UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to          

Commission File Number 001-03970

HARSCO CORPORATION

(Exact name of registrant as specified in its charter) 

Delaware			23-1483991
(State or other jurisdiction of incorporation or organization)			(I.R.S. employer identification number)
350 Poplar Church Road,	Camp Hill,	Pennsylvania	17011
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code  717-763-7064 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $1.25 per share	HSC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes ☒  NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒		Accelerated filer	☐
Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☐
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES ☐  NO ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Class	Outstanding at October 31, 2020
Common stock, par value $1.25 per share	78,916,106

HARSCO CORPORATION

FORM 10-Q

INDEX

		Page
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets (Unaudited)	4
	Condensed Consolidated Statements of Operations (Unaudited)	6
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows (Unaudited)	8
	Condensed Consolidated Statements of Equity (Unaudited)	10
	Notes to Condensed Consolidated Financial Statements (Unaudited)	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	47
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 6.	Exhibits	49
SIGNATURES		50

2

Glossary of Defined Terms

Unless the context requires otherwise, "Harsco," the "Company," "we," "our," or "us" refers to Harsco Corporation on a consolidated basis. The Company also uses several other terms in this Quarterly Report on Form 10-Q, which are further defined below:

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

3

PART I — FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

HARSCO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands)	September 30 2020		December 31 2019
ASSETS
Current assets:
Cash and cash equivalents	$	83,859	$	57,259
Restricted cash	2,283		2,473
Trade accounts receivable, net	400,994		309,990
Other receivables	38,325		21,265
Inventories	170,037		156,991
Current portion of contract assets	53,256		31,166
Current portion of assets held-for-sale	—		22,093
Other current assets	66,219		51,575
Total current assets	814,973		652,812
Property, plant and equipment, net	640,887		561,786
Right-of-use assets, net	96,800		52,065
Goodwill	881,911		738,369
Intangible assets, net	443,682		299,082
Deferred income tax assets	11,871		14,288
Assets held-for-sale	—		32,029
Other assets	55,365		17,036
Total assets	$	2,945,489	$	2,367,467
LIABILITIES
Current liabilities:
Short-term borrowings	$	10,246	$	3,647
Current maturities of long-term debt	2,753		2,666
Accounts payable	230,948		176,755
Accrued compensation	41,320		37,992
Income taxes payable	3,872		18,692
Insurance liabilities	11,589		10,140
Current portion of advances on contracts	42,763		53,906
Current portion of operating lease liabilities	26,577		12,544
Current portion of liabilities of assets held-for-sale	—		11,344
Other current liabilities	169,898		137,208
Total current liabilities	539,966		464,894
Long-term debt	1,246,395		775,498
Insurance liabilities	16,267		18,515
Retirement plan liabilities	151,230		189,954
Advances on contracts	43,273		6,408
Operating lease liabilities	67,995		36,974
Liabilities of assets held-for-sale	—		12,152
Environmental liabilities	29,747		5,600
Deferred tax liabilities	43,178		24,242
Other liabilities	41,024		43,571
Total liabilities	2,179,075		1,577,808

4

(In thousands)	September 30 2020		December 31 2019
COMMITMENTS AND CONTINGENCIES
HARSCO CORPORATION STOCKHOLDERS’ EQUITY
Preferred stock	—		—
Common stock	144,268		143,400
Additional paid-in capital	206,113		200,595
Accumulated other comprehensive loss	(597,052)		(587,622)
Retained earnings	1,804,061		1,824,100
Treasury stock	(843,098)		(838,893)
Total Harsco Corporation stockholders’ equity	714,292		741,580
Noncontrolling interests	52,122		48,079
Total equity	766,414		789,659
Total liabilities and equity	$	2,945,489	$	2,367,467

See accompanying notes to unaudited condensed consolidated financial statements.

5

HARSCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Three Months Ended				Nine Months Ended
	September 30				September 30
(In thousands, except per share amounts)	2020		2019		2020			2019
Revenues from continuing operations:
Service revenues	$	384,279	$	316,667	$	1,021,196		$	784,190
Product revenues	125,119		106,488		334,324			319,765
Total revenues	509,398		423,155		1,355,520			1,103,955
Costs and expenses from continuing operations:
Cost of services sold	313,136		239,519		835,277			608,230
Cost of products sold	99,043		71,970		257,512			220,634
Selling, general and administrative expenses	87,954		63,197		241,224			187,104
Research and development expenses	568		1,341		2,620			3,210
Other expenses, net	3,633		383		9,074			409
Total costs and expenses	504,334		376,410		1,345,707			1,019,587
Operating income from continuing operations	5,064		46,745		9,813			84,368
Interest income	604		445		1,613			1,569
Interest expense	(15,794)		(12,819)		(43,396)			(24,429)
Unused debt commitment and amendment fees	—		(158)		(1,920)			(7,593)
Defined benefit pension income (expense)	1,859		(1,356)		5,171			(4,166)
Income (loss) from continuing operations before income taxes and equity income	(8,267)		32,857		(28,719)			49,749
Income tax benefit (expense)	1,654		(12,601)		4,640			(17,814)
Equity income of unconsolidated entities, net	9		81		176			151
Income (loss) from continuing operations	(6,604)		20,337		(23,903)			32,086
Discontinued operations:
Gain on sale of discontinued business	—		527,980		18,371			527,980
Income (loss) from discontinued businesses	(1,531)		272		(1,232)			23,958
Income tax expense related to discontinued businesses	(204)		(110,732)		(9,803)			(112,701)
Income (loss) from discontinued operations	(1,735)		417,520		7,336			439,237
Net income (loss)	(8,339)		437,857		(16,567)			471,323
Less: Net income attributable to noncontrolling interests	(1,239)		(2,506)		(3,472)			(6,633)
Net income (loss) attributable to Harsco Corporation	$	(9,578)	$	435,351	$	(20,039)		$	464,690
Amounts attributable to Harsco Corporation common stockholders:
Income (loss) from continuing operations, net of tax	$	(7,843)	$	17,831	$	(27,375)		$	25,453
Income (loss) from discontinued operations, net of tax	(1,735)		417,520		7,336			439,237
Net income (loss) attributable to Harsco Corporation common stockholders	$	(9,578)	$	435,351	$	(20,039)		$	464,690
Weighted-average shares of common stock outstanding	79,000		79,666		78,916			79,966
Basic earnings (loss) per common share attributable to Harsco Corporation common stockholders:
Continuing operations	$	(0.10)	$	0.22	$	(0.35)		$	0.32
Discontinued operations	(0.02)		5.24		0.09			5.49
Basic earnings (loss) per share attributable to Harsco Corporation common stockholders	$	(0.12)	$	5.46	$	(0.25)	(a)	$	5.81
Diluted weighted-average shares of common stock outstanding	79,000		81,110		78,916			81,749
Diluted earnings (loss) per common share attributable to Harsco Corporation common stockholders:
Continuing operations	$	(0.10)	$	0.22	$	(0.35)		$	0.31
Discontinued operations	(0.02)		5.15		0.09			5.37
Diluted earnings (loss) per share attributable to Harsco Corporation common stockholders	$	(0.12)	$	5.37	$	(0.25)	(a)	$	5.68

(a)     Does not total due to rounding

See accompanying notes to unaudited condensed consolidated financial statements.

6

HARSCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

	Three Months Ended
	September 30
(In thousands)	2020		2019
Net income (loss)	$	(8,339)	$	437,857
Other comprehensive income (loss):
Foreign currency translation adjustments, net of deferred income taxes of $2,418 and $(1,834) in 2020 and 2019, respectively	17,527		(22,780)
Net loss on cash flow hedging instruments, net of deferred income taxes of $(125) and $54 in 2020 and 2019, respectively	(263)		(314)
Pension liability adjustments, net of deferred income taxes of $(323) and $(340) in 2020 and 2019, respectively	(9,153)		13,880
Unrealized gain (loss) on marketable securities, net of deferred income taxes of $(4) and $2 in 2020 and 2019, respectively	9		(6)
Total other comprehensive income (loss)	8,120		(9,220)
Total comprehensive income (loss)	(219)		428,637
Less: Comprehensive income attributable to noncontrolling interests	(2,795)		(821)
Comprehensive income (loss) attributable to Harsco Corporation	$	(3,014)	$	427,816

	Nine Months Ended
	September 30
(In thousands)	2020		2019
Net income (loss)	$	(16,567)	$	471,323
Other comprehensive income (loss):
Foreign currency translation adjustments, net of deferred income taxes of $(2,323) and $(2,086) in 2020 and 2019, respectively	(35,244)		(22,276)
Net loss on cash flow hedging instruments, net of deferred income taxes of $141 and $1,195 in 2020 and 2019, respectively	(1,622)		(4,485)
Pension liability adjustments, net of deferred income taxes of $(2,356) and $(1,061) in 2020 and 2019, respectively	28,037		25,651
Unrealized gain (loss) on marketable securities, net of deferred income taxes of $8 and $(6) in 2020 and 2019, respectively	(22)		19
Total other comprehensive loss	(8,851)		(1,091)
Total comprehensive income (loss)	(25,418)		470,232
Less: Comprehensive income attributable to noncontrolling interests	(4,053)		(4,768)
Comprehensive income (loss) attributable to Harsco Corporation	$	(29,471)	$	465,464

See accompanying notes to unaudited condensed consolidated financial statements.

7

HARSCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Nine Months Ended September 30
(In thousands)	2020		2019
Cash flows from operating activities:
Net income (loss)	$	(16,567)	$	471,323
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	93,864		89,681
Amortization	24,721		11,941
Deferred income tax expense	2,346		11,500
Equity income of unconsolidated entities, net	(176)		(151)
Dividends from unconsolidated entities	—		125
Gain on sale from discontinued business	(18,371)		(527,980)
Loss on early extinguishment of debt	—		5,314
Other, net	(336)		2,187
Changes in assets and liabilities, net of acquisitions and dispositions of businesses:
Accounts receivable	26,308		(12,395)
Income tax refunds receivable	(11,168)		—
Inventories	(11,801)		(43,477)
Contract assets	(26,775)		(5,269)
Right-of-use assets	18,195		11,204
Accounts payable	(1,488)		5,615
Accrued interest payable	(9,984)		7,398
Accrued compensation	1,795		(12,802)
Advances on contracts	19,145		(17,067)
Operating lease liabilities	(17,864)		(10,919)
Retirement plan liabilities, net	(23,902)		(18,800)
Income taxes payable - Gain on sale of discontinued businesses	(10,342)		102,940
Other assets and liabilities	4,676		(20,339)
Net cash provided by operating activities	42,276		50,029
Cash flows from investing activities:
Purchases of property, plant and equipment	(79,096)		(147,071)
Purchases of businesses, net of cash acquired	(432,855)		(623,495)
Proceeds from sale of discontinued business, net	37,219		599,685
Proceeds from sales of assets	4,473		7,560
Expenditures for intangible assets	(169)		(1,246)
Net proceeds from settlement of foreign currency forward exchange contracts	536		1,453
Payments for interest rate swap terminations	—		(2,758)
Other investing activities, net	(197)		—
Net cash used by investing activities	(470,089)		(165,872)
Cash flows from financing activities:
Short-term borrowings, net	1,712		(1,417)
Current maturities and long-term debt:
Additions	580,903		781,987
Reductions	(111,999)		(604,616)
Dividends paid to noncontrolling interests	—		(3,103)
Sale of noncontrolling interests	—		4,026
Common stock acquired for treasury	—		(25,752)
Stock-based compensation - Employee taxes paid	(4,188)		(11,202)
Payment of contingent consideration	(2,342)		—
Deferred financing costs	(1,928)		(11,073)
Other financing activities, net	(1,368)		—
Net cash provided by financing activities	460,790		128,850
Effect of exchange rate changes on cash and cash equivalents, including restricted cash	(6,567)		(2,234)
Net increase in cash and cash equivalents, including restricted cash	26,410		10,773
Cash and cash equivalents, including restricted cash, at beginning of period	59,732		67,146
Cash and cash equivalents, including restricted cash, at end of period	$	86,142	$	77,919

8

	Nine Months Ended September 30
(In thousands)	2020		2019
Supplementary cash flow information:
Change in accrual for purchases of property, plant and equipment included in accounts payable	$	3,060	$	5,917

See accompanying notes to unaudited condensed consolidated financial statements.

9

HARSCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

	Harsco Corporation Stockholders’ Equity
	Common Stock				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests
(In thousands, except share  amounts)	Issued		Treasury										Total
Balances, December 31, 2018	$	141,842	$	(795,821)	$	190,597	$	1,298,752	$	(567,107)	$	45,113	$	313,376
Adoption of new accounting standard							21,429		(21,429)				—
Net income							20,697				1,840		22,537
Total other comprehensive income, net of deferred income taxes of $1,729									4,111		420		4,531
Sale of subsidiary shares to noncontrolling interest											876		876
Stock appreciation rights exercised, net 927 shares	2		(8)		(2)								(8)
Vesting of restricted stock units and other stock grants, net 94,229 shares	198		(1,456)		(198)								(1,456)
Vesting of performance share units, net 529,213 shares	1,136		(8,235)		(1,149)								(8,248)
Amortization of unearned portion of stock-based compensation, net of forfeitures					3,664								3,664
Balances, March 31, 2019	143,178		(805,520)		192,912		1,340,878		(584,425)		48,249		335,272
Net income							8,642				2,287		10,929
Cash dividends declared:
Noncontrolling interests											(4,690)		(4,690)
Total other comprehensive income (loss), net of deferred income taxes of $(1,569)									4,196		(598)		3,598
Contributions receivable from noncontrolling interest (a)											3,150		3,150