HARRISBURG, Pa., Jan. 31, 2002 (PRIMEZONE) -- Worldwide industrial services and products company Harsco Corporation (NYSE:HSC) today reported fourth quarter 2001 diluted earnings per share of $0.63, before net unusual costs, special charges and gains. Excluding these special items, income was $25.3 million, down slightly from net income of $26.1 million in the fourth quarter of 2000. After-tax net unusual costs, special charges and gains totaled $15.3 million, or $0.38 per share, related principally to plant and facility closures, the sale of underperforming product lines, severance costs, increased bad-debt reserves for customer bankruptcies, and asset write-downs. Including these special items, fourth quarter net income was $10.0 million, or $0.25 per share.
Revenues in the quarter were $519 million, compared with $539 million in the prior year. Adjusting for the effects of negative foreign exchange translation, revenues in the quarter would have been $526 million. Negative foreign exchange translation also lowered pre-tax income by approximately $2.5 million, or $.04 per share.
For the full year 2001, diluted earnings per share were $2.37 and income was $94.9 million, before net unusual costs, special charges and gains. After-tax net unusual costs, special charges and gains totaled $23.2 million, or $0.58 per share. Including these special items, net income for the year was $71.7 million, or $1.79 per share. Revenues totaled a record $2.1 billion, up 5 percent over 2000. Without the negative effect of foreign exchange translation, revenues would have been up approximately 7 percent. Negative foreign exchange translation also lowered operating income by approximately $6.7 million, or $0.11 per share, in 2001.
Commenting on the Company's performance, Harsco Chairman, President and Chief Executive Officer Derek C. Hathaway said, "Given the state of the economy and the recessionary environment, Harsco's businesses performed relatively well, validating our aggressive near-term actions to deal with economic realities while maintaining our long-term strategies for growth. We will continue to focus on our industrial services businesses, expand our global market leadership and maintain our sound financial position."
Fourth Quarter Business Segment Review
Infrastructure -- Performance from this segment was mixed, with the services businesses posting good results, while the manufacturing businesses were weaker compared with last year's fourth quarter. Operating income, excluding net unusual income of $0.4 million, was $22.5 million, down 12 percent from last year's fourth quarter. Sales were down 3 percent in the quarter.
Demand for SGB's international scaffolding, shoring, forming and access products continued to be strong. Results in the North American Patent Construction Systems business were slightly lower due to economic uncertainties in the fourth quarter and the related deferral of several planned construction projects. IKG's industrial grating business continued to be adversely affected by slower U.S. manufacturing activity. To improve IKG's performance going forward, the Company has closed two plants and sold three product lines, including the January 2002 sale of the bridge decking business. Harsco Track Technologies performance was also down for the quarter due to lower spending on track maintenance-of-way repair parts and equipment by the domestic railroads. As a result of these combined factors, fourth quarter margins were 10.3 percent compared with 11.3 percent last year.
Mill Services -- Difficult market conditions, including mill shutdowns, lower production and customer bankruptcies, particularly in North America, and the continuing appreciation of the U.S. dollar created a challenging environment for the Mill Services segment. Global diversity, stringent cost controls, internal process improvements, a broad service offering and a continuing positive contribution from the Reed Minerals roofing granules business enabled this segment to post consistent results under difficult conditions.
Sales remained even with last year, but would have been up 3 percent if not for the effect of unfavorable foreign exchange translation. Operating income, excluding $21.7 million of pre-tax net unusual costs, special charges and gains, was $21.4 million. Excluding these special items, margins were 12.0 percent compared with last year's 12.8 percent. Foreign exchange translation negatively impacted operating income by $1.6 million.
Gas and Fluid Control -- The performance of this segment continued to be negatively impacted by the domestic recession and an increasingly competitive business environment affecting pricing and demand. Sales in the segment declined by 10 percent in the quarter over last year. Operating income, before $4.9 million of pre-tax net unusual costs, special charges and gains, declined 23 percent to $4.6 million. Margins declined by 60 basis points.
Financial Position
For the year 2001, excellent progress was made toward the Company's previously stated strategic financial objectives. Cash flow from operations exceeded $240 million, and an additional $36 million was generated from asset sales. This allowed the Company to reduce debt by some $75 million in 2001 and lower its debt-to-capital ratio by 280 basis points. Further, 2001 capital expenditures were reduced by 13 percent, and by 21 percent when adjusted for the acquisition of SGB in mid-year 2000.
The Company enters 2002 with the strategic objective of reducing debt by another $100 million in the year. This will be accomplished by generating historically strong levels of operating cash flow coupled with a further $50 million in cash from targeted asset sales. The Company also intends to continue its initiatives for improved working capital efficiency and lower capital spending.
The year 2002 will be Harsco's first year of full implementation of the Stern Stewart Economic Value Added (EVA(r)) program for financial measurement, decision making and incentive compensation. The Company has taken action to freeze all Company Officer salaries for 2002 at 2001 levels. Future incentive compensation will be based on EVA improvement results. The Company expects its EVA implementation to generate additional momentum toward its objectives for improved returns on invested capital in 2002 and beyond.
Harsco has scheduled a conference call for 2 p.m. ET this afternoon, January 31, to discuss its fourth 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. 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 advised to dial in at least five minutes prior to the call. Replays will be available via both the Harsco Web site and by telephone, beginning approximately 5 p.m. ET on Thursday, January 31 until 4:30 p.m. ET Thursday, February 7. The telephone replay dial-in number is (800) 642-1687, or (706) 645-9291 from outside the United States and Canada. Enter Conference ID number 2852390.
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 is a diversified provider of market-leading industrial services and products serving the worldwide infrastructure development, steel and metals, railway transportation, and gas and energy industries. The company employs approximately 20,000 people in 40 countries of operation. Additional information can be found at www.harsco.com
Harsco Corporation
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(In thousands, Three Months Ended Twelve Months Ended
except per December 31 December 31
share amounts) 2001 2000 2001 2000
---------- ---------- ---------- ----------
Revenues:
Service sales $ 334,433 $ 321,963 $1,323,000 $1,140,922
Product sales 183,401 216,931 784,111 862,465
Other 787 511 1,363 1,354
---------- ---------- ---------- ----------
Total revenues 518,621 539,405 2,108,474 2,004,741
---------- ---------- ---------- ----------
Costs and expenses:
Cost of
services sold 240,111 229,110 954,417 840,501
Cost of
products sold 148,662 174,669 640,037 688,385
Selling, general,
and administrative
expenses 83,627 79,427 322,934 274,079
Research and
development
expenses 1,086 1,288 3,981 5,714
Other expense 18,898 606 23,490 1,334
---------- ---------- ---------- ----------
Total costs
and expenses 492,384 485,100 1,944,859 1,810,013
---------- ---------- ---------- ----------
Operating income 26,237 54,305 163,615 194,728
Equity in income
(loss) of
affiliates, net (29) (1,000) (1,852) (2,020)
Interest income 1,037 1,926 5,589 5,987
Interest expense (11,687) (17,234) (53,557) (50,104)
---------- ---------- ---------- ----------
Income before
income taxes and
minority interest 15,558 37,997 113,795 148,591
Provision for
income taxes 4,073 10,309 36,982 46,805
---------- ---------- ---------- ----------
Income before
minority interest 11,485 27,688 76,813 101,786
Minority interest
in net income 1,442 1,630 5,088 4,983
---------- ---------- ---------- ----------
Net income $ 10,043 $ 26,058 $ 71,725 $ 96,803
---------- ---------- ---------- ----------
Average shares of
common stock
outstanding 39,967 39,887 39,876 39,964
---------- ---------- ---------- ----------
Basic earnings per
common share $ .25 $ .65 $ 1.80 $ 2.42
========== ========== ========== ==========
Diluted average
shares of common
shares outstanding 40,293 39,896 40,066 40,022
========== ========== ========== ==========
Diluted earnings
per common share $ .25 $ .65 $ 1.79 $ 2.42
========== ========== ========== ==========
Harsco Corporation
CONSOLIDATED BALANCE SHEET (Unaudited)
December 31 December 31
(In thousands) 2001 2000
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 67,409 $ 56,422
Accounts Receivable, net 396,185 413,654
Inventories 183,812 199,117
Other current assets 68,661 57,222
----------- -----------
Total current assets 716,067 726,415
----------- -----------
Property, plant and equipment, net 840,489 896,781
Cost in excess of net assets
of businesses acquired, net 353,564 369,199
Other assets 180,646 188,553
----------- -----------
Total assets $ 2,090,766 $ 2,180,948
=========== ===========
LIABILITIES
Current liabilities:
Short-term borrowings $ 29,300 $ 47,676
Current maturities of long-term debt 12,471 14,619
Accounts payable 169,434 192,148
Accrued compensation 37,757 46,591
Income taxes 35,523 34,783
Dividends payable 9,996 9,553
Other current liabilities 180,193 190,809
----------- -----------
Total current liabilities 474,674 536,179
----------- -----------
Long-term debt 720,197 774,450
Deferred income taxes 103,082 88,480
Insurance liabilities 49,019 46,988
Other liabilities 57,621 60,672
----------- -----------
Total liabilities 1,404,593 1,506,769
=========== ===========
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock 83,106 82,887
Additional paid-in capital 94,597 90,000
Accumulated other
comprehensive income (expense) (135,263) (109,377)
Retained earnings 1,247,680 1,214,659
----------- -----------
1,290,120 1,278,169
Treasury stock (603,947) (603,990)
----------- -----------
Total shareholders' equity 686,173 674,179
=========== ===========
Total liabilities and
shareholders' equity $ 2,090,766 $ 2,180,948
=========== ===========
HARSCO CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
(In thousands) 2001 2000 2001 2000
========= ========= ========= =========
Cash flows from
operating activities:
Net income $ 10,043 $ 26,058 $ 71,725 $ 96,803
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 39,376 37,685 159,157 141,128
Amortization 4,296 5,867 17,374 17,971
Equity in (income) loss
of affiliates, net 29 1,000 1,852 2,020
Dividends or
distributions from
affiliates 50 1,027 895 1,729
Other (income) and
expenses 15,590 887 18,940 3,397
Other, net (2,671) (948) (1,049) (804)
Changes in assets and
liabilities, net of
acquisitions and
dispositions of
businesses:
Accounts receivable 58,112 16,739 12,352 17,811
Inventories 10,324 30,087 11,893 966
Accounts payable 13,751 (3,187) (11,744) 10,193
Net disbursements
related to
discontinued
defense business (391) (150) (1,328) (12,012)
Other assets and
liabilities (41,603) (16,530) (39,466) (19,754)
--------- --------- --------- ---------
Net cash provided by
operating activities 106,906 98,535 240,601 259,448
========= ========= ========= =========
Cash flows from
investing activities:
Purchases of property,
plant and equipment (38,759) (48,004) (156,073) (180,048)
Purchase of businesses,
net of cash acquired -- (904) (4,914) (302,461)
Proceeds from sale
of assets 10,742 4,877 35,668 22,469
Other investing
activities 90 110 106 988
--------- --------- --------- ---------
Net cash (used) by
investing activities (27,927) (43,921) (125,213) (459,052)
========= ========= ========= =========
Cash flows from
financing activities:
Short-term borrowings,
net 4,975 (50,100) (15,181) 146,552
Current maturities
and long-term debt:
Additions 40,208 316,017 195,678 562,993
Reductions (101,749) (335,888) (241,862) (448,366)
Cash dividends paid
on common stock (9,591) (9,393) (38,261) (37,594)
Common stock issued
-options 622 38 4,773 1,792
Common stock acquired
for treasury -- (4,149) (167) (7,917)
Other financing
activities (1,441) (2,907) (4,170) (6,714)
--------- --------- --------- ---------
Net cash provided (used)
by financing activities (66,976) (86,382) (99,190) 210,746
========= ========= ========= =========
Effect of exchange rate
changes on cash (422) 283 (5,211) (5,986)
--------- --------- --------- ---------
Net increase (decrease)
in cash and
cash equivalents 11,581 (31,485) 10,987 5,156
Cash and cash equivalents
at beginning of period 55,828 87,907 56,422 51,266
========= ========= ========= =========
Cash and cash equivalents
at end of period $ 67,409 $ 56,422 $ 67,409 $ 56,422
========= ========= ========= =========
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
December 31, 2001
Net sales to
unaffiliated
customers $ 217.8 $ 178.4 $ 121.6 $ -- $ -- $ 517.8
------ ------ ------ ----- ----- -------
Operating income
(loss) $ 22.9 $ (0.3) $ (0.3) $ -- $ 3.9 $ 26.2
Equity in income
(loss) of
affiliates, net (0.1) 0.1 -- -- -- --
Interest income -- 1.0 -- -- 0.1 1.1
Interest expense (8.0) (1.8) (0.5) -- (1.4) (11.7)
Income tax
(expense)
benefit (2.7) 0.6 (0.7) -- (1.3) (4.1)
Minority interest
in net (income)
loss (0.2) (1.4) 0.1 -- -- (1.5)
------ ------ ------ ----- ----- -------
Segment net
income (loss) $ 11.9 $ (1.8) $ (1.4) $ -- $ 1.3 $ 10.0
====== ====== ====== ===== ===== =======
Three Months Ended
December 31, 2000
Net sales to
unaffiliated
customers $ 225.3 $ 178.3 $ 135.3 $ -- $ -- $ 538.9
------ ------ ------ ----- ----- -------
Operating income
(loss) $ 25.5 $ 22.9 $ 6.0 $ -- $ (0.1) $ 54.3
Equity in income
(loss) of
affiliates, net 0.1 0.1 -- (1.2) -- (1.0)
Interest income 0.6 1.3 -- -- -- 1.9
Interest expense (10.7) (3.3) (0.6) -- (2.6) (17.2)
Income tax
(expense)
benefit (5.7) (4.0) (2.1) 0.4 1.1 (10.3)
Minority interest
in net income -- (1.6) -- -- -- (1.6)
------ ------ ------ ----- ----- -------
Segment net
income (loss) $ 9.8 $ 15.4 $ 3.3 $ (0.8) $ (1.6) $ 26.1
====== ====== ====== ===== ===== =======
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
====== ====== ====== ===== ===== =======
Twelve Months Ended
December 31, 2001
Net sales to
unaffiliated
customers $ 887.0 $ 731.0 $ 489.1 $ -- $ -- $2,107.1
------ ------ ------ ----- ----- -------
Operating income $ 79.0 $ 61.3 $ 19.6 $ -- $ 3.7 $ 163.6
Equity in income
(loss) of
affiliates, net 0.9 0.2 -- (2.9) -- (1.8)
Interest income 0.4 4.1 0.1 -- 1.0 5.6
Interest expense (34.5) (8.8) (1.9) -- (8.4) (53.6)
Income tax
(expense)
benefit (14.6) (16.9) (7.5) 1.0 1.0 (37.0)
Minority interest
in net (income)
loss (0.3) (4.9) 0.1 -- -- (5.1)
------ ------ ------ ----- ----- -------
Segment net
income (loss) $ 30.9 $ 35.0 $ 10.4 $ (1.9) $ (2.7) $ 71.7
====== ====== ====== ===== ===== =======
Twelve Months Ended
December 31, 2000
Net sales to
unaffiliated
customers $ 703.6 $ 757.4 $ 542.4 $ -- $ -- $2,003.4
------ ------ ------ ----- ----- -------
Operating income
(loss) $ 62.3 $ 92.6 $ 41.1 $ -- $ (1.3) $ 194.7
Equity in income
(loss) of
affiliates, net 0.6 0.8 -- (3.4) -- (2.0)
Interest income 1.3 4.5 0.1 -- 0.1 6.0
Interest expense (24.1) (10.7) (3.6) -- (11.7) (50.1)
Income tax
(expense)
benefit (13.8) (23.9) (13.7) 1.2 3.4 (46.8)
Minority interest
in net income (0.2) (4.8) -- -- -- (5.0)
------ ------ ------ ----- ----- -------
Segment net
income (loss) $ 26.1 $ 58.5 $ 23.9 $ (2.2) $ (9.5) $ 96.8
====== ====== ====== ===== ===== =======
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
December 31, 2001
Net sales to
unaffiliated
customers $ 217.8 $ 178.4 $ 121.6 $ -- $ -- $ 517.8
------ ------ ------ ----- ----- -------
Operating income
before special
items $ 22.5 $ 21.4 $ 4.6 $ -- $ 0.1 $ 48.6
Net unusual costs,
special (charges)
and gains 0.4 (21.7) (4.9) -- 3.8 (22.4)
------ ------ ------ ----- ----- -------
Operating income
(loss) 22.9 (0.3) (0.3) -- 3.9 26.2
Equity in income
(loss) of
affiliates, net (0.1) 0.1 -- -- -- --
Interest income -- 1.0 -- -- 0.1 1.1
Interest expense (8.0) (1.8) (0.5) -- (1.4) (11.7)
Income tax
(expense)
benefit (2.7) 0.6 (0.7) -- (1.3) (4.1)
Minority interest
in net (income)
loss (0.2) (1.4) 0.1 -- -- (1.5)
------ ------ ------ ----- ----- -------
Segment net
income (loss) $ 11.9 $ (1.8) $ (1.4) $ -- $ 1.3 $ 10.0
====== ====== ====== ===== ===== =======
Three Months Ended
December 31, 2000
Net sales to
unaffiliated
customers $ 225.3 $ 178.3 $ 135.3 $ -- $ -- $ 538.9
------ ------ ------ ----- ----- -------
Operating income
(loss) $ 25.5 $ 22.9 $ 6.0 $ -- $ (0.1) $ 54.3
Equity in income
(loss) of
affiliates, net 0.1 0.1 -- (1.2) -- (1.0)
Interest income 0.6 1.3 -- -- -- 1.9
Interest expense (10.7) (3.3) (0.6) -- (2.6) (17.2)
Income tax
(expense)
benefit (5.7) (4.0) (2.1) 0.4 1.1 (10.3)
Minority interest
in net income -- (1.6) -- -- -- (1.6)
------ ------ ------ ----- ----- -------
Segment net
income (loss) $ 9.8 $ 15.4 $ 3.3 $ (0.8) $ (1.6) $ 26.1
====== ====== ====== ===== ===== =======
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
====== ====== ====== ===== ===== =======
Twelve Months Ended
December 31, 2001
Net sales to
unaffiliated
customers $ 887.0 $ 731.0 $ 489.1 $ -- $ -- $2,107.1
------ ------ ------ ----- ----- -------
Operating income
before special
items $ 80.7 $ 88.3 $ 25.3 $ -- $ 0.8 $ 195.1
Net unusual
costs, special
(charges) and
gains (1.7) (27.0) (5.7) (2.9) 2.9 (34.4)
------ ------ ------ ----- ----- -------
Operating income 79.0 61.3 19.6 -- 3.7 163.6(a)
Equity in income
(loss) of
affiliates, net 0.9 0.2 -- (2.9) -- (1.8)
Interest income 0.4 4.1 0.1 -- 1.0 5.6
Interest expense (34.5) (8.8) (1.9) -- (8.4) (53.6)
Income tax
(expense)
benefit (14.6) (16.9) (7.5) 1.0 1.0 (37.0)
Minority interest
in net (income)
loss (0.3) (4.9) 0.1 -- -- (5.1)
------ ------ ------ ----- ----- -------
Segment net
income (loss) $ 30.9 $ 35.0 $ 10.4 $ (1.9) $ (2.7) $ 71.7
====== ====== ====== ===== ===== =======
Twelve Months Ended
December 31, 2000
Net sales to
unaffiliated
customers $ 703.6 $ 757.4 $ 542.4 $ -- $ -- $2,003.4
------ ------ ------ ----- ----- -------
Operating income
(loss) $ 62.3 $ 92.6 $ 41.1 $ -- $ (1.3) $ 194.7
Equity in income
(loss) of
affiliates, net 0.6 0.8 -- (3.4) -- (2.0)
Interest income 1.3 4.5 0.1 -- 0.1 6.0
Interest expense (24.1) (10.7) (3.6) -- (11.7) (50.1)
Income tax
(expense)
benefit (13.8) (23.9) (13.7) 1.2 3.4 (46.8)
Minority interest
in net income (0.2) (4.8) -- -- -- (5.0)
------ ------ ------ ----- ----- -------
Segment net
income (loss) $ 26.1 $ 58.5 $ 23.9 $ (2.2) $ (9.5) $ 96.8
====== ====== ====== ===== ===== =======
(a) Excludes $2.9 million of losses for S3Networks, LLC that are
included as special items above. The $2.9 million is included in
Equity in income (loss) of affiliates, net.