Acquisitions

9 Months Ended

Sep. 30, 2018

In May 2018, the Company acquired Altek Europe Holdings Limited and its affiliated entities (collectively, "Altek"), a U.K.-based manufacturer of market leading products that enable aluminum producers and recyclers to manage and efficiently extract value from critical waste streams, reduce waste generation 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 through 2021 subject to the future financial performance of Altek. The preliminary purchase price included an upfront payment of $60.1 million, subject to working capital adjustments and net of cash acquired, as well as contingent consideration with an estimated preliminary fair value of $16.3 million as of the acquisition date. Altek's revenues and operating results have been included in the results of the Harsco Metals & Minerals Segment and were not material to the Company's consolidated results for the three and nine months ended September 30, 2018. The Company incurred approximately $1 million of costs associated with the Altek acquisition in the caption Selling, general and administrative expenses in the Condensed 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 30 2018			Measurement Period Adjustments (a)		September 30 2018
Cash and cash equivalents	$	1.7		$	—	$	1.7
Net working capital	(1.5		)	0.2		(1.3		)
Property, plant and equipment	3.3			—		3.3
Intangible assets	52.5			0.2		52.7
Goodwill	20.9			5.8		26.7
Net deferred tax liabilities	(8.5		)	—		(8.5		)
Other liabilities	(0.3		)	—		(0.3		)
Total identifiable net assets of Altek	$	68.1		$	6.2	$	74.3

(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 the Company 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)	Amortization Period	June 30 2018		Measurement Period Adjustments (a)		September 30 2018
Customer related	14.2 years	$	11.5	$	0.1	$	11.6
Technology related	10.3 years	36.5		0.1		36.6
Trade names	15.0 years	4.5		—		4.5
Total 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 forecast a 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 on a quarterly basis as additional data impacting the assumptions is obtained. Any changes in the fair value of contingent consideration related to updated assumptions and estimates will be recognized in the Consolidated Statements of Operations during the period in which the change occurs.

The following table reflects the changes in the fair value of contingent consideration:



(In thousands)	Contingent Consideration
Balance, June 30, 2018	$	10,097
Measurement period adjustment (b)	6,177
Fair value adjustment (c)	412
Foreign currency translation (c)	(298		)
Balance, September 30, 2018	$	16,388

(b) Measurement period adjustment was recorded to goodwill on the Condensed Consolidated Balance Sheet.

(c) These amounts are recorded in the caption Other (income) expenses, net on the Condensed 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 from those reflected in the condensed consolidated financial statements at September 30, 2018. Inclusion of pro forma financial information for this transaction is not necessary as the acquisition is immaterial to the Company's results of operations.