Harsco Corporation (NYSE:HSC) today reported second quarter 2016
results. On a U.S. GAAP (“GAAP”) basis, second quarter 2016
diluted loss per share from continuing operations was $0.35, which
included a loss provision related to the Company's railway
maintenance equipment contracts with SBB, the federal railway
system in Switzerland. As previously disclosed, the Company
concluded that it will have a loss on its outstanding contracts
with SBB, and under generally accepted accounting principles, a
loss provision is recorded when determined probable.
Excluding this item, diluted earnings per share from continuing
operations in the second quarter of 2016 were $0.15. This
result compares with diluted earnings per share of $0.08 in the
second quarter of 2015.
Operating income from continuing operations for the second
quarter of 2016 was $1 million. Excluding the loss provision,
operating income for the second quarter of 2016 was $41 million,
which was above the guidance range of $22 million to $27 million
provided by the Company.
“We were particularly pleased with the performance of Metals
& Minerals in the second quarter,” said President and CEO Nick
Grasberger. “The performance in Metals & Minerals
reflects the structural and operational improvements completed over
the past two years, strong execution against our key priorities and
an improved market environment. Our second quarter results
also benefited from lower than anticipated Corporate costs, and our
Industrial business performed well in a challenging economic
environment. As previously announced, our reported results
were impacted by the recognition of expected losses on our SBB
contracts in Rail. While we are disappointed with this
outcome, our SBB development work is progressing and we expect to
begin delivering key components under these contracts during the
second-half of the year.”
Grasberger continued, “Looking forward, we expect the internal
momentum to continue in our Metals & Minerals segment and
believe that our businesses are well positioned to show significant
operating leverage as key markets recover. Accordingly, we
have raised our 2016 Outlook for adjusted operating income.
As we enter the second-half of the year, our priorities are
unchanged. We remain focused on achieving meaningful debt
reduction during the year and will continue to pursue initiatives
to strengthen the market positions and capital returns of our
businesses. Finally, we are committed to rebalancing our
business portfolio and realizing the embedded value within our
businesses.”
Harsco Corporation—Selected Second Quarter
Results
($ in millions, except per share amounts) |
|
Q2 2016 |
|
Q2 2015 |
Revenues |
|
$ |
370 |
|
|
$ |
456 |
|
Operating income from continuing operations - GAAP |
|
$ |
1 |
|
|
$ |
36 |
|
Operating margin from continuing operations - GAAP |
|
0.4 |
% |
|
7.8 |
% |
Diluted EPS from continuing operations |
|
$ |
(0.35 |
) |
|
$ |
0.08 |
|
Unusual items per diluted share |
|
$ |
0.50 |
|
|
$ |
— |
|
Adjusted operating income - excluding unusual items |
|
$ |
41 |
|
|
$ |
36 |
|
Adjusted operating margin - excluding unusual items |
|
11.2 |
% |
|
7.8 |
% |
Adjusted diluted EPS from continuing operations - excluding unusual
items |
|
$ |
0.15 |
|
|
$ |
0.08 |
|
Return on invested capital (TTM) - excluding unusual items |
|
6.0 |
% |
|
6.8 |
% |
Consolidated Second Quarter Operating
Results
Total revenues were $370 million, with the decrease attributable
to each of the Company’s segments, as expected. Foreign
currency translation negatively affected second quarter 2016
revenues by approximately $13 million.
Operating income from continuing operations for the second
quarter of 2016 was $1 million, while operating income from
continuing operations excluding the loss provision was $41 million
in the second quarter of 2016. These figures compare with
operating income of $36 million in the prior-year quarter.
Excluding the Rail loss provision, the improvement in results in
Metals & Minerals in comparison with the same quarter last
year more than offset lower earnings in the Industrial and Rail
segments. As a result, operating margin increased by 340
basis points versus the prior-year period excluding the Rail
loss provision.
Foreign currency translation positively impacted operating
income by approximately $2 million in this year’s quarter
compared with the prior-year quarter. Also, the Company’s
second quarter 2016 earnings included an equity loss of
approximately $0.7 million ($0.01 loss per share after tax) from
the Brand Energy joint venture.
Second Quarter Business Review
Metals & Minerals
($ in millions) |
|
Q2 2016 |
|
Q2 2015 |
|
%Change |
Revenues |
|
$ |
254 |
|
|
$ |
294 |
|
|
(14 |
)% |
Operating income - GAAP |
|
$ |
31 |
|
|
$ |
19 |
|
|
66 |
% |
Operating margin - GAAP |
|
12.2 |
% |
|
6.3 |
% |
|
|
Customer liquid steel tons (millions) |
|
34.8 |
|
|
40.6 |
|
|
(14 |
)% |
Revenues decreased 14 percent to $254 million, primarily as a
result of exiting certain contracts and foreign exchange
translation. Meanwhile, operating income increased 66 percent
in comparison with the prior-year as the workforce reductions and
other benefits realized under Project Orion, lower overall
operating costs and improved profitability for certain Applied
Products offset the impact from site exits. As a result, the
segment operating margin improved to 12.2 percent versus 6.3
percent in last year’s second quarter. There were no unusual
items in either period.
Industrial
($ in millions) |
|
Q2 2016 |
|
Q2 2015 |
|
%Change |
Revenues |
|
$ |
66 |
|
|
$ |
92 |
|
|
(28 |
)% |
Operating income - GAAP |
|
$ |
7 |
|
|
$ |
14 |
|
|
(49 |
)% |
Operating margin - GAAP |
|
11.0 |
% |
|
15.7 |
% |
|
|
Revenues declined 28 percent to $66 million, principally due to
volume changes in the segment’s heat exchanger business resulting
from lower capital spending among U.S. energy customers.
Operating income declined as reduced demand for heat exchangers
offset lower selling and administrative costs. As a result,
the segment’s operating margin decreased to 11.0 percent compared
with 15.7 percent in the comparable quarter last year.
Rail
($ in millions) |
|
Q2 2016 |
|
Q2 2015 |
|
%Change |
Revenues |
|
$ |
50 |
|
|
$ |
70 |
|
|
(28 |
)% |
Operating income - GAAP |
|
$ |
(32 |
) |
|
$ |
11 |
|
|
nmf |
Operating margin - GAAP |
|
(63.8 |
)% |
|
16.4 |
% |
|
|
Adjusted operating income - excluding unusual items |
|
$ |
8 |
|
|
$ |
11 |
|
|
(29 |
)% |
Adjusted operating margin - excluding unusual items |
|
16.2 |
% |
|
16.4 |
% |
|
|
nmf=not meaningful |
|
|
|
|
|
|
Revenues decreased 28 percent to $50 million as lower equipment
volume offset an increase in after-market parts sales. The
segment incurred an operating loss of $32 million in the second
quarter of 2016 due to the loss provision on the SBB
contracts. Excluding this item, operating income totaled $8
million as compared with operating income of $11 million in the
prior-year quarter. This change can be attributed to lower
contributions from equipment sales, which offset benefits from
higher parts sales and lower selling and administrative
costs. Meanwhile, the segment's operating margin excluding
the loss provision was largely unchanged at 16.2 percent compared
with 16.4 percent in the comparable quarter last year.
Cash Flow
Free cash flow was $19 million in the second quarter of 2016,
compared with $10 million in the prior-year period. This cash
flow improvement resulted principally from a decline in capital
expenditures compared with last year's quarter.
Financial Position
At the end of the second quarter, Harsco maintained net debt of
approximately $809 million, a modest decrease from the sequential
quarter. Meanwhile, the Company's net debt to EBITDA ratio
was 2.9x, as compared with a maximum leverage covenant of 4.0x
under the Company's current Credit Agreement, and its
borrowing capacity and available cash totaled more than $220
million at the end of the quarter. Also, the Company is now
targeting a net leverage ratio of less than 3.0x at year-end as
compared to 3.0x to 3.2x previously.
2016 Outlook
The Company's 2016 Outlook is improved to mainly reflect revised
forecasts for the Metals & Minerals segment and Corporate
spending as compared with the guidance provided as part of its
first quarter 2016 results. For Metals & Minerals,
adjusted operating income is now expected to improve compared with
2015 given current expectations for cost and operational gains as
well as improved fundamentals within the global mill services and
Applied Products markets. As a result, internal improvements
and site start-ups are forecasted to fully offset the impacts from
site exits, weaker commodities prices and lower steel production
for the year. Further, Corporate spending is now expected to
decrease at least 20 percent versus 2015 as a result of continued
reduction of various overhead expenditures such as personnel,
travel and professional fees. The Company's outlook for the
Industrial and Rail segments are mostly unchanged. In
Industrial, operating results are projected to be meaningfully
lower as compared with 2015 due to reduced demand from U.S. energy
customers. Rail earnings are expected to decrease as a result
of weaker U.S. market demand, sales mix and administrative costs to
facilitate international expansion as well as the $40 million loss
provision in the just-completed quarter. Lastly, the Outlook
also includes anticipated equity income from the Brand Energy joint
venture, where impacts from various financial uncertainties such as
foreign exchange and income taxes are assumed to be limited in the
forecast period.
Full Year 2016
- GAAP operating income for the full year is expected to range
from $57 million to $72 million; compared with $89 million in
2015.
- Adjusted operating income for the full year is expected to
range from $105 million to $120 million; compared with $80 million
to $100 million previously and with $135 million in 2015.
- Free cash flow in the range of $65 million to $80 million;
compared with a previous range of $50 million to $70 million and
with $24 million in 2015.
- Net interest expense is forecasted to range from $50 million to
$52 million.
- Equity income from the Brand Energy joint venture is expected
to be $6 million to $8 million; compared with $3 million to $6
million previously.
- GAAP loss per share for the full year in the range of $0.17 to
$0.32; compared GAAP earnings per share of $0.09 in 2015.
- Adjusted earnings per share for the full year in the range of
$0.33 to $0.49; compared with $0.13 to $0.33 previously and $0.56
per share in 2015.
- Adjusted return on invested capital is expected to range from
5.5 percent to 6.0 percent; compared with 6.3 percent in 2015.
Q3 2016
- Adjusted operating income of $27 million to $32 million;
compared with $35 million in the prior-year quarter.
- Adjusted earnings per share of $0.10 to $0.15; compared with
$0.18 in the prior-year quarter.
Conference Call
As previously announced, the Company will hold a conference call
today at 9:00 a.m. Eastern Time to discuss its results and
respond to questions from the investment community. The
conference call will be broadcast live through the Harsco
Corporation website at www.harsco.com. The Company will refer
to a slide presentation that accompanies its formal remarks.
The slide presentation will be available on the Company’s
website.
The call can also be accessed by telephone by dialing
(800) 611-4920, or (973) 200-3957 for international callers.
Enter Conference ID number 44559392. Listeners are
advised to dial in at least five minutes prior to the call.
Replays will be available via the Harsco website and also by
telephone through August 18, 2016 by dialing (800) 585-8367, (855)
859-2056 or (404) 537-3406.
Forward-Looking Statements
The nature of the Company's business and the many countries in
which it operates subject it to changing economic, competitive,
regulatory and technological conditions, risks and uncertainties.
In accordance with the "safe harbor" provisions of Section
27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, the Company provides the following cautionary
remarks regarding important factors that, among others, could cause
future results to differ materially from the results contemplated
by forward-looking statements, including the expectations and
assumptions expressed or implied herein. Forward-looking
statements contained herein could include, among other things,
statements about management's confidence in and strategies for
performance; expectations for new and existing products,
technologies and opportunities; and expectations regarding growth,
sales, cash flows, and earnings. Forward-looking statements
can be identified by the use of such terms as "may," "could,"
"expect," "anticipate," "intend," "believe," "likely," "estimate,"
"target," "plan" or other comparable terms.
Factors that could cause actual results to differ, perhaps
materially, from those implied by forward-looking statements
include, but are not limited to: (1) changes in the worldwide
business environment in which the Company operates, including
general economic conditions; (2) changes in currency exchange
rates, interest rates, commodity and fuel costs and capital costs;
(3) changes in the performance of equity and bond markets that
could affect, among other things, the valuation of the assets in
the Company's pension plans and the accounting for pension assets,
liabilities and expenses; (4) changes in governmental laws and
regulations, including environmental, occupational health and
safety, tax and import tariff standards; (5) market and competitive
changes, including pricing pressures, market demand and acceptance
for new products, services and technologies; (6) the Company's
inability or failure to protect its intellectual property rights
from infringement in one or more of the many countries in which the
Company operates; (7) failure to effectively prevent, detect or
recover from breaches in the Company's cybersecurity
infrastructure; (8) unforeseen business disruptions in one or more
of the many countries in which the Company operates due to
political instability, civil disobedience, armed hostilities,
public health issues or other calamities; (9) disruptions
associated with labor disputes and increased operating costs
associated with union organization; (10) the seasonal nature of the
Company's business; (11) the Company's ability to successfully
enter into new contracts and complete new acquisitions or strategic
ventures in the time-frame contemplated, or at all; (12) the
integration of the Company's strategic acquisitions; (13) the
amount and timing of repurchases of the Company's common stock, if
any; (14) the prolonged recovery in global financial and credit
markets and economic conditions generally, which could result in
the Company's customers curtailing development projects,
construction, production and capital expenditures, which, in turn,
could reduce the demand for the Company's products and services
and, accordingly, the Company's revenues, margins and
profitability; (15) the outcome of any disputes with customers,
contractors and subcontractors; (16) the financial condition of the
Company's customers, including the ability of customers (especially
those that may be highly leveraged and those with inadequate
liquidity) to maintain their credit availability; (17) the
Company's ability to successfully implement and receive the
expected benefits of cost-reduction and restructuring initiatives,
including the achievement of expected cost savings in the expected
time frame and the ability to reduce its net debt; (18) the ability
to successfully implement the Company's strategic initiatives and
portfolio optimization and the impact of such initiatives, such as
the Harsco Metals & Minerals Segment's Improvement Plan
("Project Orion"); (19) the amount ultimately realized from the
Company's exit from the strategic venture between the Company and
Clayton, Dubilier & Rice and the timing of such exit; (20)
implementation of environmental remediation matters; (21) risk and
uncertainty associated with intangible assets; (22) the impact of a
transaction, if any, resulting from the Company's determination to
explore strategic options for the separation of the Harsco Metals
& Minerals Segment; and (23) other risk factors listed from
time to time in the Company's SEC reports. A further
discussion of these, along with other potential risk factors, can
be found in Part I, Item 1A, "Risk Factors," of the Company's
Annual Report on Form 10-K for the year ended December 31, 2015.
The Company cautions that these factors may not be exhaustive and
that many of these factors are beyond the Company's ability to
control or predict. Accordingly, forward-looking statements
should not be relied upon as a prediction of actual results.
The Company undertakes no duty to update forward-looking
statements except as may be required by law.
About Harsco
Harsco Corporation serves key industries that are fundamental to
worldwide economic development, including steel and metals
production, railways and energy. Harsco’s common stock is a
component of the S&P SmallCap 600 Index and the
Russell 2000 Index. Additional information can be found
at www.harsco.com.
HARSCO CORPORATIONCONSOLIDATED STATEMENTS
OF OPERATIONS (Unaudited) |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
(In thousands, except per share amounts) |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues from
continuing operations: |
|
|
|
|
|
|
|
|
Service revenues |
|
$ |
249,626 |
|
|
$ |
292,209 |
|
|
$ |
475,120 |
|
|
$ |
579,637 |
|
Product revenues |
|
120,307 |
|
|
163,538 |
|
|
248,094 |
|
|
327,689 |
|
Total
revenues |
|
369,933 |
|
|
455,747 |
|
|
723,214 |
|
|
907,326 |
|
Costs and expenses
from continuing operations: |
|
|
|
|
|
|
|
|
Cost of services sold |
|
191,508 |
|
|
243,838 |
|
|
381,325 |
|
|
489,699 |
|
Cost of products sold |
|
125,388 |
|
|
116,561 |
|
|
218,632 |
|
|
231,782 |
|
Selling, general and administrative
expenses |
|
49,520 |
|
|
58,463 |
|
|
100,304 |
|
|
122,365 |
|
Research and development
expenses |
|
956 |
|
|
1,514 |
|
|
1,838 |
|
|
2,433 |
|
Other (income) expenses |
|
1,247 |
|
|
(358 |
) |
|
10,370 |
|
|
(13,563 |
) |
Total costs and
expenses |
|
368,619 |
|
|
420,018 |
|
|
712,469 |
|
|
832,716 |
|
Operating income
from continuing operations |
|
1,314 |
|
|
35,729 |
|
|
10,745 |
|
|
74,610 |
|
Interest income |
|
552 |
|
|
431 |
|
|
1,087 |
|
|
687 |
|
Interest expense |
|
(13,805 |
) |
|
(11,818 |
) |
|
(26,168 |
) |
|
(23,702 |
) |
Change in fair value to
unit adjustment liability and loss on dilution of equity method
investment |
|
(1,489 |
) |
|
(2,164 |
) |
|
(13,706 |
) |
|
(4,409 |
) |
Income (loss) from
continuing operations before income taxes and equity income
(loss) |
|
(13,428 |
) |
|
22,178 |
|
|
(28,042 |
) |
|
47,186 |
|
Income tax expense |
|
(12,000 |
) |
|
(7,105 |
) |
|
(9,834 |
) |
|
(19,960 |
) |
Equity in income (loss) of
unconsolidated entities, net |
|
(694 |
) |
|
(7,584 |
) |
|
2,481 |
|
|
(3,501 |
) |
Income
(loss) from continuing operations |
|
(26,122 |
) |
|
7,489 |
|
|
(35,395 |
) |
|
23,725 |
|
Discontinued
operations: |
|
|
|
|
|
|
|
|
Income (loss) on disposal of
discontinued business |
|
2,886 |
|
|
434 |
|
|
2,380 |
|
|
(212 |
) |
Income tax benefit (expense)
related to discontinued business |
|
(1,065 |
) |
|
(161 |
) |
|
(878 |
) |
|
78 |
|
Income (loss) from
discontinued operations |
|
1,821 |
|
|
273 |
|
|
1,502 |
|
|
(134 |
) |
Net income
(loss) |
|
(24,301 |
) |
|
7,762 |
|
|
(33,893 |
) |
|
23,591 |
|
Less: Net income attributable to
noncontrolling interests |
|
(1,872 |
) |
|
(1,187 |
) |
|
(3,149 |
) |
|
(1,752 |
) |
Net income
(loss) attributable to Harsco Corporation |
|
$ |
(26,173 |
) |
|
$ |
6,575 |
|
|
$ |
(37,042 |
) |
|
$ |
21,839 |
|
Amounts
attributable to Harsco Corporation common
stockholders: |
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations, net of tax |
|
$ |
(27,994 |
) |
|
$ |
6,302 |
|
|
$ |
(38,544 |
) |
|
$ |
21,973 |
|
Income (loss) from discontinued
operations, net of tax |
|
1,821 |
|
|
273 |
|
|
1,502 |
|
|
(134 |
) |
Net income (loss)
attributable to Harsco Corporation common
stockholders |
|
$ |
(26,173 |
) |
|
$ |
6,575 |
|
|
$ |
(37,042 |
) |
|
$ |
21,839 |
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
of common stock outstanding |
|
80,337 |
|
|
80,221 |
|
|
80,288 |
|
|
80,230 |
|
Basic
earnings (loss) per common share attributable to Harsco Corporation
common stockholders: |
Continuing operations |
|
$ |
(0.35 |
) |
|
$ |
0.08 |
|
|
$ |
(0.48 |
) |
|
$ |
0.27 |
|
Discontinued operations |
|
0.02 |
|
|
— |
|
|
0.02 |
|
|
— |
|
Basic earnings
(loss) per share attributable to Harsco Corporation common
stockholders |
|
$ |
(0.33 |
) |
|
$ |
0.08 |
|
|
$ |
(0.46 |
) |
|
$ |
0.27 |
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average
shares of common stock outstanding |
|
80,337 |
|
|
80,418 |
|
|
80,288 |
|
|
80,385 |
|
Diluted earnings (loss) per common share attributable to
Harsco Corporation common stockholders: |
Continuing operations |
|
$ |
(0.35 |
) |
|
$ |
0.08 |
|
|
$ |
(0.48 |
) |
|
$ |
0.27 |
|
Discontinued operations |
|
0.02 |
|
|
— |
|
|
0.02 |
|
|
— |
|
Diluted
earnings (loss) per share attributable to Harsco Corporation common
stockholders |
|
$ |
(0.33 |
) |
|
$ |
0.08 |
|
|
$ |
(0.46 |
) |
|
$ |
0.27 |
|
HARSCO
CORPORATIONCONSOLIDATED BALANCE SHEETS
(Unaudited) |
|
|
|
|
(In thousands) |
|
June 30 2016 |
|
December 31 2015 |
ASSETS |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash
equivalents |
|
$ |
69,238 |
|
|
$ |
79,756 |
|
Trade accounts
receivable, net |
|
265,241 |
|
|
254,877 |
|
Other
receivables |
|
16,875 |
|
|
30,395 |
|
Inventories |
|
208,243 |
|
|
216,967 |
|
Other current
assets |
|
80,503 |
|
|
82,527 |
|
Total current
assets |
|
640,100 |
|
|
664,522 |
|
Investments |
|
236,112 |
|
|
252,609 |
|
Property, plant and
equipment, net |
|
531,292 |
|
|
564,035 |
|
Goodwill |
|
394,423 |
|
|
400,367 |
|
Intangible assets,
net |
|
47,078 |
|
|
53,043 |
|
Other assets |
|
110,016 |
|
|
126,621 |
|
Total
assets |
|
$ |
1,959,021 |
|
|
$ |
2,061,197 |
|
LIABILITIES |
|
|
|
|
Current
liabilities: |
|
|
|
|
Short-term
borrowings |
|
$ |
10,129 |
|
|
$ |
30,229 |
|
Current maturities
of long-term debt |
|
35,588 |
|
|
25,084 |
|
Accounts
payable |
|
113,532 |
|
|
136,018 |
|
Accrued
compensation |
|
40,736 |
|
|
38,899 |
|
Income taxes
payable |
|
7,192 |
|
|
4,408 |
|
Dividends
payable |
|
— |
|
|
4,105 |
|
Insurance
liabilities |
|
11,927 |
|
|
11,420 |
|
Advances on
contracts and other customer advances |
|
107,912 |
|
|
107,250 |
|
Due to
unconsolidated affiliate |
|
7,715 |
|
|
7,733 |
|
Unit adjustment
liability |
|
11,681 |
|
|
22,320 |
|
Other current
liabilities |
|
121,536 |
|
|
118,657 |
|
Total current
liabilities |
|
467,948 |
|
|
506,123 |
|
Long-term debt |
|
832,339 |
|
|
845,621 |
|
Deferred income taxes |
|
15,364 |
|
|
12,095 |
|
Insurance liabilities |
|
25,078 |
|
|
30,400 |
|
Retirement plan
liabilities |
|
210,482 |
|
|
241,972 |
|
Due to unconsolidated
affiliate |
|
14,138 |
|
|
13,674 |
|
Unit adjustment
liability |
|
52,510 |
|
|
57,614 |
|
Other liabilities |
|
40,213 |
|
|
42,895 |
|
Total
liabilities |
|
1,658,072 |
|
|
1,750,394 |
|
HARSCO CORPORATION
STOCKHOLDERS' EQUITY |
|
|
|
|
Common
stock |
|
140,622 |
|
|
140,503 |
|
Additional paid-in
capital |
|
169,048 |
|
|
170,699 |
|
Accumulated other
comprehensive loss |
|
(488,302 |
) |
|
(515,688 |
) |
Retained
earnings |
|
1,199,313 |
|
|
1,236,355 |
|
Treasury stock |
|
(760,391 |
) |
|
(760,299 |
) |
Total
Harsco Corporation stockholders’ equity |
|
260,290 |
|
|
271,570 |
|
Noncontrolling
interests |
|
40,659 |
|
|
39,233 |
|
Total
equity |
|
300,949 |
|
|
310,803 |
|
Total
liabilities and equity |
|
$ |
1,959,021 |
|
|
$ |
2,061,197 |
|
HARSCO CORPORATIONCONSOLIDATED STATEMENTS
OF CASH FLOWS (Unaudited) |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
(In thousands) |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(24,301 |
) |
|
$ |
7,762 |
|
|
$ |
(33,893 |
) |
|
$ |
23,591 |
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities: |
Depreciation |
|
32,655 |
|
|
36,853 |
|
|
65,736 |
|
|
73,507 |
|
Amortization |
|
2,962 |
|
|
2,836 |
|
|
5,926 |
|
|
6,073 |
|
Change in fair value to the unit
adjustment liability and loss on dilution of equity method
investment |
|
1,489 |
|
|
2,164 |
|
|
13,706 |
|
|
4,409 |
|
Deferred income tax expense
(benefit) |
|
(2,290 |
) |
|
(274 |
) |
|
(2,857 |
) |
|
2,355 |
|
Equity in (income) loss of
unconsolidated entities, net |
|
694 |
|
|
7,584 |
|
|
(2,481 |
) |
|
3,501 |
|
Dividends from unconsolidated
entities |
|
— |
|
|
— |
|
|
16 |
|
|
— |
|
Contract loss provision for Harsco
Rail Segment |
|
40,050 |
|
|
— |
|
|
40,050 |
|
|
— |
|
Other, net |
|
14,132 |
|
|
(7,861 |
) |
|
4,257 |
|
|
(17,473 |
) |
Changes in assets and
liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
(12,941 |
) |
|
9,453 |
|
|
3,011 |
|
|
(10,698 |
) |
Inventories |
|
(11,383 |
) |
|
(11,696 |
) |
|
(23,791 |
) |
|
(31,192 |
) |
Accounts payable |
|
(548 |
) |
|
5,662 |
|
|
(16,399 |
) |
|
11,437 |
|
Accrued interest payable |
|
(6,704 |
) |
|
(6,991 |
) |
|
(36 |
) |
|
(163 |
) |
Accrued compensation |
|
5,014 |
|
|
2,149 |
|
|
1,237 |
|
|
(6,870 |
) |
Advances on contracts and other
customer advances |
|
7,886 |
|
|
(447 |
) |
|
(1,109 |
) |
|
8,246 |
|
Harsco 2011/2012 Restructuring
Program accrual |
|
— |
|
|
87 |
|
|
— |
|
|
(101 |
) |
Other assets and liabilities |
|
(15,158 |
) |
|
(12,536 |
) |
|
(24,791 |
) |
|
(21,404 |
) |
Net cash provided by
operating activities |
|
31,557 |
|
|
34,745 |
|
|
28,582 |
|
|
45,218 |
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
Purchases of property, plant and
equipment |
|
(15,225 |
) |
|
(31,616 |
) |
|
(32,176 |
) |
|
(63,246 |
) |
Proceeds from sales of assets |
|
2,296 |
|
|
6,570 |
|
|
5,115 |
|
|
13,351 |
|
Purchases of businesses, net of
cash acquired |
|
— |
|
|
(929 |
) |
|
(26 |
) |
|
(7,757 |
) |
Payment of unit adjustment
liability |
|
— |
|
|
(5,580 |
) |
|
— |
|
|
(11,160 |
) |
Other investing activities,
net |
|
(6,043 |
) |
|
(7,143 |
) |
|
(616 |
) |
|
(4,783 |
) |
Net cash used by investing
activities |
|
(18,972 |
) |
|
(38,698 |
) |
|
(27,703 |
) |
|
(73,595 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
Short-term borrowings, net |
|
2,315 |
|
|
(7,944 |
) |
|
1,949 |
|
|
(3,046 |
) |
Current maturities and long-term
debt: |
|
|
|
|
|
|
|
|
Additions |
|
21,009 |
|
|
40,941 |
|
|
50,019 |
|
|
92,980 |
|
Reductions |
|
(32,687 |
) |
|
(11,005 |
) |
|
(75,608 |
) |
|
(16,152 |
) |
Cash dividends paid on common
stock |
|
— |
|
|
(16,448 |
) |
|
(4,105 |
) |
|
(32,891 |
) |
Dividends paid to noncontrolling
interests |
|
(1,702 |
) |
|
(1,559 |
) |
|
(1,702 |
) |
|
(1,559 |
) |
Purchase of noncontrolling
interests |
|
(4,731 |
) |
|
— |
|
|
(4,731 |
) |
|
— |
|
Common stock acquired for
treasury |
|
— |
|
|
— |
|
|
— |
|
|
(12,143 |
) |
Proceeds from cross-currency
interest rate swap termination |
|
— |
|
|
— |
|
|
16,625 |
|
|
— |
|
Other financing activities,
net |
|
(1 |
) |
|
(143 |
) |
|
(895 |
) |
|
(2,192 |
) |
Net cash provided (used) by
financing activities |
|
(15,797 |
) |
|
3,842 |
|
|
(18,448 |
) |
|
24,997 |
|
Effect of exchange rate
changes on cash |
|
2,045 |
|
|
710 |
|
|
7,051 |
|
|
7,685 |
|
Net increase (decrease) in
cash and cash equivalents |
|
(1,167 |
) |
|
599 |
|
|
(10,518 |
) |
|
4,305 |
|
Cash and cash equivalents
at beginning of period |
|
70,405 |
|
|
66,549 |
|
|
79,756 |
|
|
62,843 |
|
Cash and cash
equivalents at end of period |
|
$ |
69,238 |
|
|
$ |
67,148 |
|
|
$ |
69,238 |
|
|
$ |
67,148 |
|
HARSCO CORPORATIONREVIEW OF OPERATIONS BY
SEGMENT (Unaudited) |
|
|
Three Months Ended |
|
Three Months Ended |
|
|
June 30, 2016 |
|
June 30, 2015 |
(In thousands) |
|
Revenues |
|
OperatingIncome
(Loss) |
|
Revenues |
|
Operating Income (Loss) |
Harsco Metals & Minerals |
|
$ |
253,560 |
|
|
$ |
30,927 |
|
|
$ |
294,336 |
|
|
$ |
18,599 |
|
Harsco Industrial |
|
66,270 |
|
|
7,300 |
|
|
91,881 |
|
|
14,419 |
|
Harsco Rail |
|
50,103 |
|
|
(31,948 |
) |
|
69,530 |
|
|
11,400 |
|
General Corporate |
|
— |
|
|
(4,965 |
) |
|
— |
|
|
(8,689 |
) |
Consolidated Totals |
|
$ |
369,933 |
|
|
$ |
1,314 |
|
|
$ |
455,747 |
|
|
$ |
35,729 |
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
Six Months Ended |
|
|
June 30, 2016 |
|
June 30, 2015 |
(In thousands) |
|
Revenues |
|
OperatingIncome
(Loss) |
|
Revenues |
|
Operating Income (Loss) |
Harsco Metals & Minerals |
|
$ |
483,232 |
|
|
$ |
37,868 |
|
|
$ |
585,534 |
|
|
$ |
29,182 |
|
Harsco Industrial |
|
128,139 |
|
|
13,771 |
|
|
190,684 |
|
|
31,446 |
|
Harsco Rail |
|
111,843 |
|
|
(27,042 |
) |
|
131,108 |
|
|
33,033 |
|
General Corporate |
|
— |
|
|
(13,852 |
) |
|
— |
|
|
(19,051 |
) |
Consolidated Totals |
|
$ |
723,214 |
|
|
$ |
10,745 |
|
|
$ |
907,326 |
|
|
$ |
74,610 |
|
HARSCO CORPORATIONRECONCILIATION OF
ADJUSTED DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS
EXCLUDING UNUSUAL ITEMS TO DILUTED EARNINGS (LOSS) PER SHARE FROM
CONTINUING OPERATIONS AS REPORTED (Unaudited) |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Diluted earnings (loss)
per share from continuing operations as reported (a) |
|
$ |
(0.35 |
) |
|
$ |
0.08 |
|
|
$ |
(0.48 |
) |
|
$ |
0.27 |
|
Harsco Rail Segment
contract loss provision (b) |
|
0.50 |
|
|
— |
|
|
0.50 |
|
|
— |
|
Net loss on dilution of
equity method investment (c) |
|
— |
|
|
— |
|
|
0.13 |
|
|
— |
|
Harsco Metals &
Minerals Segment site exit charges (d) |
|
— |
|
|
— |
|
|
0.06 |
|
|
— |
|
Harsco Metals &
Minerals Segment separation costs (e) |
|
— |
|
|
— |
|
|
0.04 |
|
|
— |
|
Taxes on above unusual
items |
|
— |
|
|
— |
|
|
(0.07 |
) |
|
— |
|
Adjusted
diluted earnings per share from continuing operations
excluding unusual items |
|
$ |
0.15 |
|
|
$ |
0.08 |
|
|
$ |
0.18 |
|
|
$ |
0.27 |
|
(a) No unusual items were excluded in the three and six months
ended June 30, 2015.(b) Harsco Rail Segment contract loss provision
related the Company's contracts with the federal railway system of
Switzerland (Q2 and six months 2016 $40.1 pre-tax).(c) Loss on the
dilution of the Company's investment in Brand recorded at Corporate
(six months 2016 $10.3 million pre-tax).(d) Harsco Metals &
Minerals Segment charges primarily attributable to site exit costs
(six months 2016 $5.1 million pre-tax).(e) Costs associated with
Harsco Metals & Minerals Segment separation recorded at
Corporate (six months 2016 $3.3 million pre-tax).
The Company’s management believes Adjusted diluted earnings per
share from continuing operations excluding unusual items, which is
a non-U.S. GAAP financial measure, is useful to investors because
it provides an overall understanding of the Company’s historical
and future prospects. Exclusion of unusual items permits
evaluation and comparison of results for the Company’s core
business operations, and it is on this basis that management
internally assesses the Company’s performance. This measure should
be considered in addition to, rather than as a substitute for,
other information provided in accordance with U.S. GAAP.
HARSCO
CORPORATIONRECONCILIATION OF ADJUSTED DILUTED
EARNINGS PER SHARE FROM CONTINUING OPERATIONS EXCLUDING UNUSUAL
ITEMS TO DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS AS
REPORTED (Unaudited) |
|
|
|
Twelve Months Ended |
|
|
|
December 31 |
|
|
|
2015 |
|
Diluted earnings per
share from continuing operations as reported |
|
$ |
0.09 |
|
|
Harsco Metals &
Minerals Segment contract termination charges, net (a) |
|
0.17 |
|
|
Harsco Metals &
Minerals Segment separation costs (b) |
|
0.12 |
|
|
Harsco Metals &
Minerals Segment salt cake processing and disposal charges (c) |
|
0.06 |
|
|
Harsco Metals &
Minerals Segment site exit and underperforming contract charges,
net (d) |
|
0.06 |
|
|
Harsco Metals &
Minerals Segment Project Orion charges (e) |
|
0.06 |
|
|
Harsco Metals &
Minerals Segment subcontractor settlement charge (f) |
|
0.05 |
|
|
Harsco Metals &
Minerals Segment multi-employer pension plan charge (g) |
|
0.01 |
|
|
Harsco Infrastructure
Segment loss on disposal (h) |
|
0.01 |
|
|
Taxes on above unusual
items |
|
(0.08 |
) |
|
Adjusted
diluted earnings per share from continuing operations
excluding unusual items |
|
$ |
0.56 |
|
(i) |
(a) Harsco Metals & Minerals Segment charges related to a
contract terminations (Full year 2015 $13.5 million pre-tax).(b)
Costs associated with Harsco Metals & Minerals Segment
separation costs recorded as Corporate (Full year 2015 $9.9 million
pre-tax).(c) Harsco Metals & Minerals Segment charges incurred
in connection with the processing and disposal of salt cakes (Full
year 2015 $7.0 million pre-tax). The Company's Bahrain operations
are operated under a strategic venture for which its strategic
venture partner has a 35% minority interest. Accordingly, the
net impact of the charge to the Company's Net income (loss)
attributable to Harsco Corporation was $4.6 million.(d) Harsco
Metals & Minerals Segment charges primarily attributable to
site exit costs and non-cash long lived asset impairment charges
associated with strategic actions from Project Orion’s focus on
underperforming contracts (Full year 2015 $5.0 million pre-tax
which includes $1.4 million of pre-tax gains).(e) Harsco Metals
& Minerals Segment Project Orion restructuring charges (Full
year 2015 $5.1 million pre-tax).(f) Harsco Metals & Minerals
Segment charges related to a settlement with a subcontractor (Full
year 2015 $4.2 million pre-tax).(g) Harsco Metals & Minerals
Segment charges related to a multi-employer pension plan (Full year
2015 $1.1 million pre-tax).(h) Loss resulting from the Harsco
Infrastructure Transaction, which was consummated in the fourth
quarter of 2013 (Full year 2015 $1.0 million pre-tax).(i) Does not
total due to rounding.
The Company’s management believes Adjusted diluted earnings per
share from continuing operations excluding unusual items, which is
a non-U.S. GAAP financial measure, is useful to investors because
it provides an overall understanding of the Company’s historical
and future prospects. Exclusion of unusual items permits
evaluation and comparison of results for the Company’s core
business operations, and it is on this basis that management
internally assesses the Company’s performance. This measure should
be considered in addition to, rather than as a substitute for,
other information provided in accordance with U.S. GAAP.
HARSCO
CORPORATIONRECONCILIATION OF ADJUSTED DILUTED
EARNINGS PER SHARE FROM CONTINUING OPERATIONS EXCLUDING UNUSUAL
ITEMS TO DILUTED LOSS PER SHARE FROM CONTINUING OPERATIONS AS
REPORTED (Unaudited) |
|
|
|
Three Months Ended |
|
|
|
September 30 |
|
|
|
2015 |
|
Diluted loss per share
from continuing operations as reported |
|
$ |
(0.10 |
) |
|
Harsco Metals &
Minerals Segment contract termination charges (a) |
|
0.17 |
|
|
Harsco Metals &
Minerals Segment salt cake processing and disposal charges (b) |
|
0.06 |
|
|
Harsco Metals &
Minerals Segment subcontractor settlement charge (c) |
|
0.05 |
|
|
Strategic planning
costs (d) |
|
0.02 |
|
|
Harsco Metals &
Minerals Segment multi-employer pension plan charge (e) |
|
0.01 |
|
|
Harsco Infrastructure
Segment loss on disposal (f) |
|
0.01 |
|
|
Harsco Metals &
Minerals Segment site exit and underperforming contract charges
(g) |
|
(0.02 |
) |
|
Taxes on above unusual
items |
|
(0.03 |
) |
|
Adjusted
diluted earnings per share from continuing operations excluding
unusual items |
|
$ |
0.18 |
|
(h) |
(a) Harsco Metals & Minerals Segment charges related to a
contract terminations (Q3 2015 $13.7 million pre-tax).(b) Harsco
Metals & Minerals Segment charges incurred in connection with
the processing and disposal of salt cakes (Q3 2015 $7.0 million
pre-tax). The Company's Bahrain operations are operated under a
strategic venture for which its strategic venture partner has a 35%
minority interest. Accordingly, the net impact of the charge
to the Company's Net income (loss) attributable to Harsco
Corporation was $4.6 million.(c) Harsco Metals & Minerals
Segment charges related to a settlement with a subcontractor (Q3
2015 $4.2 million pre-tax).(d) Costs associated with strategic
planning expenses recorded as Corporate (Q3 2015 $1.8 million
pre-tax).(e) Harsco Metals & Minerals Segment charges related
to a multi-employer pension plan (Q3 2015 $1.1 million pre-tax).(f)
(Gain) loss resulting from the Harsco Infrastructure Transaction,
which was consummated in the fourth quarter of 2013 (Q3 2015 $1.0
million pre-tax).(g) Harsco Metals & Minerals Segment charges
primarily attributable to site exit costs and non-cash long lived
asset impairment charges associated with strategic actions from
Project Orion’s focus on underperforming contracts (Q3 2015 $1.4
million pre-tax).(h) Does not total due to rounding.
The Company’s management believes Adjusted diluted earnings per
share from continuing operations excluding unusual items, which is
a non-U.S. GAAP financial measure, is useful to investors because
it provides an overall understanding of the Company’s historical
and future prospects. Exclusion of unusual items permits
evaluation and comparison of results for the Company’s core
business operations, and it is on this basis that management
internally assesses the Company’s performance. This measure should
be considered in addition to, rather than as a substitute for,
other information provided in accordance with U.S. GAAP.
HARSCO CORPORATIONREVIEW OF OPERATIONS BY
SEGMENT EXCLUDING UNUSUAL ITEMS (Unaudited) |
(In thousands) |
|
HarscoMetals &
Minerals |
|
HarscoIndustrial |
|
Harsco
Rail |
|
Corporate |
|
Consolidated Totals |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2016: |
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income (loss) excluding unusual items |
|
$ |
30,927 |
|
|
$ |
7,300 |
|
|
$ |
8,102 |
|
|
$ |
(4,965 |
) |
|
$ |
41,364 |
|
Revenues as
reported |
|
$ |
253,560 |
|
|
$ |
66,270 |
|
|
$ |
50,103 |
|
|
$ |
— |
|
|
$ |
369,933 |
|
Adjusted operating
margin (%) excluding unusual items |
|
12.2 |
% |
|
11.0 |
% |
|
16.2 |
% |
|
|
|
11.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2015: |
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
as reported (a) |
|
$ |
18,599 |
|
|
$ |
14,419 |
|
|
$ |
11,400 |
|
|
$ |
(8,689 |
) |
|
$ |
35,729 |
|
Revenues as
reported |
|
$ |
294,336 |
|
|
$ |
91,881 |
|
|
$ |
69,530 |
|
|
$ |
— |
|
|
$ |
455,747 |
|
Operating margin
(%) |
|
6.3 |
% |
|
15.7 |
% |
|
16.4 |
% |
|
|
|
7.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended June 30, 2016: |
|
|
|
|
|
|
|
|
Adjusted operating
income (loss) excluding unusual items |
|
$ |
42,968 |
|
|
$ |
13,771 |
|
|
$ |
13,008 |
|
|
$ |
(10,565 |
) |
|
$ |
59,182 |
|
Revenues as
reported |
|
$ |
483,232 |
|
|
$ |
128,139 |
|
|
$ |
111,843 |
|
|
$ |
— |
|
|
$ |
723,214 |
|
Adjusted operating
margin (%) excluding unusual items |
|
8.9 |
% |
|
10.7 |
% |
|
11.6 |
% |
|
|
|
8.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended June 30, 2015: |
|
|
|
|
|
|
|
|
Operating income (loss)
as reported (a) |
|
$ |
29,182 |
|
|
$ |
31,446 |
|
|
$ |
33,033 |
|
|
$ |
(19,051 |
) |
|
$ |
74,610 |
|
Revenues as
reported |
|
$ |
585,534 |
|
|
$ |
190,684 |
|
|
$ |
131,108 |
|
|
$ |
— |
|
|
$ |
907,326 |
|
Operating margin
(%) |
|
5.0 |
% |
|
16.5 |
% |
|
25.2 |
% |
|
|
|
8.2 |
% |
(a) No unusual items were excluded during the first quarter and
six months ended June 30, 2015.
The Company’s management believes Adjusted operating margin (%)
excluding unusual items, which is a non-U.S. GAAP financial
measure, is useful to investors because it provides an overall
understanding of the Company’s historical and future
prospects. Exclusion of unusual items permits evaluation and
comparison of results for the Company’s core business operations,
and it is on this basis that management internally assesses the
Company’s performance. This measure should be considered in
addition to, rather than as a substitute for, other information
provided in accordance with U.S. GAAP.
HARSCO CORPORATIONRECONCILIATION OF
ADJUSTED OPERATING INCOME (LOSS) EXCLUDING UNUSUAL ITEMS BY SEGMENT
TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT
(Unaudited) |
(In thousands) |
|
HarscoMetals &
Minerals |
|
HarscoIndustrial |
|
Harsco
Rail |
|
Corporate |
|
Consolidated Totals |
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended June 30, 2016: |
|
|
|
|
|
|
|
|
Operating income (loss)
as reported |
|
$ |
30,927 |
|
|
$ |
7,300 |
|
|
$ |
(31,948 |
) |
|
$ |
(4,965 |
) |
|
$ |
1,314 |
|
Harsco Rail Segment
contract loss provision |
|
— |
|
|
— |
|
|
40,050 |
|
|
— |
|
|
40,050 |
|
Adjusted operating income
(loss), excluding unusual items |
|
$ |
30,927 |
|
|
$ |
7,300 |
|
|
$ |
8,102 |
|
|
$ |
(4,965 |
) |
|
$ |
41,364 |
|
Revenues as
reported |
|
$ |
253,560 |
|
|
$ |
66,270 |
|
|
$ |
50,103 |
|
|
$ |
— |
|
|
$ |
369,933 |
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended June 30, 2015: |
|
|
|
|
|
|
|
|
Operating income (loss)
as reported (a) |
|
$ |
18,599 |
|
|
$ |
14,419 |
|
|
$ |
11,400 |
|
|
$ |
(8,689 |
) |
|
$ |
35,729 |
|
Revenues as
reported |
|
$ |
294,336 |
|
|
$ |
91,881 |
|
|
$ |
69,530 |
|
|
$ |
— |
|
|
$ |
455,747 |
|
(a) No unusual items were excluded in the second quarter of
2015.
The Company’s management believes Adjusted operating income
(loss) excluding unusual items, which is a non-U.S. GAAP financial
measure, is useful to investors because it provides an overall
understanding of the Company’s historical and future
prospects. Exclusion of unusual items permits evaluation and
comparison of results for the Company’s core business operations,
and it is on this basis that management internally assesses the
Company’s performance. This measure should be considered in
addition to, rather than as a substitute for, other information
provided in accordance with U.S. GAAP.
HARSCO CORPORATIONRECONCILIATION OF
ADJUSTED OPERATING INCOME (LOSS) EXCLUDING UNUSUAL ITEMS BY SEGMENT
TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT
(Unaudited) |
(In thousands) |
|
HarscoMetals &
Minerals |
|
HarscoIndustrial |
|
Harsco
Rail |
|
Corporate |
|
Consolidated Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended June 30, 2016: |
|
|
|
|
|
|
|
|
|
Operating income (loss)
as reported |
|
$ |
37,868 |
|
|
$ |
13,771 |
|
|
$ |
(27,042 |
) |
|
$ |
(13,852 |
) |
|
$ |
10,745 |
|
|
Harsco Rail Segment
contract loss provision |
|
— |
|
|
— |
|
|
40,050 |
|
|
— |
|
|
$ |
40,050 |
|
|
Harsco Metals &
Minerals Segment site exit charges |
|
5,100 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,100 |
|
|
Harsco Metals &
Minerals Segment separation costs |
|
— |
|
|
— |
|
|
— |
|
|
3,287 |
|
|
3,287 |
|
|
Adjusted operating income
(loss), excluding unusual items |
|
$ |
42,968 |
|
|
$ |
13,771 |
|
|
$ |
13,008 |
|
|
$ |
(10,565 |
) |
|
$ |
59,182 |
|
|
Revenues as
reported |
|
$ |
483,232 |
|
|
$ |
128,139 |
|
|
$ |
111,843 |
|
|
$ |
— |
|
|
$ |
723,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended June 30, 2015: |
|
|
|
|
|
|
|
|
|
Operating income (loss)
as reported (a) |
|
$ |
29,182 |
|
|
$ |
31,446 |
|
|
$ |
33,033 |
|
|
$ |
(19,051 |
) |
|
$ |
74,610 |
|
|
Revenues as
reported |
|
$ |
585,534 |
|
|
$ |
190,684 |
|
|
$ |
131,108 |
|
|
$ |
— |
|
|
$ |
907,326 |
|
|
(a) No unusual items were excluded in the six months ended
2015.
The Company’s management believes Adjusted operating income
(loss) excluding unusual items, which is a non-U.S. GAAP financial
measure, is useful to investors because it provides an overall
understanding of the Company’s historical and future
prospects. Exclusion of unusual items permits evaluation and
comparison of results for the Company’s core business operations,
and it is on this basis that management internally assesses the
Company’s performance. This measure should be considered in
addition to, rather than as a substitute for, other information
provided in accordance with U.S. GAAP.
HARSCO CORPORATIONRECONCILIATION OF
ADJUSTED OPERATING INCOME (LOSS) EXCLUDING UNUSUAL ITEMS BY SEGMENT
TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT
(Unaudited) |
(In thousands) |
|
HarscoMetals &
Minerals |
|
HarscoIndustrial |
|
Harsco
Rail |
|
Corporate |
|
Consolidated Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve
Months Ended December 31, 2015: |
|
|
|
|
|
|
|
|
|
Operating income (loss)
as reported |
|
$ |
26,289 |
|
|
$ |
57,020 |
|
|
$ |
50,896 |
|
|
$ |
(45,669 |
) |
|
$ |
88,536 |
|
|
Harsco Metals &
Minerals Segment contract termination charges, net |
|
13,484 |
|
|
— |
|
|
— |
|
|
— |
|
|
13,484 |
|
|
Harsco Metals &
Minerals Segment separation costs |
|
— |
|
|
— |
|
|
— |
|
|
9,922 |
|
|
9,922 |
|
|
Harsco Metals &
Minerals Segment salt cake processing and disposal charges |
|
7,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
7,000 |
|
|
Harsco Metals &
Minerals Segment Project Orion charges |
|
5,070 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,070 |
|
|
Harsco Metals &
Minerals Segment site exit and underperforming contract charges,
net (a) |
|
4,977 |
|
|
— |
|
|
— |
|
|
— |
|
|
4,977 |
|
|
Harsco Metals &
Minerals Segment subcontractor settlement charge |
|
4,220 |
|
|
— |
|
|
— |
|
|
— |
|
|
4,220 |
|
|
Harsco Metals &
Minerals Segment multi-employer pension plan charge |
|
1,122 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,122 |
|
|
Harsco Infrastructure
Segment loss on disposal |
|
— |
|
|
— |
|
|
— |
|
|
1,000 |
|
|
1,000 |
|
|
Adjusted operating income
(loss), excluding unusual items |
|
$ |
62,162 |
|
|
$ |
57,020 |
|
|
$ |
50,896 |
|
|
$ |
(34,747 |
) |
|
$ |
135,331 |
|
|
Revenues as
reported |
|
$ |
1,106,162 |
|
|
$ |
357,256 |
|
|
$ |
259,674 |
|
|
$ |
— |
|
|
$ |
1,723,092 |
|
|
(a) Harsco Metals & Minerals Segment charges
primarily attributable to site exit costs and non-cash long lived
asset impairment charges associated with strategic actions from
Project Orion’s focus on underperforming contracts (Full year 2015
$5.0 million pre-tax which includes $1.4 million of pre-tax
gains).
The Company’s management believes Adjusted operating income
(loss) excluding unusual items, which is a non-U.S. GAAP financial
measure, is useful to investors because it provides an overall
understanding of the Company’s historical and future
prospects. Exclusion of unusual items permits evaluation and
comparison of results for the Company’s core business operations,
and it is on this basis that management internally assesses the
Company’s performance. This measure should be considered in
addition to, rather than as a substitute for, other information
provided in accordance with U.S. GAAP.
HARSCO CORPORATIONRECONCILIATION OF
ADJUSTED OPERATING INCOME (LOSS) EXCLUDING UNUSUAL ITEMS BY SEGMENT
TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT
(Unaudited) |
|
(In thousands) |
|
HarscoMetals &
Minerals |
|
HarscoIndustrial |
|
Harsco
Rail |
|
Corporate |
|
Consolidated Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended September 30, 2015: |
|
|
|
|
|
|
|
|
|
Operating income (loss)
as reported |
|
$ |
(3,331 |
) |
|
$ |
13,934 |
|
|
$ |
7,786 |
|
|
$ |
(10,661 |
) |
|
$ |
7,728 |
|
|
Harsco Metals &
Minerals Segment contract termination charges |
|
13,737 |
|
|
— |
|
|
— |
|
|
— |
|
|
13,737 |
|
|
Harsco Metals &
Minerals Segment salt cake processing and disposal charges |
|
7,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
7,000 |
|
|
Harsco Metals &
Minerals Segment subcontractor settlement charge |
|
4,220 |
|
|
— |
|
|
— |
|
|
— |
|
|
4,220 |
|
|
Strategic planning
costs |
|
— |
|
|
— |
|
|
— |
|
|
1,753 |
|
|
1,753 |
|
|
Harsco Metals &
Minerals Segment multi-employer pension plan charge |
|
1,122 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,122 |
|
|
Harsco Infrastructure
Segment loss on disposal |
|
— |
|
|
— |
|
|
— |
|
|
1,000 |
|
|
1,000 |
|
|
Harsco Metals &
Minerals Segment site exit and underperforming contract
charges |
|
(1,422 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(1,422 |
) |
|
Adjusted operating income
(loss), excluding unusual items |
|
$ |
21,326 |
|
|
$ |
13,934 |
|
|
$ |
7,786 |
|
|
$ |
(7,908 |
) |
|
$ |
35,138 |
|
|
Revenues as
reported |
|
$ |
277,367 |
|
|
$ |
91,199 |
|
|
$ |
59,768 |
|
|
$ |
— |
|
|
$ |
428,334 |
|
|
The Company’s management believes Adjusted operating income
(loss) excluding unusual items, which is a non-U.S. GAAP financial
measure, is useful to investors because it provides an overall
understanding of the Company’s historical and future
prospects. Exclusion of unusual items permits evaluation and
comparison of results for the Company’s core business operations,
and it is on this basis that management internally assesses the
Company’s performance. This measure should be considered in
addition to, rather than as a substitute for, other information
provided in accordance with U.S. GAAP.
HARSCO CORPORATIONRECONCILIATION OF FREE
CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES
(Unaudited) |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
(In thousands) |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Net cash provided by
operating activities |
|
$ |
31,557 |
|
|
$ |
34,745 |
|
|
$ |
28,582 |
|
|
$ |
45,218 |
|
Less maintenance
capital expenditures (a) |
|
(12,585 |
) |
|
(24,440 |
) |
|
(27,117 |
) |
|
(43,445 |
) |
Less growth capital
expenditures (b) |
|
(2,640 |
) |
|
(7,176 |
) |
|
(5,059 |
) |
|
(19,801 |
) |
Plus capital
expenditures for strategic ventures (c) |
|
79 |
|
|
187 |
|
|
95 |
|
|
267 |
|
Plus total proceeds
from sales of assets (d) |
|
2,296 |
|
|
6,570 |
|
|
5,115 |
|
|
13,351 |
|
Free cash flow |
|
$ |
18,707 |
|
|
$ |
9,886 |
|
|
$ |
1,616 |
|
|
$ |
(4,410 |
) |
(a) Maintenance capital expenditures are necessary to sustain
the Company’s current revenue streams and include contract renewal.
(b) Growth capital expenditures, for which management has
discretion as to amount, timing and geographic placement, expand
the Company's revenue base and create additional future cash flow.
(c) Capital expenditures for strategic ventures represent the
partner’s share of capital expenditures in certain ventures
consolidated in the Company’s financial statements.(d) Asset sales
are a normal part of the business model, primarily for the Harsco
Metals & Minerals Segment.
The Company's management believes that Free cash flow, which is
a non-U.S. GAAP financial measure, is meaningful to investors
because management reviews cash flows generated from (used in)
operations less capital expenditures net of asset sales
proceeds. It is important to note that free cash flow does
not represent the total residual cash flow available for
discretionary expenditures since other non-discretionary
expenditures, such as mandatory debt service requirements, are not
deducted from the measure. This measure should be considered in
addition to, rather than as a substitute for, other information
provided in accordance with U.S. GAAP.
HARSCO
CORPORATIONRECONCILIATION OF FREE CASH FLOW TO NET
CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited)
|
|
|
Twelve Months Ended |
|
|
December 31 |
(In thousands) |
|
2015 |
Net cash provided by
operating activities |
|
$ |
121,507 |
|
Less maintenance
capital expenditures (a) |
|
(92,545 |
) |
Less growth capital
expenditures (b) |
|
(31,007 |
) |
Plus capital
expenditures for strategic ventures (c) |
|
439 |
|
Plus total proceeds
from sales of assets (d) |
|
25,966 |
|
Free cash flow |
|
$ |
24,360 |
|
(a) Maintenance capital expenditures are necessary to sustain
the Company’s current revenue streams and include contract
renewal. (b) Growth capital expenditures, for which management
has discretion as to amount, timing and geographic placement,
expand the Company's revenue base and create additional future cash
flow. (c) Capital expenditures for strategic ventures
represent the partner’s share of capital expenditures in certain
ventures consolidated in the Company’s financial statements.(d)
Asset sales are a normal part of the business model, primarily for
the Harsco Metals & Minerals Segment.
The Company's management believes that Free cash flow, which is
a non-U.S. GAAP financial measure, is meaningful to investors
because management reviews cash flows generated from operations
less capital expenditures net of asset sales proceeds. It is
important to note that free cash flow does not represent the total
residual cash flow available for discretionary expenditures since
other non-discretionary expenditures, such as mandatory debt
service requirements, are not deducted from the measure. This
measure should be considered in addition to, rather than as a
substitute for, other information provided in accordance with U.S.
GAAP.
HARSCO
CORPORATIONRECONCILIATION OF FREE CASH FLOW TO NET
CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited)
|
|
|
Projected Twelve Months Ending December
31 |
|
|
2016 |
(In millions) |
|
Low |
|
High |
Net cash provided by
operating activities |
|
$ |
151 |
|
|
$ |
153 |
|
Less capital
expenditures (a) |
|
(95 |
) |
|
(85 |
) |
Plus total proceeds
from asset sales and capital expenditures for strategic
ventures |
|
9 |
|
|
12 |
|
Free Cash Flow |
|
$ |
65 |
|
|
$ |
80 |
|
(a) Capital expenditures encompass two primary elements:
maintenance capital expenditures, which are necessary to sustain
the Company’s current revenue streams and include contract
renewals; and growth capital expenditures, for which management has
discretion as to amount, timing and geographic placement, and which
expand the Company's revenue base and create additional future cash
flow.
The Company's management believes that free cash flow, which is
a non-U.S. GAAP financial measure, is meaningful to investors
because management reviews cash flows generated from operations
less capital expenditures net of asset sales proceeds. It is
important to note that free cash flow does not represent the total
residual cash flow available for discretionary expenditures since
other non-discretionary expenditures, such as mandatory debt
service requirements, are not deducted from the measure. This
measure should be considered in addition to, rather than as a
substitute for, other information provided in accordance with U.S.
GAAP.
HARSCO
CORPORATIONRECONCILIATION OF RETURN ON INVESTED
CAPITAL EXCLUDING UNUSUAL ITEMS TO NET INCOME (LOSS) FROM
CONTINUING OPERATIONS AS REPORTED (a) (Unaudited) |
|
|
Trailing Twelve Months for Period Ended June
30 |
(In thousands) |
|
2016 |
|
2015 |
Income (loss) from
continuing operations |
|
$ |
(51,808 |
) |
|
$ |
7,611 |
|
Unusual items: |
|
|
|
|
Harsco Rail Segment
contract loss provision |
|
40,050 |
|
|
— |
|
Harsco Metals &
Minerals Segment contract termination charges |
|
13,484 |
|
|
— |
|
Harsco Metals &
Minerals Segment separation costs |
|
13,209 |
|
|
— |
|
Net loss on dilution of
equity method investment |
|
10,304 |
|
|
— |
|
Harsco Metals &
Minerals Segment site exit and underperforming contract charges,
net |
|
10,077 |
|
|
39,248 |
|
Harsco Metals &
Minerals Segment salt cake processing and disposal charges |
|
7,000 |
|
|
— |
|
Harsco Metals &
Minerals Segment Project Orion charges |
|
5,070 |
|
|
3,453 |
|
Harsco Metals &
Minerals Segment subcontractor settlement charge |
|
4,220 |
|
|
— |
|
Harsco Metals &
Minerals Segment multi-employer pension plan charge |
|
1,122 |
|
|
— |
|
Harsco Infrastructure
Segment loss on disposal |
|
1,000 |
|
|
— |
|
Harsco Metals &
Minerals Segment Brazilian labor claim reserves |
|
— |
|
|
5,204 |
|
Strategic transaction
review costs |
|
— |
|
|
3,531 |
|
Harsco Infrastructure
transaction costs |
|
— |
|
|
504 |
|
Harsco Rail Segment
grinder asset impairment charge |
|
— |
|
|
590 |
|
Gains associated with
exited Harsco Infrastructure operations retained |
|
— |
|
|
(2,205 |
) |
Taxes on above unusual
items |
|
(12,021 |
) |
|
2,053 |
|
Net income from
continuing operations, as adjusted |
|
41,707 |
|
|
59,989 |
|
After-tax interest expense
(b) |
|
31,039 |
|
|
29,872 |
|
|
|
|
|
|
Net operating profit after
tax as adjusted |
|
$ |
72,746 |
|
|
$ |
89,861 |
|
|
|
|
|
|
Average equity |
|
$ |
300,556 |
|
|
$ |
430,525 |
|
Plus average debt |
|
904,177 |
|
|
882,974 |
|
Average capital |
|
$ |
1,204,733 |
|
|
$ |
1,313,499 |
|
|
|
|
|
|
Return on invested
capital excluding unusual items |
|
6.0 |
% |
|
6.8 |
% |
(a) Return on invested capital excluding unusual items is net
income (loss) from continuing operations excluding unusual items,
and after-tax interest expense, divided by average capital for the
year. The Company uses a trailing twelve month average for
computing average capital.(b) The Company’s effective tax rate
approximated 37% on an adjusted basis for both periods for interest
expense.
The Company’s management believes Return on invested capital
excluding unusual items, which is a non-U.S. GAAP financial
measure, is meaningful in evaluating the efficiency and
effectiveness of the capital invested in the Company’s
business. Exclusion of unusual items permits evaluation and
comparison of results for the Company’s core business operations,
and it is on this basis that management internally assesses the
Company’s performance. This measure should be considered in
addition to, rather than as a substitute for, net income or other
information provided in accordance with U.S. GAAP.
HARSCO
CORPORATIONRECONCILIATION OF RETURN ON INVESTED
CAPITAL EXCLUDING UNUSUAL ITEMS TO NET INCOME FROM CONTINUING
OPERATIONS AS REPORTED (a) (Unaudited) |
|
|
Year Ended December 31 |
(In thousands) |
|
2015 |
Income from continuing
operations |
|
$ |
7,312 |
|
Unusual items: |
|
|
Harsco Metals &
Minerals Segment contract termination charges, net |
|
13,484 |
|
Harsco Metals &
Minerals Segment separation costs |
|
9,922 |
|
Harsco Metals &
Minerals Segment salt cake processing and disposal charges |
|
7,000 |
|
Harsco Metals &
Minerals Segment Project Orion charges |
|
5,070 |
|
Harsco Metals &
Minerals Segment site exit and underperforming contract charges,
net (b) |
|
4,977 |
|
Harsco Metals &
Minerals Segment subcontractor settlement charge |
|
4,220 |
|
Harsco Metals &
Minerals Segment multi-employer pension plan charge |
|
1,122 |
|
Harsco Infrastructure
Segment loss on disposal |
|
1,000 |
|
Taxes on above unusual
items |
|
(6,198 |
) |
Net income from
continuing operations, as adjusted |
|
47,909 |
|
After-tax interest expense
(c) |
|
29,486 |
|
|
|
|
Net operating profit after
tax as adjusted |
|
$ |
77,395 |
|
|
|
|
Average equity |
|
$ |
308,182 |
|
Plus average debt |
|
910,955 |
|
Average capital |
|
$ |
1,219,137 |
|
|
|
|
Return on invested
capital excluding unusual items |
|
6.3 |
% |
(a) Return on invested capital excluding unusual items is net
income from continuing operations excluding unusual items, and
after-tax interest expense, divided by average capital for the
year. The Company uses a trailing twelve month average for
computing average capital.(b) Harsco Metals & Minerals Segment
charges primarily attributable to site exit costs and non-cash long
lived asset impairment charges associated with strategic actions
from Project Orion’s focus on underperforming contracts (Full year
2015 $5.0 million pre-tax which includes $1.4 million of pre-tax
gains).(c) The Company’s effective tax rate approximated 37% on an
adjusted basis for interest expense.
The Company’s management believes Return on invested capital
excluding unusual items, which is a non-U.S. GAAP financial
measure, is meaningful in evaluating the efficiency and
effectiveness of the capital invested in the Company’s
business. Exclusion of unusual items permits evaluation and
comparison of results for the Company’s core business operations,
and it is on this basis that management internally assesses the
Company’s performance. This measure should be considered in
addition to, rather than as a substitute for, net income or other
information provided in accordance with U.S. GAAP.
Investor Contact
David Martin
717.612.5628
damartin@harsco.com
Media Contact
Kenneth Julian
717.730.3683
kjulian@harsco.com
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