HARRISBURG, Pa., July 17, 2001 (PRIMEZONE) -- Worldwide industrial services and products company Harsco Corporation (NYSE:HSC) today reported second quarter 2001 diluted earnings per share of $0.65 before nonrecurring costs and special charges, exceeding analysts' consensus estimates, while revenues reached a record $532 million, up 14 percent over the second quarter of 2000. Adjusting for the effects of negative foreign exchange translation, revenues would have been up approximately 17 percent. Negative foreign exchange translation also lowered pre-tax income by approximately $1.5 million, or $0.02 per share.
Income before nonrecurring costs and special charges was $25.9 million, down from net income of $28.2 million in the second quarter of 2000 but up 53 percent from the first quarter of 2001. Pre-tax net nonrecurring costs and special charges totaled $1.9 million, or $0.03 per share, principally related to reorganization actions. Including these charges, net income in the second quarter of 2001 was $24.7 million, or $0.62 per share.
For the first six months of 2001, diluted earnings per share before nonrecurring costs and special charges were $1.07 and income was $42.9 million. Pre-tax net nonrecurring costs and special charges totaled $12.4 million, or $0.20 per share. Including these charges, net income for the first six months was $34.8 million, or $0.87 per share. Revenues totaled a record $1.06 billion, an increase of 15 percent. Without the negative effect of foreign exchange translation, revenues would have been up approximately 18 percent. Negative foreign exchange translation also lowered pre-tax income by approximately $3.6 million, or $.06 per share.
"We are pleased with the continuing strong performance of our international businesses and the progress made within our Infrastructure segment. Our railway track maintenance services and equipment business achieved year-over-year improvement, our domestic scaffolding and access services business continued its strong performance, and our SGB Group acquisition was accretive to results. We also benefited from stringent cost management efforts throughout all operations," said Harsco Chairman, President and Chief Executive Officer, Derek C. Hathaway.
"We further strengthened our industrial services focus during the quarter by acquiring two small but strategic scaffolding and access services operations, one in Ireland and one in the U.K., while completing the previously-planned divestitures of two non-core U.K. manufacturing operations, both part of our June 2000 acquisition of SGB. The cash generated from these and other asset sales was used for the acquisitions and for debt reduction.
"While economic and market challenges remain, we continue to expect a sequential improvement in our operating results for the second half of 2001. We remain confident that our historically strong second half cash flows will allow us to further reduce our debt levels and, coupled with the meaningful Federal Reserve interest rate cuts of the first six months of 2001, reduce interest expense as well."
Second Quarter Business Segment Review
Infrastructure -- Overall performance from the segment was strong. Operating income increased 61 percent over last year's second quarter, while sales increased 63 percent. Results benefited significantly from the inclusion of the SGB Group, which was accretive in the quarter and performed slightly ahead of plan. Patent Construction Systems continued to perform ahead of last year reflecting solid demand from the non-residential construction market, but IKG industrial grating was adversely affected by slower U.S. manufacturing activity. Harsco Track Technologies benefited from a better product mix in its sales and favorable results from cost containment efforts. Margins for the Infrastructure segment were 10.3 percent, down slightly from last year's 10.5 percent, due primarily to the industrial grating business.
Mill Services -- Strong international results offset a lower domestic performance resulting from the continuing difficulties in the North American steel industry. While sales for the segment were down $12.1 million compared with last year, $11.4 million of the decline was due to the effect of foreign exchange translation. Operating income declined approximately $3.6 million before pre-tax nonrecurring costs of $2.0 million, with approximately $1.3 million of the decline attributable to foreign exchange translation.
Margins, excluding nonrecurring costs, declined 110 basis points from 13.8 percent in last year's second quarter.
Gas and Fluid Control -- Representing the majority of the Company's manufacturing operations, sales in the segment declined by 7 percent in the quarter over last year, due to the well-publicized decline in manufacturing demand from the weak domestic economy. Operating income decreased 24 percent for the quarter while margins declined by 150 basis points.
Financial Position
Harsco gained momentum in the second quarter on its strategic objectives for cash optimization and debt reduction. During the quarter, the Company realized approximately $15 million in cash from the sale of assets, bringing its total to $18 million for the first half of the year and representing significant progress toward the $40 million target set for 2001. Also noteworthy in the quarter was a $30 million reduction in debt, which lowered the debt to capital ratio by 130 basis points, to 55.5 percent. On a comparative basis to last year, capital expenditures declined approximately 16 percent during the second quarter and 26 percent for the first half of the year, excluding SGB which was acquired in June 2000. Due in large part to seasonality, working capital increased in the first half of the year compared with year-end. This situation is expected to reverse in the second half when the Company historically generates a substantial amount of its cash flow.
EVA(r) -- Significant progress was made in the quarter toward full implementation of the Stern Stewart & Co. Economic Value Added program for financial measurement and incentive compensation. Training is underway within all operations of the company, new EVA-based financial models are being implemented, and an EVA incentive compensation plan is being evaluated to begin January 1, 2002. These efforts are expected to generate improved returns on invested capital in future quarters.
Harsco has scheduled a conference call for 2 p.m. ET this afternoon, July 17, to discuss its second quarter 2001 results and respond to questions from the investment community. The conference call will be broadcast live through the Harsco Corporation Web site at www.harsco.com and through www.streetevents.com. The call will also be available by telephone by dialing 800-633-8298, or 212-346-6501 from outside the United States. Participants are asked to dial in at least five minutes prior to the call. A replay of the call will be available via telephone from 4 p.m. ET on Tuesday, July 17 until 4 p.m. ET Saturday, July 21. The replay dial-in number is 800-633-8284, or 858-587-5842 from outside the United States. The passcode is 19195485. The replay will also be available through the Web sites noted above.
Harsco Corporation is a $2 billion worldwide industrial services and products company serving the infrastructure development, steel, railway transportation, gas and energy industries. The company employs more than 20,000 people in 40 countries. Additional information about Harsco can be found at www.harsco.com.
The nature of Harsco's operations and the many countries in which it operates subject it to changing economic, competitive, regulatory, and technological conditions, risks, and uncertainties. In accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Harsco provides the following cautionary remarks regarding important factors which, among others, could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied herein. These include statements about our management confidence and strategies for performance; expectations for new and existing products, technologies, and opportunities; and expectations for market segment and industry growth, sales, earnings, and other financial performance measures.
These factors include, but are not limited to: (1) changes in the worldwide business environment in which the Company operates, including general economic conditions, particularly in the mill service, infrastructure and industrial gas markets; currency exchange rates; interest rates; and capital costs; (2) changes in governmental laws and regulations, including taxes; (3) market and competitive changes, including pricing pressures, market demand and acceptance for new products, services, and technologies; (4) effects of unstable governments and business conditions in emerging economies; and (5) other risk factors listed from time to time in the Company's SEC reports. The Company does not intend to update this information and disclaims any legal liability to the contrary.
Harsco Corporation
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(In thousands, Three Months Ended Six Months Ended
except per June 30 June 30
share amounts) 2001 2000 2001 2000
---------------------- -------- -------- ---------- --------
Revenues:
Service sales (a) $332,185 $256,328 $ 657,249 $487,577
Product sales (a) 200,027 209,248 401,175 435,453
Other 132 236 558 439
-------- -------- ---------- --------
Total revenues 532,344 465,812 1,058,982 923,469
-------- -------- ---------- --------
Costs and expenses:
Cost of services
sold (a) 237,635 190,453 475,278 369,547
Cost of products
sold (a) 160,893 165,635 329,052 349,360
Selling, general,
and administrative
expenses 79,937 56,265 163,303 110,059
Research and
development expenses 893 1,441 1,478 3,088
Other expense (income) 2 (650) 4,042 (276)
-------- -------- ---------- --------
Total costs and
expenses 479,360 413,144 973,153 831,778
-------- -------- ---------- --------
Operating income 52,984 52,668 85,829 91,691
Equity in income (loss)
of affiliates, net 190 (588) (2,048) (438)
Interest income 1,197 1,262 2,419 2,450
Interest expense (14,262) (8,727) (28,818) (16,217)
-------- -------- ---------- --------
Income before income
taxes and minority
interest 40,109 44,615 57,382 77,486
Provision for income
taxes 14,038 15,615 20,084 27,120
-------- -------- ---------- --------
Income before minority
interest 26,071 29,000 37,298 50,366
Minority interest in
net income 1,366 769 2,452 1,933
-------- -------- ---------- --------
Net income $ 24,705 $ 28,231 $ 34,846 $ 48,433
======== ======== ========== ========
Average shares of
common stock
outstanding 39,828 39,964 39,818 39,989
-------- -------- ---------- --------
Basic earnings per
common share $ .62 $ .71 $ .88 $ 1.21
======== ======== ========== ========
Diluted average shares
of common shares
outstanding 39,933 40,048 39,906 40,067
-------- -------- ---------- --------
Diluted earnings per
common share $ .62 $ .70 $ .87 $ 1.21
======== ======== ========== ========
(a) In order to comply with Emerging Issues Task Force (EITF) Issue
No. 00-10, all shipping and handling costs have been classified
as cost of services sold or as cost of products sold rather than
as reductions of sales. The income statements for the three
months and six months ended June 30, 2000 have been reclassified
to reflect this change. The reclassifications have no effect on
previously reported operating income or net income for the three
months and six months ended June 30, 2000.
Harsco Corporation
CONSOLIDATED BALANCE SHEET (Unaudited)
June 30 December 31
(In thousands) 2001 2000
----------------------------- ----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 57,152 $ 56,422
Receivables 436,711 413,654
Inventories 202,051 199,117
Other current assets 54,830 57,222
----------- -----------
Total current assets 750,744 726,415
=========== ===========
Property, plant and
equipment, net 856,237 896,781
Cost in excess of net assets
of businesses acquired, net 354,736 369,199
Other assets 176,175 188,553
----------- -----------
Total assets $ 2,137,892 $ 2,180,948
=========== ===========
LIABILITIES
Current liabilities:
Notes payable and current maturities $ 63,513 $ 62,295
Accounts payable 156,243 192,148
Accrued compensation 39,182 46,591
Income taxes 40,956 34,783
Other current liabilities 203,595 200,362
----------- -----------
Total current liabilities 503,489 536,179
=========== ===========
Long-term debt 769,287 774,450
Deferred income taxes 91,571 88,480
Other liabilities 105,734 107,660
----------- -----------
Total liabilities 1,470,081 1,506,769
=========== ===========
SHAREHOLDERS' EQUITY
Common stock and additional
paid-in capital 173,627 172,887
Accumulated other comprehensive
income (expense) (132,204) (109,377)
Retained earnings 1,230,388 1,214,659
Treasury stock (604,000) (603,990)
----------- -----------
Total shareholders' equity 667,811 674,179
=========== ===========
Total liabilities and
shareholders' equity $ 2,137,892 $ 2,180,948
=========== ===========
Harsco Corporation
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
(In thousands) 2001 2000 2001 2000
------------------------ -------- --------- -------- ---------
Cash flows from
operating activities:
Net income $ 24,705 $ 28,231 $ 34,846 $ 48,433
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 40,234 32,768 79,508 64,651
Amortization 4,391 3,403 8,718 6,753
Equity in (income) loss
of affiliates, net (190) 588 2,048 438
Dividends or distribu-
tions from affiliates 108 587 108 587
Deferred income taxes (1,020) 7,335 4,843 9,194
Other, net 719 (1,415) 4,615 (551)
Changes in assets and
liabilities, net of
acquisitions and dis-
positions of businesses:
Accounts receivable (6,095) 11,869 (32,211) 4,968
Inventories (912) (12,215) (7,087) (18,332)
Accounts payable (293) 2,911 (22,072) (4,976)
Disbursements related
to discontinued
defense business (282) (390) (468) (617)
Other assets and
liabilities 3,694 524 (5,235) (18,869)
-------- --------- -------- ---------
Net cash provided by
operating activities 65,059 74,196 67,613 91,679
======== ========= ======== =========
Cash flows from investing
activities:
Purchases of property,
plant and equipment (44,241) (38,839) (77,850) (78,046)
Purchase of businesses,
net of cash acquired (4,880) (254,209) (4,880) (263,711)
Proceeds from sales of
businesses 3,650 6,002 3,650 9,745
Proceeds from sale of
property, plant and
equipment 10,888 1,609 13,923 2,402
Other investing
activities 41 (21) 50 101
-------- --------- -------- ---------
Net cash (used) by
investing activities (34,542) (285,458) (65,107) (329,509)
======== ========= ======== =========
Cash flows from financing
activities:
Short-term and long-term
debt, net (23,454) 246,443 24,034 282,320
Cash dividends paid on
common stock (9,556) (9,387) (19,109) (18,808)
Common stock issued-options 508 588 659 853
Common stock acquired
for treasury -- -- (50) (3,768)
Other financing activities (1,074) (2,366) (2,280) (3,114)
-------- --------- -------- ---------
Net cash provided (used)
by financing activities (33,576) 235,278 3,254 257,483
======== ========= ======== =========
Effect of exchange rate
changes on cash (1,156) (1,682) (5,030) (2,737)
-------- --------- -------- ---------
Net increase (decrease)
in cash and cash
equivalents (4,215) 22,334 730 16,916
Cash and cash equivalents
at beginning of period 61,367 45,848 56,422 51,266
======== ========= ======== =========
Cash and cash equivalents
at end of period $ 57,152 $ 68,182 $ 57,152 $ 68,182
======== ========= ======== =========
Harsco Corporation
REVIEW OF OPERATIONS BY SEGMENT (Unaudited)
(In millions)
Infra- Gas and S3- Gen'l Consol-
struc- Mill Fluid Networks Corpo- idated
ture Svcs Control LLC rate Totals
====== ====== ====== ===== ===== =====
Three Months Ended
June 30, 2001
Net sales to
unaffiliated
customers $225.8 $185.2 $121.2 $ -- $ -- $532.2
====== ====== ====== ===== ===== =====
Operating income $ 23.3 $ 21.6 $ 8.1 $ -- $ -- $ 53.0
Equity in income
(loss) of
affiliates, net 0.4 -- -- (0.2) -- 0.2
Interest income 0.1 1.0 0.1 -- -- 1.2
Interest expense (8.9) (2.5) (0.5) -- (2.4) (14.3)
Income tax
(expense)
benefit (6.1) (6.1) (2.7) 0.1 0.8 (14.0)
Minority interest
in net income (0.1) (1.3) -- -- -- (1.4)
------ ------ ------ ----- ----- ------
Segment net income
(loss) $ 8.7 $ 12.7 $ 5.0 $(0.1) $(1.6) $ 24.7
====== ====== ====== ===== ===== ======
Three Months Ended
June 30, 2000
Net sales to
unaffiliated
customers (a) $138.3 $197.3 $130.0 $ -- $ -- $465.6
====== ====== ====== ===== ===== ======
Operating income $ 14.5 $ 27.2 $ 10.7 $ -- $0.3 $ 52.7
Equity in income
(loss) of
affiliates, net -- 0.3 -- (0.9) -- (0.6)
Interest income 0.2 1.0 -- -- -- 1.2
Interest expense (2.3) (2.3) (1.0) -- (3.1) (8.7)
Income tax
(expense)
benefit (4.5) (8.7) (3.5) 0.3 0.8 (15.6)
Minority interest
in net income (0.1) (0.7) -- -- -- (0.8)
------ ------ ------ ----- ----- ------
Segment net income
(loss) $ 7.8 $ 16.8 $ 6.2 $(0.6) $(2.0) $ 28.2
====== ====== ====== ===== ===== ======
Six Months Ended
June 30, 2001
Net sales to
unaffiliated
customers $440.9 $368.3 $249.2 $ -- $ -- $1,058.4
====== ====== ====== ===== ===== ========
Operating income
(loss) $ 31.5 $ 40.1 $ 14.4 $ -- $(0.2) $ 85.8
Equity in income
(loss) of
affiliates, net 0.8 0.1 -- (2.9) -- (2.0)
Interest income 0.3 2.0 0.1 -- -- 2.4
Interest expense (18.0) (4.7) (0.8) -- (5.3) (28.8)
Income tax
(expense)
benefit (5.9) (11.3) (5.1) 1.0 1.2 (20.1)
Minority interest
in net income (0.1) (2.4) -- -- -- (2.5)
------ ------ ------ ----- ----- --------
Segment net income
(loss) $ 8.6 $ 23.8 $ 8.6 $(1.9) $(4.3) $ 34.8
====== ====== ====== ===== ===== ========
Six Months Ended
June 30, 2000
Net sales to
unaffiliated
customers (a) $262.1 $390.8 $270.1 $ -- $ -- $ 923.0
====== ====== ====== ===== ===== =======
Operating income
(loss) $ 23.3 $ 47.0 $ 21.8 $ -- $(0.5) $ 91.6
Equity in income
(loss) of
affiliates, net -- 0.5 -- (0.9) -- (0.4)
Interest income 0.2 2.1 0.1 -- -- 2.4
Interest expense (4.1) (4.4) (2.0) -- (5.7) (16.2)
Income tax
(expense)
benefit (6.9) (15.4) (7.3) 0.3 2.2 (27.1)
Minority interest
in net income (0.1) (1.8) -- -- -- (1.9)
------ ------ ------ ----- ----- --------
Segment net income
(loss) $ 12.4 $ 28.0 $ 12.6 $(0.6) $(4.0) $ 48.4
====== ====== ====== ===== ===== =======
(a) In order to comply with Emerging Issues Task Force (EITF) Issue
No. 00-10, all shipping and handling costs have been classified
as cost of services sold or as cost of products sold rather than
as reductions of sales. The income statement for the three months
ended June 30, 2000 has been reclassified to reflect this change.
The reclassification has no effect on previously reported
operating income or net income for the three months ended June
30, 2000.
Harsco Corporation
REVIEW OF OPERATIONS BY SEGMENT - Addendum (Unaudited)
(In millions)
Infra- Gas and S3- Gen'l Consol-
struc- Mill Fluid Networks Corpo- idated
ture Svcs Control LLC rate Totals
====== ====== ====== ===== ===== =====
Three Months Ended
June 30, 2001
Net sales to
unaffiliated
customers $225.8 $185.2 $121.2 $ -- $ -- $532.2
====== ====== ====== ====== ====== ======
Operating income
(loss) before non-
recurring items $ 23.1 $ 23.6 $ 8.3 $ -- $ (0.3) $ 54.7
Non-recurring items 0.2 (2.0) (0.2) (0.2) 0.3 (1.9)
------ ------ ------ ------ ------ ------
Operating income 23.3 21.6 8.1 -- -- 53.0(a)
Equity in income
(loss) of
affiliates, net 0.4 -- -- (0.2) -- 0.2
Interest income 0.1 1.0 0.1 -- -- 1.2
Interest expense (8.9) (2.5) (0.5) -- (2.4) (14.3)
Income tax
(expense) benefit (6.1) (6.1) (2.7) 0.1 0.8 (14.0)
Minority interest
in net income (0.1) (1.3) -- -- -- (1.4)
------ ------ ------ ------ ------ ------
Segment net income
(loss) $ 8.7 $ 12.7 $ 5.0 $ (0.1) $ (1.6) $ 24.7
====== ====== ====== ====== ====== ======
Three Months Ended
June 30, 2000
Net sales to
unaffiliated
customers (b) $138.3 $197.3 $130.0 $ -- $ -- $465.6
====== ====== ====== ====== ====== ======
Operating income $ 14.5 $ 27.2 $ 10.7 $ -- $ 0.3 $ 52.7
Equity in income
(loss) of
affiliates, net -- 0.3 -- (0.9) -- (0.6)
Interest income 0.2 1.0 -- -- -- 1.2
Interest expense (2.3) (2.3) (1.0) -- (3.1) (8.7)
Income tax
(expense) benefit (4.5) (8.7) (3.5) 0.3 0.8 (15.6)
Minority interest
in net income (0.1) (0.7) -- -- -- (0.8)
------ ------ ------ ------ ------ ------
Segment net income
(loss) $ 7.8 $ 16.8 $ 6.2 $ (0.6) $ (2.0) $ 28.2
====== ====== ====== ====== ====== ======
Six Months Ended
June 30, 2001
Net sales to
unaffiliated
customers $440.9 $368.3 $249.2 $ -- $ -- $1,058.4
====== ====== ====== ====== ====== ========
Operating income
(loss) before non-
recurring items $ 34.9 $ 44.5 $ 15.5 $ -- $ 0.4 $ 95.3
Non-recurring items (3.4) (4.4) (1.1) (2.9) (0.6) (12.4)
------ ------ ------ ------ ------ ------
Operating income
(loss) 31.5 40.1 14.4 -- (0.2) 85.8(a)
Equity in income
(loss) of
affiliates, net 0.8 0.1 -- (2.9) -- (2.0)
Interest income 0.3 2.0 0.1 -- -- 2.4
Interest expense (18.0) (4.7) (0.8) -- (5.3) (28.8)
Income tax
(expense) benefit (5.9) (11.3) (5.1) 1.0 1.2 (20.1)
Minority interest
in net income (0.1) (2.4) -- -- -- (2.5)
------ ------ ------ ------ ------ ------
Segment net income
(loss) $ 8.6 $ 23.8 $ 8.6 $ (1.9) $ (4.3) $34.8
====== ====== ====== ====== ====== =====
Six Months Ended
June 30, 2001
Net sales to
unaffiliated
customers (b) $262.1 $390.8 $270.1 $ -- $ -- $923.0
====== ====== ====== ====== ====== ======
Operating income
(loss) $ 23.3 $ 47.0 $ 21.8 $ -- $ (0.5) $ 91.6
Equity in income
(loss) of
affiliates, net -- 0.5 -- (0.9) -- (0.4)
Interest income 0.2 2.1 0.1 -- -- 2.4
Interest expense (4.1) (4.4) (2.0) -- (5.7) (16.2)
Income tax
(expense) benefit (6.9) (15.4) (7.3) 0.3 2.2 (27.1)
Minority interest
in net income (0.1) (1.8) -- -- -- (1.9)
------ ------ ------ ------ ------ ------
Segment net income
(loss) $ 12.4 $ 28.0 $ 12.6 $ (0.6) $ (4.0) $ 48.4
====== ====== ====== ====== ====== ======
(a) Excludes $0.2 million of losses for S3Networks, LLC that are
included as non-recurring items above. The $0.2 million is
included in Equity in income (loss) of affiliates, net.
(b) In order to comply with Emerging Issues Task Force (EITF) Issue
No. 00-10, all shipping and handling costs have been classified
as cost of services sold or as cost of products sold rather than
as reductions of sales. The income statement for the three months
ended June 30, 2000 has been reclassified to reflect this change.
The reclassification has no effect on previously reported
operating income or net income for the three months ended June
30, 2000.