Harsco Corporation (NYSE:HSC) today provided an update on its
expected financial results for the second quarter and outlook for
the full-year 2016.
For the second quarter, the Company currently expects U.S. GAAP
operating income of $1 million. Included in this reported
figure is an estimated loss provision of approximately $40 million
related to the Company’s railway maintenance equipment contracts
with SBB, the federal railway system in Switzerland. This
provision will be finalized before the filing of the Company’s
quarterly 10-Q. Excluding this item, Harsco expects adjusted
operating income of $41 million for the second quarter. The
Company’s previous guidance for the second quarter of 2016 included
adjusted operating income of $22 million to $27 million.
As a result of increased vendor costs, ongoing discussions with
the customer, and increased estimates for commissioning,
certification and testing costs, as well as expected settlements
with the customer, the Company concluded it will have a loss on its
contracts with SBB. The majority of the equipment deliveries
and related revenue recognition under these contracts are expected
in 2017 through 2020. However, pursuant to generally accepted
accounting principles, the loss provision is recorded when
determined probable.
The Company noted that the positive expected underlying results
can be largely attributed to its Metals & Minerals
segment. The better results in Metals & Minerals reflect
the internal progress made over the past two years through Project
Orion to strengthen this segment’s operating disciplines and
performance, as well as some external market momentum. As a
result, this segment is expected to show a meaningful improvement
in second quarter operating income and margin compared with the
prior-year quarter. Additionally, Corporate is expected to
benefit from ongoing reduction of various overhead costs.
Also, for the full year 2016, Harsco expects adjusted operating
income, excluding the loss provision for the contracts in Q2, will
exceed the previously provided guidance range of $80 million to
$100 million. The Company’s current expectation is that its
overall outlook for operating income has improved by approximately
$20 million from its last update provided in May. The 2016
guidance range above for operating income translates to a range of
$32 million and $52 million on a U.S. GAAP basis including the Q2
charge as well as the charges recorded in the first quarter of the
year.
“We are clearly disappointed with the developments on our Rail
contracts with SBB,” said President and CEO Nick Grasberger.
“Despite this challenge, we have made considerable progress in
recent months developing our highly-advanced equipment for this
important customer. We look forward to executing against
these contracts over the next year and remain confident that we are
building a profitable business within the European rail
market.”
“As for the remainder of 2016, we are very encouraged by our
underlying operating results in M&M against key performance
indicators. For example, we anticipate that the EBITDA minus
capex margin in this segment will roughly double in 2016 compared
to the periods prior to the launch of Project Orion, despite lower
revenues and a meaningful decrease in certain commodity
prices. Also, the fundamental improvement in the steel and
energy markets in recent months has reduced business risk and we
are optimistic on Harsco’s ability to demonstrate significant
operating leverage when key markets recover further.”
Harsco will provide further information on its performance in
the second quarter of 2016 and the outlook for the remainder of
year when it reports quarterly financial results on August
4th. Details on its scheduled earnings release and conference
call are as follows:
- Earnings Release: Thursday, August 4, 2016 before NYSE
market opening via public newswire distribution and the Harsco
Corporation website at www.harsco.com.
- Teleconference: Thursday, August 4, 2016 at 9:00 am
ET. Internet broadcast in listen-only mode at
www.harsco.com. The call can also be accessed by telephone by
dialing (800) 611-4920, or (973) 200-3957 for international
callers. Listeners are advised to dial in approximately five
minutes prior to the call. Enter Conference ID number
44559392.
- Replay: available after completion of the live call at
www.harsco.com, and also by telephone through August 18, 2016 by
dialing (855) 859-2056, (404) 537-3406 or (800)
585-8367.
Forward-Looking StatementsThe 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 CorporationHarsco Corporation is a
diversified industrial company providing a range of onsite services
and engineered products to the global steel, energy and railway
sectors. 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
CORPORATIONRECONCILIATION OF EXPECTED ADJUSTED
OPERATING INCOME EXCLUDING UNUSUAL ITEMS TO EXPECTED OPERATING
INCOME AS REPORTED (Unaudited) |
|
|
(In millions) |
|
Consolidated Totals |
|
|
|
Three Months Ended
June 30, 2016: |
|
|
Expected operating
income as reported |
|
$ |
1 |
|
Harsco Rail Segment
estimated loss provision on SBB contracts |
|
40 |
|
Expected adjusted
operating income excluding unusual items |
|
$ |
41 |
|
|
|
|
|
|
The Company’s management believes expected adjusted operating
income 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.
Investor Contact
David Martin
717.612.5628
damartin@harsco.com
Media Contact
Kenneth Julian
717.730.3683
kjulian@harsco.com
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