rata threeyear basis from the grant date or upon specified retirement or years of service criteria and expire no later than ten years after the grant date. The exercise priceof the SARs is equal to the fair value of Harsco common stock on the grant date. Upon exercise, shares of the Company's common stock are issued based onthe increase in the fair value of the Company's common stock over the exercise price of the SAR. SARs do not have an option for cash payment.During 2016, the Company issued SARS covering 554,719 shares in May and 21,686 shares in November under the 2013 Plan. During 2017, the Companyissued SARS covering 266,540 shares in March under the 2013 Plan. During 2018, the Company issued SARS covering 221,818 shares in March and 7,622in July under the 2013 Plan.The fair value of each SAR grant was estimated on the grant date using a Black-Scholes pricing model with the following assumptions: Risk-free Interest rate Dividend Yield Expected Life(Years) Volatility SAR Grant Price Fair Value of SARMay 2016 Grant 1.39% —% 6.0 42.1% 7.00 2.93November 2016 Grant 1.74% —% 6.0 43.8% 12.25 5.38March 2017 Grant 2.17% —% 6.0 43.9% 13.70 6.13March 2018 Grant 2.69% —% 6.0 44.6% 19.80 9.16July 2018 Grant 2.87% —% 6.0 44.7% 24.65 11.48SARs activity for the year ended December 31, 2018 was as follows: Number of Shares Weighted AverageExercise Price Aggregate IntrinsicValue (in millions) (b)Outstanding, December 31, 2017 1,679,276 $15.40 $7.9Granted 229,440 19.99 Exercised (150,013) 17.88 Forfeited/Expired (13,256) 24.53 Outstanding, December 31, 2018 1,745,447 15.73 8.9(b)Intrinsic value is defined as the difference between the current market value and the exercise price, for those SARs where the market price exceeds the exercise price.The total intrinsic value of SARs exercised in 2018 and 2017 was $0.5 million and $0.3 million respectively. No SARs were exercised in 2016.The following table summarizes information concerning outstanding and exercisable SARs at December 31, 2018: SARs Outstanding SARs ExercisableRange of exercisableprices Vested Non-vested Weighted-AverageExercise Price perShare Weighted-AverageRemainingContractual Life inYears Number Exercisable Weighted-AverageExercise Price perShare$7.00 - $13.70 484,331 242,513 $9.41 7.65 484,331 $9.24$16.53 - $22.70 532,700 217,343 18.58 6.78 532,700 18.08$23.03 - $26.92 260,938 7,622 24.84 5.45 260,938 24.84 1,277,969 467,478 15.73 6.94 1,277,969 16.11Total compensation expense related to SARs was $1.9 million, $2.0 million and $1.7 million for the years ended December 31, 2018, 2017 and 2016,respectively. Vested and currently exercisable SARs have a weighted-average remaining contractual life of 6.94 years and an intrinsic value of 8.9 million atDecember 31, 2018 and total unrecognized compensation expense related to non-vested SARs was $2.2 million, which will be recognized over a weightedaverage period of 1.8 years.76Table of ContentsWeighted-average grant date fair value of non-vested SARs for the year ended December 31, 2018 was as follows: Number of Shares Weighted-AverageGrant Date Fair ValueNon-vested shares, December 31, 2017 877,417 $4.42Granted 229,440 9.17Vested (626,123) 4.63Forfeited (13,256) 7.51Non-vested shares, December 31, 2018 467,478 6.65Performance Share UnitsThe Company's Board approves the granting of PSUs to officers and certain key employees that may be earned based on the Company's total shareholderreturn over the three-year performance period. PSUs are paid out at the end of each performance period based on the Company’s performance, which ismeasured by determining the percentile rank of the total shareholder return of the Company's common stock in relation to the total shareholder return of aspecific peer group of companies. For PSUs issued in 2016, 2017 and 2018, the peer group of companies utilized is the S&P 600 Industrial Index. Thepayment of PSUs following the performance period will be based in accordance with the scale set forth in the PSU agreements, and may range from 0% to200% of the initial grant. PSUs do not have an option for cash payment.During the year ended December 31, 2016, the Company granted 527,249 shares in May and 9,524 shares in November under the 2013 plan. During the yearended December 31, 2017, the Company granted 286,251 shares in March under the 2013 Plan.During the year ended December 31, 2018, the Company granted 233,266 shares in March and 6,742 shares in July under the 2013 Plan. The fair value ofPSUs granted was estimated on the grant date using a Monte Carlo pricing model with the following assumptions: Risk-free Interest rate Dividend Yield Expected Life(Years) Volatility Fair Value of PSUMay 2016 Grant 0.84% —% 2.65 33.3% $7.19November 2016 Grant 0.96% —% 2.14 35.2% 17.84March 2017 Grant 1.54% —% 2.83 34.2% 17.05March 2018 Grant 2.36% —% 2.83 34.7% 29.56July 2018 Grant 2.69% —% 2.42 33.1% 39.06Total compensation expense related to PSUs was $4.8 million, $3.5 million and $2.5 million for the years endedDecember 31, 2018, 2017 and 2016, respectively. At December 31, 2018, total unrecognized compensation expense related to non-vested PSUs was $5.9million, which will be recognized over a weighted average period of 1.8 years.A summary of the Company's non-vested PSU activity during the year ending December 31, 2018 was as follows: Number of Shares Weighted-AverageGrant Date FairValueNon-vested shares, December 31, 2017 743,583 $10.91Granted 240,00829.83Forfeited (34,426)13.33Vested, not issued (c) (454,283) 7.41Non-vested shares, December 31, 2018 494,88223.13(c) The measurement period for PSUs issued in 2016 ended on December 31, 2018 and these shares vested but will not be issued until the Board of Directors certifies the measurementperiod results in early 2019. A total of 908,566 shares are expected to be issued and have been included in the Company's calculation of diluted weighted average shares at theend of December 31, 2018.Stock OptionsThe Company's Board approves the granting of incentive stock options and nonqualified stock options to officers, certain key employees and non-employeedirectors under the plans noted above. The stock options would generally vest three years from the grant date, which is the date the Board approved thegrants, and expire no later than seven years after the grant date. The exercise price of the stock option would be the fair value on the grant date. Uponexercise, shares of the Company's common stock are issued based on the increase in the fair value of the Company's common stock over the exercise price ofthe stock options. All stock options are vested and there was no compensation expense related to stock options in 2018, 2017, and 2016. There were no stockoptions exercised and no net cash proceeds from the exercise of stock options in 2018, 2017 and 2016. All stock options outstanding at December 31, 2017were forfeited during 2018 and there are no remaining stock options outstanding at December 31, 2018.77Table of Contents15. Financial InstrumentsOff-Balance Sheet RiskAs collateral for the Company's performance and to insurers, the Company is contingently liable under standby letters of credit, bonds and bank guarantees inthe amounts of $285.4 million, $275.4 million and $273.1 million at December 31, 2018, 2017 and 2016, respectively. These standby letters of credit, bondsand bank guarantees are generally in force for up to 2 years. Certain issues have no scheduled expiration date. The Company pays fees to various banks andinsurance companies that range from 0.4% to 3.9% per annum of the instrument's face value. If the Company were required to obtain replacement standbyletters of credit, bonds and bank guarantees at December 31, 2018 for those currently outstanding, it is the Company's opinion that the replacement costswould be within the present fee structure.The Company has currency exposures in approximately 30 countries. The Company's primary foreign currency exposures during 2018 were in the EuropeanUnion, the U.K. and Brazil.Off-Balance Sheet Risk—Third-Party GuaranteesDuring June 2014, the Company provided a guarantee to Brand as part of the net working capital settlement related to the Infrastructure Transaction, forcertain matters occurring prior to closing. The remaining term of this guarantee is 2 years at December 31, 2018. The maximum potential amount of futurepayments related to this guarantee is approximately $3 million at December 31, 2018. There is no recognition of this potential future payment in theconsolidated financial statements as the Company believes the potential for making this payment is remote.Any liabilities related to the Company's obligation to stand ready to act on third-party guarantees are included in Other current liabilities or Other liabilities(as appropriate) on the Consolidated Balance Sheets. Any recognition of these liabilities did not have a material impact on the Company's financial positionor results of operations for 2018, 2017 or 2016.In the normal course of business, legal indemnifications are provided related primarily to the performance of the Company's products and services and patentand trademark infringement of the products and services sold. These indemnifications generally relate to the performance (regarding function, not price) ofthe respective products or services and therefore no liability is recognized related to the fair value of such guarantees.Derivative Instruments and Hedging ActivitiesThe Company uses derivative instruments, including foreign currency exchange forward contracts, interest rate swaps and cross-currency interest rate swaps("CCIRs"), to manage certain foreign currency and interest rate exposures. Derivative instruments are viewed as risk management tools by the Company andare not used for trading or speculative purposes. All derivative instruments are recorded on the Consolidated Balance Sheets at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date (an exit price). The Company utilizes market data or assumptions that the Company believes market participants would use in valuing theasset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique.The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources(observable inputs), and (2) an entity’s own assumptions about market participant assumptions based on the best information available in the circumstances(unobservable inputs). The fair value hierarchy consists of three broad levels, which give the highest priority to unadjusted quoted prices in active marketsfor identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:•Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.•Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly,including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets thatare not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derivedprincipally from or corroborated by observable market data by correlation or other means.•Level 3—Inputs that are both significant to the fair value measurement and unobservable. In instances in which multiple levels of inputs are used to measure fair value, hierarchy classification is based on the lowest level input that is significant tothe fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entiretyrequires judgment and considers factors specific to the asset or liability.78Table of ContentsThe Company primarily applies the market approach for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs, such as forward rates, interest rates, the Company’scredit risk and counterparties’ credit risks, and which minimize the use of unobservable inputs. The Company is able to classify fair value balances based onthe ability to observe those inputs. Foreign currency exchange forward contracts, interest rate swaps and CCIRs are based upon pricing models using market-based inputs (Level 2). Model inputs can be verified and valuation techniques do not involve significant management judgment.The fair value of outstanding derivative contracts recorded as assets and liabilities on the Consolidated Balance Sheets was as follows:(In thousands) Balance Sheet Location Fair Value ofDerivativesDesignated as HedgingInstruments Fair Value ofDerivatives NotDesignated as HedgingInstruments Total Fair ValueDecember 31, 2018 Asset derivatives (Level 2): Foreign currency exchange forward contracts Other current assets $2,970 $589 $3,559Interest rate swaps Other current assets 1,331 — 1,331Interest rate swaps Other assets 128 — 128Total $4,429 $589 $5,018Liability derivatives (Level 2):Foreign currency exchange forward contracts Other current liabilities $24 $2,910 $2,934Interest rate swaps Other liabilities 1,849 — 1,849Total $1,873 $2,910 $4,783December 31, 2017 Asset derivatives (Level 2): Foreign currency exchange forward contracts Other current assets $2,329 $2,915 $5,244Interest rate swaps Other current assets 464 — 464Interest rate swaps Other assets 170 — 170Total $2,963 $2,915 $5,878Liability derivatives (Level 2):Foreign currency exchange forward contracts Other current liabilities $153 $6,970 $7,123Interest rate swaps Other liabilities 1,368 — 1,368Total $1,521 $6,970 $8,491All of the Company's derivatives are recorded on the Consolidated Balance Sheets at gross amounts and not offset. All of the Company's interest rate swaps,CCIRs and certain foreign currency exchange forward contracts are transacted under International Swaps and Derivatives Association ("ISDA")documentation. Each ISDA master agreement permits the net settlement of amounts owed in the event of default. The Company's derivative assets andliabilities subject to enforceable master netting arrangements resulted in a $0.1 million and $0.2 million net liability at December 31, 2018 andDecember 31, 2017, respectively.79Table of ContentsThe effect of derivative instruments on the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income (Loss):Derivatives Designated as Hedging Instruments(In thousands) Amount ofGain (Loss)Recognized inOtherComprehensiveIncome("OCI") onDerivative—EffectivePortion Location of Gain(Loss) Reclassifiedfrom AccumulatedOCI into Income—EffectivePortionAmount ofGain (Loss)ReclassifiedfromAccumulatedOCI intoIncome—EffectivePortion Location of Gain(Loss) Recognizedin Income onDerivative—IneffectivePortionand AmountExcluded fromEffectivenessTestingAmount ofGain (Loss)Recognizedin Incomeon Derivative—IneffectivePortion andAmountExcludedfrom EffectivenessTesting Twelve Months Ended December 31, 2018:Foreign currency exchange forwardcontracts $1,935 Product revenues /Cost of services andproducts sold$(374) $— Foreign currency forward exchangecontracts — Retained earnings(1,520)(b) — Interest rate swaps 1,451 Interest expense(1,108) — Cross-currency interest rate swaps 63(a)Interest expense1,264 — $3,449 $(1,738) $— Twelve Months Ended December 31, 2017:Foreign currency exchange forwardcontracts $3,547 Productrevenues/Cost ofservices and productssold$(954) $— Interest rate swaps (734) — — Cross-currency interest rate swaps (205)(a)Interest expense1,002 Cost of services andproducts sold420(c) $2,608 $48 $420 Twelve Months Ended December 31, 2016:Foreign currency exchange forwardcontracts $2,294 Cost of services andproducts sold$(410) $— Cross-currency interest rate swaps (1,549) — Cost of services andproducts sold4,042(c) $745 $(410) $4,042 (a)Amounts represent changes in foreign currency translation related to balances in Accumulated other comprehensive loss.(b)The Company has adopted the new revenue recognition standard utilizing the modified retrospective transition method, including use of practical expedients. See Note 2,Recently Adopted and Recently Issued Accounting Standards for additional information.(c)These gains (losses) offset foreign currency fluctuation effects on the debt principal.Derivatives Not Designated as Hedging Instruments Location of Gain (Loss) Recognized inIncome on Derivatives Amount of Gain (Loss) Recognized in Income on Derivatives for theTwelve Months Ended December 31(d)(In thousands) 2018 2017 2016Foreign currency exchange forward contracts Cost of services and products sold $17,262 $(23,572) $15,875(d)These gains (losses) offset amounts recognized in cost of service and products sold principally as a result of intercompany or third-party foreign currency exposures.Foreign Currency Exchange Forward ContractsThe Company conducts business in multiple currencies and, accordingly, is subject to the inherent risks associated with foreign exchange rate movements. Foreign currency-denominated assets and liabilities are translated into U.S. dollars at the exchange rates existing at the respective balance sheet dates, andincome and expense items are translated at the average exchange rates during the respective periods. 80Table of ContentsThe Company uses derivative instruments to hedge cash flows related to foreign currency fluctuations. Foreign currency exchange forward contractsoutstanding are part of a worldwide program to minimize foreign currency exchange operating income and balance sheet exposure by offsetting foreigncurrency exposures of certain future payments between the Company and various subsidiaries, suppliers or customers. The unsecured contracts are withmajor financial institutions. The Company may be exposed to credit loss in the event of non-performance by the contract counterparties. The Companyevaluates the creditworthiness of the counterparties and does not expect default by them. Foreign currency exchange forward contracts are used to hedgecommitments, such as foreign currency debt, firm purchase commitments and foreign currency cash flows for certain export sales transactions.Changes in the fair value of derivatives used to hedge foreign currency denominated balance sheet items are reported directly in earnings, along withoffsetting transaction gains and losses on the items being hedged. Derivatives used to hedge forecasted cash flows associated with foreign currencycommitments may be accounted for as cash flow hedges, as deemed appropriate, if the criteria for hedge accounting are met. Gains and losses on derivativesdesignated as cash flow hedges are deferred in Accumulated other comprehensive loss, a separate component of equity, and reclassified to earnings in amanner that matches the timing of the earnings impact of the hedged transactions. The ineffective portion of all hedges, if any, is recognized currently inearnings.The recognized gains and losses offset amounts recognized in cost of services and products sold principally as a result of intercompany or third-party foreigncurrency exposures. At December 31, 2018 and December 31, 2017, the notional amounts of foreign currency exchange forward contracts were $423.9million and $671.9 million, respectively. These contracts primarily hedge British pounds sterling and euros against other currencies and mature throughOctober 2021.In addition to foreign currency exchange forward contracts, the Company designates certain loans as hedges of net investments in international subsidiaries.The Company recorded pre-tax net losses of $9.9 million, pre-tax net gains of $17.4 million and pre-tax net losses of $37.5 million related to hedges of netinvestments during 2018, 2017 and 2016, respectively, in Accumulated other comprehensive loss.Interest Rate SwapsThe Company uses interest rate swaps in conjunction with certain debt issuances in order to secure a fixed interest rate. Changes in the fair value attributedto the effect of the swaps’ interest spread and changes in the credit worthiness of the counter-parties are recorded in Accumulated other comprehensive loss. In January 2017 and February 2018, the Company entered into a series of interest rate swaps that cover the period from 2018 through 2022 and had the effectof converting $300.0 million of the Term Loan Facility from floating-rate to fixed-rate beginning in 2018. The fixed rates provided by the swaps replace theadjusted LIBOR rate in the interest calculation, ranging from 1.65% for 2018 to 3.12% for 2022. The total notional of the Company's interest rate swaps was$300.0 million as of December 31, 2018.Cross-Currency Interest Rate SwapsThe Company may use CCIRs in conjunction with certain debt issuances in order to secure a fixed local currency interest rate. Under these CCIRs, theCompany receives interest based on a fixed or floating U.S. dollar rate and pays interest on a fixed local currency rate based on the contractual amounts indollars and the local currency, respectively. At maturity, there is also the payment of principal amounts between currencies. Changes in the fair valueattributed to the effect of the swaps' interest spread and changes in the credit worthiness of the counter-parties are recorded in Accumulated othercomprehensive loss. Changes in value attributed to the effect of foreign currency fluctuations are recorded in the Consolidated Statements of Operations andoffset currency fluctuation effects on the debt principal. The Company had no outstanding CCIRs at December 31, 2018 or December 31, 2017.Fair Value of Other Financial InstrumentsThe carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term borrowings approximate fairvalue due to the short-term maturities of these assets and liabilities. At December 31, 2018 and 2017, the total fair value of long-term debt, including currentmaturities, was $592.0 million and $599.1 million, respectively, compared with a carrying value of $605.4 million and $593.7 million, respectively. Fairvalues for debt are based upon pricing models using market-based inputs (Level 2) for similar issues or on the current rates offered to the Company for debt ofthe same remaining maturities.Concentrations of Credit RiskFinancial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accountsreceivable. The Company places cash and cash equivalents with high-quality financial institutions and, by policy, limits the amount of credit exposure toany single institution.81Table of ContentsConcentrations of credit risk with respect to accounts receivable are generally limited in the Harsco Industrial Segment. However, the Company's HarscoMetals & Minerals Segment and, to a lesser extent, the Harsco Rail Segment have several large customers throughout the world with significant accountsreceivable balances. Consolidation in the global steel or rail industries could result in an increase in concentration of credit risk for the Company.The Company generally does not require collateral or other security to support customer receivables. If a receivable from one or more of the Company's largercustomers becomes uncollectible, it could have a material effect on the Company's results of operations or cash flows.16. Information by Segment and Geographic AreaThe Company reports information about operating segments using the "management approach," which is based on the way management organizes andreports the segments within the enterprise for making operating decisions and assessing performance. The Company's reportable segments are identifiedbased upon differences in products, services and markets served. In 2018, the Company had three reportable segments. These segments and the types ofproducts and services offered include the following:Harsco Metals & Minerals SegmentGlobal expertise in providing on-site services for product quality improvement; resource recovery from steel and metals manufacturing; and materiallogistics; value added environmental solutions for industrial co-products; as well as aluminum dross and scrap process systems. Major customers includesteel mills and asphalt roofing manufacturers.Harsco Industrial SegmentMajor products include air-cooled heat exchangers; industrial grating and high-security fencing; and boilers and water heaters. Major customers includeindustrial plants and the non-residential, commercial and public construction and retrofit markets; and the natural gas, natural gas processing andpetrochemical industries.Harsco Rail SegmentThis Segment manufactures railway track maintenance and safety equipment and provides track maintenance services. The major customers include privateand government-owned railroads and urban mass transit systems worldwide.Other InformationThe measurement basis of segment profit or loss is operating income. There are no significant inter-segment sales. Corporate assets, at December 31, 2018 and2017, include principally cash, prepaid taxes, fair value of derivative instruments and U.S. deferred income taxes. Countries with revenues from unaffiliatedcustomers or net property, plant and equipment of ten percent or more of the consolidated totals (in at least one period presented) are as follows:Information by Geographic Area (a) Revenues from Unaffiliated Customers Year Ended December 31(In thousands) 2018 2017 2016U.S. $812,941 $697,663 $614,327U.K. 143,346 146,624 156,552All Other 766,093 762,775 680,344Totals including Corporate $1,722,380 $1,607,062 $1,451,223(a)Revenues are attributed to individual countries based on the location of the facility generating the revenue. Property, Plant and Equipment, Net Balances at December 31(In thousands) 2018 2017 2016U.S. $135,086 $120,555 $125,386China 89,503 95,569 90,288Brazil 36,960 54,704 62,597All Other 208,351 208,919 211,984Totals including Corporate $469,900 $479,747 $490,255No single customer provided in excess of 10% of the Company's consolidated revenues in 2018, 2017 and 2016.82Table of ContentsIn 2018, 2017 and 2016, the Harsco Metals & Minerals Segment had one customer that provided in excess of 10% of this Segment's revenues under multiplelong-term contracts at several mill sites. Should additional consolidations occur involving some of the steel industry's larger companies which are customersof the Company, it would result in an increase in concentration of credit risk for the Company. The loss of any one of the contracts would not have a materialadverse effect upon the Company's financial position or cash flows; however, it could have a significant effect on quarterly or annual results of operations.In 2018 and 2016, the Harsco Industrial Segment had no customers and in 2017 one customer that provided in excess of 10% of the Segment's revenues. In2018, 2017 and 2016, the Harsco Rail Segment had one customer that provided in excess of 10% of the Segment's revenues. The loss of any of thesecustomers would not have a material adverse impact on the Company's financial positions or cash flows; however, it could have a material effect on quarterlyor annual results of operations.Operating Information by Segment: Twelve Months Ended December 31(In thousands) 2018 2017 2016Revenues Harsco Metals & Minerals $1,068,304 $1,011,328 $965,540Harsco Industrial 374,708 299,592 247,542Harsco Rail 279,294 295,999 238,107Corporate 74 143 34Total Revenues $1,722,380 $1,607,062 $1,451,223Operating Income (Loss) Harsco Metals & Minerals $121,195 $102,362 $78,590Harsco Industrial 54,665 35,532 23,804Harsco Rail 37,341 32,953 (16,592)Corporate (22,274) (25,453) (20,919)Total Operating Income $190,927 $145,394 $64,883Total Assets Harsco Metals & Minerals $1,230,152 $1,184,280 $1,181,602Harsco Industrial 163,324 113,410 107,987Harsco Rail 186,049 237,135 204,477Corporate 53,342 43,860 87,272Total Assets $1,632,867 $1,578,685 $1,581,338Depreciation and Amortization Harsco Metals & Minerals $115,059 $112,329 $120,611Harsco Industrial 7,729 7,360 7,223Harsco Rail 4,287 4,221 5,383Corporate 5,710 6,027 8,269Total Depreciation and Amortization $132,785 $129,937 $141,486Capital Expenditures Harsco Metals & Minerals $114,142 $87,526 $62,322Harsco Industrial 7,561 6,895 5,118Harsco Rail 9,152 2,403 1,696Corporate 1,313 1,490 204Total Capital Expenditures $132,168 $98,314 $69,34083Table of ContentsReconciliation of Segment Operating Income to Consolidated Income (Loss) From Continuing Operations Before Income Taxes and Equity Income: Twelve Months Ended December 31(In thousands) 2018 2017 2016Segment operating income $213,201 $170,847 $85,802General Corporate expense (22,274) (25,453) (20,919)Operating income from continuing operations 190,927 145,394 64,883Interest income 2,155 2,469 2,475Interest expense (38,148) (47,552) (51,584)Defined benefit pension income (expense) 3,447 (2,595) (1,414)Loss on early extinguishment of debt (1,127) (2,265) (35,337)Change in fair value to the unit adjustment liability and loss on dilution and sale of equitymethod investment — — (58,494)Income (loss) from continuing operations before income taxes and equity income $157,254 $95,451 $(79,471)17. Revenue RecognitionThe Company recognizes revenues to depict the transfer of promised services and products to customers in an amount that reflects the consideration theCompany expects to receive in exchange for those services or products. Service revenues include the service components of the Harsco Metals & Mineralsand Harsco Rail Segments. Product revenues include the Harsco Industrial Segment and the product revenues of the Harsco Metals & Minerals and HarscoRail Segments. See Note 1, Summary of Significant Accounting Policies, Revenue Recognition, for additional information. A summary of the Company's revenues by primary geographical markets as well as by key product and service groups is as follows: Twelve Months Ended December 31, 2018(In thousands) Harsco Metals& Minerals Segment Harsco IndustrialSegment Harsco Rail Segment Corporate Consolidated TotalsPrimary Geographical Markets (a): North America $302,238 $354,558 $205,212 $74 $862,082Western Europe 390,840 — 48,016 — 438,856Latin America (b) 151,886 20,150 3,977 — 176,013Asia-Pacific 145,761 — 22,089 — 167,850Middle East and Africa 50,003 — — — 50,003Eastern Europe 27,576 — — — 27,576Total Revenues (c) $1,068,304 $374,708 $279,294 $74 $1,722,380Key Product and Service Groups: On-site services and material logistics,product quality improvement and resourcerecovery for iron, steel and metalsmanufacturing; value- added environmentalsolutions for industrial co-products; as wellas aluminum dross and scrap processingsystems $1,068,304 $— $— $— $1,068,304Railway track maintenance services andequipment — — 279,294 — 279,294Air-cooled heat exchangers — 207,184 — — 207,184Industrial grating products — 127,419 — — 127,419Heat transfer products — 40,105 — — 40,105General Corporate — — — 74 74Total Revenues (c) $1,068,304 $374,708 $279,294 $74 $1,722,38084Table of Contents Twelve Months Ended December 31, 2017(In thousands) Harsco Metals& Minerals Segment Harsco IndustrialSegment Harsco Rail Segment Corporate Consolidated TotalsPrimary Geographical Markets (a): North America $274,476 $273,775 $196,567 $143 $744,961Western Europe 369,763 — 78,698 — 448,461Latin America (b) 159,130 21,369 2,827 — 183,326Asia-Pacific 138,311 4,448 17,907 — 160,666Middle East and Africa 42,700 — — — 42,700Eastern Europe 26,948 — — — 26,948Total Revenues (c) $1,011,328 $299,592 $295,999 $143 $1,607,062Key Product and Service Groups: On-site services and material logistics,product quality improvement and resourcerecovery for iron, steel and metalsmanufacturing; value- added environmentalsolutions for industrial co-products; as well asaluminum dross and scrap processing systems $1,011,328 $— $— $— $1,011,328Railway track maintenance services andequipment — — 295,999 — 295,999Air-cooled heat exchangers — 144,955 — — 144,955Industrial grating products — 116,598 — — 116,598Heat transfer products — 38,039 — — 38,039General Corporate — — — 143 143Total Revenues (c) $1,011,328 $299,592 $295,999 $143 $1,607,062 Twelve Months Ended December 31, 2016(In thousands) Harsco Metals& Minerals Segment Harsco IndustrialSegment Harsco Rail Segment Corporate Consolidated TotalsPrimary Geographical Markets (a): North America $247,287 $215,322 $191,726 $34 $654,369Western Europe 388,336 — 30,270 — 418,606Latin America (b) 134,071 28,256 2,014 — 164,341Asia-Pacific 119,873 3,964 13,025 — 136,862Middle East and Africa 45,659 — 1,072 — 46,731Eastern Europe 30,314 — — — 30,314Total Revenues (c) $965,540 $247,542 $238,107 $34 $1,451,223Key Product and Service Groups: On-site services and material logistics,product quality improvement and resourcerecovery for iron, steel and metalsmanufacturing; value- added environmentalsolutions for industrial co-products; as wellas aluminum dross and scrap processingsystems $965,540 $— $— $— $965,540Railway track maintenance services andequipment — — 238,107 — 238,107Air-cooled heat exchangers — 93,616 — — 93,616Industrial grating products — 115,914 — — 115,914Heat transfer products — 38,012 — — 38,012General Corporate — — — 34 34Total Revenues (c) $965,540 $247,542 $238,107 $34 $1,451,223(a)Revenues are attributed to individual countries based on the location of the facility generating the revenue.(b)Includes Mexico.(c)The Company has adopted the new revenue recognition standard utilizing the modified retrospective transition method, including use of practical expedients. Comparativeinformation has not been restated and continues to be reported under U.S. GAAP in effect for those periods. See Note 2, Recently Adopted and Recently Issued AccountingStandards for additional information.85Table of ContentsThe Company may receive payments in advance of earning revenue, which are treated as Advances on contracts on the Consolidated Balance Sheets. TheCompany may recognize revenue in advance of being able to contractually invoice the customer, which is treated as Contract assets on the ConsolidatedBalance Sheets. Contract assets are transferred to Trade accounts receivable, net when right to payment becomes unconditional. Contract assets and Contractliabilities are reported as a net position, on a contract-by-contract basis, at the end of each reporting period. These instances are primarily related to theHarsco Rail Segment and air-cooled heat exchangers business of the Harsco Industrial Segment.The Company had Contract assets totaling $21.8 million at January 1, 2018 and $24.3 million at December 31, 2018. The increase is due principally torevenue recognized in excess of amounts reclassified to trade accounts receivable, net of approximately $5 million and the Altek acquisition partially offsetby a contract termination. The Company had Advances on contracts totaling $64.0 million at January 1, 2018 and $69.0 million at December 31, 2018. Theincrease is due principally to advances on contracts received in excess of revenue recognized of approximately $2 million as well as the Altek acquisitionand foreign currency translation.At December 31, 2018, the Harsco Metals & Minerals Segment had remaining, fixed, unsatisfied performance obligations, where the expected contractduration exceeds one year totaling $148.1 million. Of this amount, $44.3 million is expected to be fulfilled by December 31, 2019, $39.6 million byDecember 31, 2020, $24.9 million by December 31, 2021, $24.1 million by December 31, 2022 and the remainder thereafter. These amounts exclude anyvariable fees, fixed fees subject to indexation and any performance obligations expected to be satisfied within one year.At December 31, 2018, the Harsco Rail Segment had remaining, fixed, unsatisfied performance obligations, where the expected contract duration exceeds oneyear totaling $209.8 million. Of this amount, $65.5 million is expected to be fulfilled by December 31, 2019, $70.8 million by December 31, 2020, $50.9million by December 31, 2021, $18.7 million by December 31, 2022 and the remainder thereafter. These amounts exclude any variable fees, fixed feessubject to indexation and any performance obligations expected to be satisfied within one year.The Company provides assurance type warranties primarily for product sales in the Harsco Industrial and Harsco Rail Segments. These warranties aretypically not priced or negotiated separately (there is no option to separately purchase the warranty) or the warranty does not provide customers with aservice in addition to the assurance that the product complies with agreed-upon specifications. Accordingly, such warranties do not represent separateperformance obligations. See Note 1, Summary of Significant Accounting Policies for additional information on warranties.The Company has elected to utilize the following practical expedients on an ongoing basis as part of the adoption:•The Company has not adjusted the promised amount of consideration for the effects of a significant financing component if the Company expects, atcontract inception, that the period between when the Company transfers the promised good or services to the customer and when the customer paysfor that good or service would be one year or less; and•The Company has elected to exclude disclosures related to unsatisfied performance obligations where the related contract has a duration of one yearor less; or where the consideration is entirely variable. Accordingly, the Company's disclosure related to unsatisfied performance obligations islimited to the railway track maintenance equipment in the Harsco Rail Segment and the fixed portion of fees related to metals services in the HarscoMetals & Minerals Segment.Taxes assessed by governmental authorities that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by theCompany from a customer, are excluded from revenue. Additionally, in certain contracts, the Company facilitates shipping and handling activities aftercontrol has transferred to the customer. The Company has elected to record all shipping and handling activities as costs to fulfill a contract. In situationswhere the shipping and handling costs have not been incurred at the time revenue is recognized, the respective shipping and handling costs are accrued.86Table of Contents18. Other (Income) Expenses, NetThe major components of this Consolidated Statements of Operations caption are as follows:(In thousands) 2018 2017 2016Net gains Harsco Metals & Minerals Segment $(2,650) $(1,354) $(1,828)Harsco Industrial Segment — (3,782) 64Corporate (1,218) — —Total net gains (3,868) (5,136) (1,764)Employee termination benefit costs Harsco Metals & Minerals Segment 2,853 4,411 8,491Harsco Industrial Segment 220 617 947Harsco Rail Segment 704 1,133 297Corporate 1,206 1,189 1,042Total employee termination benefit costs 4,983 7,350 10,777Other costs to exit activities Harsco Metals & Minerals Segment 352 706 220Harsco Industrial Segment 258 371 40Corporate (182) 556 180Total other costs to exit activities 428 1,633 440Impaired asset write-downs Harsco Metals & Minerals Segment 104 706 399Harsco Industrial Segment 9 151 —Corporate — 168 —Total impaired asset write-downs 113 1,025 399Harsco Metals & Minerals Segment contingent consideration adjustments (2,939) — —Harsco Metals & Minerals Segment separation costs — — 3,235Other income (239) (231) (467)Total other (income) expenses, net $(1,522) $4,641 $12,620Net GainsNet gains result from the sales of redundant properties (primarily land, buildings and related equipment) and non-core assets. In 2018, gains related to assetssold principally in Eastern Europe, Western Europe and Asia Pacific. In 2017, gains related to assets sold principally in Latin America and Western Europe. In2016, gains related to assets sold principally in Western Europe, North America and Latin America. Cash proceeds associated with these gains are included inProceeds from sales of assets, in the cash flows from investing activities section of the Consolidated Statements of Cash Flows.Employee Termination Benefit CostsCosts and the related liabilities associated with involuntary termination benefit costs associated with one-time benefit arrangements provided as part of anexit or disposal activity are recognized by the Company when a formal plan for reorganization is approved at the appropriate level of management andcommunicated to the affected employees. Additionally, costs associated with ongoing benefit arrangements, or in certain countries where statutoryrequirements dictate a minimum required benefit, are recognized when they are probable and estimable. The employee termination benefits costs in 2018related principally to the Harsco Metals & Minerals Segment, primarily in Asia Pacific and Western Europe and Corporate in North America. The employeetermination benefits costs in 2017 related principally to the Harsco Metals & Minerals Segment, primarily in Latin America and Western Europe. Theemployee termination benefits costs in 2016 related principally to the Harsco Metals & Minerals Segment, including a probable site exit and the impact ofHarsco Metals & Minerals Segment's Improvement Plan, primarily in Western Europe, Latin America and North America.87Table of ContentsOther Costs to Exit ActivitiesCosts associated with exit or disposal activities include costs to terminate a contract and other costs associated with exit or disposal activities. Costs toterminate a contract that is not a capital lease are recognized when an entity terminates the contract or when an entity ceases using the right conveyed by thecontract. This includes the costs to terminate the contract before the end of its term or the costs that will continue to be incurred under the contract for itsremaining term without economic benefit to the entity (e.g., lease run-out costs). Other costs associated with exit or disposal activities (e.g., costs toconsolidate or close facilities and relocate equipment or employees) are recognized and measured at their fair value in the period in which the liability isincurred. In 2018, $0.4 million of exit costs were incurred across several regions. In 2017, $1.6 million of exit costs were incurred, principally in WesternEurope and North America. In 2016, $0.4 million of exit costs were incurred, principally in North America and Western Europe.Impaired Asset Write-downsImpaired asset write-downs are measured as the amount by which the carrying amount of assets exceeds their fair value. Fair value is estimated based upon theexpected future realizable cash flows including anticipated selling prices. Non-cash impaired asset write-downs are included in, Other, net, on theConsolidated Statements of Cash Flows as adjustments to reconcile net income (loss) to net cash provided by operating activities. In 2017, $1.0 million ofimpaired asset write-downs were incurred principally in the Harsco Metals & Minerals Segment, mostly in the Asia Pacific and North America regions. In2016, $0.4 million of impaired asset write-downs were incurred principally in the Harsco Metals & Minerals Segment, mostly in the Asia Pacific region.Harsco Metals & Minerals Segment Contingent Consideration AdjustmentsThe Company acquired Altek during 2018 and the purchase price included contingent consideration based on the performance of Altek through 2021.During 2018, the Company's assessment of these performance goals resulted in a $2.9 million reduction to the previously recognized contingentconsideration liability in the Harsco Metals & Minerals Segment. Each quarter until settlement of the contingency, the Company will assess the likelihoodthat Altek will achieve the performance goals and the resulting fair value of the contingent consideration and any future adjustments (increases or decreases)will be included in operating results.19. Components of Accumulated Other Comprehensive LossAccumulated other comprehensive loss is included on the Consolidated Statements of Stockholders' Equity. The components of Accumulated othercomprehensive loss, net of the effect of income taxes, and activity for the years ended December 31, 2018 and 2017 are as follows: Components of Accumulated Other Comprehensive Income (Loss) - Net of Tax(In thousands) CumulativeForeign ExchangeTranslationAdjustments Effective Portionof DerivativesDesignated asHedgingInstruments CumulativeUnrecognizedActuarial Losseson PensionObligations Unrealized Loss onMarketableSecurities TotalBalance at December 31, 2016 $(144,534) $(1,089) $(461,094) $(5) $(606,722)Other comprehensive income beforereclassifications 36,011(a)1,967(b)5,143(c)22 43,143Amounts reclassified from accumulated othercomprehensive loss, net of tax — (70) 20,111 — 20,041Total other comprehensive income 36,011 1,897 25,254 22 63,184Less: Other comprehensive income attributable tononcontrolling interests (3,044) — — — (3,044)Other comprehensive income attributable toHarsco Corporation 32,967 1,897 25,254 22 60,140Balance at December 31, 2017 $(111,567) $808 $(435,840) $17 $(546,582)88Table of Contents Components of Accumulated Other Comprehensive Income (Loss) - Net of Tax(In thousands) CumulativeForeign ExchangeTranslationAdjustments Effective Portionof DerivativesDesignated asHedgingInstruments CumulativeUnrecognizedActuarial Losseson PensionObligations Unrealized Loss onMarketableSecurities TotalBalance at December 31, 2017 $(111,567) $808 $(435,840) $17 $(546,582)Adoption of new accounting standard (c) (1,520) (1,520)Balance at January 1, 2018 (111,567) (712) (435,840) 17 (548,102)Other comprehensive income (loss) beforereclassifications (50,743)(a)2,466(b)8,450(c)(48) (39,875)Amounts reclassified from accumulated othercomprehensive loss, net of tax — (365) 18,735 — 18,370Total other comprehensive income (loss) (50,743) 2,101 27,185 (48) (21,505)Less: Other comprehensive loss attributable tononcontrolling interests 2,500 — — — 2,500Other comprehensive income (loss) attributable toHarsco Corporation (48,243) 2,101 27,185 (48) (19,005)Balance at December 31, 2018 $(159,810) $1,389 $(408,655) $(31) $(567,107)(a)Principally foreign currency fluctuation.(b)Principally net change from periodic revaluations.(c)Principally changes due to annual actuarial remeasurements.Amounts reclassified from accumulated other comprehensive loss for 2018 and 2017 are as follows: Year EndedDecember 31 2018 Year EndedDecember 312017 Affected Caption on the Consolidated Statements ofOperations(In thousands) Amortization of defined benefit pension items (d):Actuarial losses $20,014 $21,985 Defined benefit pension income (expense)Prior-service costs (139) 219 Defined benefit pension income (expense)Settlement/curtailment losses 249 — Defined benefit pension income (expense)Total before tax 20,124 22,204 Tax benefit (1,389) (2,093) Total reclassification of defined benefit pension items,net of tax $18,735 $20,111 Amortization of cash flow hedging instruments:Foreign currency exchange forward contracts $(374) $(936) Product revenuesForeign currency exchange forward contracts — (18) Cost of services and products soldCross-currency interest rate swaps 1,264 1,002 Interest expenseInterest rate swaps (1,108) — Interest expenseTotal before tax (218) 48 Tax benefit (147) (118) Total reclassification of cash flow hedginginstruments $(365) $(70) (d)These accumulated other comprehensive loss components are included in the computation of NPPC. See Note 10, Employee Benefit Plans, for additional information.89Table of ContentsTwo-Year Summary of Quarterly Results (Unaudited)(In millions, except per share amounts) 2018 (a)Quarterly First Second Third Fourth Revenues $408.0 $432.0 $445.5 $436.9 Gross profit (b) 96.7 113.1 118.8 105.1 Net income attributable to Harsco Corporation 17.8 40.5 32.8 45.9 Basic income (loss) per share attributable to Harsco Corporation common stockholders:Continuing operations $0.23 $0.49 $0.41 $0.56 Discontinued operations (c) (0.01) 0.01 — 0.01 Basic income per share attributable to HarscoCorporation common stockholders $0.22 $0.50 $0.41 $0.57(d)Diluted income (loss) per share attributable to Harsco Corporation common stockholders:Continuing operations $0.22 $0.48 $0.40 $0.55 Discontinued operations (c) (0.01) 0.01 — 0.01 Diluted income per share attributable to HarscoCorporation common stockholders $0.21 $0.48(d)$0.39(d)$0.55(d) 2017 (a)Quarterly First Second Third Fourth Revenues $372.5 $394.9 $384.7 $455.0 Gross profit (b) 84.3 100.9 94.3 104.6 Net income (loss) attributable to Harsco Corporation 8.9 19.0 13.3 (33.4) Basic income (loss) per share attributable to Harsco Corporation common stockholders:Continuing operations $0.12 $0.23 $0.17 $(0.42) Discontinued operations (c) — 0.01 — 0.01 Basic income (loss) per share attributable to HarscoCorporation common stockholders $0.11(d)$0.24 $0.16(d)$(0.41) Diluted loss per share attributable to Harsco Corporation common stockholders:Continuing operations $0.11 $0.22 $0.16 $(0.42) Discontinued operations (c) — — — 0.01 Diluted income (loss) per share attributable to HarscoCorporation common stockholders $0.11 $0.23(d)$0.16 $(0.41) (a)Sum of the quarters may not equal the total year due to rounding.(b)Gross profit is defined as Revenues less costs and expenses associated directly with or allocated to products sold or services rendered.(c)Discontinued operations related principally to the Gas Technologies Segment which was sold in the fourth quarter of 2007.(d)Does not total due to rounding.90Table of ContentsItem 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.None.Item 9A. Controls and Procedures.Based on the evaluation required by Securities Exchange Act Rules 13a-15(b) and 15d-15(b), the Company's management, including the Chief ExecutiveOfficer and Chief Financial Officer, conducted an evaluation of the effectiveness of disclosure controls and procedures, as defined in Securities Exchange ActRules 13a-15(e) and 15d-15(e), at December 31, 2018. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that thedisclosure controls and procedures were effective at December 31, 2018. There were no changes in internal control over financial reporting that havematerially affected, or are reasonably likely to materially affect, internal control over financial reporting during the fourth quarter of 2018.Management's Report on Internal Controls Over Financial Reporting is included in Part II, Item 8, "Financial Statements and Supplementary Data." Theeffectiveness of the Company's internal control over financial reporting at December 31, 2018 has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, as stated in the Report of Independent Registered Public Accounting Firm appearing in Part II, Item 8,"Financial Statements and Supplementary Data."Item 9B. Other Information.None.91Table of ContentsPART IIIItem 10. Directors, Executive Officers and Corporate Governance.The information regarding executive officers of the Company required by this Item is set forth as a Supplementary Item, titled "Executive Officers of theRegistrant," at the end of Part I of this Annual Report on Form 10-K (pursuant to Instruction 3 to Item 401(b) of Regulation S-K) and is incorporated herein byreference. The other information required by this Item is incorporated herein by reference from the disclosures that will be included under the sectionsentitled "Corporate Governance," "Proposal 1: Election of Directors - Nominees for Director," "Meetings and Committees of the Board," "Report of the AuditCommittee" and "Section 16(a) Beneficial Ownership Reporting Compliance" of the Company's Definitive Proxy Statement for its 2019 Annual Meeting ofStockholders (the "2019 Proxy Statement"), which will be filed pursuant to SEC Regulation 14A not later than 120 days after the end of the Company's fiscalyear ended December 31, 2018.The Company's Code of Conduct (the "Code"), which applies to all officers, directors and employees of the Company, may be found on the Company'sInternet website, www.harsco.com. The Company intends to disclose on its website any amendments to the Code or any waiver from a provision of the Codegranted to an executive officer or director of the Company. The Code is available in print, without charge, to any person who requests it. To request a copy ofthe Code please contact the Company's Vice President—Corporate Communications at (717) 730-3683.Item 11. Executive Compensation.The information regarding compensation of executive officers and directors required by this Item is incorporated herein by reference from the disclosures thatwill be included under the sections entitled "Compensation Discussion and Analysis," "Discussion and Analysis of 2018 Compensation" and "Non-EmployeeDirector Compensation" of the 2019 Proxy Statement. The other information required by this Item is incorporated herein by reference from the disclosuresthat will be included under the sections entitled "Compensation Committee Interlocks and Insider Participation" and "Compensation Committee Report" ofthe 2019 Proxy Statement.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.The information regarding security ownership of certain beneficial owners and management required by this Item is incorporated herein by reference from thedisclosures that will be included under the section entitled "Share Ownership of Directors, Management and Certain Beneficial Owners" of the 2019 ProxyStatement.Equity compensation plan information is incorporated herein by reference from the disclosures that will be included under the section entitled "EquityCompensation Plan Information (As of December 31, 2018)" of the 2019 Proxy Statement.Item 13. Certain Relationships and Related Transactions, and Director Independence.The information regarding certain relationships and related transactions required by this Item is incorporated herein by reference from the disclosures thatwill be included under the section entitled "Transactions with Related Persons" of the 2019 Proxy Statement. The information regarding directorindependence required by this Item is incorporated herein by reference from the disclosures that will be included under the section entitled "CorporateGovernance" of the 2019 Proxy Statement.Item 14. Principal Accounting Fees and Services.The information regarding principal accounting fees and services required by this Item is incorporated herein by reference from the disclosures that will beincluded under the sections entitled "Report of the Audit Committee" and "Fees Billed by the Independent Auditors for Audit and Non-Audit Services" of the2019 Proxy Statement.92Table of ContentsPART IVItem 15. Exhibits, Financial Statement Schedules.(a)1. The Index to Consolidated Financial Statements and Supplementary Data is located under Part II, Item 8, "Financial Statements andSupplementary Data." PageIndex to Consolidated Financial Statements and Supplementary Data352. The following financial statement schedule should be read in conjunction with the Consolidated Financial Statements under Part II, Item 8,"Financial Statements and Supplementary Data": PageSchedule II—Valuation and Qualifying Accounts for the years 2018, 2017 and 201694Financial statement schedules other than that listed above are omitted because the required information is not applicable, or because the information requiredis included in the consolidated financial statements.93Table of ContentsSCHEDULE II. VALUATION AND QUALIFYING ACCOUNTSContinuing Operations(In thousands)COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E Additions(Deductions) Additions (Deductions) Description Balance atBeginning ofPeriod Charged toCost andExpenses Due toCurrencyTranslationAdjustments Other Balance at Endof PeriodFor the year 2018: Allowance for Doubtful Accounts $4,731 $372 $(154) $(315)(a)$4,634Deferred Tax Assets—Valuation Allowance 174,227 (19,990) (8,693) (6,682)(b)138,862For the year 2017: Allowance for Doubtful Accounts $11,800 $5,346 $533 $(12,948)(a)$4,731Deferred Tax Assets—Valuation Allowance 146,097 33,041 10,097 (15,008)(b)174,227For the year 2016: Allowance for Doubtful Accounts $25,649 $(38) $(320) $(13,491)(a)$11,800Deferred Tax Assets—Valuation Allowance 110,680 38,490 (6,323) 3,250 146,097(a)Includes the write-off of previously reserved accounts receivable balances.(b)Includes a decrease of $5.4 million related to a change in estimate of interest deductions and a decrease of $1.1 million due to capital loss carryforward expiring in the U.S in2018. Includes a decrease of $11.6 million related to pension adjustments recorded through Accumulated other comprehensive loss and a $4.6 million decrease related to a U.S.tax rate change in 2017.94Table of ContentsListing of Exhibits Filed with Form 10-K Description of Exhibit3(a) Restated Certificate of Incorporation (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period endedJune 30, 2013, Commission File Number 001-03970).3(b) Certificate of Designation filed September 25, 1997 (incorporated by reference to Exhibit 3.A to the Company's Annual Report onForm 10-K for the period ended December 31, 1997, Commission File Number 001-03970).3(c) Certificate of Amendment to the Restated Certificate of Incorporation, dated April 29, 2015 (incorporated by reference to the Company'sCurrent Report on Form 8-K/A dated May 22, 2015, Commission File Number 001-03970).3(d) By-laws, as amended October 28, 2014 (incorporated by reference to the Company's Current Report on Form 8-K dated October 28,2014, Commission File Number 001-03970).4 Form of Specimen Common Stock Certificate (incorporated by reference to Exhibit 4(h) to the Company's Registration Statement onForm S-3 dated December 15, 1994, Registration No. 33-56885).Material Contracts—Credit and Underwriting Agreements10(a)(i) Amended and Restated Five-Year Credit Agreement, dated March 2, 2012, among Harsco Corporation, the lenders named therein,Citibank, N.A., as administrative agent, RBS Securities Inc., as syndication agent, and the Bank of Tokyo-Mitsubishi UFJ, Ltd., HSBCBank USA, National Association, ING Bank N.V., Dublin Branch, JPMorgan Chase Bank, N.A. and Lloyds TSB Bank PLC, asdocumentation agents (incorporated by reference to the Company's Current Report on Form 8-K dated March 7, 2012, Commission FileNo. 001-03970).10(a)(ii) Amendment No. 1, dated September 12, 2013, to the Amended and Restated Five-Year Credit Agreement, dated March 2, 2012, amongHarsco Corporation, the lenders named therein, Citibank, N.A., as administrative agent, RBS Securities Inc., as syndication agent, andthe Bank of Tokyo-Mitsubishi UFJ, Ltd., HSBC Bank USA, National Association, ING Bank N.V., Dublin Branch, JPMorgan ChaseBank, N.A. and Lloyds TSB Bank PLC, as documentation agents (incorporated by reference to the Company's Quarterly Report on Form10-Q for the period ended September 30, 2013, Commission File Number 001-03970).10(a)(iii) Amendment No. 2, dated December 20, 2013, to the Amended and Restated Five-Year Credit Agreement, dated March 2, 2012, amongHarsco Corporation, the lenders named therein, Citibank, N.A., as administrative agent, RBS Securities Inc., as syndication agent, andthe Bank of Tokyo-Mitsubishi UFJ, Ltd., HSBC Bank USA, National Association, ING Bank N.V., Dublin Branch, JPMorgan ChaseBank, N.A. and Lloyds TSB Bank PLC, as documentation agents (incorporated by reference to the Company's Annual Report on Form10-K for the fiscal year ended December 31, 2014, Commission File Number 001-03970).10(a)(iv) Amendment No. 3, dated as of March 27, 2015, to the Amended and Restated Five-Year Credit Agreement among Harsco Corporation, aDelaware corporation, as Borrower, the Lenders party thereto and Citibank, N.A., as Administrative Agent (incorporated by reference tothe Company's Current Report on Form 8-K filed April 1, 2015, Commission File Number 001-03970).10(a)(v) Amendment and Restatement Agreement, dated as of December 2, 2015, among Harsco Corporation, the subsidiaries of the Companyparty thereto, Citibank N.A., as administrative agent, the other agents party thereto and the lenders party thereto including SecondAmended and Restated Credit Agreement, dated as of December 2, 2015, among Harsco Corporation, the lenders named therein,Citibank, N.A. and Royal Bank of Canada, as issuing lenders, and Citibank N.A., as administrative agent and as collateral agent(incorporated by reference to the Company's Current Report on Form 8-K dated December 4, 2015, Commission File No. 001-03970).10(a)(vi) Amendment and Restatement Agreement and First Amendment to Guarantee and Collateral Agreement, dated as of November 2, 2016,among the Company, the subsidiaries of the Company party thereto, Citibank N.A., as administrative agent and collateral agent and thelenders party thereto (incorporated by reference to the Company's Current Report on Form 8-K filed November 8, 2016, Commission fileNo. 001-03970).10(a)(vii) Amendment No. 1, dated December 8, 2017, among Harsco Corporation, the subsidiaries of the Company party thereto, Citibank N.A.,as administrative agent and collateral agent, and the lenders party thereto (incorporated by reference to the Company's Current Reporton Form 8-K dated December 13, 2017, Commission File No. 001-03970).10(a)(viii) Amendment No. 2, dated as of June 18, 2018, among the Company, the subsidiaries of the Company party thereto, Citibank N.A., asadministrative agent and collateral agent and the lenders party thereto (incorporated by reference to the Company's Current Report onForm 8-K dated June 21, 2018, Commission File No. 001-03970).10(a)(ix) Amendment No. 3, dated as of June 18, 2018, among the Company, the subsidiaries of the Company party thereto, Citibank N.A., asadministrative agent and collateral agent and the lenders party thereto (incorporated by reference to the Company's Current Report onForm 8-K Dated June 21, 2018, Commission File No. 001-03970).95Table of Contents Description of ExhibitMaterial Contracts—Management Contracts and Compensatory Plans10(b) Harsco Corporation Supplemental Retirement Benefit Plan as amended and restated January 1, 2009 (incorporated by reference to theCompany's Annual Report on Form 10-K, for the period ended December 31, 2008, Commission File Number 001-03970).10(c) Trust Agreement between Harsco Corporation and Dauphin Deposit Bank and Trust Company dated July 1, 1987 relating to theSupplemental Retirement Benefit Plan (incorporated by reference to the Company's Annual Report on Form 10-K for the period endedDecember 31, 1987, Commission File Number 001-03970).10(d) Stock Option Contract (incorporated by reference to the Company's Current Report on Form 8-K dated January 31, 2011, CommissionFile Number 001-03970).10(e) Harsco Corporation 2013 Equity and Incentive Compensation Plan (incorporated by reference to the Company's Current Report onForm 8-K dated April 26, 2013, Commission File Number 001-03970).10(f) Amendment No. 1 to the Harsco Corporation 2013 Equity and Incentive Compensation Plan (incorporated by reference to theCompany's Current Report on Form 8-K dated May 1, 2017, Commission File Number 001-03970).10(g) Harsco Corporation Form of Stock Appreciation Rights Agreement (effective for grants on and after May 10, 2013) (incorporated byreference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2013, Commission File Number 001-03970).10(h)(i) Harsco Corporation 1995 Non-Employee Directors' Stock Plan as Amended and Restated at January 27, 2004 (incorporated by referenceto Proxy Statement dated March 23, 2004 on Exhibit A, pages A-1 through A-9, Commission File Number 001-03970).10(h)(ii) Amendment No. 1 to the Harsco Corporation 1995 Non-Employee Directors' Stock Plan (incorporated by reference to the Company'sAnnual Report on Form 10-K for the period ended December 31, 2008, Commission File Number 001-03970).10(i)(i) Harsco Corporation Deferred Compensation Plan for Non-Employee Directors (as Amended and Restated as of December 31, 2008)(incorporated by reference to the Company's Annual Report on Form 10-K for the period ended December 31, 2008, Commission FileNumber 001-03970).10(i)(ii) First Amendment to the Harsco Corporation Deferred Compensation Plan for Non Employee Directors (incorporated by reference to theCompany's Annual Report on Form 10-K for the period ended December 31, 2016, Commission File Number 001-03970).10(j) Harsco Non-Qualified Retirement Savings & Investment Plan Part B—Amendment and Restatement as of January 1, 2009 (incorporatedby reference to the Company's Annual Report on Form 10-K for the period ended December 31, 2008, Commission File Number 001-03970).10(k) Form of Change in Control Severance Agreement (incorporated by reference to the Company's Quarterly Report on Form 10-Q for theperiod ended September 30, 2014, Commission File Number 001-03970).10(l) Notification Letter to F. Nicholas Grasberger, III dated March 20, 2013 (incorporated by reference to the Company's Quarterly Report onForm 10-Q for the period ended March 31, 2013, Commission File Number 001-03970).10(m) Notification Letter to David Everitt dated March 14, 2014 (incorporated by reference to the Company's Quarterly Report on Form 10-Qfor the period ended March 31, 2014, Commission File Number 001-03970).10(n) Notification Letter to F. N. Grasberger dated April 8, 2014 (incorporated by reference to the Company's Quarterly Report on Form 10-Qfor the period ended June 30, 2014, Commission File Number 001-03970).10(o) Notification Letter to F. N. Grasberger dated August 1, 2014 (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2014, Commission File Number 001-03970).10(p) Form of Stock Appreciation Rights Agreement (effective for grants on or after April 28, 2014) (incorporated by reference to theCompany's Quarterly Report on Form 10-Q for the period ended June 30, 2014, Commission File Number 001-03970).10(q) Form of Performance Share Units Agreement (effective for grants on or after April 28, 2015) (incorporated by reference to the Company'sQuarterly Report on Form 10-Q for the period ended March 31, 2015, Commission File Number 001-03970).10(r) Form of Stock Appreciation Rights Agreement (effective for grants on or after April 28, 2015) (incorporated by reference to theCompany's Quarterly Report on Form 10-Q for the period ended March 31, 2015, Commission File Number 001-03970).10(s)(i) 2016 Non-Employee Directors' Long-Term Equity Compensation Plan (incorporated by reference to the Company's Form S-8 dated May6, 2016, Commission File Number 001-03970).96Table of Contents Description of Exhibit10(s)(ii) First Amendment to 2016 Non-Employee Directors' Long-Term Equity Compensation Plan (incorporated by reference to the Company'sQuarterly Report on Form 10-Q for the period ended June 30, 2016, Commission File Number 001-03970).10(t) Form of Restricted Stock Units Agreement (Non-Employee Director) (incorporated by reference to the Company's Quarterly Report onForm 10-Q for the period ended June 30, 2016, Commission File Number 001-03970).10(u) Form of Performance Share Units Agreement (effective for grants on or after April 26, 2016) (incorporated by reference to the Company'sQuarterly Report on Form 10-Q for the period ended March 31, 2016, Commission File Number 001-03970).10(v) Form of Restricted Stock Units Agreement (effective for grants on or after April 26, 2016) (incorporated by reference to the Company'sQuarterly Report on Form 10-Q for the period ended March 31, 2016, Commission File Number 001-03970).10(w) Form of Stock Appreciation Rights Agreement (effective for grants on or after April 26, 2016) (incorporated by reference to theCompany's Quarterly Report on Form 10-Q for the period ended March 31, 2016, Commission File Number 001-03970).10(x) Form of Performance Share Units Agreement (effective for grants on or after February 16, 2017) (incorporated by reference to theCompany's Annual Report on Form 10-K for the period ended December 31, 2016, Commission File Number 001-03970).10(y) Form of Restricted Stock Units Agreement (effective for grants on or after February 16, 2017) (incorporated by reference to theCompany's Annual Report on Form 10-K for the period Ended December 31, 2016, Commission File Number 001-03970).10(z) Form of Stock Appreciation Rights Agreement (effective for grants on or after February 16, 2017) (incorporated by reference to theCompany's Annual Report on Form 10-K for the period ended December 31, 2016, Commission File Number 001-03970).10(aa) Form of PSU Award Agreement (for awards granted on or after March 2, 2018) (incorporated by reference to the Company's currentreport on Form 8-K dated March 8, 2018, Commission File Number 001-03970).Director Indemnity Agreements10(bb) Form of Director Indemnification Agreement (incorporated by reference to the Company's Annual Report on Form 10-K for the periodended December 31, 2017, Commission File Number 001-03970). 21 Subsidiaries of the Registrant.23 Consent of Independent Registered Public Accounting Firm.31.1 Certification Pursuant to Rule 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (ChiefExecutive Officer).31.2 Certification Pursuant to Rule 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (ChiefFinancial Officer).32 Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (ChiefExecutive Officer and Chief Financial Officer).101.Def Definition Linkbase Document101.Pre Presentation Linkbase Document101.Lab Labels Linkbase Document101.Cal Calculation Linkbase Document101.Sch Schema Document101.Ins Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within theInline XBRL document.Exhibits other than those listed above are omitted for the reason that they are either not applicable or not material.Item 16. Form 10-K Summary.None.97Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. HARSCO CORPORATION(Registrant)DATEFebruary 21, 2019 /s/ PETER F. MINAN Peter F. MinanSenior Vice President and Chief Financial Officer(Principal Financial Officer) DATEFebruary 21, 2019 /s/ SAMUEL C. FENICE Samuel C. FeniceVice President and Corporate Controller(Principal Accounting Officer)Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.Signature Capacity Date/s/ F. NICHOLAS GRASBERGER III Chairman, President, Chief Executive Officer and Director(Principal Executive Officer) February 21, 2019F. Nicholas Grasberger III /s/ PETER F. MINAN Senior Vice President and Chief Financial Officer (PrincipalFinancial Officer) February 21, 2019Peter F. Minan /s/ DAVID C. EVERITT Lead Director February 21, 2019David C. Everitt /s/ JAMES F. EARL Director February 21, 2019James F. Earl /s/ KATHY G. EDDY Director February 21, 2019Kathy G. Eddy /s/ CAROLANN I. HAZNEDAR Director February 21, 2019Carolann I. Haznedar /s/ MARIO LONGHI Director February 21, 2019Mario Longhi /s/ EDGAR M. PURVIS, JR. Director February 21, 2019Edgar M. Purvis, Jr. /s/ PHILLIP C. WIDMAN Director February 21, 2019Phillip C. Widman 98HARSCO CORPORATION Exhibit 21Subsidiaries of Registrant SubsidiaryCountry of IncorporationOwnership Percentage Harsco Metals Argentina S.A.Argentina100%Harsco (Australia) Pty. LimitedAustralia100%Harsco Industrial Air-X-Changers Pty. Ltd.Australia100%Harsco Metals Australia Pty. Ltd.Australia100%Harsco Metals Australia Holding Investment Co. Pty. Ltd.Australia100%Harsco Rail Pty. Ltd.Australia100%Harsco Minerals Austria GmbHAustria100%AluServ Middle East W.L.L.Bahrain65%Harsco Belgium S.P.R.L.Belgium100%Harsco Metals Belgium S.A.Belgium100%Harsco Metals Emirates PartnershipBelgium65%Harsco Rail Emirates Maatschap/Societe de Droit CommunBelgium100%Harsco Brazil Investments SPRLBelgium100%Harsco Chile Investments SPRLBelgium100%Harsco do Brasil Participacoes e Servicos Siderurgicos Ltda.Brazil100%Harsco Metals LimitadaBrazil100%Harsco Minerais LimitadaBrazil100%Harsco Rail LtdaBrazil100%Heckett Comercio de Rejeitos Industriais, Importacao e Exportacao LtdaBrazil100%Harsco Canada Corporation Societe Harsco CanadaCanada100%Harsco Canada General Partner LimitedCanada100%Harsco Canada Limited PartnershipCanada100%Harsco Nova Scotia Holding CorporationCanada100%Harsco Metals Chile S.A.Chile100%Harsco (Beijing) Fertiliser Co., LtdChina100%Harsco Metals (Ningbo) Pty. Ltd.China70%Harsco Metals Zhejiang Co. Ltd.China70%JiangSu Harsco Industrial Grating Company LimitedChina100%Shanxi TISCO-Harsco Technology Co., Ltd.China60%Harsco APAC Rail Machinery (Beijing) Co., Ltd.China100%Harsco Technology China Co., Ltd.China100%Harsco (Tangshan) Metallurgical Materials Technology Co., LtdChina65%Harsco (Tangshan) Metallurgical Materials Technology Co., Ltd. - GuYe BranchChina100%Harsco (Tangshan) Renewable Resources Development Co., LtdChina51%Harsco Infrastructure CZ s.r.oCzech Republic100%Czech Slag- Nova Hut s.r.o.Czech Republic65%Harsco Metals CZ s.r.oCzech Republic100%Harsco Metals Middle East FZEDubai100%Harsco Metals Egypt L.L.C.Egypt100%Heckett Bahna Co. For Industrial Operations S.A.E.Egypt65%Heckett MultiServ Bahna S.A.E.Egypt65%Slag Processing Company Egypt (SLAR) S.A.E.Egypt60%MultiServ OyFinland100%  HARSCO CORPORATION Exhibit 21Subsidiaries of Registrant SubsidiaryCountry of IncorporationOwnership PercentageHarsco Metals and Minerals France S.A.S.France100%Harsco France S.A.S.France100%Harsco Metals Germany GmbHGermany100%Harsco Minerals Deutschland GmbHGermany100%Harsco Rail Europe GmbHGermany100%Harsco (Gibraltar) Holding LimitedGibraltar100%Harsco Metals Guatemala S.A.Guatemala100%Harsco China Holding Company LimitedHong Kong100%Harsco Industrial Grating China Holding Co. Ltd.Hong Kong100%Harsco Infrastructure Hong Kong LtdHong Kong100%Harsco India Metals Private LimitedIndia99.99%Harsco India Private Ltd.India91.78%Harsco India Services Private Ltd.India100%Harsco Track Machines and Services Private LimitedIndia100%SGB Scafform LimitedIreland100%Harsco Metals Italia S.R.L.Italy100%Ilserv S.R.L.Italy65%Harsco Metals Nord Italia S.R.L.Italy100%Ballagio S.a.r.l.Luxembourg100%Excell Africa Holdings, Ltd.Luxembourg100%Harsco Luxembourg S.a.r.lLuxembourg100%Harsco Metals Luxembourg S.A.Luxembourg100%Harsco Metals Luxequip S.A.Luxembourg100%Excell Americas Holdings Ltd S.a.r.L.Luxembourg100%Harsco Americas Investments S.a.r.l.Luxembourg100%Harsco International Finance S.a.r.l.Luxembourg100%harsco Metals Kemaman Sdn BhdMalaysia100%Harsco Rail Malaysia Sdn BhdMalaysia100%Harsco Industrial IKG de Mexico, S.A. de C.V.Mexico100%Harsco Metals de Mexico S.A. de C.V.Mexico100%Irving, S.A. de C.V.Mexico100%Harsco Asia Investment B.V.Netherlands100%Harsco Asia China Investment B.V.Netherlands100%Harsco Asia Pacific Investment B.V.Netherlands100%GasServ (Netherlands) VII B.V.Netherlands100%Harsco (Mexico) Holdings B.V.Netherlands100%Harsco Infrastructure Industrial Services B.V.Netherlands100%Harsco Infrastructure B.V.Netherlands100%Harsco Infrastructure Construction Services B.V.Netherlands100%Harsco Investments Europe B.V.Netherlands100%Harsco Metals Holland B.V.Netherlands100%Harsco Metals Transport B.V.Netherlands100%  HARSCO CORPORATION Exhibit 21Subsidiaries of Registrant SubsidiaryCountry of IncorporationOwnership PercentageHarsco Metals Oostelijk Staal International B.V.Netherlands100%Harsco Minerals Europe B.V.Netherlands100%Harsco Nederland Slag B.V.Netherlands100%Heckett MultiServ China B.V.Netherlands100%Heckett MultiServ Far East B.V.Netherlands100%Hunnebeck Nederland B.V.Netherlands100%Minerval Metallurgic Additives B.V.Netherlands100%MultiServ Finance B.V.Netherlands100%MultiServ International B.V.Netherlands100%Slag Reductie (Pacific) B.V.Netherlands100%Slag Reductie Nederland B.V.Netherlands100%Harsco (Peru) Holdings B.V.Netherlands100%Harsco Europa B.V.Netherlands100%Harsco Finance B.V.Netherlands100%Harsco Metals LimitedNew Zealand50%Harsco Infrastructure Norge A.S.Norway100%Harsco Metals Norway A.S.Norway100%Harsco Minerals Arabia LLC (FZC)Oman100%Harsco Steel Mill Trading Arabia LLCOman100%Harsco Metals Peru S.A.Peru100%Harsco Metals Polska SP Z.O.O.Poland100%Harsco Metals CTS Prestacao de Servicos Tecnicos e Aluguer de Equipamentos LDAUnipessoalPortugal100%Harsco Metals Saudi Arabia, Ltd.Saudi Arabia55%Harsco Metals D.O.O. SmederevoSerbia100%Harsco Infrastructure Slovensko s.r.o.Slovak Republic100%Harsco Metals Slovensko s.r.o.Slovak Republic100%Harsco Minerali d.o.o.Slovenia100%Harsco Metals RSA Africa (Pty.) Ltd.South Africa100%Harsco Metals South Africa (Pty.) Ltd.South Africa100%Harsco Metals SRH Mill Services (Pty.) Ltd.South Africa100%Harsco Metals SteelServ (Pty.) Ltd.South Africa100%Harsco Metals Ilanga Pty. Ltd.South Africa100%Harsco Infrastructure South Africa (Pty.) Ltd.South Africa100%Heckett MultiServ (FS) Pty LtdSouth Africa100%Metal Reclamation SPV (Pty.) Ltd.South Africa100%MultiServ Technologies (South Africa) Pty LtdSouth Africa100%Harsco Metals Gesmafesa S.A.Spain100%Harsco Metals Lycrete S.A.Spain100%Harsco Metals Reclamet S.A.Spain100%Harsco Infrastructure Sverige A.B.Sweden100%Harsco Metals Sweden A.B.Sweden100%Harsco Rail FilialSweden100%Montanus Industriforvaltning A.B.Sweden100%MultiServ Nordiska ABSweden100%MultiServ (Sweden) ABSweden100%Harsco Rail Switzerland GMBHSwitzerland100%Harsco Switzerland Finance GmbHSwitzerland100%Harsco Switzerland Holding GmbHSwitzerland100%Harsco Metals (Thailand) Company Ltd.Thailand100%Harsco Metals Turkey Celik Limited SirketyTurkey100%Harsco Sun Demiryolu Ekipmanlari Uretim Ve Ticaret Limited SirketiTurkey51%Tosyali Harsco Geri Kazanim Teknolojileri Anonim SirketiTurkey50% HARSCO CORPORATION Exhibit 21Subsidiaries of Registrant SubsidiaryCountry of IncorporationOwnership PercentageAltek Europe Holdings Ltd.U.K.100%Altek Europe LimitedU.K.100%Altek MHD LimitedU.K.100%Alusalt LimitedU.K.100%Faber Prest LimitedU.K.100%Fourninezero Ltd.U.K.100%Harsco (U.K.) LimitedU.K.100%Harsco (UK) Group LtdU.K.100%Harsco (UK) Holdings LtdU.K.100%Harsco (York Place) LimitedU.K.100%Harsco Fairerways Limited PartnershipU.K.100%Harsco Fairestways Limited PartnershipU.K.100%Harsco Fairways PartnershipU.K.100%Harsco Higherlands Limited PartnershipU.K.100%Harsco Highestlands Limited PartnershipU.K.100%Harsco Infrastructure Group Ltd.U.K.100%Harsco Infrastructure Services Ltd.U.K.100%Harsco Investment Ltd.U.K.100%Harsco Leatherhead LimitedU.K.100%Harsco Metals 373 LtdU.K.100%Harsco Metals 385 plcU.K.100%Harsco Metals Group LimitedU.K.100%Harsco Metals Holdings LimitedU.K.100%Harsco Metals LimitedU.K.100%Harsco Mole Valley LimitedU.K.100%Harsco Rail LimitedU.K.100%Harsco Surrey LimitedU.K.100%Harsco Track Technologies LtdU.K.100%HLWKH 517 LimitedU.K.100%Iductelec LimitedU.K.100%Mastclimbers LtdU.K.100%MultiServ Investment LimitedU.K.100%MultiServ LimitedU.K.100%MultiServ Logistics LimitedU.K.100%Nortal LimitedU.K.100%SGB Holdings LimitedU.K.100%SGB Investments Ltd.U.K.100%Short Brothers (Plant) Ltd.U.K.100%Altek LLCU.S.A.100%Altek International Sales CompanyU.S.A.100%Harsco Defense Holding, LLCU.S.A.100%Harsco Financial Holdings Inc.U.S.A.100%Harsco Holdings, Inc.U.S.A.100%Harsco Infrastructure Holdings, Inc.U.S.A.100%Harsco Metals Holding LLCU.S.A.100%Harsco Metals Intermetal LLCU.S.A.100%Harsco Metals Investment LLCU.S.A.100%Harsco Metals Operations LLCU.S.A.100%Harsco Metals SRI LLCU.S.A.100%Harsco Metals VB LLCU.S.A.100%Harsco Metro Rail, LLCU.S.A.100%Harsco Minerals Technologies LLCU.S.A.100%Harsco Minnesota Finance, Inc.U.S.A.100%Harsco Minnesota LLCU.S.A.100%Harsco Rail, LLCU.S.A.100%Harsco Switzerland Finance GmbH, IncU.S.A.100%Harsco Technologies LLCU.S.A.100%Protran Technology LLCU.S.A.100%Heckett Multiserv MV & MS, CAVenezuela100% HARSCO CORPORATION Exhibit 21Subsidiaries of Registrant Companies in which Harsco Corporation does not exert management control are not consolidated. These companies are listed below as unconsolidatedentities.Company NameCountry of IncorporationOwnershipPercentage P.T. Purna Baja HeckettIndonesia40%Exhibit 23CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Forms S‑8 (Nos. 333-13175, 333-13173, 333-59832, 333-70710, 333-114958, 333-188448, 333-211203, and 333-217616) of Harsco Corporation of our report dated February 21, 2019 relating to the financial statements,financial statement schedule, and the effectiveness of internal control over financial reporting, which appears in this Form 10‑K./s/PricewaterhouseCoopers LLPPhiladelphia, PennsylvaniaFebruary 21, 2019Exhibit 31.1 HARSCO CORPORATIONCERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a)AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, F. Nicholas Grasberger, III, certify that:1. I have reviewed this Annual Report on Form 10-K of Harsco Corporation;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. February 21, 2019 /s/ F. NICHOLAS GRASBERGER IIIF. Nicholas Grasberger IIIChairman, President and Chief Executive Officer Exhibit 31.2 HARSCO CORPORATIONCERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a)AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Peter F. Minan, certify that:1. I have reviewed this Annual Report on Form 10-K of Harsco Corporation;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. February 21, 2019 /s/ PETER F. MINANPeter F. MinanSenior Vice President and Chief Financial OfficerExhibit 32HARSCO CORPORATIONCERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Harsco Corporation (the "Company") on Form 10-K for the period ending December 31, 2018, as filed with theSecurities and Exchange Commission on the date hereof (the "Report"), we certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe Sarbanes-Oxley Act of 2002, that, to the best of our knowledge:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.February 21, 2019/s/ F. NICHOLAS GRASBERGER IIIF. Nicholas Grasberger IIIChairman, President and Chief Executive Officer/s/ PETER F. MINANPeter F. MinanSenior Vice President and Chief Financial OfficerA signed original of this written statement required by Section 906 has been provided to Harsco Corporation and will be retained by Harsco Corporation andfurnished to the Securities and Exchange Commission or its staff upon request.

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