HARRISBURG, Pa., Dec. 10, 2001 (PRIMEZONE) -- Addressing the financial community in New York City today, Harsco Corporation's (NYSE:HSC) Chairman, President and CEO Derek C. Hathaway reaffirmed the Company's confidence in its long-term strategies, saying the Company is well-positioned for improved operating results given a medium-term economic upturn.
Mr. Hathaway said Harsco is dealing aggressively with the current economic realities, noting that the Company has achieved sequential earnings improvement through the first three-quarters of 2001. He said the recent action taken by the Harsco Board of Directors to raise the quarterly cash dividend 4.2 percent, Harsco's tenth dividend increase in the past eleven years, provides further evidence of the Company's confidence in future earnings and cash flow. "We will continue to grow the industrial services side of our business; continue our leadership in clearly identified markets; expand our global market share and reach; and maintain a sound and flexible financial position," Mr. Hathaway said.
Joining Mr. Hathaway in detailing the Company's performance were: Salvatore Fazzolari, Senior Vice President, Chief Financial Officer and Treasurer; Paul Coppock, Senior Vice President, Chief Administrative Officer, General Counsel and Secretary; Geoffrey Butler, Senior Vice President - Operations and President, Heckett MultiServ-East Region and SGB Group; Ronald Kaplan, Senior Vice President - Operations and President, Harsco Gas and Fluid Control Group; K. F. Bruch III, President, Heckett MultiServ-West Region; James Mitchell, President, Patent Construction Systems/IKG; and Robert Newman, President, Harsco Track Technologies.
Commenting on Harsco's financial outlook, Mr. Fazzolari said the Company is forecasting 2002 earnings per share (EPS) growth in the range of 10-12 percent over the current consensus estimate for 2001, reflecting aggressive cost management, process improvement initiatives, lower interest expense, and the improved economic climate expected in the second half of 2002. This is despite pre-tax amounts of approximately $20 million ($0.33 per share) in anticipated higher pension expense due to market conditions and approximately $4 million ($0.07 per share) in increased insurance costs, which will be partially offset by an approximately $16 million ($0.27 per share) reduction in goodwill amortization resulting from the Company's adoption of the FASB's Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," at the beginning of the 2002 fiscal year in January.
Revenues are expected to remain essentially even with 2001 due to anticipated divestitures of non-core product lines; continuing weak economic conditions, particularly in the first half of the year; and the possibility of a continued strong U.S. dollar. Excluded from the revenue forecast is the effect of any potential acquisitions.
Reviewing the Company's quarter-by-quarter outlook, Mr. Fazzolari said first quarter 2002 EPS is expected to be down slightly from the prior year period, due primarily to the continuing economic slowdown, particularly in the North American steel industry and the Company's manufacturing businesses. Second quarter EPS is expected to be up 10-12 percent on lower interest expense and expectations for improving operating performance. Third and fourth quarter EPS are expected to be up 12-16 percent as a result of continued lower interest expense and an acceleration in operating performance as economic conditions in Harsco's markets improve. Mr. Fazzolari said other 2002 financial targets include a return on invested capital of 9.5-10 percent, operating margins of 10-10.5 percent, and an EBITDA margin of 18-18.5 percent.
Mr. Fazzolari said the Company's financial priorities for 2002 include:
-- Continued improvement in its discretionary cash flow initiatives
by further reducing capital expenditures, increasing working
capital efficiency, and by the sale of assets, including non-core
businesses.
-- Utilizing discretionary cash flow to reduce debt by a further $100
million and achieving a year-end debt to capital ratio of
approximately 47%.
-- Realizing an additional $50 million from asset sales.
-- Increasing service business sales to 70% of total revenues by the
end of 2002, augmented by acquisitions.
-- Sustaining a 33.5% effective tax rate.
-- Improving EVA(r) performance.
-- Maintaining an overall strong financial position.
Lastly, Mr. Fazzolari said the Company expects 2001 EPS to be in the area of the current First Call consensus estimate of $2.35 a share, excluding net nonrecurring costs and special charges. As mentioned in the Company's third quarter press release, the Company anticipates further net nonrecurring costs and special charges in the fourth quarter of 2001. Mr. Fazzolari said he expects these pre-tax net nonrecurring costs and special charges to be in the range of $15-$20 million, primarily for costs associated with the sale of underperforming assets, exit from certain product lines, increased reserves for current steel industry conditions, and other reorganization expenses.
An archived Webcast of the meeting can be accessed through the Harsco Corporation Web site at www.harsco.com.
Forward-Looking Statements
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; expectations for market segment and industry growth; and expectations for sales, earnings, return on capital, and other financial 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 steel and metals, infrastructure and industrial gas industries; 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 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 of operation. Additional information about Harsco can be found at www.harsco.com.