FORM 8-K |
Delaware | 001-03970 | 23-1483991 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
350 Poplar Church Road, Camp Hill, Pennsylvania | 17011 | |||
(Address of principal executive offices) | (Zip Code) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common stock, par value $1.25 per share | HSC | New York Stock Exchange |
Earnings press release dated May 9, 2019. | ||
Press release dated May 9, 2019, announcing the acquisition of Clean Earth. | ||
Press release dated May 9, 2019, announcing the sale of Air-X-Changers. |
Harsco Corporation /s/ PETER F. MINAN | ||
May 9, 2019 (Date) | Peter F. Minan Senior Vice President and Chief Financial Officer |
Investor Contact David Martin 717.612.5628 damartin@harsco.com | Media Contact Jay Cooney 717.730.3683 jcooney@harsco.com |
• | Revenue Increased 10 Percent in Q1 Compared with the Prior-Year Quarter |
• | Q1 GAAP Operating Income Totaled $38 Million |
• | Operating Income Excluding Unusual Items Increased 14 Percent Compared with the Prior-Year Quarter to $42 Million |
• | GAAP Diluted Earnings per Share in Q1 of $0.26, While Adjusted Diluted Earnings per Share Excluding Unusual Items Increased 32 Percent to $0.29 |
• | 2019 Adjusted Operating Income Guidance Increased to Between $207 Million to $222 Million; Compared with Prior Range of $200 Million to $220 Million |
• | Announces Strategic Transactions to Accelerate Portfolio Transformation to a Leading Provider of Environmental Solutions and Drive Growth with Acquisition of Clean Earth and Divestiture of Air-X-Changers |
• | Quarterly Conference Call Time Changed to 8:30 AM ET |
($ in millions, except per share amounts) | Q1 2019 | Q1 2018 | ||||||
Revenues | $ | 447 | $ | 408 | ||||
Operating income from continuing operations - GAAP | $ | 38 | $ | 37 | ||||
Operating margin from continuing operations - GAAP | 8.6 | % | 9.0 | % | ||||
Diluted EPS from continuing operations - GAAP | $ | 0.26 | $ | 0.22 | ||||
Return on invested capital (TTM) - excluding unusual items | 16.2 | % | 12.5 | % |
($ in millions) | Q1 2019 | Q1 2018 | %Change | ||||||||
Revenues | $ | 261 | $ | 265 | (1 | )% | |||||
Operating income - GAAP | $ | 24 | $ | 28 | (12 | )% | |||||
Operating margin - GAAP | 9.4 | % | 10.5 | % |
($ in millions) | Q1 2019 | Q1 2018 | %Change | ||||||||
Revenues | $ | 117 | $ | 84 | 40 | % | |||||
Operating income - GAAP | $ | 17 | $ | 12 | 37 | % | |||||
Operating margin - GAAP | 14.5 | % | 14.9 | % |
($ in millions) | Q1 2019 | Q1 2018 | %Change | ||||||||
Revenues | $ | 69 | $ | 60 | 15 | % | |||||
Operating income - GAAP | $ | 5 | $ | 2 | 176 | % | |||||
Operating margin - GAAP | 7.9 | % | 3.3 | % |
• | GAAP operating income for the full year is expected to range from $192 million to $207 million; compared with $192 million to $212 million previously and GAAP operating income of $191 million in 2018. |
• | Adjusted operating income for the full year is expected to range from $207 million to $222 million; compared with $200 million to $220 million previously and adjusted operating income of $187 million in 2018. |
• | GAAP diluted earnings per share from continuing operations for the full year are expected in the range of $1.15 to $1.33; compared with $1.22 to $1.40 previously and GAAP diluted earnings per share of $1.64 in 2018. |
• | Adjusted diluted earnings per share from continuing operations for the full year are expected in the range of $1.35 to $1.53; compared with $1.29 to $1.47 previously and adjusted diluted earnings per share of $1.31 in 2018. |
• | Free cash flow is expected in the range of $55 million to $70 million, versus $50 million to $70 million previously; as a result, free cash flow before growth capital is expected in the range of $135 million to $150 million compared with $104 million in 2018. |
• | Net interest expense is forecasted to range from $37 million to $39 million. |
• | Non-operating defined benefit pension expense of approximately $5 million. |
• | The effective tax rate, excluding any unusual items, is expected to range from 25 percent to 27 percent. |
• | Adjusted return on invested capital is expected to range from 16.0 percent to 17.0 percent; compared with 16.1 percent in 2018. |
• | GAAP and adjusted operating income of $41 million to $46 million and $53 million to $58 million, respectively; compared with GAAP operating income $54 million and adjusted operating income of $52 million in the prior-year quarter. |
• | GAAP and adjusted earnings per share from continuing operations of $0.23 to $0.29 and $0.35 to $0.40, respectively; compared with GAAP diluted earnings per share of $0.48 and adjusted diluted earnings per share of $0.36 in the prior-year quarter. |
HARSCO CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||
Three Months Ended | ||||||||
March 31 | ||||||||
(In thousands, except per share amounts) | 2019 | 2018 | ||||||
Revenues from continuing operations: | ||||||||
Service revenues | $ | 229,520 | $ | 244,209 | ||||
Product revenues | 217,768 | 163,829 | ||||||
Total revenues | 447,288 | 408,038 | ||||||
Costs and expenses from continuing operations: | ||||||||
Cost of services sold | 181,871 | 191,675 | ||||||
Cost of products sold | 157,004 | 119,678 | ||||||
Selling, general and administrative expenses | 67,029 | 57,083 | ||||||
Research and development expenses | 1,262 | 1,239 | ||||||
Other expenses, net | 1,876 | 1,822 | ||||||
Total costs and expenses | 409,042 | 371,497 | ||||||
Operating income from continuing operations | 38,246 | 36,541 | ||||||
Interest income | 534 | 498 | ||||||
Interest expense | (9,739 | ) | (9,583 | ) | ||||
Defined benefit pension income (expense) | (1,337 | ) | 839 | |||||
Income from continuing operations before income taxes and equity income | 27,704 | 28,295 | ||||||
Income tax expense | (4,855 | ) | (8,266 | ) | ||||
Equity income of unconsolidated entities, net | 20 | — | ||||||
Income from continuing operations | 22,869 | 20,029 | ||||||
Discontinued operations: | ||||||||
Loss on disposal of discontinued business | (440 | ) | (580 | ) | ||||
Income tax benefit related to discontinued business | 108 | 128 | ||||||
Loss from discontinued operations | (332 | ) | (452 | ) | ||||
Net income | 22,537 | 19,577 | ||||||
Less: Net income attributable to noncontrolling interests | (1,840 | ) | (1,769 | ) | ||||
Net income attributable to Harsco Corporation | $ | 20,697 | $ | 17,808 | ||||
Amounts attributable to Harsco Corporation common stockholders: | ||||||||
Income from continuing operations, net of tax | $ | 21,029 | $ | 18,260 | ||||
Loss from discontinued operations, net of tax | (332 | ) | (452 | ) | ||||
Net income attributable to Harsco Corporation common stockholders | $ | 20,697 | $ | 17,808 | ||||
Weighted-average shares of common stock outstanding | 79,907 | 80,650 | ||||||
Basic earnings (loss) per common share attributable to Harsco Corporation common stockholders: | ||||||||
Continuing operations | $ | 0.26 | $ | 0.23 | ||||
Discontinued operations | — | (0.01 | ) | |||||
Basic earnings per share attributable to Harsco Corporation common stockholders | $ | 0.26 | $ | 0.22 | ||||
Diluted weighted-average shares of common stock outstanding | 81,653 | 83,544 | ||||||
Diluted earnings (loss) per common share attributable to Harsco Corporation common stockholders: | ||||||||
Continuing operations | $ | 0.26 | $ | 0.22 | ||||
Discontinued operations | — | (0.01 | ) | |||||
Diluted earnings per share attributable to Harsco Corporation common stockholders | $ | 0.25 | (a) | $ | 0.21 |
HARSCO CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) | ||||||||
(In thousands) | March 31 2019 | December 31 2018 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 84,743 | $ | 64,260 | ||||
Restricted cash | 2,942 | 2,886 | ||||||
Trade accounts receivable, net | 296,795 | 291,213 | ||||||
Other receivables | 51,130 | 54,182 | ||||||
Inventories | 147,696 | 133,111 | ||||||
Current portion of contract assets | 17,478 | 24,254 | ||||||
Other current assets | 45,219 | 35,128 | ||||||
Total current assets | 646,003 | 605,034 | ||||||
Property, plant and equipment, net | 483,448 | 469,900 | ||||||
Right-of-use assets, net | 49,584 | — | ||||||
Goodwill | 412,449 | 411,552 | ||||||
Intangible assets, net | 78,753 | 79,825 | ||||||
Deferred income tax assets | 50,051 | 49,114 | ||||||
Other assets | 17,273 | 17,442 | ||||||
Total assets | $ | 1,737,561 | $ | 1,632,867 | ||||
LIABILITIES | ||||||||
Current liabilities: | ||||||||
Short-term borrowings | $ | 6,426 | $ | 10,078 | ||||
Current maturities of long-term debt | 6,538 | 6,489 | ||||||
Accounts payable | 159,037 | 149,410 | ||||||
Accrued compensation | 37,483 | 57,586 | ||||||
Income taxes payable | 1,598 | 2,634 | ||||||
Insurance liabilities | 40,830 | 40,774 | ||||||
Current portion of advances on contracts | 37,014 | 31,317 | ||||||
Current portion of operating lease liabilities | 12,936 | — | ||||||
Other current liabilities | 122,721 | 118,708 | ||||||
Total current liabilities | 424,583 | 416,996 | ||||||
Long-term debt | 642,375 | 585,662 | ||||||
Insurance liabilities | 20,384 | 19,575 | ||||||
Retirement plan liabilities | 201,572 | 213,578 | ||||||
Advances on contracts | 27,478 | 37,675 | ||||||
Operating lease liabilities | 37,037 | — | ||||||
Other liabilities | 48,860 | 46,005 | ||||||
Total liabilities | 1,402,289 | 1,319,491 | ||||||
HARSCO CORPORATION STOCKHOLDERS’ EQUITY | ||||||||
Common stock | 143,178 | 141,842 | ||||||
Additional paid-in capital | 192,912 | 190,597 | ||||||
Accumulated other comprehensive loss | (584,425 | ) | (567,107 | ) | ||||
Retained earnings | 1,340,878 | 1,298,752 | ||||||
Treasury stock | (805,520 | ) | (795,821 | ) | ||||
Total Harsco Corporation stockholders’ equity | 287,023 | 268,263 | ||||||
Noncontrolling interests | 48,249 | 45,113 | ||||||
Total equity | 335,272 | 313,376 | ||||||
Total liabilities and equity | $ | 1,737,561 | $ | 1,632,867 |
HARSCO CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | ||||||||
Three Months Ended | ||||||||
March 31 | ||||||||
(In thousands) | 2019 | 2018 | ||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 22,537 | $ | 19,577 | ||||
Adjustments to reconcile net income to net cash provided (used) by operating activities: | ||||||||
Depreciation | 30,204 | 31,418 | ||||||
Amortization | 3,045 | 1,934 | ||||||
Deferred income tax expense | 595 | 4,635 | ||||||
Equity in income of unconsolidated entities, net | (20 | ) | — | |||||
Other, net | (279 | ) | 1,944 | |||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (3,270 | ) | (4,848 | ) | ||||
Inventories | (14,448 | ) | (11,490 | ) | ||||
Contract assets | 6,770 | (5,698 | ) | |||||
Right-of-use assets | 3,895 | — | ||||||
Accounts payable | 3,099 | 7,340 | ||||||
Accrued compensation | (19,924 | ) | (26,131 | ) | ||||
Advances on contracts | (3,406 | ) | (7,348 | ) | ||||
Operating lease liabilities | (3,913 | ) | — | |||||
Retirement plan liabilities, net | (9,403 | ) | (12,252 | ) | ||||
Other assets and liabilities | (644 | ) | (7,324 | ) | ||||
Net cash provided (used) by operating activities | 14,838 | (8,243 | ) | |||||
Cash flows from investing activities: | ||||||||
Purchases of property, plant and equipment | (36,407 | ) | (26,897 | ) | ||||
Purchase of business, net of cash acquired | 680 | — | ||||||
Proceeds from sales of assets | 1,177 | 377 | ||||||
Net payments from settlement of foreign currency forward exchange contracts | (4,091 | ) | (3,822 | ) | ||||
Net cash used by investing activities | (38,641 | ) | (30,342 | ) | ||||
Cash flows from financing activities: | ||||||||
Short-term borrowings, net | (3,578 | ) | (3,659 | ) | ||||
Current maturities and long-term debt: | ||||||||
Additions | 56,998 | 46,000 | ||||||
Reductions | (1,700 | ) | (2,944 | ) | ||||
Sale of noncontrolling interests | 876 | 477 | ||||||
Stock-based compensation - Employee taxes paid | (8,237 | ) | (709 | ) | ||||
Net cash used by financing activities | 44,359 | 39,165 | ||||||
Effect of exchange rate changes on cash and cash equivalents, including restricted cash | (17 | ) | 738 | |||||
Net increase in cash and cash equivalents, including restricted cash | 20,539 | 1,318 | ||||||
Cash and cash equivalents, including restricted cash, at beginning of period | 67,146 | 66,209 | ||||||
Cash and cash equivalents, including restricted cash, at end of period | $ | 87,685 | $ | 67,527 |
HARSCO CORPORATION REVIEW OF OPERATIONS BY SEGMENT (Unaudited) | ||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||
March 31, 2019 | March 31, 2018 | |||||||||||||||
(In thousands) | Revenues | Operating Income (Loss) | Revenues | Operating Income (Loss) | ||||||||||||
Harsco Metals & Minerals | $ | 261,312 | $ | 24,497 | $ | 264,723 | $ | 27,735 | ||||||||
Harsco Industrial | 117,385 | 17,030 | 83,598 | 12,421 | ||||||||||||
Harsco Rail | 68,591 | 5,389 | 59,678 | 1,952 | ||||||||||||
Corporate | — | (8,670 | ) | 39 | (5,567 | ) | ||||||||||
Consolidated Totals | $ | 447,288 | $ | 38,246 | $ | 408,038 | $ | 36,541 | ||||||||
HARSCO CORPORATION RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS EXCLUDING UNUSUAL ITEMS TO DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS AS REPORTED (Unaudited) | ||||||||
Three Months Ended | ||||||||
March 31 | ||||||||
2019 | 2018 (a) | |||||||
Diluted earnings per share from continuing operations as reported | $ | 0.26 | $ | 0.22 | ||||
Harsco Rail Segment improvement initiative costs (b) | 0.03 | — | ||||||
Corporate strategic costs (c) | 0.03 | — | ||||||
Harsco Metals & Minerals Segment cumulative translation adjustment liquidation (d) | (0.03 | ) | — | |||||
Harsco Metals & Minerals Segment change in fair value to contingent consideration liability (e) | — | — | ||||||
Taxes on above unusual items (f) | (0.01 | ) | — | |||||
Adjusted diluted earnings per share from continuing operations excluding unusual items | $ | 0.29 | (g) | $ | 0.22 |
(a) | No unusual items were excluded in the three months ended March 31, 2018. |
(b) | Costs associated with a productivity improvement initiative in the Harsco Rail Segment (Q1 2019 $2.6 million pre-tax). |
(c) | Costs at Corporate associated with supporting and executing the Company's growth strategy (Q1 2019 $2.7 million pre-tax). |
(d) | Harsco Metals & Minerals Segment gain related to the liquidation of cumulated translation adjustment related to an exited country (Q1 2019 $2.3 million pre-tax). |
(e) | Fair value adjustment to contingent consideration liability related to the acquisition of Altek (Q1 2019 $0.4 million pretax). The Company adjusts Operating income and Diluted earnings per share from continuing operations to exclude the impact of the change in fair value to the acquisition-related contingent consideration liability for the Altek acquisition because it believes that the adjustment for this item more closely correlates the reported financial measures with the ordinary and ongoing course of the Company's operations. |
(f) | Unusual items are tax effected at the global effective tax rate, before discrete items, in effect at the time the unusual item is recorded except for unusual items from countries where no tax benefit can be realized, in which case a zero percent tax rate is used. |
(g) | Does not total due to rounding. |
HARSCO CORPORATION RECONCILIATION 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 | ||||
June 30 | ||||
2018 | ||||
Diluted earnings per share from continuing operations as reported | $ | 0.48 | ||
Harsco Metals & Minerals adjustment to slag disposal accrual (a) | (0.04 | ) | ||
Altek acquisition costs (b) | 0.01 | |||
Loss on early extinguishment of debt (c) | 0.01 | |||
Taxes on above unusual items (e) | — | |||
Deferred tax asset valuation allowance adjustment (e) | (0.10 | ) | ||
Adjusted diluted earnings per share from continuing operations excluding unusual items | $ | 0.36 |
(a) | Harsco Metals & Minerals adjustment to previously accrued amounts related to the disposal of certain slag material in Latin America ($3.2 million pre-tax). |
(b) | Costs associated with the acquisition of Altek Europe Holdings Limited and its affiliated entities recorded in the Harsco Metals & Minerals Segment ($0.8 million pretax) and at Corporate ($0.4 million pretax). |
(c) | Loss on early extinguishment of debt associated with the amending of the Company's existing Senior Secured Credit Facility in order to reduce the interest rate applicable to the Term Loan Facility ($1.0 million pre-tax). |
(d) | Unusual items are tax effected at the global effective tax rate, before discrete items, in effect at the time the unusual item is recorded except for unusual items from countries where no tax benefit can be realized, in which case a zero percent tax rate is used. |
(e) | Adjustment of certain existing deferred tax asset valuation allowances as a result of the Altek acquisition ($8.3 million). |
HARSCO CORPORATION RECONCILIATION 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 | |||||
2018 | |||||
Diluted earnings per share from continuing operations as reported | $ | 1.64 | |||
Harsco Metals & Minerals adjustment to slag disposal accrual (a) | (0.04 | ) | |||
Harsco Metals & Minerals Segment change in fair value to contingent consideration liability (b) | (0.04 | ) | |||
Altek acquisition costs (c) | 0.01 | ||||
Loss on early extinguishment of debt (d) | 0.01 | ||||
Harsco Rail Segment improvement initiative costs (e) | 0.01 | ||||
Taxes on above unusual items (f) | (0.01 | ) | |||
Impact of U.S. tax reform on income tax benefit (expense) (g) | (0.18 | ) | |||
Deferred tax asset valuation allowance adjustment (h) | (0.10 | ) | |||
Adjusted diluted earnings per share from continuing operations excluding unusual items | $ | 1.31 | (i) |
(a) | Harsco Metals & Minerals adjustment to previously accrued amounts related to the disposal of certain slag material in Latin America ($3.2 million pre-tax). |
(b) | Fair value adjustment to contingent consideration liability related to the acquisition of Altek ($2.9 million pre-tax). The Company adjusts Operating income and Diluted earnings per share from continuing operations to exclude the impact of the change in fair value to the acquisition-related contingent consideration liability for the Altek acquisition because it believes that the adjustment for this item more closely correlates the reported financial measures with the ordinary and ongoing course of the Company's operations. |
(c) | Costs associated with the acquisition of Altek Europe Holdings Limited and its affiliated entities ("Altek") recorded in the Harsco Metals & Minerals Segment ($0.8 million pretax) and at Corporate ($0.4 million pretax). |
(d) | Loss on early extinguishment of debt associated with the amending of the Company's existing Senior Secured Credit Facility in order to reduce the interest rate applicable to the Term Loan Facility ($1.0 million pre-tax). |
(e) | Costs associated with a productivity improvement initiative in the Harsco Rail Segment ($0.6 million pre-tax). |
(f) | Unusual items are tax effected at the global effective tax rate, before discrete items, in effect at the time the unusual item is recorded except for unusual items from countries where no tax benefit can be realized, in which case a zero percent tax rate is used. |
(g) | The Company recorded a benefit (expense) as a result of revaluing net deferred tax assets and liabilities as a result of U.S. tax reform ($15.4 million benefit). |
(h) | Adjustment of certain existing deferred tax asset valuation allowances as a result of the Altek acquisition ($8.3 million). |
(i) | Does not total due to rounding. |
HARSCO CORPORATION RECONCILIATION OF PROJECTED ADJUSTED DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS EXCLUDING UNUSUAL ITEMS TO DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS (Unaudited) | ||||||||
Projected Three Months Ending June 30 | ||||||||
2019 | ||||||||
Low | High | |||||||
Diluted earnings per share from continuing operations | $ | 0.23 | $ | 0.29 | ||||
Corporate strategic and transaction related costs | 0.12 | 0.12 | ||||||
Harsco Rail Segment improvement initiative costs | 0.02 | 0.02 | ||||||
Taxes on above unusual items | (0.03 | ) | (0.03 | ) | ||||
Adjusted diluted earnings per share from continuing operations, excluding unusual items | $ | 0.35 | (a) | $ | 0.40 | |||
Projected Twelve Months Ending December 31 | ||||||||
2019 | ||||||||
Low | High | |||||||
Diluted earnings per share from continuing operations | $ | 1.15 | $ | 1.33 | ||||
Corporate strategic and transaction related costs | 0.15 | 0.15 | ||||||
Loss on early extinguishment of debt | 0.09 | 0.09 | ||||||
Harsco Rail Segment improvement initiative costs | 0.06 | 0.06 | ||||||
Harsco Metals & Minerals Segment cumulative translation adjustment liquidation | (0.03 | ) | (0.03 | ) | ||||
Harsco Metals & Minerals Segment change in fair value to contingent consideration liability | — | — | ||||||
Taxes on above unusual items | (0.07 | ) | (0.07 | ) | ||||
Adjusted diluted earnings per share from continuing operations, excluding unusual items | $ | 1.35 | $ | 1.53 |
HARSCO CORPORATION RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS) EXCLUDING UNUSUAL ITEMS BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited) | ||||||||||||||||||||
(In thousands) | Harsco Metals & Minerals | Harsco Industrial | Harsco Rail | Corporate | Consolidated Totals | |||||||||||||||
Three Months Ended March 31, 2019: | ||||||||||||||||||||
Operating income (loss) as reported | $ | 24,497 | $ | 17,030 | $ | 5,389 | $ | (8,670 | ) | $ | 38,246 | |||||||||
Harsco Rail Segment improvement initiative costs | — | — | 2,648 | — | 2,648 | |||||||||||||||
Corporate strategic costs | — | — | — | 2,739 | 2,739 | |||||||||||||||
Harsco Metals & Minerals Segment cumulative translation adjustment liquidation | (2,271 | ) | — | — | — | (2,271 | ) | |||||||||||||
Harsco Metals & Minerals Segment change in fair value to contingent consideration liability | 369 | — | — | — | 369 | |||||||||||||||
Adjusted operating income (loss), excluding unusual items | $ | 22,595 | $ | 17,030 | $ | 8,037 | $ | (5,931 | ) | $ | 41,731 | |||||||||
Revenues as reported | $ | 261,312 | $ | 117,385 | $ | 68,591 | $ | — | $ | 447,288 | ||||||||||
Adjusted operating margin (%) excluding unusual items | 8.6 | % | 14.5 | % | 11.7 | % | 9.3 | % | ||||||||||||
Three Months Ended March 31, 2018: | ||||||||||||||||||||
Operating income (loss) as reported (a) | $ | 27,735 | $ | 12,421 | $ | 1,952 | $ | (5,567 | ) | $ | 36,541 | |||||||||
Revenues as reported | $ | 264,723 | $ | 83,598 | $ | 59,678 | $ | 39 | $ | 408,038 | ||||||||||
Operating margin (%) as reported | 10.5 | % | 14.9 | % | 3.3 | % | 9.0 | % |
(a) | No unusual items were excluded in the three months ended March 31, 2018. |
HARSCO CORPORATION RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS) EXCLUDING UNUSUAL ITEMS BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited) | ||||||||||||||||||||
(In thousands) | Harsco Metals & Minerals | Harsco Industrial | Harsco Rail | Corporate | Consolidated Totals | |||||||||||||||
Three Months Ended June 30, 2018: | ||||||||||||||||||||
Operating income (loss) as reported | $ | 35,661 | $ | 14,170 | $ | 8,618 | $ | (4,824 | ) | $ | 53,625 | |||||||||
Harsco Metals & Minerals adjustment to slag disposal accrual | (3,223 | ) | — | — | — | (3,223 | ) | |||||||||||||
Altek acquisition costs | 753 | — | — | 431 | 1,184 | |||||||||||||||
Adjusted operating income (loss), excluding unusual items | $ | 33,191 | $ | 14,170 | $ | 8,618 | $ | (4,393 | ) | $ | 51,586 | |||||||||
Revenues as reported | $ | 272,320 | $ | 92,065 | $ | 67,552 | $ | 35 | $ | 431,972 | ||||||||||
Adjusted operating margin (%) excluding unusual items | 12.2 | % | 15.4 | % | 12.8 | % | 11.9 | % |
HARSCO CORPORATION RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS), EXCLUDING UNUSUAL ITEMS BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited) | ||||||||||||||||||||
(In thousands) | Harsco Metals & Minerals | Harsco Industrial | Harsco Rail | Corporate | Consolidated Totals | |||||||||||||||
Twelve Months Ended December 31, 2018: | ||||||||||||||||||||
Operating income (loss) as reported | $ | 121,195 | $ | 54,665 | $ | 37,341 | $ | (22,274 | ) | $ | 190,927 | |||||||||
Harsco Metals & Minerals adjustment to slag disposal accrual | (3,223 | ) | — | — | — | (3,223 | ) | |||||||||||||
Harsco Metals & Minerals Segment change in fair value to contingent consideration liability | (2,939 | ) | — | — | — | (2,939 | ) | |||||||||||||
Altek acquisition costs | 753 | — | — | 431 | 1,184 | |||||||||||||||
Harsco Rail Segment improvement initiative costs | — | — | 640 | — | 640 | |||||||||||||||
Adjusted operating income (loss), excluding unusual items | $ | 115,786 | $ | 54,665 | $ | 37,981 | $ | (21,843 | ) | $ | 186,589 | |||||||||
Revenues as reported | $ | 1,068,304 | $ | 374,708 | $ | 279,294 | $ | 74 | $ | 1,722,380 | ||||||||||
Adjusted operating margin (%) excluding unusual items | 10.8 | % | 14.6 | % | 13.6 | % | 10.8 | % |
HARSCO CORPORATION RECONCILIATION OF PROJECTED ADJUSTED OPERATING INCOME, EXCLUDING UNUSUAL ITEMS TO OPERATING INCOME (Unaudited) | |||||||||
Projected Three Months Ending June 30 | |||||||||
2019 | |||||||||
(In millions) | Low | High | |||||||
Operating income | $ | 41 | $ | 46 | |||||
Corporate strategic and transaction related costs | 10 | 10 | |||||||
Harsco Rail Segment improvement initiative costs | 2 | 2 | |||||||
Adjusted operating income, excluding unusual items | $ | 53 | $ | 58 | |||||
Projected Twelve Months Ending December 31 | |||||||||
2019 | |||||||||
(In millions) | Low | High | |||||||
Operating income | $ | 192 | $ | 207 | |||||
Corporate strategic and transaction related costs | 13 | 13 | |||||||
Harsco Rail Segment improvement initiative costs | 5 | 5 | |||||||
Harsco Metals & Minerals Segment cumulative translation adjustment liquidation | (2 | ) | (2 | ) | |||||
Harsco Metals & Minerals Segment change in fair value to contingent consideration liability | — | — | |||||||
Adjusted operating income, excluding unusual items | $ | 207 | (a) | $ | 222 | (a) |
HARSCO CORPORATION RECONCILIATION OF FREE CASH FLOW AND FREE CASH FLOW BEFORE GROWTH CAPITAL EXPENDITURES TO NET CASH USED BY OPERATING ACTIVITIES (Unaudited) | ||||||||
Three Months Ended | ||||||||
March 31 | ||||||||
(In thousands) | 2019 | 2018 | ||||||
Net cash used by operating activities | $ | 14,838 | $ | (8,243 | ) | |||
Less capital expenditures | (36,407 | ) | (26,897 | ) | ||||
Plus capital expenditures for strategic ventures (a) | 843 | 240 | ||||||
Plus total proceeds from sales of assets (b) | 1,177 | 377 | ||||||
Free cash flow | (19,549 | ) | (34,523 | ) | ||||
Add growth capital expenditures | 12,517 | 7,684 | ||||||
Free cash flow before growth capital expenditures | $ | (7,032 | ) | $ | (26,839 | ) |
(a) | Capital expenditures for strategic ventures represent the partner’s share of capital expenditures in certain ventures consolidated in the Company’s financial statements. |
(b) | Asset sales are a normal part of the business model, primarily for the Harsco Metals & Minerals Segment. |
HARSCO CORPORATION RECONCILIATION OF FREE CASH FLOW AND FREE CASH FLOW BEFORE GROWTH CAPITAL EXPENDITURES TO NET CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited) | ||||
Twelve Months Ended | ||||
December 31 | ||||
(In thousands) | 2018 | |||
Net cash provided by operating activities | $ | 192,022 | ||
Less capital expenditures | (132,168 | ) | ||
Plus capital expenditures for strategic ventures (a) | 1,595 | |||
Plus total proceeds from sales of assets (b) | 11,887 | |||
Free cash flow | 73,336 | |||
Add growth capital expenditures | 30,655 | |||
Free cash flow before growth capital expenditures | $ | 103,991 |
(a) | Capital expenditures for strategic ventures represent the partner’s share of capital expenditures in certain ventures consolidated in the Company’s financial statements. |
(b) | Asset sales are a normal part of the business model, primarily for the Harsco Metals & Minerals Segment. |
HARSCO CORPORATION RECONCILIATION OF FREE CASH FLOW AND FREE CASH FLOW BEFORE GROWTH CAPITAL EXPENDITURES TO NET CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited) | ||||||||
Projected Twelve Months Ending December 31 | ||||||||
2019 | ||||||||
(In millions) | Low | High | ||||||
Net cash provided by operating activities | $ | 225 | $ | 260 | ||||
Less capital expenditures | (176 | ) | (194 | ) | ||||
Plus total proceeds from asset sales and capital expenditures for strategic ventures | 6 | 4 | ||||||
Free cash flow | 55 | 70 | ||||||
Add growth capital expenditures | 80 | 80 | ||||||
Free cash flow before growth capital expenditures | $ | 135 | $ | 150 |
HARSCO CORPORATION RECONCILIATION 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 March 31 | ||||||||
(In thousands) | 2019 | 2018 | ||||||
Income from continuing operations | $ | 147,579 | $ | 21,163 | ||||
Unusual items: | ||||||||
Harsco Rail Segment improvement initiative costs | 3,288 | — | ||||||
Harsco Metals & Minerals Segment adjustment to slag disposal accrual | (3,223 | ) | — | |||||
Corporate strategic costs | 2,739 | — | ||||||
Harsco Metals & Minerals Segment change in fair value to contingent consideration liability | (2,570 | ) | — | |||||
Harsco Metals & Minerals Segment cumulative translation adjustment liquidation | (2,271 | ) | — | |||||
Altek acquisition costs | 1,184 | — | ||||||
Harsco Metals & Minerals Segment bad debt expense | — | 4,589 | ||||||
Loss on early extinguishment of debt | 1,034 | 2,265 | ||||||
Taxes on above unusual items (b) | (1,525 | ) | (2,052 | ) | ||||
Impact of U.S. tax reform on income tax benefit | (15,409 | ) | 48,680 | |||||
Deferred tax asset valuation allowance adjustment | (8,292 | ) | — | |||||
Net income from continuing operations, as adjusted | 122,534 | 74,645 | ||||||
After-tax interest expense (c) | 29,494 | 29,995 | ||||||
Net operating profit after tax as adjusted | $ | 152,028 | $ | 104,640 | ||||
Average equity | $ | 296,468 | $ | 209,938 | ||||
Plus average debt | 643,816 | 625,337 | ||||||
Average capital | $ | 940,284 | $ | 835,275 | ||||
Return on invested capital excluding unusual items | 16.2 | % | 12.5 | % |
(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) | Unusual items are tax effected at the global effective tax rate, before discrete items, in effect at the time the unusual item is recorded except for unusual items from countries where no tax benefit can be realized, in which case a zero percent tax rate is used. |
(c) | The Company’s effective tax rate approximated 23% for the trailing twelve months for the period ended March 31, 2019 and for the trailing twelve months for the period ended March 31, 2018, 37% was used for April 1, 2017 through December 31, 2017 and 23% was used for January 1, 2018 through March 31, 2018, on an adjusted basis, for interest expense. |
HARSCO CORPORATION RECONCILIATION OF RETURN ON INVESTED CAPITAL EXCLUDING UNUSUAL ITEMS TO NET INCOME FROM CONTINUING OPERATIONS AS REPORTED (a) (Unaudited) | ||||
Year Ended December 31 | ||||
(In thousands) | 2018 | |||
Income from continuing operations | $ | 144,739 | ||
Unusual items: | ||||
Harsco Metals & Minerals Segment adjustment to slag disposal accrual | (3,223 | ) | ||
Harsco Metals & Minerals Segment change in fair value to contingent consideration liability | (2,939 | ) | ||
Altek acquisition costs | 1,184 | |||
Loss on early extinguishment of debt | 1,034 | |||
Harsco Rail Segment improvement initiative costs | 640 | |||
Taxes on above unusual items (b) | (361 | ) | ||
Impact of U.S. tax reform on income tax benefit | (15,409 | ) | ||
Deferred tax asset valuation allowance adjustment | (8,292 | ) | ||
Net income from continuing operations, as adjusted | 117,373 | |||
After-tax interest expense (c) | 29,374 | |||
Net operating profit after tax as adjusted | $ | 146,747 | ||
Average equity | $ | 274,164 | ||
Plus average debt | 635,491 | |||
Average capital | $ | 909,655 | ||
Return on invested capital excluding unusual items | 16.1 | % |
(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) | Unusual items are tax effected at the global effective tax rate, before discrete items, in effect at the time the unusual item is recorded except for unusual items from countries where no tax benefit can be realized, in which case a zero percent tax rate is used. |
(c) | The Company’s effective tax rate approximated 23% for the year ended December 31, 2018 on an adjusted basis, for interest expense. |
Investor Contact David Martin 717.612.5628 damartin@harsco.com | Media Contact Jay Cooney 717.730.3683 jcooney@harsco.com |
• | Upon Completion of Strategic Transactions, Environmental Solutions and Services to Represent Nearly 80% of Harsco’s Total Revenue |
• | Clean Earth Business Adds Recurring Revenue Streams, Strong Growth Potential and Access to Markets with High Regulatory Barriers to Entry |
• | Harsco to Host Conference Call at 8:30 a.m. ET to Discuss Transaction and Earnings |
• | Advances Harsco’s Environmental Strategy: As a result of the acquisition, Harsco will gain immediate scale and a breadth of capabilities in the contaminated materials, hazardous waste, and dredge material markets that are complementary to its Metals & Minerals (“M&M”) segment’s environmental solutions and services offerings. Clean Earth and Harsco’s M&M segment share a fundamental business philosophy rooted in the beneficial reuse of waste volumes generated by industrial customers. Clean Earth’s markets have significant regulatory barriers to entry with high demand for service capabilities driven by ongoing waste generation and regulatory requirements. Clean Earth’s extensive operating permits and permitted facility footprint will accelerate Harsco’s expansion into environmental services. Upon completion of the strategic transactions, including the divestiture of Air-X-Changers, environmental solutions and services will comprise nearly 80% of Harsco’s total revenue. |
• | Establishes a New Growth Platform: The addition of Clean Earth significantly increases the overall addressable market opportunity for the combined company. Clean Earth operates in an expanding market driven by tightening environmental regulation at federal, state and local levels; increased public infrastructure spending; growing remediation activity, both government and private; and the increasing pricing of competing disposal alternatives. Industry consolidation also presents a unique growth opportunity with Clean Earth’s current markets. Together with Clean Earth, Harsco will have enhanced resources and expertise to capture an increasing share of the specialty waste processing and treatment market. Furthermore, Clean Earth maintains relationships with a widely diversified base of industrial customers across a variety of sector and industry segments. The combined company’s expanded customer base will create potential long-term cross-selling opportunities with its M&M segment. |
• | Compelling Long-term Financial Benefits: The acquisition of Clean Earth will be margin enhancing and free cash flow accretive immediately. The transaction is expected to be accretive to earnings in 2020, the first full-year of ownership. Clean Earth has a capital light and high-margin business model with strong underlying growth driven by fundamental factors. Additionally, given the complementary nature of the companies, the combined company is targeting synergies of $10 million by 2020. Considering the impact of both strategic transactions, Harsco also expects to maintain a strong balance sheet and financial flexibility to support innovation and growth initiatives. The Company’s leverage ratio is expected to be below 2-times at year-end following the completion of these two transactions. Lastly, Harsco expects the impact of both transactions to be accretive to the Company’s long-term financial targets. |
• | Seamless Integration: Harsco and Clean Earth are a strong cultural fit, with shared values and a focus on creating exceptional value for employees, customers and shareholders. Additionally, the Harsco management team has a proven track record of successfully integrating acquisitions and anticipate a seamless integration process for Clean Earth. |
Investor Contact David Martin 717.612.5628 damartin@harsco.com | Media Contact Jay Cooney 717.730.3683 jcooney@harsco.com |
• | Positions Harsco with Capital to Drive Growth in Value-Added Environmental Solutions Sector |
• | Harsco to Host Conference Call at 8:30 a.m. ET to Discuss Transaction and Earnings |
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