As collateral for the Company's performance and to insurers, the Company is contingently liable under standby letters of credit, bonds and bank guarantees in the amounts of $281.8 million, $285.4 million and $275.4 million at December 31, 2019, 2018 and 2017, respectively. These standby letters of credit, bonds and 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 and insurance companies that range from 0.4% to 3.7% per annum of the instrument's face value. If the Company were required to obtain replacement standby letters of credit, bonds and bank guarantees at December 31, 2019 for those currently outstanding, it is the Company's opinion that the replacement costs would be within the present fee structure.

During June 2014, the Company provided a guarantee to Brand as part of the net working capital settlement related to the Infrastructure Transaction, for certain matters occurring prior to closing. The remaining term of this guarantee is 1 year at December 31, 2019. The maximum potential amount of future payments related to this guarantee is approximately $3 million at December 31, 2019. There is no recognition of this potential future payment in the consolidated 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 position or results of operations for 2019, 2018 or 2017.

In the normal course of business, legal indemnifications are provided related primarily to the performance of the Company's products and services and patent and trademark infringement of the products and services sold. These indemnifications generally relate to the performance (regarding function, not price) of the respective products or services and therefore no liability is recognized related to the fair value of such guarantees.

The 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 and are not used for trading or speculative purposes. All derivative instruments are recorded on the Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply, or the Company elects not to apply hedge accounting.

The 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’s credit risk and counterparties’ credit risks, and which minimize the use of unobservable inputs. The Company is able to classify fair value balances based on the 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.

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 the measurement date (an exit price). The Company utilizes market data or assumptions that the Company believes market participants would use in valuing the asset 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 markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

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 to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

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 of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value
December 31, 2019
Asset derivatives (Level 2):
Foreign currency exchange forward contracts	Other current assets	$	2,039	$	946	$	2,985
Total		$	2,039	$	946	$	2,985
Liability derivatives (Level 2):
Foreign currency exchange forward contracts	Other current liabilities	$	140	$	3,733	$	3,873
Interest rate swaps	Other current liabilities	2,098		—		2,098
Interest rate swaps	Other liabilities	4,281		—		4,281
Total		$	6,519	$	3,733	$	10,252
December 31, 2018
Asset derivatives (Level 2):
Foreign currency exchange forward contracts	Other current assets	$	2,970	$	589	$	3,559
Interest rate swaps	Other current assets	1,331		—		1,331
Interest rate swaps	Other assets	128		—		128
Total		$	4,429	$	589	$	5,018
Liability derivatives (Level 2):
Foreign currency exchange forward contracts	Other current liabilities	$	24	$	2,910	$	2,934
Interest rate swaps	Other liabilities	1,849		—		1,849
Total		$	1,873	$	2,910	$	4,783

All 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 and liabilities subject to enforceable master netting arrangements did not result in a net asset or liability at December 31, 2019 and resulted in a 0.1 million net liability at December 31, 2018.



	Amount Recognized in Other Comprehensive Income (“OCI”) on Derivatives								Location of Amount Reclassified from Accumulated OCI into Income	Amount Reclassified from Accumulated OCI into Income - Effective Portion or Equity
(In thousands)	2019			2018		2017				2019			2018			2017
Foreign currency exchange forward contracts	$	(1,227	)	$	1,935	$	3,547		Product revenues/Cost of services sold	$	(506	)	$	(374	)	$	(954	)
Foreign currency exchange forward contracts (a)	—			—		—			Retained earnings (b)	—			(1,520		)	—
Interest rate swaps	—			—		—			Income from discontinued businesses	2,741			—			—
Interest rate swaps	(8,209		)	1,451		(734		)	Interest expense	(520		)	(1,108		)	—
Cross-currency interest rate swaps (a)	(42		)	63		(205		)	Interest expense	1,219			1,264			1,002
	$	(9,478	)	$	3,449	$	2,608			$	2,934		$	(1,738	)	$	48



	2019
(in thousands)	Product Revenues		Cost of Services Sold			Interest Expense			Income From Discontinued Businesses
Total amounts of line items presented in the statement of operations in which the effects of cash flow hedges are recorded	$	422,269	$	839,156		$	(36,586	)	$	27,531
Interest rate swaps:
Amount of gain (loss) reclassified from accumulated other comprehensive loss into income	—		—			520			—
Amount of gain (loss) reclassified from accumulated other comprehensive loss into income as a result that a forecasted transaction is no longer probable of occurring	—		—			—			(2,741		)
Foreign exchange contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive loss into income	550		(44		)	—			—
Amount excluded from effectiveness testing recognized in earnings based on changes in fair value	509		—			—			—
Cross-currency interest rate swaps:
Amount of gain (loss) reclassified from accumulated other comprehensive loss into income	—		—			(1,219		)	—



	2018
(in thousands)	Product Revenues			Cost of Services Sold		Interest Expense
Total amounts of line items presented in the statement of operations in which the effects of cash flow hedges are recorded	$	392,208		$	745,748	$	(21,531	)
Interest rate swaps:
Amount of gain (loss) reclassified from accumulated other comprehensive loss into income	—			—		1,108
Foreign exchange contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive loss into income	374			—		—
Amount excluded from effectiveness testing recognized in earnings based on changes in fair value	(440		)	1		—
Cross-currency interest rate swaps:
Amount of gain (loss) reclassified from accumulated other comprehensive loss into income	—			—		(1,264		)



	2017
(in thousands)	Product Revenues			Cost of Services Sold		Interest Expense
Total amounts of line items presented in the statement of operations in which the effects of cash flow hedges are recorded	$	373,188		$	737,499	$	(26,862	)
Foreign exchange contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive loss into income	936			18		—
Amount excluded from effectiveness testing recognized in earnings based on changes in fair value	(105		)	—		—
Cross-currency interest rate swaps:
Amount of gain (loss) reclassified from accumulated other comprehensive loss into income	—			—		(1,002		)
Amount excluded from the effectiveness testing recognized in earnings based an amortization approach	—			—		(420		)



	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives for the Twelve Months Ended December 31(c)
(In thousands)	Location of Gain (Loss) Recognized in Income on Derivatives	2019		2018		2017
Foreign currency exchange forward contracts	Cost of services and products sold	$	6,807	$	17,262	$	(23,572	)

The 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, and income and expense items are translated at the average exchange rates during the respective periods.

The Company uses derivative instruments to hedge cash flows related to foreign currency fluctuations. Foreign currency exchange forward contracts outstanding are part of a worldwide program to minimize foreign currency exchange operating income and balance sheet exposure by offsetting foreign currency exposures of certain future payments between the Company and various subsidiaries, suppliers or customers. The unsecured contracts are with major financial institutions. The Company may be exposed to credit loss in the event of non-performance by the contract counterparties. The Company evaluates the creditworthiness of the counterparties and does not expect default by them. Foreign currency exchange forward contracts are used to hedge commitments, 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 with offsetting transaction gains and losses on the items being hedged. Derivatives used to hedge forecasted cash flows associated with foreign currency commitments may be accounted for as cash flow hedges, as deemed appropriate, if the criteria for hedge accounting are met. Gains and losses on derivatives designated as cash flow hedges are deferred in Accumulated other comprehensive loss, a separate component of equity, and reclassified to earnings in a manner that matches the timing of the earnings impact of the hedged transactions. The ineffective portion of all hedges, if any, is recognized currently in earnings.

The recognized gains and losses offset amounts recognized in cost of services and products sold principally as a result of intercompany or third-party foreign currency exposures. At December 31, 2019 and December 31, 2018, the notional amounts of foreign currency exchange forward contracts were $496.3 million and $423.9 million, respectively. These contracts primarily hedge British pounds sterling and euros against other currencies and mature through October 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 gains of $7.7 million, pre-tax net losses of $9.9 million and pre-tax net gains of $17.4 million related to hedges of net investments during 2019, 2018 and 2017, respectively, in Accumulated other comprehensive loss.

The Company uses interest rate swaps in conjunction with certain variable rate debt issuances in order to secure a fixed interest rate. Changes in the fair value attributed to 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 effect of converting $300.0 million of the Term Loan Facility from floating-rate to fixed-rate. The fixed rates provided by the swaps replace the adjusted LIBOR rate in the interest calculation, ranging from 2.12% for 2018 to 3.12% for 2022.

During June 2019, the Company effected the early termination of interest rate swaps that covered the period from 2019 through 2022 and had the effect of converting $100.0 million of the Term Loan Facility from floating-rate to fixed-rate. This termination was conducted as a result of the Company's new Notes offering and required repayment of a portion of the Term Loan Facility with proceeds from the AXC disposal. The Company paid $2.8 million and recognized a loss of $2.7 million related to these terminations in Income from discontinued businesses on the Consolidated Statements of Operations. The total notional of the Company's interest rate swaps was $200.0 million as of December 31, 2019.

The Company may use CCIRs in conjunction with certain debt issuances in order to secure a fixed local currency interest rate. Under these CCIRs, the Company 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 in dollars and the local currency, respectively. At maturity, there is also the payment of principal amounts between currencies. Changes in the fair value attributed to the effect of the swaps' interest spread and changes in the credit worthiness of the counter-parties are recorded in Accumulated other comprehensive loss. Changes in value attributed to the effect of foreign currency fluctuations are recorded in the Consolidated Statements of Operations and offset currency fluctuation effects on the debt principal. The Company had no outstanding CCIRs at December 31, 2019 or December 31, 2018.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term borrowings approximate fair value due to the short-term maturities of these assets and liabilities. At December 31, 2019 and 2018, the total fair value of long-term debt, including current maturities, was $827.2 million and $592.0 million, respectively, compared with a carrying value of $795.0 million and $605.4 million, respectively. Fair values 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 of the same remaining maturities.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company places cash and cash equivalents with high-quality financial institutions and, by policy, limits the amount of credit exposure to any single institution.

Concentrations of credit risk with respect to accounts receivable exist in the Company's Harsco Environmental Segment and, to a lesser extent, the Harsco Rail Segment have several large customers throughout the world with significant accounts receivable balances. Consolidation in the global steel or rail industries could result in an increase in concentration of credit risk for the Company.