Equity Method Investments

In November 2013, the Company sold the Company's Harsco Infrastructure Segment into a strategic venture with Clayton, Dubilier & Rice ("CD&R") as part of 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 & Infrastructure Service, Inc. and Subsidiaries ("Brand" or the "Infrastructure strategic venture") which is accounted for as an equity method investment in accordance with U.S. GAAP.

As part of the Infrastructure Transaction, the Company is required to make a quarterly payment to the Company's partner in the Infrastructure strategic venture, 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 $15 million per year after-tax), or (ii) in kind, through the transfer of approximately 3% of the Company's ownership interest in the Infrastructure strategic venture on an annual basis (the "unit adjustment liability"). The Company will recognize the change in fair value to the unit adjustment liability each period until the Company is no longer required to make these payments or chooses not to make these payments. The change in fair value to the unit adjustment liability is a non-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 the remainder of 2016. Instead, the Company will transfer approximately 3% of its ownership interest in satisfaction of the Company's 2016 obligation related to the unit adjustment liability. As a result of not making the quarterly cash payments for 2016, the Company's ownership interest in the Infrastructure strategic venture decreased to approximately 26% at March 31, 2016 compared to approximately 29% at December 31, 2015, and the value of the unit adjustment liability was updated to reflect this change. Accordingly, the book value of the Company's equity method investment in Brand decreased by $29.4 million and the unit adjustment liability decreased by $19.1 million. The resulting net loss of $10.3 million was recognized in the Condensed Consolidated Statement of Operations caption Change in fair value to the unit adjustment liability and loss on dilution of equity method investment. This net loss is non-cash expense.

For the three months ended March 31, 2016 and 2015, the Company recognized $1.9 million and $2.2 million, respectively, of change in fair value to the unit adjustment liability, exclusive of the fair value adjustment resulting from the decision not to make the quarterly payments in 2016, in the Condensed Consolidated Statement of Operations caption Change in fair value to the unit adjustment liability and loss on dilution of equity method investment. The Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015 include balances related to the unit adjustment liability of $62.7 million and $79.9 million, respectively, in the current and non-current captions, Unit adjustment liability. A reconciliation of beginning and ending balances related to the unit adjustment liability is included in Note 11, Derivative Instruments, Hedging Activities and Fair Value.

The Company will continue to evaluate whether to make payments in cash or in kind in 2017 and beyond based upon performance of the Infrastructure strategic venture and the Company's liquidity and capital resources. Should the Company decide not to make additional cash payments in 2017 and beyond, the value of both the equity method investment in Brand and the related unit adjustment liability may be further impacted, and the change may be reflected in earnings in that period.

The book value of the Company's equity method investment in Brand at March 31, 2016 and December 31, 2015 was $227.8 million and $250.1 million, respectively. The Company records the Company's proportionate share of Brand's net income or loss one quarter in arrears.

Brand's results of operations for the three months ended December 31, 2015 and 2014 are summarized as follows:



(In thousands)	Three Months Ended December 31 2015		Three Months Ended December 31 2014
Net revenues	$	800,752	$	804,199
Gross profit	180,577		197,241
Net income attributable to Brand Energy & Infrastructure Services, Inc. and Subsidiaries	11,060		14,217

Harsco's equity in income of Brand	3,175		4,083

Balances related to transactions between the Company and Brand are as follows:



(In thousands)	March 31 2016		December 31 2015
Balances due from Brand	$	1,942	$	1,557
Balances due to Brand	21,600		21,407

The remaining balances between the Company and Brand, at March 31, 2016, relate primarily to transition services and the funding of certain transferred defined benefit pension plan obligations through 2018. There is not expected to be any significant level of revenue or expense between the Company and Brand on an ongoing basis once all aspects of the Infrastructure Transaction have been finalized.