The following discussion should be read in conjunction with the Consolidated Financial Statements of Harsco Corporation provided under Part II, Item 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Operating Income (Loss) and Operating Margins by Segment

$ 1,068.1 Net effects of price/volume changes, primarily attributable to volume changes

The following factors contributed to the changes in operating income for the year ended December 31, 2022.

The following factors contributed to the changes in operating income (loss) for the year ended December 31, 2022.

Equity in income (loss) of unconsolidated entities, net

Diluted earnings (loss) per share from continuing operations attributable to Harsco Corporation common stockholders

Comparative Analysis of Consolidated Results

- $ 134.2 Net effect of price/volume changes in HE, primarily attributable to volume changes

Net effect of price/volume changes in CE, primarily attributable to pricing changes

Net effect of price/volume changes in CE, primarily attributable to volume changes

Net impact of new contracts and lost contracts (including exited underperforming contracts) in HE

See the Fair Value Estimates for Business Combinations and Goodwill and the Long-lived Asset Impairment (Other than Goodwill) paragraphs under Part II, Item 7 Management's Discussion and Analysis, Application of Critical Accounting Policies and Critical Accounting Estimates for further details.

Employee termination benefits costs $ 6,490 $ 4,766 $ 10,249 Net gains

Total other (income) expenses, net $ 4,737 $ (3,722) $ 10,072

Interest expense in 2021 was $63.2 million, an increase of $5.0 million, or 9%, compared with 2020. This increase primarily relates to higher outstanding borrowings.

See Note 8, Debt and Credit Agreements in Part II, Item 8, Financial Statements and Supplementary Data, for additional information.

During 2021, the Company recognized $5.5 million of fees and other costs primarily related to the amended Senior Secured Credit Facilities.

During 2020, the Company recognized $1.9 million of fees and expenses related to the amended Senior Secured Credit Facilities.

See Note 8, Debt and Credit Agreements in Part II, Item 8, Financial Statements and Supplementary Data, for additional information.

See Note 1 0. Employee Ben efit Plans in Part II, Item 8, Financial Statements and Supplementary Data, for additional information.

See Note 11, Income Taxes in Part II, Item 8, Financial Statements and Supplementary Data, for additional information.

See Note 3, Discontinued Operations in Part II, Item 8, Financial Statements and Supplementary Data, for additional information.

Cash Flow Summary The Company currently expects to have sufficient financial liquidity and borrowing capacity to support the strategies within each of its businesses.

Effect of exchange rate changes on cash (10.7) (0.5) (0.2) Net change in cash and cash equivalents $ (2.0) $ 7.5 $ 19.9

Also included in the Cash flows from operating activities section of the Consolidated Statements of Cash Flows is the caption, Other assets and liabilities. A summary of the major components of this caption for the periods presented is as follows:

Net cash provided (used) by:

Total change in Other assets and liabilities $ (9.2) $ 21.6 $ (1.1)

(a) Other relates primarily to other accruals that are individually not significant.

Amount of Commercial Commitment Expiration Per Period

(a) Includes total commitments of $377.9 million for the Rail business.

Certain commercial commitments that are of a continuous nature do not have an expiration date and are therefore considered to be indefinite in nature. See

Note 15, Financial Instruments in Part II, Item 8, Financial Statements and Supplementary Data for additional information.

Summary of Senior Secured Credit Facilities and Notes: December 31

The following table shows the amount outstanding under the Revolving Credit Facility and available credit at December 31, 2022.

Outstanding Outstanding Letters Available (In thousands)

See Note 8, Debt and Credit Agreements in Part II, Item 8 Financial Statements and Supplementary Data for additional details on the Company's Senior Secured Credit Facilities and other long-term debt, in addition to Note 4,

Application of Critical Accounting Policies and Critical Accounting Estimates

Note 1, Summary of Significant Accounting Policies in Part II, Item 8, Financial Statements and Supplementary Data.

See Note 10, Employee Benefit Plans in Part II, Item 8, Financial Statements and Supplementary Data for additional information.

See Note 4, Accounts Receivable and Note Receivable in Part II, Item 8, Financial Statements and Supplementary Data for additional information.

The Company's goodwill balances were $759.3 million and $883.1 million at December 31, 2022 and 2021, respectively. The Company performs its annual goodwill impairment test as of October 1.

The performance of the Company's 2022 annual impairment tests did not result in any impairment of the Company's goodwill.

See Note 1, Summary of Significant Accounting Policies and Note 7, Goodwill and Other Intangible Assets in Part II, Item 8, Financial Statements and Supplementary Data, for additional information.

See Note 7 Goodwill and Other Intangible Assets and Note 18, Other (Income) Expenses, Net in Part II, Item 8, Financial Statements and Supplementary Data, for additional information.

For the second SBB contract, the Company recorded an additional $3.5 million forward estimated loss provision during the first quarter of 2022 due to additional supply chain delays and cost overruns.

Recently Adopted and Recently Issued Accounting Standards

Information on recently adopted and recently issued accounting standards is included in Note 2, Recently Adopted and Recently Issued Accounting Standards, in Part II, Item 8, Financial Statements and Supplementary Data.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Index to Consolidated Financial Statements and Supplementary Data

Consolidated Financial Statements of Harsco Corporation:

The Company's internal control over financial reporting includes policies and procedures that:

•Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company;

•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the Company's consolidated financial statements.

The effectiveness of the Company's internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing in Part II, Item 8 of this Annual Report on Form 10-K.

To the Stockholders and Board of Directors of Harsco Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Definition and Limitations of Internal Control over Financial Reporting

Goodwill Impairment Assessments - Environmental and Clean Earth Reporting Units

Revenue Recognition using the Cost-to-Cost Method - Harsco Rail

We have served as the Company's auditor since at least 1933. We have not been able to determine the specific year we began serving as auditor of the Company.

Common stock, par value $1.25 (issued 116,358,520 and 115,906,393 shares at December 31, 2022 and 2021, respectively)

Treasury stock, at cost (36,868,880 and 36,690,847 shares at December 31, 2022 and 2021, respectively)

See accompanying notes to consolidated financial statements.

1,889,065 $ 1,848,399 $ 1,534,033 Costs and expenses from continuing operations:

Income (loss) from continuing operations before income taxes and equity income

(137,155) $ 22,137 $ (49,727) Income (loss) from discontinued operations, net of tax

Net income (loss) attributable to Harsco Corporation common stockholders

Basic earnings (loss) per share attributable to Harsco Corporation common stockholders

Diluted earnings (loss) per share attributable to Harsco Corporation common stockholders

Net gain (loss) on cash flow hedging instruments, net of deferred income taxes of $(1,284), $(797) and $79 in 2022, 2021 and 2020, respectively

Pension liability adjustments, net of deferred income taxes of $(2,590), $(5,409) and $384 in 2022, 2021 and 2020, respectively

Unrealized gain (loss) on marketable securities, net of deferred income taxes of $4, $(12) and $2 in 2022, 2021 and 2020, respectively

Comprehensive income (loss) attributable to Harsco Corporation

See accompanying notes to consolidated financial statements.

Changes in assets and liabilities, net of acquisitions and dispositions of businesses: Accounts receivable

Net proceeds (payments) from settlement of foreign currency forward exchange contracts

Effect of exchange rate changes on cash, including restricted cash

Net increase (decrease) in cash and cash equivalents, including restricted cash

Cash and cash equivalents, including restricted cash, at end of period

Supplementary cash flow information: Change in accrual for purchases of property, plant and equipment included in accounts payable

See accompanying notes to consolidated financial statements.

1. Summary of Significant Accounting Policies

Certain reclassifications have been made to prior year amounts to conform with current year classifications.

Note 7, Goodwill and Other Intangible Assets for additional information.

Harsco Clean Earth - This Segment provides specialty waste processing and beneficial reuse solutions for hazardous wastes, and soil and dredged materials.

Harsco Rail - This business sells railway track maintenance equipment, after-market parts, Protran/safety equipment and provides railway track maintenance services.

The Company has elected to utilize the following practical expedients on an ongoing basis:

The significant assumptions and estimates described in the preceding paragraphs are important contributors to the effective tax rate each year.

See Note 11, Income Taxes , for additional information.

See Note 15, Financial Instruments , for additional information.

2. Recently Adopted and Recently Issued Accounting Standards

The following accounting standards were adopted in 2022:

On January 1, 2022, the Company adopted changes issued by the FASB which improved the transparency of government assistance received by entities. The adoption of these changes did not have a material impact on the Company's consolidated financial statements.

The following accounting standards have been issued and become effective for the Company at a future date:

The former Harsco Rail Segment's balance sheet positions as of December 31, 2022 and 2021 are presented as Assets held-for-sale and Liabilities of assets held-for-sale in the Consolidated Balance Sheets and are summarized as follows:

Amounts directly attributable to the former Harsco Rail Segment: Service revenues

Additional amounts allocated to the former Harsco Rail Segment:

Selling, general and administrative expenses (b) $ 4,039

The following is selected financial information included on the Consolidated Statements of Cash Flows attributable to the Rail Segment:

4. Accounts Receivable and Note Receivable

Accounts receivable consist of the following:

Provision for expected credit losses related to trade accounts receivable

In 2022, the Company capitalized fees of $1.8 million related to the AR Facility. See Note 8, Debt and Credit Agreements, for facility expenses incurred.

Net amounts sold under factoring arrangements $ 17.3 $

Note receivable, at amortized cost $ 23.9 $ 31.0 Note receivable, at fair value

Inventories consist of the following:

Property, plant and equipment consist of the following:

(a) Buildings and improvements include leasehold improvements that are amortized over the shorter of their useful lives or the initial term of the lease.

(b) Includes information technology hardware and software.

7. Goodwill and Other Intangible Assets

Goodwill by Segment The following table reflects the changes in carrying amounts of goodwill by segment for the years ended December 31, 2022 and 2021:

The performance of the Company's 2022 annual impairment tests did not result in any impairment of the Company's goodwill.

(b) These estimated amortization expense amounts do not reflect the potential effect of future foreign currency exchange rate fluctuations.

The Company's long-term debt consists of the following:

Senior Secured Credit Facilities (a):

New Term Loan with an interest rate of 6.69% and 2.75% at December 31, 2022 and 2021, respectively

Revolving Credit Facility with an average interest rate of 7.19% and 2.45% at

Other financing payable (including capital leases) in varying amounts due principally through 2026 with a weighted-average interest rate of 5.00% and 4.73% at December 31, 2022 and 2021, respectively

Cash payments for interest on debt were $73.4 million, $60.9 million and $59.5 million in 2022, 2021 and 2020, respectively.

Facility fees and debt-related income (expense) $ (2,956) $ (5,506) $ (1,920)

The following table shows the amount outstanding under the Revolving Credit Facility and available credit at December 31, 2022.

The components of lease expense were as follows:

Total lease expense from continuing operations $ 88,300 $ 83,276 $ 70,995

Supplemental cash flow information related to leases was as follows:

Cash paid for amounts included in the measurement of lease liabilities: Cash flows used by operating activities - Operating leases (a)

(a) Cash flows include cash paid for operating leases of discontinued operations. (b) Cash flows include ROU assets of approximately $56 million that were recorded upon the acquisition of ESOL in 2020.

Supplemental balance sheet information related to leases was as follows:

Supplemental additional information related to leases was as follows:

Maturities of lease liabilities were as follows:

The change in the financial status of the defined benefit pension plans and amounts recognized on the Consolidated Balance Sheets at December 31, 2022 and 2021 are as follows:

Amounts recognized on the Consolidated Balance Sheets for defined benefit pension plans consist of the following at December 31, 2022 and 2021:

Amounts recognized in AOCI for defined benefit pension plans consist of the following at December 31, 2022 and 2021:

Future Benefit Payments Expected benefit payments for defined benefit pension plans over the next ten years are as follows:

The weighted-average actuarial assumptions used to determine the defined benefit pension plan obligations at December 31, 2022 and 2021 were as follows:

Accumulated Benefit Obligation The accumulated benefit obligation for all defined benefit pension plans at December 31, 2022 and 2021 was as follows:

(a) Investments within this caption include diversified global asset allocation funds and credit collection funds.

The U.S. defined benefit pension plans' assets include 310,000 shares at December 31, 2022 and 310,000 shares at December 31, 2021 of the Company's common stock, valued at $2.0 million and $5.2 million, respectively. These shares represented 1.1% and 2.2% of total U.S. plan assets at December 31, 2022 and 2021, respectively.

The asset allocations attributable to the Company's international defined benefit pension plans at December 31, 2022 and 2021 and the long-term target allocation of plan assets, by asset category, are as follows:

(b) Investments within this caption include diversified growth funds and real estate funds.

The fair values of the Company's U.S. defined benefit pension plans' assets at December 31, 2022 by asset class are as follows:

The fair values of the Company's U.S. defined benefit pension plans' assets at December 31, 2021 by asset class are as follows:

The fair values of the Company's international defined benefit pension plans' assets at December 31, 2022 by asset class are as follows:

The fair values of the Company's international defined benefit pension plans' assets at December 31, 2021 by asset class are as follows:

Income tax expense (benefit) as reported on the Consolidated Statements of Operations consists of the following:

Total income tax expense (benefit) from continuing operations

A reconciliation of the normal expected statutory U.S. federal income tax expense (benefit) to the actual Income tax expense (benefit) from continuing operations as reported on the Consolidated Statements of Operations is as follows:

$ 7,877 $ (11,386) U.S. state income taxes, net of federal income tax benefit

Difference in effective tax rates on international earnings and remittances

The Company's differences in income tax expense for 2022 and 2021 on international earnings and remittances was $10.3 million and $4.5 million, respectively, which included U.S income tax expense on international deemed remittances of $0.1 million and $0.1 million respectively. The increase is primarily due to no tax benefit recorded on the $15.0 million intangible assets impairment recorded for the Altek business and the change in mix of income.

A reconciliation of the change in the unrecognized income tax benefits balance from January 1, 2020 to December 31, 2022 is as follows:

Additions for tax positions related to the current year (includes currency translation adjustment)

Other reductions for tax positions related to prior years

Additions for tax positions related to the current year (includes currency translation adjustment)

Additions for tax positions related to prior years (includes currency translation adjustment)

Additions for tax positions related to the current year (includes currency translation adjustment)

The Company files income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. These tax returns are subject to examinations and possible challenge by the tax authorities. Positions challenged by the tax authorities may be settled or appealed by the Company.

The tax years that remain subject to examination for the Company's major tax jurisdictions as of December 31, 2022 are shown below:

The following table summarizes information related to the location and undiscounted amount of the Company's environmental liabilities:

Current portion of environmental liabilities (a) $ 7,120 $

(a) The current portion of environmental liabilities is included in the caption Other current liabilities on the Consolidated Balance Sheets.

In the ordinary course of business, the Company is a defendant or party to various claims and lawsuits, including those discussed below.

The Company has liability insurance coverage under various primary and excess policies that the Company believes will be available, if necessary, to substantially cover any liability that might ultimately be incurred in the asbestos actions referred to above. The costs and expenses of the asbestos actions are being paid by the Company's insurers.

In view of the persistence of asbestos litigation in the U.S., the Company expects to continue to receive additional claims in the future. The Company intends to continue its practice of vigorously defending these claims and cases. At December 31, 2022, the Company has obtained dismissal in 28,416 cases by stipulation or summary judgment prior to trial.

Income (loss) from continuing operations attributable to Harsco Corporation common stockholders

(a) Represents number of awards originally issued.

RSU activity for the year ended December 31, 2022 was as follows:

At December 31, 2022, the total unrecognized compensation expense related to non-vested RSUs was $4.5 million, which will be recognized over a weighted-average period of 1.8 years.

The total fair value of RSU's vested in 2022, 2021 and 2020 was $5.1 million, $4.1 million and $4.3 million, respectively.

The fair value of each SAR grant was estimated on the grant date using a Black-Scholes pricing model with the following assumptions:

SARs activity for the year ended December 31, 2022 was as follows:

The total intrinsic value of SARs exercised in 2022, 2021 and 2020 was $0.0 million, $0.6 million, and $0.5 million, respectively.

The following table summarizes information concerning outstanding and exercisable SARs at December 31, 2022:

Weighted-average grant date fair value of non-vested SARs for the year ended December 31, 2022 was as follows:

A summary of the Company's non-vested PSU activity during the year ending December 31, 2022 was as follows:

The three levels of the fair value hierarchy are described below:

The fair value of outstanding derivative contracts recorded as assets and liabilities on the Company's Consolidated Balance Sheets was as follows:

(a)Amounts represent changes in foreign currency translation related to balances in AOCI.

Total amounts in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded

Total amounts in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded

Total amounts in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded

Derivatives for the Twelve Months Ended December 31(a)

(a) These gains (losses) offset amounts recognized in cost of sales sold principally as a result of intercompany or third-party foreign currency exposures.

16. Information by Segment and Geographic Area

Information by Geographic Area (a)

(a) Revenues are attributed to individual countries based on the location of the facility generating the revenue.

No customer provided in excess of 10% of the Company's consolidated revenues in 2022, 2021 and 2020.

(b) Amortization expense on Corporate relates to the amortization of deferred financing costs.

Reconciliation of Segment Operating Income to Consolidated Income (Loss) From Continuing Operations Before Income Taxes and Equity Income:

Environmental systems for aluminum dross and scrap processing

Environmental systems for aluminum dross and scrap processing

Environmental systems for aluminum dross and scrap processing

19. Components of Accumulated Other Comprehensive Loss

AOCI is included on the Consolidated Statements of Stockholders' Equity. The components of AOCI, net of the effect of income taxes, and activity for the years ended December 31, 2022 and 2021 are as follows:

Components of AOCI - Net of Tax

Amounts reclassified from AOCI for 2022 and 2021 are as follows:

Amortization of cash flow hedging instruments:

(d) These AOCI components are included in the computation of NPPC. See Note 10, Employee Benefit Plans, for additional information.

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