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Revenue Recognition

9 Months Ended

Sep. 30, 2018

Revenue from Contract with Customer [Abstract]

The Company recognizes revenues to depict the transfer of promised services and products to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services or products. Service revenues include the service components of the Harsco Metals & Minerals and Harsco Rail Segments. Product revenues include the Harsco Industrial Segment and the product revenues of the Harsco Metals & Minerals and Harsco Rail Segments.

Harsco Metals & Minerals - This Segment provides on-site services, under long-term contracts, for material logistics; product quality improvement and resource recovery from iron, steel and metals manufacturing; and also manufactures and sells industrial abrasives and roofing granule products.

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Service revenues are recognized over time as the customer simultaneously receives the benefits provided by the Company's performance. The Company 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 contractual terms, which may include both fixed and variable portions. The fixed portion is recognized as earned (normally monthly) over the contractual period. The variable portion is recognized as services are performed and differs based on the volume of services performed. Given the long-term nature of these arrangements, most contracts permit periodic adjustment of either the variable or both the fixed and variable portions based on the changes in macroeconomic indicators, including changes in commodity prices. Transaction prices, when the 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.

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Product revenues are recognized at the point when control transfers to the customer. Control generally transfers at the 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 each transaction.

At September 30, 2018, the Harsco Metals & Minerals Segment had remaining, fixed, unsatisfied performance obligations, where the expected contract duration exceeds one-year totaling $147.5 million. Of this amount, $44.6 million is expected to be fulfilled by September 30, 2019, $40.1 million by September 30, 2020, $25.6 million by September 30, 2021, $22.5 million by September 30, 2022 and the remainder thereafter. These amounts exclude any variable fees, fixed fees subject to indexation and any performance obligations expected to be satisfied within one year. The increase in remaining, fixed, unsatisfied performance obligations, where the expected contract duration exceeds one year is primarily attributable to new contracts entered into during the third quarter of 2018.

Harsco Industrial - This segment sells air-cooled heat exchangers, metal bar grating configurations and energy-efficient heat transfer products.

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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 an input method based on costs incurred 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 associated with key milestones with any remaining consideration billed and payable upon completion of the transaction.

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For metal bar grating configurations and energy-efficient heat transfer products, revenue is recognized at the point when control transfers to the customer. Control generally transfers at the 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 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.

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For the majority of railway track maintenance equipment sales, revenue is recognized at the point when control transfers to the customer. Control generally transfers at the point of shipment for domestic orders and in accordance with the international commercial terms included in contracts for export 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 an input method based on costs incurred 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 contracted terms, which are generally fixed, and when the standalone selling price is not directly observable, allocated to performance obligations utilizing either the adjusted market assessment or expected cost plus a margin approach. For certain transactions, the Company receives periodic payments associated with key milestones. In limited instances, those payments are intended to provide financing with such transactions being treated as including a significant financing component. Any remaining consideration is billed and payable upon completion of the transaction.

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For after-market parts sales, revenue is recognized at the point when control transfers to the customer. Control generally transfer to the customer at the 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 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 each contract.

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For railway track maintenance services, revenue is recognized over time as the customer simultaneously receives the benefits provided by the Company's performance. The Company utilizes an appropriate output method based on work performed (feet, miles, shifts worked, 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 contracted terms, which are generally variable. The variable portion is recognized as services are performed and differs based on the value of services. Given the long-term nature of these arrangements, most contracts permit periodic adjustment based on the changes in macroeconomic indicators. Transaction prices, when the 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.

At September 30, 2018, the Harsco Rail Segment had remaining, fixed, unsatisfied performance obligations, where the expected contract duration exceeds one-year totaling $200.3 million. Of this amount, $46.6 million is expected to be fulfilled by September 30, 2019, $63.0 million by September 30, 2020, $54.5 million by September 30, 2021, $28.0 million by September 30, 2022 and the remainder thereafter. These amounts exclude any variable fees, fixed fees subject to indexation and any performance obligations expected to be satisfied within one year. The increase in remaining, fixed, unsatisfied performance obligations, where the expected contract duration exceeds one year is primarily attributable to the further satisfaction of performance obligations for over time equipment contracts.

A summary of the Company's revenues by primary geographical markets as well as by key product and service groups is as follows:



	Three Months Ended
	September 30, 2018
(In thousands)	Harsco Metals & Minerals Segment		Harsco Industrial Segment		Harsco Rail Segment		Corporate		Consolidated Totals
Primary Geographical Markets (a):
North America	$	78,844	$	88,524	$	62,823	$	—	$	230,191
Western Europe	97,411		—		10,720		—		108,131
Latin America (b)	36,165		5,388		1,130		—		42,683
Asia-Pacific	36,846		—		8,009		—		44,855
Middle East and Africa	12,370		—		—		—		12,370
Eastern Europe	7,245		—		—		—		7,245
Total Revenues (c)	$	268,881	$	93,912	$	82,682	$	—	$	445,475
Key Product and Service Groups:
On-site services and material logistics, product quality improvement and resource recovery for iron, steel and metals manufacturing; as well as value- added environmental solutions for industrial co-products	$	268,881	$	—	$	—	$	—	$	268,881
Railway track maintenance services and equipment	—		—		82,682		—		82,682
Air-cooled heat exchangers	—		52,093		—		—		52,093
Industrial grating and fencing products	—		31,782		—		—		31,782
Heat transfer products	—		10,037		—		—		10,037
Total Revenues (c)	$	268,881	$	93,912	$	82,682	$	—	$	445,475



	Three Months Ended
	September 30, 2017
(In thousands)	Harsco Metals & Minerals Segment		Harsco Industrial Segment		Harsco Rail Segment		Corporate		Consolidated Totals
Primary Geographical Markets (a):
North America	$	70,325	$	72,260	$	36,112	$	38	$	178,735
Western Europe	89,481		—		10,495		—		99,976
Latin America (b)	41,656		5,026		737		—		47,419
Asia-Pacific	35,990		1,032		3,790		—		40,812
Middle East and Africa	10,849		—		—		—		10,849
Eastern Europe	6,862		—		—		—		6,862
Total Revenues (c)	$	255,163	$	78,318	$	51,134	$	38	$	384,653
Key Product and Service Groups:
On-site services and material logistics, product quality improvement and resource recovery for iron, steel and metals manufacturing; as well as value- added environmental solutions for industrial co-products	$	255,163	$	—	$	—	$	—	$	255,163
Railway track maintenance services and equipment	—		—		51,134		—		51,134
Air-cooled heat exchangers	—		38,248		—		—		38,248
Industrial grating and fencing products	—		29,659		—		—		29,659
Heat transfer products	—		10,411		—		—		10,411
General Corporate	—		—		—		38		38
Total Revenues (c)	$	255,163	$	78,318	$	51,134	$	38	$	384,653



	Nine Months Ended
	September 30, 2018
(In thousands)	Harsco Metals & Minerals Segment		Harsco Industrial Segment		Harsco Rail Segment		Corporate		Consolidated Totals
Primary Geographical Markets (a):
North America	$	229,771	$	254,556	$	150,775	$	74	$	635,176
Western Europe	291,742		—		38,481		—		330,223
Latin America (b)	115,011		15,019		3,294		—		133,324
Asia-Pacific	110,855		—		17,362		—		128,217
Middle East and Africa	36,073		—		—		—		36,073
Eastern Europe	22,472		—		—		—		22,472
Total Revenues (c)	$	805,924	$	269,575	$	209,912	$	74	$	1,285,485
Key Product and Service Groups:
On-site services and material logistics, product quality improvement and resource recovery for iron, steel and metals manufacturing; as well as value- added environmental solutions for industrial co-products	$	805,924	$	—	$	—	$	—	$	805,924
Railway track maintenance services and equipment	—		—		209,912		—		209,912
Air-cooled heat exchangers	—		144,936		—		—		144,936
Industrial grating and fencing products	—		94,325		—		—		94,325
Heat transfer products	—		30,314		—		—		30,314
General Corporate	—		—		—		74		74
Total Revenues (c)	$	805,924	$	269,575	$	209,912	$	74	$	1,285,485



	Nine Months Ended
	September 30, 2017
(In thousands)	Harsco Metals & Minerals Segment		Harsco Industrial Segment		Harsco Rail Segment		Corporate		Consolidated Totals
Primary Geographical Markets (a):
North America	$	208,317	$	197,776	$	130,010	$	107	$	536,210
Western Europe	278,717		—		26,866		—		305,583
Latin America (b)	119,434		16,916		1,991		—		138,341
Asia-Pacific	103,306		3,074		13,849		—		120,229
Middle East and Africa	31,358		—		—		—		31,358
Eastern Europe	20,371		—		—		—		20,371
Total Revenues (c)	$	761,503	$	217,766	$	172,716	$	107	$	1,152,092
Key Product and Service Groups:
On-site services and material logistics, product quality improvement and resource recovery for iron, steel and metals manufacturing; as well as value- added environmental solutions for industrial co-products	$	761,503	$	—	$	—	$	—	$	761,503
Railway track maintenance services and equipment	—		—		172,716		—		172,716
Air-cooled heat exchangers	—		102,483		—		—		102,483
Industrial grating and fencing products	—		86,952		—		—		86,952
Heat transfer products	—		28,331		—		—		28,331
General Corporate	—		—		—		107		107
Total Revenues (c)	$	761,503	$	217,766	$	172,716	$	107	$	1,152,092


(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. Comparative information 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 Accounting Standards for additional information.

The Company may receive payments in advance of earning revenue, which are treated as Advances on contracts on the Condensed Consolidated Balance Sheets. The Company may recognize revenue in advance of being able to contractually invoice the customer, which is treated as Contract assets on the Condensed Consolidated Balance Sheet. Contract assets are transferred to Trade accounts receivable, net when right to payment becomes unconditional. Contract assets and Contract liabilities 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 the Harsco Rail Segment and air-cooled heat exchangers business of the Harsco Industrial Segment.

The following table reflects Contract assets and Advances on contracts:



(In thousands)	September 30, 2018		December 31, 2017
Contract assets:
Current portion of contract assets	$	27,870	$	—
Contract assets	3,566		—
Total contract assets	$	31,436	$	—
Advances on contracts:
Current portion of advances on contracts	$	43,682	$	117,958
Advances on contracts	10,322		—
Total advances on contracts	$	54,004	$	117,958

The increase in Contract assets and decrease in Advances on contracts is primarily attributable to the initial adoption of the FASB issued changes related to revenue recognition as well as the Altek acquisition. See Note 2, Recently Adopted and Recently Issued Accounting Standards for additional information.

The Company provides assurance type warranties primarily for product sales in the Harsco Industrial and Harsco Rail Segments. These warranties are typically not priced or negotiated separately (there is no option to separately purchase the warranty) or the warranty does not provide customers with a service in addition to the assurance that the product complies with agreed-upon specifications. Accordingly, such warranties do not represent separate performance obligations. See Note 1, Summary of Significant Accounting Policies, to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 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, at contract inception, that the period between when the Company transfers the promised good or services to the customer and when the customer pays for 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 year or less; or where the consideration is entirely variable. Accordingly, the Company's disclosure related to unsatisfied performance obligations is limited to the railway track maintenance equipment in the Harsco Rail Segment and the fixed portion of fees related to metals services in the Harsco Metals & Minerals Segment.

Taxes assessed by governmental authorities that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Additionally, in certain contracts, the Company facilitates shipping and handling activities after control has transferred to the customer. The Company has elected to record all shipping and handling activities as costs to fulfill a contract. In situations where the shipping and handling costs have not been incurred at the time revenue is recognized, the respective shipping and handling costs are accrued.