Disposal Groups, Including Discontinued Operations |
The former Harsco Industrial Segment's balance sheet positions of IKG as of December 31, 2019 are presented as Assets held-for-sale and Liabilities of assets held-for-sale in the Company’s Consolidated Balance Sheets and are summarized as follows: | | | | | | | | | | | (in thousands) | | December 31, 2019 | | | Trade accounts receivable, net | | $ | 10,982 | | | | Other receivables | | 78 | | | | Inventories | | 9,838 | | | | | | | | | Other current assets | | 655 | | | | Property, plant and equipment, net | | 20,703 | | | | Right-of-use assets, net | | 11,230 | | | | | | | | | | | | | | | | | | | Other assets | | 96 | | | | Total assets | | $ | 53,582 | | | | | | | | | Accounts payable | | $ | 5,060 | | | | Accrued compensation | | 2,324 | | | | Current portion of advances on contracts | | 1,168 | | | | Current portion of operating lease liabilities | | 1,575 | | | | Other current liabilities | | 1,218 | | | | | | | | | Operating lease liabilities | | 9,837 | | | | Other liabilities | | 2,314 | | | | Total liabilities | | $ | 23,496 | | | |
Certain key selected financial information included in net income from discontinued operations for the former Harsco Industrial Segment is as follows: | | | | | | | | | | | | | | | | | | | | | | | Years ended December 31 | (In millions) | | 2020 | | 2019 | | 2018 | Amounts directly attributable to the former Harsco Industrial Segment: | | | Total revenues | | $ | 10,203 | | | $ | 306,972 | | | $ | 374,707 | | Cost of products sold | | 8,082 | | | 224,811 | | | 276,198 | | Gain on sale from discontinued businesses | | 18,281 | | | 569,135 | | | — | | Income (loss) from discontinued business | | (1,578) | | | 27,823 | | | 43,593 | | Additional amounts allocated to the former Harsco Industrial Segment: | | | Selling, general and administrative expenses (h) | | $ | 2,695 | | | $ | 8,429 | | | $ | — | | Interest expense (i) | | — | | | 11,237 | | | 16,613 | | Loss on early extinguishment of debt (j) | | — | | | 5,314 | | | — | |
(h) The Company has allocated directly attributable transaction costs to discontinued operations. In addition, this caption includes costs directly attributable to retained contingent liabilities of the Harsco Industrial Segment. (i) The Company has allocated interest expense, including a portion of the amount reclassified into income for the Company's interest rate swaps, amortization of deferred financing costs, and $2.7 million related to interest rate swap terminations which occurred during the year ended December 31, 2019, all of which were directly attributed with the mandatory repayment of the Company's Term Loan Facility, resulting from the AXC disposal, as part of discontinued operations. (j) The Company has allocated the $5.3 million write-off of deferred financing costs to discontinued operations as it is directly attributed to the mandatory repayment of the Term Loan Facility that resulted from the AXC disposal.
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Business Acquisition, Pro Forma Information |
The values assigned to the assets acquired and liabilities assumed are based on preliminary valuations, for the ESOL acquisition, and are subject to change as the Company obtains additional information during the measurement period. In addition, the historical ESOL results include $8.9 million and $35.7 million for the years ended December 31, 2020 and 2019, respectively, of corporate expenses charged to ESOL from Stericycle, Inc. | | | | | | | | | | | | | | | | | Year Ended December 31 (unaudited) | (In millions) | | 2020 | | 2019 | Pro forma revenues | | $ | 1,994.5 | | | $ | 2,185.2 | | | | | | | Pro forma net income (including discontinued operations) (e) | | 0.1 | | | 471.3 | | (e) Pro forma net income for 2020 includes the after tax gains on the sale of IKG of approximately $9 million, and the 2019 includes the after-tax gains on the sale of AXC and PK of approximately $454 million.
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Summary of assets acquired and liabilities assumed |
The preliminary fair value recorded for the assets acquired and liabilities assumed for ESOL is as follows:
| | | | | | | | | | | | | | | | | | | | | | | Preliminary Valuation | (In millions) | | April 6 2020 | | Measurement Period Adjustments | | December 31 2020 | Cash and cash equivalents | | $ | 0.4 | | | $ | — | | | $ | 0.4 | | Trade accounts receivable | | 124.1 | | | (1.2) | | | 122.9 | | Inventory | | 5.0 | | | — | | | 5.0 | | Other current assets | | 0.7 | | | (0.4) | | | 0.3 | | Property, plant and equipment | | 105.3 | | | (3.1) | | | 102.2 | | Right-of-use assets | | 56.0 | | | — | | | 56.0 | | Goodwill | | 152.0 | | | 0.1 | | | 152.1 | | Intangible assets | | 161.0 | | | — | | | 161.0 | | Other assets | | 0.2 | | | — | | | 0.2 | | Accounts payable | | (48.6) | | | (1.5) | | | (50.1) | | Accrued expenses | | (17.5) | | | (2.0) | | | (19.5) | | Current portion of operating lease liabilities | | (16.6) | | | — | | | (16.6) | | Other current liabilities | | (6.4) | | | — | | | (6.4) | | Environmental liabilities | | (24.4) | | | — | | | (24.4) | | Deferred income taxes | | (15.5) | | | (1.7) | | | (17.2) | | Operating lease liabilities | | (39.4) | | | — | | | (39.4) | | Total identifiable net assets of ESOL | | 436.3 | | | (9.8) | | | 426.5 | | Non-compete agreement | | 2.5 | | | — | | | 2.5 | | Total identifiable net assets of ESOL, including non-compete agreement | | $ | 438.8 | | | $ | (9.8) | | | $ | 429.0 | |
The fair value recorded for the assets acquired and liabilities assumed for Clean Earth is as follows: | | | | | | | | | | | | | | | | | | | | | | | Final | (In millions) | | June 28, 2019 | | Measurement Period Adjustments (a) | | December 31 2020 | Cash and cash equivalents (b) | | $ | 42.8 | | | $ | (39.2) | | | $ | 3.6 | | Trade accounts receivable, net | | 63.7 | | | (1.2) | | | 62.5 | | Other receivables | | 0.8 | | | 1.3 | | | 2.1 | | Other current assets | | 8.7 | | | (1.4) | | | 7.3 | | Property, plant and equipment | | 75.6 | | | 1.4 | | | 77.0 | | Right-of-use assets | | 14.4 | | | 11.4 | | | 25.8 | | Goodwill | | 313.8 | | | 16.8 | | | 330.6 | | Intangible assets | | 261.1 | | | (18.9) | | | 242.2 | | Other assets | | 4.0 | | | (2.8) | | | 1.2 | | Accounts payable | | (23.0) | | | (0.1) | | | (23.1) | | Acquisition consideration payable (b) | | (39.2) | | | 39.2 | | | — | | | | | | | | | | | | | | | | Other current liabilities | | (18.0) | | | (1.7) | | | (19.7) | | Net deferred taxes liabilities | | (51.2) | | | 5.5 | | | (45.7) | | Operating lease liabilities | | (11.1) | | | (8.4) | | | (19.5) | | Other liabilities | | (6.5) | | | (2.1) | | | (8.6) | | Total identifiable net assets of Clean Earth | | $ | 635.9 | | | $ | (0.2) | | | $ | 635.7 | |
(a) The measurement period adjustments did not have a material impact on the Company's previously reported operating results. (b) Acquisition consideration payable represents a portion of the cash consideration not paid out until July 2019. The fair value recorded for the assets acquired and liabilities assumed for Altek is as follows: | | | | | | | | | | | | | | | | | | | | | | | Final Valuation | (In millions) | | June 30 2018 | | Measurement Period Adjustments (f) | | March 31 2019 | 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 | Just | 52.5 | | | 0.2 | | | 52.7 | | Goodwill | | 20.9 | | | 1.6 | | | 22.5 | | Net deferred tax liabilities | | (8.5) | | | — | | | (8.5) | | Other liabilities | | (0.3) | | | — | | | (0.3) | | Total identifiable net assets of Altek | | $ | 68.1 | | | $ | 2.0 | | | $ | 70.1 | |
(f) The measurement period adjustments did not have a material impact on the Company's previously reported operating results.
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Summary of intangible assets and amortization periods |
The following table details the preliminary valuation of identifiable intangible assets and amortization periods for ESOL and the non-compete agreement entered into by the Company upon acquisition of ESOL: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Preliminary Valuation | (Dollars in millions) | | Weighted-Average Amortization Period | | April 6 2020 | | Measurement Period Adjustments | | December 31 2020 | Permits and rights | | 22 years | | $ | 138.0 | | | $ | — | | | $ | 138.0 | | Customer relationships | | 10 years | | 23.0 | | | — | | | 23.0 | | Total identifiable intangible assets of ESOL | | | | 161.0 | | | — | | | 161.0 | | Non-compete agreement | | 4 years | | 2.5 | | | — | | | 2.5 | | Total identifiable intangible assets acquired | | | | $ | 163.5 | | | $ | — | | | $ | 163.5 | |
The following table details the preliminary valuation of identifiable intangible assets and amortization periods for Clean Earth: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Final | (Dollars in millions) | | Weighted-Average Amortization Period | | Preliminary Valuation June 28, 2019 | | Measurement Period Adjustments (c) | | December 31 2020 | Permits | | 18 years | | $ | 176.1 | | | $ | (6.0) | | | $ | 170.1 | | Customer relationships and backlog | | 8 years | | 33.4 | | | (12.9) | | | 20.5 | | Air rights | | Usage based (d) | | 25.6 | | | — | | | 25.6 | | Trade names | | 12 years | | 26.0 | | | — | | | 26.0 | | | | | | | | | | | Total identifiable intangible assets of Clean Earth | | | | $ | 261.1 | | | $ | (18.9) | | | $ | 242.2 | |
(c) The measurement period adjustments did not have a material impact on the Company's previously reported operating results. (d) The Company estimates that based on current usage that the expected useful life would be 27 years.
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Summary of changes in fair value of contingent consideration |
The following table reflects the changes in the fair value of contingent consideration which occurred since acquisition: | | | | | | | | | | | | | | | | | (In thousands) | | 2020 | | June 28, 2019 through December 31, 2019 | | | Balance at beginning of year | | $ | 3,400 | | | $ | 3,100 | | | | Payment | | (2,342) | | | (525) | | | | Fair value adjustment | | 112 | | | 825 | | | | Balance at end of year | | $ | 1,170 | | | $ | 3,400 | | | | The following table reflects the changes in the fair value of contingent consideration: | | | | | | | | | | | | | | | | | (In thousands) | | 2019 | | 2018 | | | Balance at beginning of year | | $ | 8,420 | | | $ | — | | | | Recognition of contingent consideration | | — | | | 10,097 | | | | Measurement period adjustment | | — | | | 1,958 | | | | Fair value adjustment (g) | | (8,506) | | | (2,939) | | | | Foreign currency translation | | 86 | | | (696) | | | | Balance at end of year | | $ | — | | | $ | 8,420 | | | |
(g) The fair value adjustment resulted from the decreased probability of Altek achieving cumulative financial and non-financial performance goals within the required time frame. This amount is recorded in Other expenses, net on the Consolidated Statements of Operations.
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