Harsco Corporation Reports Second Quarter 2021 Results

Camp Hill, Pennsylvania, UNITED STATES


  • Second Quarter Revenues Totaled $570 Million, an Increase of 27 Percent and 8 Percent, Respectively, From the Prior Year and Sequential Quarters

  • Q2 GAAP Operating Income of $36 Million and GAAP Diluted Earnings Per Share of $0.18

  • Adjusted Q2 EBITDA Totaled $78 Million; At Upper-End of Previous Guidance Range

  • Q2 Adjusted Earnings Per Share of $0.28

  • Full Year 2021 Adjusted EBITDA Guidance Range Unchanged At $295 Million To $310 Million

CAMP HILL, Pa., Aug. 03, 2021 (GLOBE NEWSWIRE) -- Harsco Corporation (NYSE: HSC) today reported second quarter 2021 results. On a U.S. GAAP ("GAAP") basis, second quarter of 2021 diluted earnings per share from continuing operations were $0.18 including certain strategic costs. Adjusted diluted earnings per share from continuing operations in the second quarter of 2021 were $0.28. These figures compare with a second quarter of 2020 GAAP diluted loss per share from continuing operations of $0.14 and adjusted diluted earnings per share from continuing operations of $0.13.

GAAP operating income from continuing operations for the second quarter of 2021 was $36 million. Adjusted EBITDA totaled $78 million in the quarter, compared to the Company's previously provided guidance range of $73 million to $79 million.

“Harsco continued to experience strong growth and operational momentum during the second quarter in each of our businesses," said Chairman and CEO Nick Grasberger. “The underlying business strength has broadened to include certain businesses that had lagged earlier in the economic recovery, and was supported by our ongoing operational improvements and key initiatives. We have also continued to make good progress on our integration with Clean Earth, which remains one of our near term priorities along with the ongoing efforts to strengthening our financial position. I am confident that Harsco is well-positioned to benefit as the global economy strengthens further, and we expect to create additional shareholder value in the future through our ongoing business transformation.”

Harsco Corporation—Selected Second Quarter Results

($ in millions, except per share amounts) Q2 2021 Q2 2020 Q1 2021
Revenues $570  $447  $529 
Operating income from continuing operations - GAAP $36  $2  $25 
Diluted EPS from continuing operations - GAAP $0.18  $(0.14) $0.02 
Adjusted EBITDA - excluding unusual items $78  $59  $66 
Adjusted EBITDA margin - excluding unusual items 13.7% 13.2% 12.4%
Adjusted diluted EPS from continuing operations - excluding unusual items $0.28  $0.13  $0.15 

Note: Adjusted earnings per share and adjusted EBITDA details presented throughout this release are adjusted for unusual items; in addition, adjusted earnings per share details are adjusted for acquisition-related amortization expense.


Consolidated Second Quarter Operating Results
Consolidated total revenues from continuing operations were $570 million, an increase of 27 percent compared with the prior-year quarter. Each business segment realized meaningful revenue growth versus the comparable 2020 quarter. Foreign currency translation positively impacted second quarter 2021 revenues by approximately $16 million compared with the prior-year period, translating to an organic growth rate of 24 percent.

GAAP operating income from continuing operations was $36 million for the second quarter of 2021, compared with $2 million in the same quarter of last year. Meanwhile, adjusted EBITDA totaled $78 million in the second quarter of 2021 versus $59 million in the second quarter of 2020. This adjusted EBITDA increase is attributable to improved performance in each of the Company's business segments as a result of strengthening economic conditions, internal improvement actions and growth initiatives.

Second Quarter Business Review

Environmental

($ in millions) Q2 2021 Q2 2020 Q1 2021
Revenues $273  $204  $258 
Operating income - GAAP $30  $14  $26 
Adjusted EBITDA - excluding unusual items $58  $40  $54 
Adjusted EBITDA margin - excluding unusual items 21.2% 19.7% 20.8%

Environmental revenues totaled $273 million in the second quarter of 2021, an increase of 34 percent compared with the prior-year quarter. This increase is principally attributable to improved demand for environmental services and applied products as well as favorable foreign exchange movements. The segment's GAAP operating income and adjusted EBITDA totaled $30 million and $58 million, respectively, in the second quarter of 2021. These figures compare with GAAP operating income of $14 million and adjusted EBITDA of $40 million in the prior-year period. The year-on-year improvement in adjusted earnings is attributable to increased services and products demand, as noted above.

Clean Earth

($ in millions) Q2 2021 Q2 2020 Q1 2021
Revenues $196  $162  $189 
Operating income - GAAP $7  $  $3 
Adjusted EBITDA - excluding unusual items $18  $11  $15 
Adjusted EBITDA margin - excluding unusual items 9.4% 7.0% 7.7%

Note: The 2020 financial information provided above and discussed below for Clean Earth does not include a corporate cost allocation for ESOL.


Clean Earth revenues totaled $196 million in the second quarter of 2021, an increase of 21 percent compared with the prior-year quarter. The revenue increase is attributable to increased environmental services demand within both the hazardous waste and contaminated-dredge materials lines of business. Segment operating income was $7 million and adjusted EBITDA totaled $18 million in the second quarter of 2021. These figures compare with zero operating income and adjusted EBITDA of $11 million, respectively, in the prior-year period. The improvement in adjusted earnings is attributable to the above factors as well as integration improvement benefits. These factors were partially offset by personnel investments to support the Clean Earth platform and certain other expenditures, including IT and rebranding related expenses, which will not occur beyond 2021. Lastly, Clean Earth's adjusted EBITDA margin increased to 9.4 percent in the second quarter of 2021 versus 7.0 percent in the comparable-quarter of 2020.

Rail

($ in millions) Q2 2021 Q2 2020 Q1 2021
Revenues $101  $82  $82 
Operating income (loss) - GAAP $9  $9  $5 
Adjusted EBITDA - excluding unusual items $10  $10  $6 
Adjusted EBITDA margin - excluding unusual items 10.1% 12.2% 7.3%

Rail revenues increased 24 percent compared with the prior-year quarter to $101 million. This increase principally reflects higher global equipment revenues, including those under various long-term supply contracts. The segment's operating income and adjusted EBITDA totaled $9 million and $10 million, respectively, in the second quarter of 2021, and these figures are similar to results realized in the prior-year quarter. EBITDA performance year-on-year reflects higher equipment contributions, offset by a less favorable sales mix across other business-lines and higher SG&A costs.

Cash Flow
Net cash provided by operating activities totaled $37 million in the second quarter of 2021, compared with net cash provided by operating activities of $33 million in the prior-year period. Free cash flow was $6 million in the second quarter of 2021, compared with $18 million in the prior-year period. The change in free cash flow compared with the prior-year quarter is principally related to higher capital expenditures, some of which were deferred from 2020, as well as the timing of working capital items.

2021 Outlook
The Company's 2021 guidance is unchanged relative to the outlook provided with the Company's first quarter 2021 results. Comments by business segments are as follows:

Environmental. For the year, the primary drivers for an increase in adjusted EBITDA compared with 2020 are expected to be favorable demand for underlying services and products as well as higher commodity prices.

Clean Earth. For the year, adjusted EBITDA is projected to increase due to the full-year impact of ESOL ownership, underlying organic growth for hazardous material services and integration benefits, partially offset by an additional allocation of Corporate costs and investments which include various non-recurring expenditures.

Rail. For the year, the primary drivers for an increase in adjusted EBITDA versus 2020 remain higher anticipated demand for equipment and technology products, as well as higher contract services contributions.

Lastly, adjusted Corporate spending is still expected to range from $36 million to $37 million for the year.

Summary Outlook highlights are as follows:

2021 Full Year Outlook 
GAAP Operating Income$118 - $133 million
Adjusted EBITDA$295 - $310 million
GAAP Diluted Earnings Per Share$0.42 - 0.57
Adjusted Diluted Earnings Per Share$0.82 - 0.96
Free Cash Flow Before Growth Capital$95 - $115 million
Free Cash Flow$35 - $55 million
Net Interest Expense$62 - $63 million
Net Capital Expenditures$150 - $170 million
Effective Tax Rate, Excluding Any Unusual Items34 - 36%
  
Q3 2021 Outlook 
GAAP Operating Income$31 - $37 million
Adjusted EBITDA$75 - $81 million
GAAP Diluted Earnings Per Share$0.15 - 0.21
Adjusted Diluted Earnings Per Share$0.23 - 0.29

Conference Call
The Company will hold a conference call today at 9:00 a.m. Eastern Time to discuss its results and respond to questions from the investment community. The conference call will be broadcast live through the Harsco Corporation website at www.harsco.com. The Company will refer to a slide presentation that accompanies its formal remarks. The slide presentation will be available on the Company’s website.

The call can also be accessed by telephone by dialing (833) 651-7826 or (414) 238-0989.
Enter Conference ID number 2147976.

Forward-Looking Statements
The nature of the Company's business, together with the number of countries in which it operates, subject it to changing economic, competitive, regulatory and technological conditions, risks and uncertainties. In accordance with the "safe harbor" provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, the Company provides the following cautionary remarks regarding important factors that, among others, could cause future results to differ materially from the results contemplated by forward-looking statements, including the expectations and assumptions expressed or implied herein. Forward-looking statements contained herein could include, among other things, statements about management's confidence in and strategies for performance; expectations for new and existing products, technologies and opportunities; and expectations regarding growth, sales, cash flows, and earnings. Forward-looking statements can be identified by the use of such terms as "may," "could," "expect," "anticipate," "intend," "believe," "likely," "estimate," "outlook," "plan" or other comparable terms.

Factors that could cause actual results to differ, perhaps materially, from those implied by forward-looking statements include, but are not limited to: (1) changes in the worldwide business environment in which the Company operates, including changes in general economic conditions or changes due to COVID-19 and governmental and market reactions to COVID-19; (2) changes in currency exchange rates, interest rates, commodity and fuel costs and capital costs; (3) changes in the performance of equity and bond markets that could affect, among other things, the valuation of the assets in the Company's pension plans and the accounting for pension assets, liabilities and expenses; (4) changes in governmental laws and regulations, including environmental, occupational health and safety, tax and import tariff standards and amounts; (5) market and competitive changes, including pricing pressures, market demand and acceptance for new products, services and technologies; (6) the Company's inability or failure to protect its intellectual property rights from infringement in one or more of the many countries in which the Company operates; (7) failure to effectively prevent, detect or recover from breaches in the Company's cybersecurity infrastructure; (8) unforeseen business disruptions in one or more of the many countries in which the Company operates due to political instability, civil disobedience, armed hostilities, public health issues or other calamities; (9) disruptions associated with labor disputes and increased operating costs associated with union organization; (10) the seasonal nature of the Company's business; (11) the Company's ability to successfully enter into new contracts and complete new acquisitions or strategic ventures in the time-frame contemplated, or at all; (12) the integration of the Company's strategic acquisitions; (13) potential severe volatility in the capital markets; (14) failure to retain key management and employees; (15) the outcome of any disputes with customers, contractors and subcontractors; (16) the financial condition of the Company's customers, including the ability of customers (especially those that may be highly leveraged, have inadequate liquidity or whose business is significantly impacted by COVID-19) to maintain their credit availability; (17) implementation of environmental remediation matters; (18) risk and uncertainty associated with intangible assets and (19) other risk factors listed from time to time in the Company's SEC reports. A further discussion of these, along with other potential risk factors, can be found in Part I, Item 1A, "Risk Factors," of the Company's Annual Report on Form 10-K for the year ended December 31, 2020. The Company cautions that these factors may not be exhaustive and that many of these factors are beyond the Company's ability to control or predict. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. The Company undertakes no duty to update forward-looking statements except as may be required by law.

About Harsco
Harsco Corporation is a global market leader providing environmental solutions for industrial and specialty waste streams and innovative technologies for the rail sector. Based in Camp Hill, PA, the 12,000-employee company operates in more than 30 countries. Harsco’s common stock is a component of the S&P SmallCap 600 Index and the Russell 2000 Index. Additional information can be found at www.harsco.com.



HARSCO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
    
     
  Three Months Ended Six Months Ended
  June 30 June 30
(In thousands, except per share amounts) 2021 2020 2021 2020
Revenues from continuing operations:        
Service revenues $436,732   $345,643   $861,181   $637,232  
Product revenues 133,088   101,638   237,494   208,890  
Total revenues 569,820   447,281   1,098,675   846,122  
Costs and expenses from continuing operations:        
Cost of services sold 348,509   285,941   683,015   522,549  
Cost of products sold 105,862   78,201   192,438   158,061  
Selling, general and administrative expenses 82,665   80,771   165,708   153,270  
Research and development expenses 628   792   1,446   2,052  
Other (income) expenses, net (4,063)  (292)  (4,975)  5,441  
Total costs and expenses 533,601   445,413   1,037,632   841,373  
Operating income from continuing operations 36,219   1,868   61,043   4,749  
Interest income 638   816   1,223   1,009  
Interest expense (15,986)  (14,953)  (32,850)  (27,602) 
Unused debt commitment fees, amendment fees and loss on extinguishment of debt (50)  (1,432)  (5,308)  (1,920) 
Defined benefit pension income 3,974   1,723   7,927   3,312  
Income (loss) from continuing operations before income taxes and equity income 24,795   (11,978)  32,035   (20,452) 
Income tax benefit (expense) from continuing operations (8,564)  2,304   (12,793)  2,986  
Equity income (loss) of unconsolidated entities, net (76)  71   (195)  167  
Income (loss) from continuing operations 16,155   (9,603)  19,047   (17,299) 
Discontinued operations:        
Gain (loss) on sale of discontinued business    (91)     18,371  
Income (loss) from discontinued businesses (1,451)  524   (3,242)  299  
Income tax benefit (expense) from discontinued businesses 376   (285)  840   (9,599) 
Income (loss) from discontinued operations, net of tax (1,075)  148   (2,402)  9,071  
Net income (loss) 15,080   (9,455)  16,645   (8,228) 
Less: Net income attributable to noncontrolling interests (1,692)  (1,147)  (3,122)  (2,233) 
Net income (loss) attributable to Harsco Corporation $13,388   $(10,602)  $13,523   $(10,461) 
Amounts attributable to Harsco Corporation common stockholders:
Income (loss) from continuing operations, net of tax $14,463   $(10,750)  $15,925   $(19,532) 
Income (loss) from discontinued operations, net of tax (1,075)  148   (2,402)  9,071  
Net income (loss) attributable to Harsco Corporation common stockholders $13,388   $(10,602)  $13,523   $(10,461) 
Weighted-average shares of common stock outstanding 79,265   78,987   79,177   78,874  
Basic earnings (loss) per common share attributable to Harsco Corporation common stockholders:
Continuing operations $0.18   $(0.14)  $0.20   $(0.25) 
Discontinued operations (0.01)     (0.03)  0.12  
Basic earnings (loss) per share attributable to Harsco Corporation common stockholders $0.17   $(0.13) (a)$0.17   $(0.13) 
Diluted weighted-average shares of common stock outstanding 80,774   78,987   80,397   78,874  
Diluted earnings (loss) per common share attributable to Harsco Corporation common stockholders:
Continuing operations $0.18   $(0.14)  $0.20   $(0.25) 
Discontinued operations (0.01)     (0.03)  0.12  
Diluted earnings (loss) per share attributable to Harsco Corporation common stockholders $0.17   $(0.13) (a)$0.17   $(0.13) 



HARSCO CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
    
     
(In thousands) June 30
2021
 December 31
2020
ASSETS    
Current assets:    
Cash and cash equivalents $77,870   $76,454  
Restricted cash 4,417   3,215  
Trade accounts receivable, net 424,185   407,390  
Other receivables 38,316   34,253  
Inventories 157,616   173,013  
Current portion of contract assets 85,236   54,754  
Prepaid expenses 58,416   56,099  
Other current assets 15,300   10,645  
Total current assets 861,356   815,823  
Property, plant and equipment, net 672,138   668,209  
Right-of-use assets, net 94,276   96,849  
Goodwill 903,345   902,074  
Intangible assets, net 422,906   438,565  
Deferred income tax assets 10,626   15,274  
Other assets 57,452   56,493  
Total assets $3,022,099   $2,993,287  
LIABILITIES    
Current liabilities:    
Short-term borrowings $7,202   $7,450  
Current maturities of long-term debt 8,514   13,576  
Accounts payable 206,180   218,039  
Accrued compensation 49,960   45,885  
Income taxes payable 7,856   3,499  
Current portion of advances on contracts 54,017   39,917  
Current portion of operating lease liabilities 24,056   24,862  
Other current liabilities 193,128   184,727  
Total current liabilities 550,913   537,955  
Long-term debt 1,327,588   1,271,189  
Retirement plan liabilities 193,421   231,335  
Advances on contracts 15,934   45,017  
Operating lease liabilities 68,484   69,860  
Environmental liabilities 29,046   29,424  
Deferred tax liabilities 31,312   40,653  
Other liabilities 56,018   54,455  
Total liabilities 2,272,716   2,279,888  
HARSCO CORPORATION STOCKHOLDERS’ EQUITY    
Common stock 144,836   144,288  
Additional paid-in capital 209,992   204,078  
Accumulated other comprehensive loss (626,206)  (645,741) 
Retained earnings 1,811,282   1,797,759  
Treasury stock (846,401)  (843,230) 
Total Harsco Corporation stockholders’ equity 693,503   657,154  
Noncontrolling interests 55,880   56,245  
Total equity 749,383   713,399  
Total liabilities and equity $3,022,099   $2,993,287  



HARSCO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
  Three Months Ended
June 30
 Six Months Ended
June 30
(In thousands) 2021 2020 2021 2020
Cash flows from operating activities:        
Net income (loss) $15,080   $(9,455)   $16,645    $(8,228) 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation 32,156   31,579   64,904   61,512  
Amortization 8,816   9,115   17,783   15,672  
Deferred income tax benefit (2,986)  (5,067)  (6,407)  (655) 
Equity in (income) loss of unconsolidated entities, net 76   (71)  195   (167) 
Loss (gain) on sale from discontinued business    91      (18,371) 
Loss on early extinguishment of debt       2,668     
Other, net (3,277)  (237)  (2,149)  (2,244) 
Changes in assets and liabilities, net of acquisitions and dispositions of businesses:        
Accounts receivable (7,038)  38,584   (23,484)  16,534  
Inventories 15,049   (254)  15,456   (16,666) 
Contract assets (18,796)  (8,623)  (37,866)  (28,934) 
Right-of-use assets 7,129   8,405   13,897   11,834  
Accounts payable (4,899)  (20,427)  (13,491)  (8,119) 
Accrued interest payable 7,183   6,951   (137)  (2,940) 
Accrued compensation 6,242   (2,015)  4,701   (4,767) 
Advances on contracts (3,653)  (4,628)  (13,351)  35,836  
Operating lease liabilities (6,756)  (8,238)  (13,506)  (11,596) 
Retirement plan liabilities, net (8,591)  (3,492)  (27,858)  (19,026) 
Income taxes payable - Gain on sale of discontinued businesses    (376)     3,467  
Other assets and liabilities 968   1,215   15,530   (1,621) 
Net cash provided by operating activities 36,703   33,057   13,530   21,521  
Cash flows from investing activities:        
Purchases of property, plant and equipment (41,264)  (23,319)  (68,646)  (51,213) 
Purchase of businesses, net of cash acquired    (438,447)     (442,604) 
Proceeds from sale of discontinued business, net          37,219  
Proceeds from sales of assets 6,180   1,767   10,042   3,952  
Expenditures for intangible assets (64)  16   (132)  (42) 
Proceeds from note receivable 6,400      6,400     
Net proceeds (payments) from settlement of foreign currency forward exchange contracts 449   (10,562)  (978)  765  
Other investing activities, net 87   59   133   59  
Net cash used by investing activities (28,212)  (470,486)  (53,181)  (451,864) 
Cash flows from financing activities:        
Short-term borrowings, net 3,869   (1,020)  4,444   2,677  
Current maturities and long-term debt:        
Additions 30,645   475,726   465,518   528,601  
Reductions (38,951)  (23,697)  (413,481)  (62,406) 
Dividends paid to noncontrolling interests (3,094)     (3,094)    
Stock-based compensation - Employee taxes paid (687)  (656)  (3,172)  (4,093) 
Deferred financing costs (1,303)  (296)  (7,828)  (1,928) 
Other financing activities, net (201)  (1,371)  (601)  (1,371) 
Net cash provided (used) by financing activities (9,722)  448,686   41,786   461,480  
Effect of exchange rate changes on cash and cash equivalents, including restricted cash 1,193   4,006   483   (6,818) 
Net increase (decrease) in cash and cash equivalents, including restricted cash (38)  15,263   2,618   24,319  
Cash and cash equivalents, including restricted cash, at beginning of period 82,325   68,788   79,669   59,732  
Cash and cash equivalents, including restricted cash, at end of period $82,287   $84,051    $82,287    $84,051  



HARSCO CORPORATION
REVIEW OF OPERATIONS BY SEGMENT (Unaudited)
 
  Three Months Ended Three Months Ended
  June 30, 2021 June 30, 2020
(In thousands) Revenues Operating
Income (Loss)
 Revenues Operating
Income (Loss)
Harsco Environmental $272,546  $30,223   $203,991  $13,563  
Harsco Clean Earth 196,128  7,386   161,579  (202) 
Harsco Rail 101,146  8,912   81,711  8,631  
Corporate   (10,302)    (20,124) 
Consolidated Totals $569,820  $36,219   $447,281  $1,868  
         
  Six Months Ended Six Months Ended
  June 30, 2021 June 30, 2020
(In thousands) Revenues Operating
Income (Loss)
 Revenues Operating
Income (Loss)
Harsco Environmental $530,532  $56,158   $445,550  $24,083  
Harsco Clean Earth (a) 385,407  10,564   240,391  4,043  
Harsco Rail 182,736  13,576   160,181  15,103  
Corporate   (19,255)    (38,480) 
Consolidated Totals $1,098,675  $61,043   $846,122  $4,749  


(a)  The Company's acquisition of ESOL closed on April 6, 2020.



HARSCO CORPORATION
RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS TO DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS AS REPORTED (Unaudited)
 
  Three Months Ended Six Months Ended
  June 30 June 30
  2021 2020 2021 2020
Diluted earnings (loss) per share from continuing operations as reported $0.18    $(0.14)  $0.20    $(0.25) 
Corporate unused debt commitment fees, amendment fees and loss on extinguishment of debt (a) —    0.02   0.07    0.02  
Corporate strategic costs (b) 0.02       0.02      
Corporate acquisition and integration costs (c) —    0.22   —    0.39  
Harsco Environmental Segment severance costs (d) —       —    0.07  
Taxes on above unusual items (e) (0.01)  (0.05)  (0.02)  (0.08) 
Adjusted diluted earnings per share from continuing operations, including acquisition amortization expense 0.20   (g)0.05   0.27    0.15  
Acquisition amortization expense, net of tax (f) 0.08    0.08   0.16    0.14  
Adjusted diluted earnings per share from continuing operations  $0.28    $0.13   $0.43    $0.29  


(a) Costs at Corporate associated with amending the Company's existing Senior Secured Credit Facilities to establish a New Term Loan the proceeds of which were used to repay in full the outstanding Term Loan A and Term Loan B, to extend the maturity date of the Revolving Credit Facility and to increase certain levels set forth in the total net leverage ratio covenant (Q2 2021 $0.1 million pre-tax; six months 2021 $5.3 million pre-tax) and costs associated with amending the Company's existing Senior secured Credit Facilities, to increase the net debt to consolidated adjusted EBITDA covenant ratio (Q2 2020 $1.4 million pre-tax; six months 2020 $1.9 million pre-tax).
(b) Certain strategic costs incurred at Corporate associated with supporting and executing the Company's growth strategy (Q2 and six months 2021 $1.7 million pre-tax).
(c) Acquisition and integration costs at Corporate (Q2 2020 $17.2 million pre-tax; six months 2020 $30.9 million pre-tax).
(d) Harsco Environmental Segment severance costs (six months 2020 $5.2 million pre-tax).
(e) 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.
(f) Acquisition amortization expense was $8.2 million pre-tax and $16.4 million pre-tax for Q2 and six months 2021, respectively; and $8.4 million pre-tax and $14.3 million pre-tax for Q2 and six months 2020, respectively.
(g) Does not total due to rounding.

The Company’s management believes Adjusted diluted earnings per share from continuing operations, which is a non-GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP.



HARSCO CORPORATION
RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS TO DILUTED LOSS PER SHARE FROM CONTINUING OPERATIONS AS REPORTED (Unaudited)
 
  Three Months
Ended
March 31
 
  2021 
Diluted income per share from continuing operations as reported $0.02    
Corporate unused debt commitment fees, amendment fees and loss on extinguishment of debt (a) 0.07    
Taxes on above unusual items (b) (0.01)  
Adjusted diluted loss per share from continuing operations, including acquisition amortization expense 0.07   (d)
Acquisition amortization expense, net of tax (c) 0.08    
Adjusted diluted earnings per share from continuing operations  $0.15    


(a) Costs at Corporate associated with amending the Company's existing Senior Secured Credit Facilities to establish a New Term Loan the proceeds of which were used to repay in full the outstanding Term Loan A and Term Loan B, to extend the maturity date of the Revolving Credit Facility and to increase certain levels set forth in the total net leverage ratio covenant ($5.3 million pre-tax).
(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) Acquisition amortization expense was $8.2 million pre-tax.
(d) Does not total due to rounding.

The Company’s management believes Adjusted diluted earnings per share from continuing operations, which is a non-GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP.



HARSCO CORPORATION
RECONCILIATION OF PROJECTED ADJUSTED DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS TO DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS (Unaudited)
 
  
  Projected
Three Months Ending
September 30
 Projected
Twelve Months Ending
December 31
 
  2021 2021 
  Low High Low High 
Diluted earnings per share from continuing operations $0.15  $0.21  $0.42   $0.57   
Corporate unused debt commitment fees, amendment fees and loss on extinguishment of debt     0.07   0.07   
Corporate strategic costs     0.02   0.02   
Taxes on above unusual items     (0.02)  (0.02)  
Adjusted diluted earnings per share from continuing operations, including acquisition amortization expense 0.15  0.21  0.49   0.64   
Estimated acquisition amortization expense, net of tax 0.08  0.08  0.33   0.33   
Adjusted diluted earnings per share from continuing operations $0.23  $0.29  $0.82   $0.96  (a)


(a)  Does not total due to rounding.

The Company’s management believes Adjusted diluted earnings per share from continuing operations, which is a non-GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP. 



HARSCO CORPORATION
RECONCILIATION OF ADJUSTED EBITDA BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited)
 
(In thousands) Harsco
Environmental
 Harsco Clean
Earth
 Harsco
Rail
 Corporate Consolidated
Totals
           
Three Months Ended June 30, 2021:        
Operating income (loss) as reported $30,223  $7,386  $8,912  $(10,302)  $36,219 
Corporate strategic costs       1,681   1,681 
Operating income (loss) excluding unusual items 30,223  7,386  8,912  (8,621)  37,900 
Depreciation 25,550  4,905  1,207  494   32,156 
Amortization 2,035  6,063  85     8,183 
Adjusted EBITDA $57,808  $18,354  $10,204  $(8,127)  $78,239 
Revenues as reported $272,546  $196,128  $101,146    $569,820 
Adjusted EBITDA margin (%) 21.2% 9.4% 10.1%   13.7%
           
Three Months Ended June 30, 2020:        
Operating income (loss) as reported $13,563  $(202) $8,631  $(20,124)  $1,868 
Corporate acquisition and integration costs       17,176   17,176 
Operating income (loss) excluding unusual items 13,563  (202) 8,631  (2,948)  19,044 
Depreciation 24,663  5,138  1,257  521   31,579 
Amortization 1,921  6,347  83     8,351 
Adjusted EBITDA $40,147  $11,283  $9,971  $(2,427)  $58,974 
Revenues as reported $203,991  $161,579  $81,711    $447,281 
Adjusted EBITDA margin (%) 19.7% 7.0% 12.2%   13.2%

Consolidated Adjusted EBITDA is a non-GAAP financial measure and consists of income from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); unused debt commitment fees, amendment fees and loss on extinguishment of debt; and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs).  The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals Consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for, net income from continuing operations, operating income from continuing operations and other information provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.



HARSCO CORPORATION
RECONCILIATION OF ADJUSTED EBITDA BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited)
 
(In thousands) Harsco
Environmental
 Harsco Clean
Earth (a)
 Harsco
Rail
 Corporate Consolidated
Totals
           
Six Months Ended June 30, 2021:        
Operating income (loss) as reported $56,158  $10,564  $13,576  $(19,255)  $61,043 
Corporate strategic costs       1,681   1,681 
Operating income (loss) excluding unusual items 56,158  10,564  13,576  (17,574)  62,724 
Depreciation 51,267  10,242  2,418  977   64,904 
Amortization 4,083  12,146  170     16,399 
Adjusted EBITDA $111,508  $32,952  $16,164  $(16,597)  $144,027 
Revenues as reported $530,532  $385,407  $182,736    $1,098,675 
Adjusted EBITDA margin (%) 21.0% 8.5% 8.8%   13.1%
           
Six Months Ended June 30, 2020:        
Operating income (loss) as reported $24,083  $4,043  $15,103  $(38,480)  $4,749 
Corporate acquisition and integration costs       30,939   30,939 
Harsco Environmental Segment severance costs 5,160         5,160 
Operating income (loss) excluding unusual items 29,243  4,043  15,103  (7,541)  40,848 
Depreciation 50,038  7,759  2,472  1,034   61,303 
Amortization 3,857  10,245  167     14,269 
Adjusted EBITDA $83,138  $22,047  $17,742  $(6,507)  $116,420 
Revenues as reported $445,550  $240,391  $160,181    $846,122 
Adjusted EBITDA margin (%) 18.7% 9.2% 11.1%   13.8%


(a)  The Company's acquisition of ESOL closed on April 6, 2020.

Consolidated Adjusted EBITDA is a non-GAAP financial measure and consists of income from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); unused debt commitment fees, amendment fees and loss on extinguishment of debt; and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs).  The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals Consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for, net income from continuing operations, operating income from continuing operations and other information provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.



HARSCO CORPORATION
RECONCILIATION OF ADJUSTED EBITDA BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited)
 
(In thousands) Harsco
Environmental
 Harsco Clean
Earth
 Harsco
Rail
 Corporate Consolidated
Totals
           
Three Months Ended March 31, 2021:        
Operating income (loss) as reported $25,935  $3,178  $4,664  $(8,953)  $24,824 
Depreciation 25,717  5,337  1,211  483   32,748 
Amortization 2,048  6,083  85     8,216 
Adjusted EBITDA $53,700  $14,598  $5,960  $(8,470)  $65,788 
Revenues as reported $257,986  $189,279  $81,590    $528,855 
Adjusted EBITDA margin (%) 20.8% 7.7% 7.3%   12.4%

Consolidated Adjusted EBITDA is a non-GAAP financial measure and consists of income from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); unused debt commitment fees, amendment fees and loss on extinguishment of debt; and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs).  The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals Consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for, net income from continuing operations, operating income from continuing operations and other information provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.



HARSCO CORPORATION
RECONCILIATION OF CONSOLIDATED ADJUSTED EBITDA TO CONSOLIDATED INCOME (LOSS) FROM CONTINUING OPERATIONS AS REPORTED (Unaudited)
 
  Three Months Ended
June 30
(In thousands) 2021 2020
Consolidated income (loss) from continuing operations $16,155   $(9,603) 
     
Add back (deduct):    
Equity in (income) loss of unconsolidated entities, net 76   (71) 
Income tax (benefit) expense 8,564   (2,304) 
Defined benefit pension income (3,974)  (1,723) 
Unused debt commitment fees, amendment fees and loss on extinguishment of debt 50   1,432  
Interest expense 15,986   14,953  
Interest income (638)  (816) 
Depreciation 32,156   31,579  
Amortization 8,183   8,351  
     
Unusual items:    
Corporate strategic costs 1,681     
Corporate acquisition and integration costs    17,176  
Consolidated Adjusted EBITDA $78,239   $58,974  

Consolidated Adjusted EBITDA is a non-GAAP financial measure and consists of income from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); unused debt commitment fees, amendment fees and loss on extinguishment of debt; and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs).  The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals Consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for, net income from continuing operations, operating income from continuing operations and other information provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.



HARSCO CORPORATION
RECONCILIATION OF CONSOLIDATED ADJUSTED EBITDA TO CONSOLIDATED INCOME (LOSS) FROM CONTINUING OPERATIONS AS REPORTED (Unaudited)
 
  Six Months Ended
June 30
(In thousands) 2021 2020
Consolidated income (loss) from continuing operations 19,047   $(17,299) 
     
Add back (deduct):    
Equity in (income) loss of unconsolidated entities, net 195   (167) 
Income tax expense (benefit) 12,793   (2,986) 
Defined benefit pension income (7,927)  (3,312) 
Unused debt commitment and amendment fees 5,308   1,920  
Interest expense 32,850   27,602  
Interest income (1,223)  (1,009) 
Depreciation 64,904   61,303  
Amortization 16,399   14,269  
     
Unusual items:    
Corporate strategic costs 1,681     
Corporate acquisition and integration costs    30,939  
Harsco Environmental Segment severance costs    5,160  
Consolidated Adjusted EBITDA $144,027   $116,420  

Consolidated Adjusted EBITDA is a non-GAAP financial measure and consists of income from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); unused debt commitment fees, amendment fees and loss on extinguishment of debt; and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs).  The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals Consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for, net income from continuing operations, operating income from continuing operations and other information provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.



HARSCO CORPORATION
RECONCILIATION OF CONSOLIDATED ADJUSTED EBITDA TO CONSOLIDATED INCOME FROM CONTINUING OPERATIONS AS REPORTED (Unaudited)
 
  Three Months
Ended
March 31
(In thousands) 2021
Consolidated income from continuing operations $2,892  
   
Add back (deduct):  
Equity in income of unconsolidated entities, net 119  
Income tax expense 4,229  
Defined benefit pension income (3,953) 
Unused debt commitment fees, amendment fees and loss on extinguishment of debt 5,258  
Interest expense 16,864  
Interest income (585) 
Depreciation 32,748  
Amortization 8,216  
Consolidated Adjusted EBITDA $65,788  

Consolidated Adjusted EBITDA is a non-GAAP financial measure and consists of income from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); unused debt commitment fees, amendment fees and loss on extinguishment of debt; and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs).  The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals Consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for, net income from continuing operations, operating income from continuing operations and other information provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.



HARSCO CORPORATION
RECONCILIATION OF PROJECTED CONSOLIDATED ADJUSTED EBITDA TO PROJECTED CONSOLIDATED INCOME FROM CONTINUING OPERATIONS (Unaudited)
 
  
  Projected
Three Months Ending
September 30
 Projected
Twelve Months Ending
December 31
 
  2021 2021 
(In millions) Low High Low High 
Consolidated income from continuing operations $13   $19   $46   $58   
          
Add back:         
          
Income tax expense 5   7   26   30   
Net interest 16   15   63   62   
Defined benefit pension income (4)  (4)  (14)  (14)  
Depreciation and amortization 44   44   175   175   
          
Consolidated Adjusted EBITDA $75  (a)$81   $295  (a)$310  (a)


(a)  Does not total due to rounding.

Consolidated Adjusted EBITDA is a non-GAAP financial measure and consists of income from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); unused debt commitment fees, amendment fees and loss on extinguishment of debt; and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs).  The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals Consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for, net income from continuing operations, operating income from continuing operations and other information provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.



HARSCO CORPORATION
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited)
 
  Three Months Ended Six Months Ended
  June 30 June 30
(In thousands) 2021 2020 2021 2020
Net cash provided by operating activities $36,703   $33,057   $13,530   $21,521  
Less capital expenditures (41,264)  (23,319)  (68,646)  (51,213) 
Less expenditures for intangible assets (64)  16   (132)  (42) 
Plus capital expenditures for strategic ventures (a) 926   225   1,798   1,364  
Plus total proceeds from sales of assets (b) 6,180   1,767   10,042   3,952  
Plus transaction-related expenditures (c) 3,920   5,961   18,004   15,940  
Plus taxes paid on sale of business    376      376  
Free cash flow $6,401   $18,083    $(25,404)  $(8,102) 


(a) Capital expenditures for strategic ventures represent the partner’s share of capital expenditures in certain ventures consolidated in the Company’s condensed consolidated financial statements.
(b) Asset sales are a normal part of the business model, primarily for the Harsco Environmental Segment.
(c) Expenditures directly related to the Company's acquisition and divestiture transactions and costs at Corporate associated with amending the Company's existing Senior Secured Credit Facilities.

The Company's management believes that Free cash flow, which is a non-GAAP financial measure, is meaningful to investors because management reviews cash flows generated from operations less capital expenditures net of asset sales proceeds and transaction-related expenditures and income taxes for planning and performance evaluation purposes. It is important to note that Free cash flow does not represent the total residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements and settlements of foreign currency forward exchange contracts, are not deducted from this measure. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP.



HARSCO CORPORATION
RECONCILIATION OF PROJECTED FREE CASH FLOW TO PROJECTED NET CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited)
 
  Projected
Twelve Months Ending
December 31
  2021
(In millions) Low High
Net cash provided by operating activities $167   $207  
Less capital expenditures (162)  (183) 
Plus total proceeds from asset sales and capital expenditures for strategic ventures 12   13  
Plus transaction related expenditures 18   18  
Free cash flow 35   55  
Add growth capital expenditures 60   60  
Free cash flow before growth capital expenditures $95   $115  

The Company's management believes that Free cash flow, which is a non-GAAP financial measure, is meaningful to investors because management reviews cash flows generated from operations less capital expenditures net of asset sales proceeds and transaction-related expenditures and income taxes for planning and performance evaluation purposes. It is important to note that Free cash flow does not represent the total residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements and settlements of foreign currency forward exchange contracts, are not deducted from this measure. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP.


Investor Contact 
David Martin
717.612.5628
damartin@harsco.com 
Media Contact
Jay Cooney
717.730.3683
jcooney@harsco.com