* Second quarter sales up 16 percent to a record $1.1 billion;
diluted EPS from continuing operations up 18 percent to a record
$1.07
* Record performance led by 18 percent increase in operating
income from Company's Access Services Segment
* Second quarter cash flow from operations a record $178 million,
up 15 percent; cash from operations through the first half of
2008 exceeds $200 million for the first time
* Company expects continued mid-teens EPS growth in 2008 second
half, adjusts full-year 2008 guidance for diluted EPS from
continuing operations from $3.45 to $3.55 to new range of $3.50
to $3.55
HARRISBURG, Pa., July 29, 2008 (PRIME NEWSWIRE) -- Worldwide industrial services company Harsco Corporation (NYSE:HSC) today reported record second quarter 2008 results from continuing operations.
Second quarter 2008 diluted EPS from continuing operations was a record $1.07, up 18 percent from $0.91 in the second quarter of 2007. Income from continuing operations was a record $90.4 million, compared with $77.0 million last year, an increase of 17 percent. Overall operating margins were 13.3 percent, compared with 14.4 percent in the second quarter of last year. Second quarter sales totaled a record $1.1 billion, up 16 percent from sales of $946 million in the same period last year. The weaker U.S. dollar in relation to foreign currencies added approximately $58 million to second quarter sales and approximately $7.8 million in pre-tax income but was also a factor in the Company's increased fuel costs. The Company was particularly impacted during the quarter in its Mill Services Segment, which incurred net higher fuel costs of approximately $9 million over this time last year.
For the first six months of 2008, sales, income from continuing operations, and diluted earnings per share were all records. Income from continuing operations was $147.3 million, or $1.74 per diluted share, compared with income from continuing operations of $122.5 million, or $1.45 per diluted share in the first six months of 2007, an increase of 20 percent in both income and diluted EPS. Sales for the first six months of 2008 were $2.1 billion, an increase of 17 percent from $1.8 billion in the same period a year ago. Foreign currency translation increased first half sales by approximately $120 million, and contributed $14.2 million to pre-tax operating income. Here again, though, the weaker dollar contributed to an approximately $12 million year-over-year increase in net fuel costs for the Company's Mill Services Segment.
Commenting on the Company's results, Harsco Chairman and Chief Executive Officer Salvatore D. Fazzolari said, "Despite the challenging economic backdrop, the Harsco team was able to deliver another record quarter led by high-teens earnings growth. We expect to sustain our momentum with solid earnings growth in the second half of the year.
"The expected moderation within some of our Access Services markets was more than offset in the quarter by better year-over-year results in other geographies, including the Middle East, Asia Pacific, Canada and parts of Europe. We believe that our expanding geographic balance will continue to serve us well in forthcoming quarters, and we are particularly pleased with our entry into India.
"We were also encouraged with our progress on a number of fronts in our Mill Services Segment during the quarter. Despite the continued headwind of significantly higher year-over-year fuel costs, we were able to improve margins on a sequential basis, as was our stated goal at the end of the first quarter. We expect to continue to make steady progress for the remainder of 2008. We are already taking constructive steps to recapture more immediately some of our higher fuel costs and address several underperforming contracts. Our decision to exit a number of historically low margin contracts within the next few months should in itself contribute to margin improvement. Likewise, we are well along in the negotiation of a number of new contracts that we expect to sign in the second half of 2008, which will further enhance future margins. While much is yet to be done to return our Mill Services Segment to its former margin levels, we firmly believe that the journey is solidly underway, and we are confident of its successful conclusion.
"The results from our Minerals & Rail Services and Products Group were excellent, particularly given the comparison to the very strong second quarter of 2007. All three operating arms of the Group -- rail, minerals, and the products companies -- contributed to this Group's fine performance.
"Like most companies, Harsco will continue to face a challenging macroeconomic environment. However, we firmly believe that the strategies we have pursued to expand our global footprint and further enhance our strong operating balance have prepared us well for such an environment and will continue to provide disciplined and sustainable growth."
Outlook
Harsco Senior Vice President and Chief Financial Officer Stephen J. Schnoor said, "Given the geographic balance and business diversity that we have achieved and the expected earnings contribution from all three of our business groups, we are adjusting our full year 2008 guidance for EPS from continuing operations to a new range of $3.50 to $3.55, from the previous range of $3.45 to $3.55 per diluted share. Using the midpoint of this adjusted guidance, this reflects an increase of 17 percent from 2007s diluted EPS from continuing operations of $3.01.
"For the third quarter of 2008, we are forecasting earnings from continuing operations in the range of $0.92 - $0.95 per share, compared with $0.83 per share in the third quarter of 2007. Again, using the mid-point of the guidance, this reflects an increase of 13 percent."
Second Quarter Business Review
Access Services
Second quarter 2008 sales increased 19 percent to $429 million from $361 million last year. Organic growth contributed $35 million, or 10 percent; acquisitions contributed $4 million, or 1 percent; and positive foreign currency translation contributed $29 million, or 8 percent. Operating income increased by 18 percent to $58.1 million in the second quarter, up from $49.3 million in the comparable period last year. Positive foreign currency translation increased operating income by approximately $5 million in this year's second quarter. Operating margins were essentially comparable with last year at 13.5 percent vs. 13.7 percent in the second quarter of 2007.
The strong second quarter performance was led by improved results in the Middle East, Asia Pacific, Canada and parts of Europe, which more than offset some slowness during the quarter, particularly in the U.K., Denmark and Ireland.
The overall outlook for the second half remains positive, and the Company expects to continue to be well-served by its expanding geographic balance in this segment. Such expansion plans include India, Russia, South Africa and South America. In addition, the Company is taking advantage of the mobility of its rental equipment and strategically relocating its worldwide stock to regions, which will continue to provide the highest returns and sustain operating margins.
Mill Services
Sales in the second quarter of 2008 increased 17 percent to $445 million from $381 million in last year's comparable quarter. Organic sales were up $27 million, or just over 7 percent, reflecting increased global steel production and new contract signings; acquisitions contributed almost $11 million, or approximately 3 percent; and positive foreign currency translation contributed $27 million, or 7 percent. Second quarter operating income increased by 1 percent to $37.1 million from $36.7 million in the comparable period last year. Foreign currency translation, particularly from the strong euro in comparison to the dollar, contributed $3.6 million to operating income in the quarter. Impacted by higher fuel costs, operating margins fell to 8.3 percent in the second quarter from last year's 9.6 percent but were up sequentially from 7.0 percent in the first quarter of 2008.
A major goal for this segment is continued sequential improvement in margins. In addition to the progress made in the second quarter, the Company expects additional progress as it successfully renegotiates or exits a number of underperforming contracts in the second half of 2008. Further, new contract bidding activity remains strong, and the Company expects several meaningful signings in forthcoming quarters. Lastly, steady progress is expected in the reduction of the negative impact from fuel prices. This will come from the automatic recapture of some of the higher fuel prices over the next twelve months through inflation adjustment clauses in existing contracts and from direct negotiations with customers for further fuel cost relief. In addition, any sustained reduction in the recent record-high oil prices in the marketplace will also have a favorable effect on future results and margins.
Minerals & Rail Services and Products
The Minerals & Rail Services and Products Group posted improved revenues and earnings in the quarter, exceeding its exceptional second quarter comparables in 2007. Results were led by the Group's Track Technologies, Air-X-Changers, Reed Minerals and Patterson-Kelley business units, all of which saw increased levels of activity in the quarter compared with last year.
Sales of $225 million in the quarter were 10 percent higher than the $204 million in the same period last year. Organic sales growth contributed $18 million, or approximately 9 percent; with acquisitions and positive currency translation contributing a combined $2 million, or approximately 1 percent. Operating income increased from $50.5 million to $52.0 million, or 3 percent. Foreign currency translation decreased operating income by $0.1 million in the second quarter of 2008. Operating margins of 23.1 percent in this year's second quarter were, as expected, slightly below the exceptionally strong 24.7 percent margins reported in the second quarter of last year.
The Group expects its solid results to continue in the second half but more in line with those of the same period last year. This is due principally to higher anticipated cost of sales resulting from increased commodity prices. Also, the timing of large unit deliveries within the Company's Track Technologies unit may cause some imbalance in quarterly performance in the final half of the year.
Liquidity, Capital Resources and Other Matters
Net cash provided by operating activities for the second quarter of 2008 was a record $178 million, a 15 percent increase over the $155 million for the comparable period last year. Net cash used by investing activities was $142 million, an 11 percent increase over the $128 million last year. The increased use of cash continues to be primarily due to higher expenditures for organic growth and capital initiatives to improve operational efficiencies. Net cash provided by operating activities for the first six months of 2008 was a record $210 million, compared with $197 million in 2007, an increase of 7 percent.
During the first six months of 2008, the Company's total debt increased by $107 million to $1.2 billion at June 30, 2008. The increase in debt was principally due to higher growth-related capital expenditures and the strengthening of the euro and pound sterling. However, the debt-to-capital ratio decreased by 140 basis points to 40.3 percent at the end of the second quarter of 2008, down from 41.7 percent at the end of the first quarter, and was 50 basis points lower than the 40.8 percent at the end of 2007.
Economic Value Added (EVA(r)) in the first half of 2008 improved over the same period last year.
Forward-Looking Statements
This news release contains forward-looking statements based on management's current expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the company's strategy for growth, product development, market position, expected expenditures and financial results are forward-looking statements. Some of the forward-looking statements may be identified by words like "may," "could," "believes," "expects," "anticipates," "plans," "intends," "projects," "indicates," and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents filed with the Securities and Exchange Commission by Harsco, particularly its latest annual report on Form 10-K and quarterly report on Form 10-Q, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to, changes in the worldwide business environment in which the Company operates; changes in the performance of stock and bond markets; changes in governmental laws and regulations; market and competitive changes, including pricing pressures, market demand and acceptance for new products, services, and technologies; unforeseen business disruptions in one or more of the many countries in which the Company operates; the seasonal nature of the Company's business; the successful integration of the Company's strategic acquisitions; and the amount and timing of repurchases of the Company's common stock, if any. The Company undertakes no duty to update forward-looking statements.
Conference Call
As previously announced, the Company will hold a conference call today at 2:00 p.m. Eastern Time (ET) 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 call can also be accessed by telephone by dialing (800) 611-4920, or (706) 634-5923 from outside the United States and Canada. Enter Conference ID number 52725646. Listeners are advised to dial in at least five minutes prior to the call. Replays will be available via the Harsco website, or by telephone beginning approximately 5:00 pm ET today. The telephone replay dial-in number is (800) 642-1687, or (706) 645-9291 from outside the United States and Canada. Enter Conference ID number 52725646.
About Harsco
Harsco Corporation is one of the world's leading diversified industrial services companies, serving key industries that play a fundamental role in worldwide economic growth and development. These include infrastructure, non-residential construction and industrial maintenance; metals and minerals; railways; and energy. Harsco's common stock is a component of the S&P MidCap 400 Index and the Russell 1000 Index. Additional information can be found at www.harsco.com.
The Harsco Corporation logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=361
HARSCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, Three Months Ended Six Months Ended
except per share June 30 June 30
amounts) 2008 2007 2008 2007
----------------------------------------------------------------------
Revenues from
continuing
operations:
Service revenues $ 944,490 $810,429 $1,797,118 $1,533,244
Product revenues 155,098 135,720 290,260 252,931
----------------------------------------------------------------------
Total revenues 1,099,588 946,149 2,087,378 1,786,175
----------------------------------------------------------------------
Costs and expenses
from continuing
operations:
Cost of services
sold 686,531 585,677 1,324,589 1,124,215
Cost of products
sold 105,215 97,580 198,162 184,659
Selling, general
and
administrative
expenses 160,332 127,313 316,964 255,068
Research and
development
expenses 1,508 734 2,561 1,727
Other (income)
expenses 163 (1,003) (117) (1,916)
----------------------------------------------------------------------
Total costs and
expenses 953,749 810,301 1,842,159 1,563,753
----------------------------------------------------------------------
Operating income
from continuing
operations 145,839 135,848 245,219 222,422
Equity in income of
unconsolidated
entities, net 246 285 650 413
Interest income 886 1,173 1,800 2,212
Interest expense (19,075) (20,540) (36,194) (39,116)
----------------------------------------------------------------------
Income from
continuing
operations
before
income taxes
and minority
interest 127,896 116,766 211,475 185,931
Income tax expense (35,000) (37,388) (59,188) (58,989)
----------------------------------------------------------------------
Income from
continuing
operations
before minority
interest 92,896 79,378 152,287 126,942
Minority interest
in net income (2,525) (2,335) (5,025) (4,459)
----------------------------------------------------------------------
Income from
continuing
operations 90,371 77,043 147,262 122,483
----------------------------------------------------------------------
Discontinued
operations:
Income (loss)
from
discontinued
business (841) 8,379 (586) 11,500
Income tax
expense 353 (2,353) 246 (3,260)
----------------------------------------------------------------------
Income (loss) from
discontinued
operations (488) 6,026 (340) 8,240
----------------------------------------------------------------------
Net Income $ 89,883 $ 83,069 $ 146,922 $ 130,723
======================================================================
Average shares of
common stock
outstanding 84,271 84,145 84,323 84,097
Basic earnings per
common share:
Continuing
operations $ 1.07 $ 0.92 $ 1.75 $ 1.46
Discontinued
operations (0.01) 0.07 (0.00) 0.10
----------------------------------------------------------------------
Basic earnings per
common share $ 1.07(a) $ 0.99 $ 1.74(a) $ 1.55(a)
======================================================================
Diluted average
shares of common
stock outstanding 84,751 84,702 84,801 84,641
Diluted earnings
per common share:
Continuing
operations $ 1.07 $ 0.91 $ 1.74 $ 1.45
Discontinued
operations (0.01) 0.07 (0.00) 0.10
----------------------------------------------------------------------
Diluted earnings
per common
share $ 1.06 $ 0.98 $ 1.73(a) $ 1.54(a)
======================================================================
(a) Does not total due to rounding.
HARSCO CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30 December 31
(In thousands) 2008 2007
---------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 123,309 $ 121,833
Trade accounts receivable, net 907,802 779,619
Other receivables 59,895 44,475
Inventories 368,108 310,931
Other current assets 99,165 88,016
Assets held-for-sale 1,261 463
---------------------------------------------------------------------
Total current assets 1,559,540 1,345,337
---------------------------------------------------------------------
Property, plant and equipment, net 1,710,827 1,535,214
Goodwill, net 744,662 720,069
Intangible assets, net 178,278 188,864
Other assets 119,850 115,946
---------------------------------------------------------------------
Total assets $ 4,313,157 $ 3,905,430
=====================================================================
LIABILITIES
Current liabilities:
Short-term borrowings $ 140,217 $ 60,323
Current maturities of
long-term debt 8,096 8,384
Accounts payable 370,652 307,814
Accrued compensation 95,136 108,871
Income taxes payable 35,310 41,300
Dividends payable 16,437 16,444
Insurance liabilities 53,240 44,823
Advances on contracts 82,380 52,763
Other current liabilities 251,440 233,248
---------------------------------------------------------------------
Total current liabilities 1,052,908 873,970
---------------------------------------------------------------------
Long-term debt 1,039,476 1,012,087
Deferred income taxes 183,350 174,423
Insurance liabilities 67,919 67,182
Retirement plan liabilities 107,939 120,536
Other liabilities 98,963 91,113
---------------------------------------------------------------------
Total liabilities 2,550,555 2,339,311
---------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock 138,870 138,665
Additional paid-in capital 133,859 128,622
Accumulated other comprehensive
income (loss) 94,251 (2,501)
Retained earnings 2,017,106 1,904,502
Treasury stock (621,484) (603,169)
---------------------------------------------------------------------
Total stockholders' equity 1,762,602 1,566,119
---------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 4,313,157 $ 3,905,430
=====================================================================
HARSCO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
(In thousands) 2008 2007 2008 2007
---------------------------------------------------------------------
Cash flows from operating
activities:
Net income $ 89,883 $ 83,069 $146,922 $130,723
Adjustments to reconcile net
income to net cash provided
(used) by operating
activities:
Depreciation 80,920 67,778 157,542 132,787
Amortization 7,779 7,690 15,449 12,959
Equity in income of
unconsolidated
entities, net (246) (285) (650) (414)
Dividends or distributions
from unconsolidated
entities 484 176 484 176
Other, net (4,837) (61) (2,687) (821)
Changes in assets and
liabilities, net of
acquisitions and
dispositions of
businesses:
Accounts receivable (55,802) (49,633) (104,705) (93,118)
Inventories (3,819) (24,154) (45,846) (54,224)
Accounts payable 34,320 25,157 41,397 11,215
Accrued interest
payable 11,540 9,437 15,818 15,057
Accrued compensation 5,970 14,525 (18,368) (8,323)
Other assets and
liabilities 12,267 21,210 5,057 50,579
---------------------------------------------------------------------
Net cash provided by
operating activities 178,459 154,909 210,413 196,596
---------------------------------------------------------------------
Cash flows from investing
activities:
Purchases of property,
plant and equipment (138,463) (117,839) (258,283) (201,202)
Net use of cash associated
with the purchases of
businesses (9,552) (14,987) (13,575) (227,323)
Proceeds from sale of
assets 5,200 6,261 7,167 10,773
Other investing activities 482 (1,453) 15,279 (1,845)
---------------------------------------------------------------------
Net cash used by
investing activities (142,333) (128,018) (249,412) (419,597)
---------------------------------------------------------------------
Cash flows from financing
activities:
Short-term borrowings,
net (38,436) (27,961) 73,783 220,926
Current maturities and
long-term debt:
Additions 547,221 171,692 686,373 466,480
Reductions (517,778) (167,644) (675,649) (446,171)
Cash dividends paid
on common stock (16,428) (14,921) (32,899) (29,837)
Common stock issued-
options 30 3,358 1,276 3,899
Common stock acquired
for treasury -- -- (16,858) --
Other financing activities (3,400) (1,898) (3,436) (3,448)
---------------------------------------------------------------------
Net cash provided
(used) by financing
activities (28,791) (37,374) 32,590 211,849
---------------------------------------------------------------------
Effect of exchange rate
changes on cash 1,072 4,379 7,885 5,819
---------------------------------------------------------------------
Net increase (decrease)
in cash and cash equivalents 8,407 (6,104) 1,476 (5,333)
Cash and cash equivalents at
beginning of period 114,902 102,031 121,833 101,260
---------------------------------------------------------------------
Cash and cash equivalents
at end of period $ 123,309 $ 95,927 $ 123,309 $ 95,927
=====================================================================
HARSCO CORPORATION
REVIEW OF OPERATIONS BY SEGMENT (Unaudited)
(In thousands)
Three Months Ended Three Months Ended
June 30, 2008 June 30, 2007
Operating Operating
Income Income
Sales (loss) Sales (loss)
----------------------------------------------------------------------
Access Services Segment $ 429,176 $ 58,134 $ 360,921 $ 49,305
Mill Services Segment 445,490 37,114 380,824 36,670
All Other Category
(Minerals & Rail
Services and Products) 224,862 52,036 204,404 50,539
General Corporate 60 (1,445) -- (666)
----------------------------------------------------------------------
Consolidated Totals $1,099,588 $ 145,839 $ 946,149 $ 135,848
=====================================================================
Six Months Ended Six Months Ended
June 30, 2008 June 30, 2007
Operating Operating
Income Income
Sales (loss) Sales (loss)
----------------------------------------------------------------------
Access Services Segment $ 808,000 $ 95,972 $ 677,130 $ 84,346
Mill Services Segment 862,206 66,321 741,594 68,978
All Other Category
(Minerals & Rail
Services and Products) 417,052 85,978 367,451 69,918
General Corporate 120 (3,052) -- (820)
----------------------------------------------------------------------
Consolidated Totals $2,087,378 $ 245,219 $1,786,175 $ 222,422
======================================================================