HARRISBURG, Pa., Oct. 18, 2001 (PRIMEZONE) -- Worldwide industrial services and products company Harsco Corporation (NYSE:HSC) today reported third quarter 2001 diluted earnings per share of $0.67, in line with current consensus estimates and, together with third quarter net income of $26.8 million, up 20 percent over the third quarter of 2000. Revenues in the quarter were $531 million, compared with $542 million in the prior year quarter. Adjusting for the effects of negative foreign exchange translation, revenues would have been $538 million. Negative foreign exchange translation also lowered pre-tax income by approximately $0.7 million, or just over $0.01 per share. Nonrecurring costs in the third quarter of 2001 were primarily offset by one-time gains.
"As has been the case all year, strong results from our global infrastructure services businesses and solid performance from our international mill services operations more than offset the depressed domestic manufacturing sector and mill services business," said Harsco Chairman, President and Chief Executive Officer, Derek C. Hathaway.
For the first nine months of 2001, diluted earnings per share before nonrecurring costs and special charges were $1.74. Income was $69.7 million. Pre-tax, net nonrecurring costs and special charges totaled $12.0 million, or $0.20 per share. Including these charges, net income for the first nine months was $61.7 million, or $1.54 per share. Revenues totaled a record $1.59 billion, up 8.5 percent over the first nine months of 2000. Without the negative effect of foreign exchange translation, revenues would have been up approximately 10.8 percent. Negative foreign exchange translation also lowered pre-tax income by approximately $4.2 million, or $0.07 per share.
"For the remainder of this year and into the early quarters of next, we expect to encounter many of the same economic and market challenges that other companies are facing," Mr. Hathaway said. "In order to position the Company for long-term earnings growth, we have taken more than $19 million in nonrecurring costs and special charges, partially offset by approximately $7 million in one-time gains, through the first nine months of this year. We anticipate further nonrecurring costs and special charges in the fourth quarter. We remain confident that our strategic decisions to gain market leadership, significantly rebalance the business toward industrial services, expand our focus on the global marketplace and maintain our strong cash flows will enable us to continue to make satisfactory progress toward our long-term growth objectives and further enhance stockholder value."
Third Quarter Business Segment Review
Infrastructure -- The Infrastructure segment posted substantial improvement, with operating income increasing 82 percent and sales increasing 6 percent over last year's third quarter, which included a one-time, $3 million asset write-down within the railway track maintenance business. Adjusting for this write-down and a $1.3 million nonrecurring gain in 2001, third quarter results were still up a substantial 41 percent over last year. Operating margins increased 260 basis points to 10.2 percent, up from last year's 7.6 percent, adjusting for the nonrecurring items referred to above. The improved performance of the Infrastructure segment was led by the continuing earnings progress of the Company's SGB international access equipment business, acquired last year, and improvements in the domestic scaffolding and railway track maintenance businesses.
Mill Services -- Solid performance from the international mill services and abrasives and roofing granules businesses offset lower results from North American mill services due to the continuing softness in the domestic steel industry. Sales declined slightly from $188 million to $184 million, with foreign exchange translation lowering sales by approximately $7 million. Operating income, excluding nonrecurring costs and special charges of $0.9 million, was even with last year's results. Negative foreign exchange translation lowered income in the quarter by approximately $1 million. Margins improved by 20 basis points to 12.2 percent, before nonrecurring costs and special charges.
Gas and Fluid Control -- As with most domestic manufacturing operations, this segment continues to be negatively affected by the difficult U.S. manufacturing environment. Sales for the quarter declined by 14 percent and operating income was down 59 percent. Margins declined to 4.6 percent from 9.7 percent in last year's third quarter.
Financial Position
During the quarter, the debt to total capital ratio was reduced by 100 basis points from the previous quarter to 54.5 percent. Cash from operations totaled $66 million, down from $69 million in last year's third quarter. Capital expenditures in the third quarter were $39 million compared with $54 million in the third quarter last year, a 28 percent reduction.
In the fourth quarter, the Company expects that lower quarter-over-quarter capital expenditures, improved working capital management from initiatives currently being implemented, and seasonally strong fourth quarter cash flows will provide significant contribution to its debt reduction efforts. In addition, the Company has generated approximately $25 million in cash from the sale of non-core assets this year, and has targeted an additional $15 million for the fourth quarter, consistent with its objectives for realizing $40 million in cash from asset sales in 2001.
The Company will be adopting the FASB's Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," with the beginning of its 2002 fiscal year in January. While the Company will benefit from the provision that goodwill will no longer be amortized, this benefit will be at least partially offset by anticipated increases in pension expenses and insurance costs in 2002 resulting from the current global economic environment. The Company expects to provide further guidance on this area during the fourth quarter.
Harsco has scheduled a conference call for 2 p.m. ET this afternoon, October 18, to discuss its third 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 800-611-4920, or 706-634-5923 from outside the United States and Canada. Listeners are asked to dial in at least five minutes prior to the call. A replay of the call will be available via telephone from 5 p.m. ET today until 5 p.m. ET Friday, October 26. The replay dial-in number is 800-642-1687, or 706-645-9291 from outside the United States and Canada. Enter Conference ID number 1956509. 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.
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; 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)
Three Months Ended Nine Months Ended
(In thousands, except September 30 September 30
per share amounts) 2001 2000 2001 2000
---------------------- --------- --------- --------- ---------
Revenues:
Service sales (a) $ 331,318 $ 331,382 $ 988,567 $ 818,959
Product sales (a) 199,535 210,081 600,710 645,534
Other 18 404 576 843
--------- --------- --------- ---------
Total revenues 530,871 541,867 1,589,853 1,465,336
--------- --------- --------- ---------
Costs and expenses:
Cost of services sold (a) 239,028 241,844 714,306 611,391
Cost of products sold (a) 162,323 164,356 491,375 513,716
Selling, general, and
administrative expenses 76,004 84,593 239,307 194,652
Research and
development expenses 1,417 1,338 2,895 4,426
Other expense (income) 550 1,004 4,592 728
--------- --------- --------- ---------
Total costs and expenses 479,322 493,135 1,452,475 1,324,913
--------- --------- --------- ---------
Operating income 51,549 48,732 137,378 140,423
Equity in income (loss)
of affiliates, net 225 (582) (1,823) (1,020)
Interest income 2,133 1,611 4,552 4,061
Interest expense (13,052) (16,653) (41,870) (32,870)
--------- --------- --------- ---------
Income before income taxes
and minority interest 40,855 33,108 98,237 110,594
Provision for income taxes 12,825 9,376 32,909 36,496
--------- --------- --------- ---------
Income before
minority interest 28,030 23,732 65,328 74,098
Minority interest
in net income 1,194 1,420 3,646 3,353
--------- --------- --------- ---------
Net income $ 26,836 $ 22,312 $ 61,682 $ 70,745
========= ========= ========= =========
Average shares of
common stock outstanding 39,898 39,992 39,845 39,990
========= ========= ========= =========
Basic earnings
per common share $ .67 $ .56 $ 1.55 $ 1.77
========= ========= ========= =========
Diluted average shares of
common shares outstanding 40,153 40,073 39,990 40,069
========= ========= ========= =========
Diluted earnings
per common share $ .67 $ .56 $ 1.54 $ 1.77
========= ========= ========= =========
(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 nine months ended September 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 nine months ended September 30, 2000.
Harsco Corporation
CONSOLIDATED BALANCE SHEET (Unaudited)
September 30 December 31
(In thousands) 2001 2000
----------------------------------- ----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 55,828 $ 56,422
Receivables 458,336 413,654
Inventories 194,618 199,117
Other current assets 59,200 57,222
----------- -----------
Total current assets 767,982 726,415
----------- -----------
Property, plant and equipment, net 864,658 896,781
Cost in excess of net assets
of businesses acquired, net 360,646 369,199
Other assets 185,849 188,553
=========== ===========
Total assets $ 2,179,135 $ 2,180,948
=========== ===========
LIABILITIES
Current liabilities:
Notes payable and current maturities $ 34,764 $ 62,295
Accounts payable 159,597 192,148
Accrued compensation 44,353 46,591
Income taxes 46,620 34,783
Other current liabilities 203,350 200,362
----------- -----------
Total current liabilities 488,684 536,179
----------- -----------
Long-term debt 793,364 774,450
Deferred income taxes 100,602 88,480
Other liabilities 106,310 107,660
----------- -----------
Total liabilities 1,488,960 1,506,769
----------- -----------
SHAREHOLDERS' EQUITY
Common stock and
additional paid-in capital 177,040 172,887
Accumulated other
comprehensive income (expense) (130,524) (109,377)
Retained earnings 1,247,633 1,214,659
Treasury stock (603,974) (603,990)
----------- -----------
Total shareholders' equity 690,175 674,179
=========== ===========
Total liabilities
and shareholders' equity $ 2,179,135 $ 2,180,948
=========== ===========
Harsco Corporation
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
(In thousands) 2001 2000 2001 2000
---------------------- --------- --------- --------- ---------
Cash flows from
operating activities:
Net income $ 26,836 $ 22,312 $ 61,682 $ 70,745
Adjustments to reconcile
net income to net cash
provided by
operating activities:
Depreciation 40,273 38,792 119,781 103,443
Amortization 4,360 5,351 13,078 12,104
Equity in (income) loss
of affiliates, net (225) 582 1,823 1,020
Dividends or
distributions
from affiliates 737 115 845 702
Deferred income taxes 7,311 4,148 12,154 13,342
Other, net 357 3,205 4,972 2,654
Changes in assets and
liabilities, net of
acquisitions and
dispositions of businesses:
Accounts receivable (13,549) (3,896) (45,760) 1,072
Inventories 8,656 (10,789) 1,569 (29,121)
Accounts payable (3,423) 18,356 (25,495) 13,380
Net disbursements
related to
discontinued defense (469) (11,245) (937) (11,862)
business
Other assets
and liabilities (4,782) 2,303 (10,017) (16,566)
--------- --------- --------- ---------
Net cash provided by
operating activities 66,082 69,234 133,695 160,913
--------- --------- --------- ---------
Cash flows from
investing activities:
Purchases of property,
plant and equipment (39,464) (53,998) (117,314) (132,044)
Purchase of businesses,
net of cash acquired (34) (37,846) (4,914) (301,557)
Proceeds from sales
of businesses -- 827 3,650 10,572
Proceeds from sale
of assets 7,353 4,364 21,276 7,020
Other investing activities (34) 1,031 16 878
--------- --------- --------- ---------
Net cash (used) by
investing activities (32,179) (85,622) (97,286) (415,131)
--------- --------- --------- ---------
Cash flows from
financing activities:
Short-term and
long-term debt, net (28,833) 48,830 (4,799) 331,150
Cash dividends paid
on common stock (9,561) (9,393) (28,670) (28,201)
Common stock
issued-options 3,492 901 4,151 1,754
Common stock acquired
for treasury (117) -- (167) (3,768)
Other financing
activities (449) (693) (2,729) (3,807)
--------- --------- --------- ---------
Net cash provided (used)
by financing activities (35,468) 39,645 (32,214) 297,128
--------- --------- --------- ---------
Effect of exchange rate
changes on cash 241 (3,532) (4,789) (6,269)
--------- --------- --------- ---------
Net increase (decrease) in
cash and cash equivalents (1,324) 19,725 (594) 36,641
Cash and cash equivalents
at beginning of period 57,152 68,182 56,422 51,266
--------- --------- --------- ---------
Cash and cash equivalents
at end of period $ 55,828 $ 87,907 $ 55,828 $ 87,907
========= ========= ========= =========
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
September 30, 2001
Net sales to
unaffiliated
customers $228.4 $184.2 $118.3 $ -- $ -- $530.9
------ ------ ------ ------ ----- ------
Operating income $ 24.6 $ 21.5 $ 5.4 $ -- $ -- $ 51.5
Equity in income
of affiliates, net 0.2 -- -- -- -- 0.2
Interest income 0.1 1.1 -- -- 0.9 2.1
Interest expense (8.5) (2.3) (0.6) -- (1.7) (13.1)
Income tax
(expense) benefit (6.0) (6.2) (1.7) -- 1.1 (12.8)
Minority interest
in net income -- (1.1) -- -- -- (1.1)
------ ------ ------ ------ ----- ------
Segment net income $ 10.4 $ 13.0 $ 3.1 $ -- $ 0.3 $ 26.8
====== ====== ====== ====== ===== ======
Three Months Ended
September 30, 2000
Net sales to
unaffiliated
customers (a) $216.3 $188.3 $136.9 $ -- $ -- $541.5
------ ------ ------ ------ ----- ------
Operating
income (loss) $ 13.5 $ 22.6 $ 13.3 $ -- $(0.7) $ 48.7
Equity in income
(loss) of
affiliates, net 0.5 0.2 -- (1.3) -- (0.6)
Interest income 0.4 1.1 -- -- 0.1 1.6
Interest expense (9.2) (3.0) (1.0) -- (3.4) (16.6)
Income tax
(expense) benefit (1.2) (4.5) (4.3) 0.5 0.1 (9.4)
Minority interest
in net income (0.1) (1.3) -- -- -- (1.4)
------ ------ ------ ------ ----- ------
Segment net
income (loss) $ 3.9 $ 15.1 $ 8.0 $ (0.8) $(3.9) $ 22.3
====== ====== ====== ====== ===== ======
(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 September 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
September 30, 2000.
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
====== ====== ====== ===== ===== =====
Nine Months Ended
September 30, 2001
Net sales to
unaffiliated
customers $669.2 $552.6 $367.5 $ -- $ -- $1,589.3
------ ------ ------ ---- ---- --------
Operating
income (loss) $ 56.1 $ 61.6 $ 19.9 $ -- $ (0.2) $ 137.4
Equity in income
(loss) of
affiliates, net 1.0 0.1 -- (2.9) -- (1.8)
Interest income 0.4 3.1 0.1 -- 0.9 4.5
Interest expense (26.5) (7.0) (1.4) -- (7.0) (41.9)
Income tax
(expense) benefit (11.9) (17.5) (6.8) 1.0 2.3 (32.9)
Minority interest
in net income (0.1) (3.5) -- -- -- (3.6)
------ ------ ------ ---- ---- -------
Segment net
income (loss) $ 19.0 $ 36.8 $ 11.8 $(1.9) $(4.0) $ 61.7
====== ====== ====== ==== ==== =======
Nine Months Ended
September 30, 2000
Net sales to
unaffiliated
customers (a) $478.4 $579.0 $ 407.1 $ -- $ -- $1,464.5
------ ------ ------ ---- ---- --------
Operating
income (loss) $ 36.8 $ 69.7 $ 35.1 $ -- $(1.2) $ 140.4
Equity in income
(loss) of
affiliates, net 0.5 0.7 -- (2.2) -- (1.0)
Interest income 0.7 3.2 0.1 -- 0.1 4.1
Interest expense (13.4) (7.4) (3.0) -- (9.1) (32.9)
Income tax
(expense) benefit (8.1) (19.9) (11.6) 0.8 2.3 (36.5)
Minority interest
in net income (0.2) (3.2) -- -- -- (3.4)
------ ------ ------ ---- ---- -------
Segment net
income (loss) $ 16.3 $ 43.1 $ 20.6 $(1.4) $(7.9) $ 70.7
====== ====== ====== ==== ==== =======
(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 nine months
ended September 30, 2000 has been reclassified to reflect this
change. The reclassification has no effect on previously reported
operating income or net income for the nine months ended
September 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
September 30, 2001
Net sales to
unaffiliated
customers $228.4 $184.2 $118.3 $ -- $ -- $530.9
------ ------ ------ ----- ---- ------
Operating income
before nonrecurring
items $ 23.3 $ 22.4 $ 5.0 $ -- $ 0.4 $ 51.1
Nonrecurring income
(expense) items 1.3 (0.9) 0.4 -- (0.4) 0.4
------ ------ ------ ----- ---- ------
Operating income 24.6 21.5 5.4 -- -- 51.5
Equity in income
of affiliates, net 0.2 -- -- -- -- 0.2
Interest income 0.1 1.1 -- -- 0.9 2.1
Interest expense (8.5) (2.3) (0.6) -- (1.7) (13.1)
Income tax
(expense) benefit (6.0) (6.2) (1.7) -- 1.1 (12.8)
Minority interest
in net income -- (1.1) -- -- -- (1.1)
------ ------ ------ ----- ---- ------
Segment net income $ 10.4 $ 13.0 $ 3.1 $ -- $ 0.3 $ 26.8
====== ====== ====== ===== ==== ======
Three Months Ended
September 30, 2000
Net sales to
unaffiliated
customers (a) $216.3 $188.3 $136.9 $ -- $ -- $541.5
------ ------ ------ ----- ----- ------
Operating income $ 13.5 $ 22.6 $ 13.3 $ -- $(0.7) $ 48.7
Equity in income
(loss) of
affiliates, net 0.5 0.2 -- (1.3) -- (0.6)
Interest income 0.4 1.1 -- -- 0.1 1.6
Interest expense (9.2) (3.0) (1.0) -- (3.4) (16.6)
Income tax
(expense) benefit (1.2) (4.5) (4.3) 0.5 0.1 (9.4)
Minority interest
in net income (0.1) (1.3) -- -- -- (1.4)
------ ------ ------ ----- ----- ------
Segment net
income (loss) $ 3.9 $ 15.1 $ 8.0 $(0.8) $(3.9) $ 22.3
====== ====== ====== ===== ===== ======
(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 September 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 September 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
====== ====== ====== ===== ===== =====
Nine Months Ended
September 30, 2001
Net sales to
unaffiliated
customers $669.2 $552.6 $367.5 $ -- $ -- $1,589.3
------ ------ ------ ----- ----- --------
Operating income
before nonrecurring
items $ 58.2 $ 66.9 $ 20.7 $ -- $ 0.7 $ 146.5
Nonrecurring
expense items (2.1) (5.3) (0.8) (2.9) (0.9) (12.0)
------ ------ ------ ----- ----- -------
Operating
income (loss) 56.1 61.6 19.9 -- (0.2) 137.4(a)
Equity in income
(loss) of
affiliates, net 1.0 0.1 -- (2.9) -- (1.8)
Interest income 0.4 3.1 0.1 -- 0.9 4.5
Interest expense (26.5) (7.0) (1.4) -- (7.0) (41.9)
Income tax
(expense) benefit (11.9) (17.5) (6.8) 1.0 2.3 (32.9)
Minority interest
in net income (0.1) (3.5) -- -- -- (3.6)
------ ------ ------ ----- ----- -------
Segment net
income (loss) $ 19.0 $ 36.8 $ 11.8 $(1.9) $(4.0) $ 61.7
====== ====== ====== ===== ===== =======
Nine Months Ended
September 30, 2000
Net sales to
unaffiliated
customers (b) $478.4 $579.0 $407.1 $ -- $ -- $1,464.5
------ ------ ------ ----- ----- --------
Operating
income (loss) $ 36.8 $ 69.7 $ 35.1 $ -- $(1.2) $ 140.4
Equity in income
(loss) of
affiliates, net 0.5 0.7 -- (2.2) -- (1.0)
Interest income 0.7 3.2 0.1 -- 0.1 4.1
Interest expense (13.4) (7.4) (3.0) -- (9.1) (32.9)
Income tax
(expense) benefit (8.1) (19.9) (11.6) 0.8 2.3 (36.5)
Minority interest
in net income (0.2) (3.2) -- -- -- (3.4)
------ ------ ------ ----- ----- -------
Segment net
income (loss) $ 16.3 $ 43.1 $ 20.6 $(1.4) $(7.9) $ 70.7
====== ====== ====== ===== ===== =======
(a) Excludes $2.9 million of losses for S3Networks, LLC that are
included as nonrecurring items above. The $2.9 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 nine months
ended September 30, 2000 has been reclassified to reflect this
change. The reclassification has no effect on previously reported
operating income or net income for the nine months ended
September 30, 2000.