HARRISBURG, Pa., April 29, 2010 (GLOBE NEWSWIRE) -- Worldwide industrial services and engineered products company Harsco Corporation (NYSE:HSC) reported first quarter 2010 results from continuing operations.
First Quarter 2010 Highlights
First quarter 2010 diluted earnings per share from continuing operations were $0.10, compared with $0.25 per share in the first quarter of last year. As expected, results in the quarter were negatively impacted by continued poor end-market conditions in the Company's Harsco Infrastructure business segment.
Income from continuing operations for the first quarter of 2010 was $9.7 million, compared with $21.0 million last year. Sales in the first quarter of 2010 increased by 6.5 percent to $742 million, compared with $697 million in the first quarter of last year. Foreign currency translation increased sales by approximately $41 million in the quarter and income before taxes by approximately $2.8 million.
Comment
Commenting on the Company's results, Harsco Chairman and Chief Executive Officer Salvatore D. Fazzolari said, "Our first quarter of 2010 results were in line with our overall expectations. This included strong performance from Harsco Rail and Harsco Metals, with both reporting higher year-on-year sales, operating income and operating margins, but Harsco Infrastructure performed well below our expectations. In the Harsco Minerals and Harsco Industrial ("All Other") category, our Harsco Minerals businesses achieved higher sales, income and margins, while our Harsco Industrial businesses, despite somewhat lower sales, were able to report flat income and higher margins compared with last year due to successful cost containment efforts.
"Our Harsco Infrastructure Segment reported a loss for the quarter on reduced sales. We have yet to see a turnaround in non-residential end-market conditions in the major geographies we serve. Pricing deteriorated at a more rapid rate than we had expected, equipment utilization rates declined to levels unseen in the past, and project postponements and deferrals by customers were much greater than we had anticipated. Results in the quarter were further negatively impacted by a very difficult winter.
"Overall, our longer-term outlook remains positive. The uplift in results from our Harsco Metals and Harsco Minerals businesses is expected to continue throughout the current year. Our Harsco Rail business is expected to have another strong year in sales, income and margins comparable to its record year in 2009. Our Harsco Industrial businesses are expected to perform reasonably well but operating income will be negatively impacted by higher LIFO expense in 2010 compared with 2009.
"Our major challenge for 2010 will continue to be our Harsco Infrastructure business. Non-residential construction markets, particularly in the U.S. and Europe, will continue to be challenging for the balance of the year. Non-residential construction is a late cycle business that usually follows GDP growth by about 12 months. We expect this business to incur a further operating loss in the second quarter, but at a somewhat reduced level from the first quarter. We do, however, expect sequential improvement and profitability in the Harsco Infrastructure business in each quarter for the second half of the year. We continue to reduce our branch structure, which will result in significant cost savings, but not until the second half of 2010. Further, we continue to develop this business in economies outside the U.S. and Europe that have greater prospects for both near-term and long-term growth.
"Due to the continued difficult end-market conditions for our Harsco Infrastructure business, and the uncertainty as to the timing of a turnaround in the major markets it serves, especially the U.S. and Europe, we feel it is prudent to revise our full year EPS guidance from continuing operations to $1.55 to $1.65 per share, from previous guidance of $2.00 to $2.10 per share."
First Quarter Business Review
Harsco Infrastructure
This Segment incurred an operating loss in the first quarter of 2010. Non-residential construction spending continues to be at depressed levels in the U.S. and most parts of Europe, significantly affecting both pricing and utilization rates. In addition, exceptionally difficult weather conditions in the first quarter, particularly in the U.S. and Europe, further contributed to the lower level of construction activity in the quarter.
Sales in the first quarter decreased 12 percent to $251 million from $284 million last year. Foreign currency translation increased sales by approximately $14 million in the quarter and had a $0.4 million positive effect on operating income. An operating loss of $19.3 million was incurred in the quarter, compared with operating income in last year's first quarter of $18.8 million. Restructuring charges in the first quarter of 2010 were as expected, but were more than offset by the combination of property gains and purchase accounting adjustments. Net gains in the first quarter were $3.1 million, compared with $2.1 million in net gains in the prior year.
While difficult end-market conditions continue, the Company foresees improved sequential results. The Segment is expected to incur a somewhat smaller loss in the second quarter this year, but return to profitability in the second half of the year due principally to cost reduction benefits, contribution from emerging markets expansion, seasonal factors and some expected improvement in overall non-residential construction activity as the year progresses. There is some evidence of the beginning of a gradual improvement in overall bidding activity in the major markets currently being served. Also, the Company continues to execute its strategy of developing opportunities outside of its principal markets in the U.S. and Europe. Lastly, the Company is confident it will achieve its goal of at least $25 million in overall cost cuts, principally for this Segment, and will see the benefit of such savings beginning in the second half of 2010.
Harsco Metals
Results in the quarter continued to benefit from a steady increase in global steel production. While still significantly lower than the peaks seen at the end of 2007 and the beginning of 2008, both steel production and utilization rates have come off of the unprecedented lows of late 2008 and early 2009. Results were also positively affected by restructuring benefits from prior actions the Company has taken.
Sales in the first quarter increased almost 25 percent to $297 million from $238 million in last year's comparable quarter. Foreign currency translation increased sales in the quarter by approximately $24 million. Operating income in the quarter was $11.4 million, compared with an operating loss of $2.8 million in the prior year quarter. Foreign currency translation increased operating income by $1.3 million in the quarter. Operating margins in the first quarter of 2010 were 3.8 percent, compared with the operating loss last year. Higher fuel costs, a stronger than anticipated U.S. dollar in translation, certain continuing restructuring actions and higher start-up costs for new contracts all served to offset somewhat the operating income and margin improvement in the quarter. However, the new contract starts are expected to benefit and improve operating results and margins for the remainder of the year.
The Company maintains an overall positive outlook for its Harsco Metals Segment. Strengthening end-market fundamentals, new contract signings, further restructuring benefits and a continued focus on reducing exposure to fuel costs with annual contract renewals and new contract signings should all have a positive effect on results for the remainder of 2010 and beyond.
Harsco Rail
Sales, operating income and margins continue to improve for the Company's Harsco Rail Segment. Strong unit deliveries, the timing of such deliveries and continuous process improvements lead this performance.
Sales in the first quarter increased 59 percent to $95 million from last year's $60 million. Foreign currency translation increased sales by $1.4 million in the quarter, but did not have a significant impact on operating income. In the first quarter of 2010, operating income was $20.4 million, almost triple the $7.2 million reported in the prior year quarter. Significantly, operating margins grew to 21.4 percent in the first quarter, compared with 12.1 percent last year.
Growing global spending on track maintenance equipment, parts and services and new track construction equipment continues to present the Company's Harsco Rail unit with significant opportunities. For the remainder of the year, results may continue to be affected by the timing of deliveries and may not be as strong as the exceptional results in the first quarter, but the Company still expects its Harsco Rail Segment to deliver overall sales, income and margins comparable to its record performance of last year.
Harsco Minerals & Harsco Industrial ("All Other" category)
This operating Group continues to perform well for the Company. Lower sales and income from the Company's Harsco Industrial units was offset by strong performance in the Harsco Minerals businesses. Both the Harsco Minerals businesses and Harsco Industrial businesses posted improved operating margins, as the Company's continuous improvement discipline continues to improve results.
While overall sales for the Group declined by 14 percent to $99 million in the first quarter from $115 million for the same period last year, operating income of $16.3 million was comparable to last year and operating margins of 16.5 percent were 240 basis points higher than those of the first quarter of 2009. For this Group, foreign currency translation increased sales by $1.5 million, but did not have a material effect on operating income.
The outlook for this Group reflects continuing balance. Continued strong results are expected from the Company's Harsco Minerals businesses as steel production continues at levels well above last year, aided by expected further year-over-year, end-market improvements in its roofing granules and abrasives business. Longer-term, the Harsco Minerals businesses will further benefit from the start-up of new contract signings and continued strong bidding activity. These improved results will continue to be somewhat offset by lower results in 2010 from the Company's Harsco Industrial units, principally due to higher LIFO expense, compared with the final nine months of last year.
Liquidity, Capital Resources and Other Matters
Net cash provided by operating activities for the first quarter of 2010 was $30.1 million, 24 percent less than the $39.6 million for the prior year period due to a decline in net income.
Capital expenditures in the first quarter of 2010 were $29.8 million, a 17 percent decrease from $36.0 million for the same period last year.
As discussed at its Annual Analysts Conference in December, the Company is confident of the successful execution of its capital investment strategy which resulted in significantly reduced capital expenditures in 2009. Such reductions will be maintained in 2010 and beyond and the Company is targeting annual free cash flow (cash from operations minus capital expenditures) to be in the area of $250 million or greater for the foreseeable future.
During the quarter, the Company's balance sheet debt increased by $9.8 million.
Due principally to the loss in its Harsco Infrastructure Segment, Economic Value Added (EVA®) declined in the first quarter of 2010 over the comparable 2009 period.
Outlook
Harsco Senior Vice President and Chief Financial Officer Stephen J. Schnoor said, "We remain pleased with the positive direction evidenced by results from our Harsco Metals, Harsco Rail and Harsco Minerals & Harsco Industrial units. However, overall Company results in the near-term will continue to be adversely affected by very difficult end-market conditions within the Harsco Infrastructure business. Also, the resurgent U.S. dollar, particularly against the European currencies, along with higher oil prices could continue to have further negative impact on results on a sequential basis relative to the assumptions used to establish our initial guidance for 2010.
"As such, for the second quarter of 2010 the Company is forecasting earnings from continuing operations in the range of $0.40 to $0.45 per share, compared with $0.52 in last year's second quarter. Further, given that we foresee a continuing difficult operating environment for our Harsco Infrastructure business well into the second quarter, we are revising our full year 2010 EPS guidance from continuing operations to $1.55 to $1.65 per share, from $2.00 to $2.10 per share.
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, including as a result of the current global financial and credit crisis; changes in the performance of the equity and debt 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; our ability to successfully enter into new contracts and complete new acquisitions in the timeframe contemplated; the financial condition of the Company's customers; 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 10:00 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 call can also be accessed by telephone by dialing (800) 611-4920, or (973) 200-3957 for international callers. Enter Conference ID number 66994861. 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 at approximately 11:00 am ET today through Monday, May 3, 2010. The telephone replay dial-in number is (800) 642-1687, or (706) 645‑9291 for international callers. Enter Conference ID number 66994861.
About Harsco
Harsco Corporation is one of the world's leading diversified industrial services and engineered products companies, serving key industries that play a fundamental role in worldwide economic growth and recovery. 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 http://www.harsco.com/">www.harsco.com.
The Harsco Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=361
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HARSCO CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) |
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Three Months Ended March 31 |
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| 2010 | 2009 | |
| Revenues from continuing operations: | ||
| Service revenues | $ 599,046 | $ 562,432 |
| Product revenues | 143,360 | 134,458 |
| Total revenues | 742,406 | 696,890 |
| Costs and expenses from continuing operations: | ||
| Cost of services sold | 486,632 | 440,619 |
| Cost of products sold | 92,801 | 96,266 |
| Selling, general and administrative expenses | 136,327 | 124,997 |
| Research and development expenses | 916 | 643 |
| Other income | (2,509) | (2,806) |
| Total costs and expenses | 714,167 | 659,719 |
| Operating income from continuing operations | 28,239 | 37,171 |
| Interest income | 461 | 545 |
| Interest expense | (16,119) | (15,313) |
| Income from continuing operations before income taxes and equity income | 12,581 | 22,403 |
| Income tax expense | (3,034) | (1,511) |
| Equity in income of unconsolidated entities, net | 130 | 87 |
| Income from continuing operations | 9,677 | 20,979 |
| Discontinued operations: | ||
| Loss from discontinued business | (163) | (1,754) |
| Income tax benefit | 414 | 530 |
| Income (loss) from discontinued operations | 251 | (1,224) |
| Net Income | 9,928 | 19,755 |
| Less: Net income attributable to noncontrolling interests | (1,894) | (1,163) |
| Net Income attributable to Harsco Corporation | $ 8,034 | $ 18,592 |
| Amounts attributable to Harsco Corporation common stockholders: | ||
| Income from continuing operations, net of tax | $ 7,783 | $ 19,816 |
| Income (loss) from discontinued operations, net of tax | 251 | (1,224) |
| Net income attributable to Harsco Corporation common stockholders | $ 8,034 | $ 18,592 |
| Weighted average shares of common stock outstanding | 80,543 | 80,249 |
| Basic earnings per common share attributable to Harsco Corporation common stockholders: | ||
| Continuing operations | $ 0.10 | $ 0.25 |
| Discontinued operations | -- | (0.02) |
| Basic earnings per share attributable to Harsco Corporation common stockholders | $ 0.10 | $ 0.23 |
| Diluted weighted average shares of common stock outstanding | 80,743 | 80,484 |
| Diluted earnings per common share attributable to Harsco Corporation common stockholders: | ||
| Continuing operations | $ 0.10 | $ 0.25 |
| Discontinued operations | -- | (0.02) |
| Diluted earnings per share attributable to Harsco Corporation common stockholders | $ 0.10 | $ 0.23 |
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HARSCO CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) |
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March 31 2010 |
December 31 2009 |
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $ 85,394 | $ 94,184 |
| Trade accounts receivable, net | 639,480 | 598,318 |
| Other receivables | 27,937 | 30,865 |
| Inventories | 279,744 | 291,174 |
| Other current assets | 147,259 | 154,797 |
| Total current assets | 1,179,814 | 1,169,338 |
| Property, plant and equipment, net | 1,442,062 | 1,510,801 |
| Goodwill | 680,607 | 699,041 |
| Intangible assets, net | 143,464 | 150,746 |
| Other assets | 121,454 | 109,314 |
| Total assets | $ 3,567,401 | $ 3,639,240 |
| LIABILITIES | ||
| Current liabilities: | ||
| Short-term borrowings | $ 89,732 | $ 57,380 |
| Current maturities of long-term debt | 54,501 | 25,813 |
| Accounts payable | 220,482 | 215,504 |
| Accrued compensation | 75,015 | 67,652 |
| Income taxes payable | 14,269 | 5,931 |
| Dividends payable | 16,502 | 16,473 |
| Insurance liabilities | 26,484 | 25,533 |
| Advances on contracts | 124,126 | 149,413 |
| Other current liabilities | 187,600 | 187,403 |
| Total current liabilities | 808,711 | 751,102 |
| Long-term debt | 850,456 | 901,734 |
| Deferred income taxes | 72,709 | 90,993 |
| Insurance liabilities | 56,713 | 61,660 |
| Retirement plan liabilities | 229,044 | 250,075 |
| Other liabilities | 62,328 | 73,842 |
| Total liabilities | 2,079,961 | 2,129,406 |
| EQUITY | ||
| Harsco Corporation stockholders' equity: | ||
| Common stock | 139,429 | 139,234 |
| Additional paid-in capital | 139,607 | 137,746 |
| Accumulated other comprehensive loss | (215,198) | (201,684) |
| Retained earnings | 2,124,729 | 2,133,297 |
| Treasury stock | (737,106) | (735,016) |
| Total Harsco Corporation stockholders' equity | 1,451,461 | 1,473,577 |
| Noncontrolling interests | 35,979 | 36,257 |
| Total equity | 1,487,440 | 1,509,834 |
| Total liabilities and equity | $ 3,567,401 | $ 3,639,240 |
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HARSCO CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) |
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Three Months Ended March 31 |
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| 2010 | 2009 | |
| Cash flows from operating activities: | ||
| Net income | $ 9,928 | $ 19,755 |
| Adjustments to reconcile net income to net cash provided (used) by operating activities: | ||
| Depreciation | 71,857 | 67,701 |
| Amortization | 9,078 | 6,707 |
| Equity in income of unconsolidated entities, net | (130) | (87) |
| Dividends or distributions from unconsolidated entities | 88 | -- |
| Other, net | (12,853) | (8,031) |
| Changes in assets and liabilities, net of acquisitions and dispositions of businesses: | ||
| Accounts receivable | (53,212) | 28,719 |
| Inventories | 5,748 | (5,885) |
| Accounts payable | 8,324 | (44,191) |
| Accrued interest payable | 9,817 | 9,536 |
| Accrued compensation | 8,697 | (18,839) |
| Other assets and liabilities | (27,287) | (15,785) |
| Net cash provided by operating activities | 30,055 | 39,600 |
| Cash flows from investing activities: | ||
| Purchases of property, plant and equipment | (29,849) | (36,042) |
| Purchases of businesses, net of cash acquired | (27,584) | (108) |
| Proceeds from sales of assets | 8,873 | 5,988 |
| Other investing activities | (4,386) | (1,276) |
| Net cash used by investing activities | (52,946) | (31,438) |
| Cash flows from financing activities: | ||
| Short-term borrowings, net | 31,736 | (10,069) |
| Current maturities and long-term debt: | ||
| Additions | 96,577 | 116,857 |
| Reductions | (95,601) | (117,712) |
| Cash dividends paid on common stock | (16,472) | (15,633) |
| Dividends paid to noncontrolling interests | (1,825) | -- |
| Contributions of equity from noncontrolling interests | 161 | -- |
| Common stock issued-options | 108 | 77 |
| Net cash provided (used) by financing activities | 14,684 | (26,480) |
| Effect of exchange rate changes on cash | (583) | (3,849) |
| Net decrease in cash and cash equivalents | (8,790) | (22,167) |
| Cash and cash equivalents at beginning of period | 94,184 | 91,336 |
| Cash and cash equivalents at end of period | $ 85,394 | $ 69,169 |
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HARSCO CORPORATION REVIEW OF OPERATIONS BY SEGMENT (Unaudited) (In thousands) |
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Three Months Ended March 31, 2010 |
Three Months Ended March 31, 2009 |
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| Sales |
Operating Income (loss) |
Sales |
Operating Income (loss) |
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| Harsco Infrastructure | $ 250,629 | $ (19,273) | $ 283,746 | $ 18,837 |
| Harsco Metals | 297,479 | 11,374 | 238,386 | (2,815) |
| Harsco Rail (a) | 95,402 | 20,414 | 59,840 | 7,224 |
| All Other Category (Harsco Minerals & Harsco Industrial) (a) | 98,836 | 16,288 | 114,858 | 16,217 |
| General Corporate | 60 | (564) | 60 | (2,292) |
| Consolidated Totals | $ 742,406 | $ 28,239 | $ 696,890 | $ 37,171 |
(a) Segment information for prior periods has been reclassified to conform with the current presentation. The Harsco Rail operating segment, which was previously a component of the All Other Category, is now reported separately.
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HARSCO CORPORATION REVIEW OF OPERATIONS BY SEGMENT (Unaudited) 2008 AND 2009 RECLASSIFIED TO SEPARATELY PRESENT HARSCO RAIL (In thousands) |
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Three Months Ended March 31, 2009 |
Three Months Ended March 31, 2008 |
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| Sales |
Operating Income (loss) |
Sales |
Operating Income (loss) |
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| Harsco Infrastructure | $ 283,746 | $ 18,837 | $ 378,824 | $ 37,838 |
| Harsco Metals | 238,386 | (2,815) | 416,716 | 29,207 |
| Harsco Rail | 59,840 | 7,224 | 59,118 | 9,087 |
| All Other Category (Harsco Minerals & Harsco Industrial) | 114,858 | 16,217 | 133,072 | 24,855 |
| General Corporate | 60 | (2,292) | 60 | (1,607) |
| Consolidated Totals | $ 696,890 | $ 37,171 | $ 987,790 | $ 99,380 |
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Three Months Ended June 30, 2009 |
Three Months Ended June 30, 2008 |
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| Sales |
Operating Income (loss) |
Sales |
Operating Income (loss) |
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| Harsco Infrastructure | $ 308,765 | $ 24,928 | $ 429,176 | $ 58,134 |
| Harsco Metals | 259,479 | 4,220 | 445,490 | 37,114 |
| Harsco Rail | 94,301 | 21,996 | 69,374 | 10,644 |
| All Other Category (Harsco Minerals & Harsco Industrial) | 114,370 | 20,663 | 155,488 | 41,392 |
| General Corporate | 60 | (1,448) | 60 | (1,445) |
| Consolidated Totals | $ 776,975 | $ 70,359 | $ 1,099,588 | $ 145,839 |
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Three Months Ended September 30, 2009 |
Three Months Ended September 30, 2008 |
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| Sales |
Operating Income (loss) |
Sales |
Operating Income (loss) |
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| Harsco Infrastructure | $ 279,450 | $ 22,503 | $ 393,292 | $ 59,998 |
| Harsco Metals | 275,093 | (4,420) | 423,831 | 33,287 |
| Harsco Rail | 77,237 | 14,785 | 70,062 | 8,684 |
| All Other Category (Harsco Minerals & Harsco Industrial) | 112,381 | 24,839 | 157,652 | 33,291 |
| General Corporate | 60 | (1,283) | 60 | (1,387) |
| Consolidated Totals | $ 744,221 | $ 56,424 | $ 1,044,897 | $ 133,873 |
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HARSCO CORPORATION REVIEW OF OPERATIONS BY SEGMENT (Unaudited) 2008 AND 2009 RECLASSIFIED TO SEPARATELY PRESENT HARSCO RAIL (In thousands) |
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Three Months Ended December 31, 2009 |
Three Months Ended December 31, 2008 |
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| Sales |
Operating Income |
Sales |
Operating Income (loss) |
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| Harsco Infrastructure | $ 287,238 | $ 2,170 | $ 338,966 | $ 29,412 |
| Harsco Metals | 311,868 | 18,941 | 291,683 | (14,263) |
| Harsco Rail | 74,638 | 12,538 | 79,042 | 7,991 |
| All Other Category (Harsco Minerals & Harsco Industrial) | 98,687 | 20,740 | 125,796 | 14,978 |
| General Corporate | 60 | 313 | 60 | (5,221) |
| Consolidated Totals | $ 772,491 | $ 54,702 | $ 835,547 | $ 32,897 |
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Twelve Months Ended December 31, 2009 |
Twelve Months Ended December 31, 2008 |
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| Sales |
Operating Income (loss) |
Sales |
Operating Income (loss) |
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| Harsco Infrastructure | $ 1,159,200 | $ 68,437 | $ 1,540,258 | $ 185,382 |
| Harsco Metals | 1,084,826 | 15,927 | 1,577,720 | 85,344 |
| Harsco Rail | 306,016 | 56,542 | 277,595 | 36,406 |
| All Other Category (Harsco Minerals & Harsco Industrial) | 440,295 | 82,460 | 572,009 | 114,516 |
| General Corporate | 240 | (4,710) | 240 | (9,660) |
| Consolidated Totals | $ 2,990,577 | $ 218,656 | $ 3,967,822 | $ 411,988 |
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Harsco Corporation FREE CASH FLOW (Unaudited) (In thousands) |
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Three Months Ended March 31 |
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| 2010 | 2009 | |
| Net cash provided by operating activities | $ 30,055 | $ 39,600 |
| Purchases of property, plant and equipment | (29,849) | (36,042) |
| Free cash flow | $ 206 | $ 3,558 |
Free Cash Flow is a non-GAAP financial measure. The Company's Management believes that this measure is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered necessary to maintain and expand the Company's asset base and are expected to generate future cash flows from operations. It is important to note that Free Cash Flow does not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure.