HARRISBURG, Pa., Oct. 24, 2002 (PRIMEZONE) --
-- Third Quarter GAAP Diluted Earnings Per Share of $0.63
-- Free Cash Flow Totals $102 Million Year-To-Date, Up 685 Percent
from Last Year
-- Debt Reduction of $73 Million Year-To-Date
-- Debt-To-Capital Ratio Down to 47.7 Percent at September 30,
2002
Worldwide industrial services and products company Harsco Corporation (NYSE:HSC) today reported results for the third quarter and first nine months of 2002.
Third Quarter Results
Income and diluted earnings per share (EPS) for the third quarter were as follows:
$ Millions Per Share - Diluted
Sept. 30 Sept. 30 Sept. 30 Sept. 30
Quarter Ending 2002 2001 2002 2001
----- ----- ----- -----
Income from Continuing
Operations $24.7 $27.4 $0.61 $0.68
Income (loss) from
Discontinued
Operations 1.0 (0.6) 0.02 (0.01)
----- ----- ----- -----
Net Income (GAAP Basis) $25.7 $26.8 $0.63 $0.67
===== ===== ===== =====
Reconciliation of Unusual Items to GAAP
Income Excluding Net
Unusual Costs,
Special Charges
and Gains $25.2 $26.7 $0.62 $0.67
Net Gains, After Tax 5.0 2.4 0.12 0.06
Unusual Costs and
Special Charges,
After Tax (4.5) (2.3) (0.11) (0.06)
----- ----- ----- -----
Net Income
(GAAP Basis) $25.7 $26.8 $0.63 $0.67
===== ===== ===== =====
Third quarter net income was negatively affected by higher pension expense of $3.4 million after-tax or $0.08 per share, which offset the elimination of $2.8 million after-tax or $0.07 per share in goodwill amortization under the Company's adoption of SFAS No. 142, "Goodwill and Other Intangible Assets," and a $0.5 million after-tax or $0.01 per share benefit from positive foreign currency translation due to the weaker U.S. dollar.
After-tax net unusual costs, special charges and gains resulted in a net gain of $0.5 million or $0.01 per share in the quarter. This amount includes a gain of $1.8 million after-tax or $0.05 per share on the sale of Heckett MultiServ International's minority equity interest in a state-controlled mill services venture in India. A gain of $1.4 million after-tax or $0.03 per share on the sale of a minor Harsco Track Technologies product line was also realized. These gains were offset by charges related primarily to employee severance costs, exit costs, and other unusual items in the quarter.
Third quarter sales from continuing operations of $511 million equaled those of the prior year period. Positive foreign currency translation increased sales by $10 million.
"This quarter's performance did not quite meet our expectations," said Harsco Chairman, President and Chief Executive Officer Derek C. Hathaway. "Results in the key month of September came in a little lower than envisioned. There were, however, a number of areas with stronger performance. Mill Services posted increased sales and operating income, underpinned by strong cash flows. We are further encouraged by the recently reported plans of some domestic customers to restart certain of their idled operations in the coming months.
"Harsco Track Technologies exceeded last year's results despite a difficult domestic operating environment. New business from the U.K. and China, other international opportunities, and recent indications that the North American market may be stabilizing are positive indicators for the future performance of this business.
"The continued downturn in non-residential construction, which in September hit a six-year low in the U.S., has weakened Patent Construction Systems' market for access equipment rentals. Performance was further impacted by an unexpected delay in the usually strong fall season for electric utility boiler repair and maintenance. SGB's U.K operations also experienced lower rental performance. Other components of our worldwide access solutions business are holding up well. We are countering these difficult market conditions by strategically relocating our rental equipment inventory to more active markets, entering new markets, and by making further headcount reductions to better match market demand. We do not anticipate a rebound in the global access market until the emergence of much stronger confidence in the economic outlook and a favorable resolution of ongoing issues pertaining to 'terrorism insurance' for new high-rise construction.
"The industrial gas control and containment market remains in a multi-year recession. The majority of our Gas and Fluid Control businesses are operating with low backlogs. While we appear to be at or near the bottom of this business cycle, we continue to aggressively cut costs through plant closures, workforce reductions and consolidation, pending definitive signs of an upturn.
"Negotiations were terminated and the decision made to retain a business that was identified in the second quarter as a discontinued operation. There may be opportunities for respectable returns and margins through aggressive cost cutting and some market improvement."
Nine-Month Results
For the first nine months of 2002, income and diluted earnings per share were as follows:
$ Millions Per Share - Diluted
Sept. 30 Sept. 30 Sept. 30 Sept. 30
Nine Months Ending 2002 2001 2002 2001
Income from Continuing
Operations $64.5 $63.6 $1.58 $1.59
Income (loss) from
Discontinued
Operations 1.5 (1.9) 0.04 (0.05)
----- ----- ----- -----
Net Income
(GAAP Basis) $66.0 $61.7 $1.62 $1.54
===== ===== ===== =====
Reconciliation of Unusual Items to GAAP
Income Excluding Net
Unusual Costs, Special
Charges and Gains $68.0 $69.7 $1.67 $1.74
Net Gains, After Tax 8.4 4.7 0.21 0.12
Unusual Costs and
Special Charges,
After Tax (10.4) (12.7) (0.26) (0.32)
----- ----- ----- -----
Net Income
(GAAP Basis) $66.0 $61.7 $1.62 $1.54
===== ===== ===== =====
Revenues from continuing operations for the first nine months of 2002 were $1.48 billion, compared with $1.53 billion for the comparable period last year. Positive foreign currency translation increased sales by $8.5 million.
"Through the first nine months of 2002, we have generated $102 million in free cash flow from operations and asset sales, after capital expenditures and dividends; reduced debt by $73 million; lowered our debt-to-capital ratio by 490 basis points; and reduced net interest expense by $7 million," Mr. Hathaway said. "We expect further significant improvement in free cash flows and debt reduction in the fourth quarter."
Third Quarter Business Segment Review
Infrastructure -- Sales from continuing operations in the Infrastructure segment were down 2 percent in the quarter to $223 million from $228 million last year. Positive foreign currency translation increased sales by $7.5 million. Operating income from continuing operations declined to $17.4 million, including a $0.8 million benefit from foreign currency translation. This compares with operating income from continuing operations of $23.3 million in the prior year, before $1.3 million in net special gains.
Segment performance was negatively impacted by the continued weakness in non-residential construction markets served by the Company's access equipment rental business. The Company believes its market leadership position, strategically located equipment and effective cost management will allow it to weather this uncharacteristically sharp downturn reasonably well. The prospects for a significant near-term rebound, however, are uncertain.
Harsco Track Technologies' operating income and margins both increased during the quarter. The continued growth in export orders validates the strategy for greater international market focus that was begun several years ago. Domestic spending for track maintenance services and equipment appears to be stabilizing after a long period of decline.
Operating margins for the Infrastructure segment declined from last year's 10.2 percent to 7.8 percent, before net special charges. The decline was led by lower utilization rates in access equipment rental.
Mill Services -- Sales increased 7 percent to $197 million from $184 million in last year's third quarter, while operating income from continuing operations, before $0.4 million in net special charges, increased 18 percent to $26.4 million. Operating margins, before special charges, increased 130 basis points to 13.4 percent in the quarter.
Solid performance from services at international mill sites and performance slightly ahead of last year from North American mill services operations both contributed to the stronger showing. With production and utilization rates at U.S. steel mills ahead of last year and production levels around the world holding at stable year-over-year levels, combined with continuing strength in the residential replacement roofing market, the near-term outlook for this segment remains positive.
Gas and Fluid Control -- Third quarter sales from continuing operations were $91 million, even with the second quarter of 2002 but down from $98 million in the third quarter of last year. Operating income from continuing operations, before $0.2 million in net special charges, declined by $0.3 million to $5.3 million. Margins improved by 10 basis points before net special charges, reflecting strong cost controls. Many of this segment's end-markets are expected to remain weak in the near term as continuing softness in industrial production and capital spending show little sign of improvement. The Company believes it will be competitively well positioned to take advantage of an upturn.
Financial Position
The Company continues to generate significant levels of free cash flow. Results for the third quarter and first nine months of 2002 are as follows:
$ Millions $ Millions
3rd Qtr. 3rd Qtr. 9 months 9 months
Free Cash Flow 2002 2001 2002 2001
Cash from Operations $83 $66 $163 $134
Sales of Assets 18 7 55 25
Capital Expenditures (26) (39) (86) (117)
Dividends (10) (10) (30) (29)
--- --- ---- ----
Free Cash Flow $65 $24 $102 $13
=== === ==== ====
Change From Prior Year 171% -- 685% --
=== === ==== ====
Through the first nine months, the Company has reduced debt by $73 million, net interest expense by almost $7 million and its debt-to-capital ratio by 490 basis points, to 47.7 percent. These strong cash flows also enabled the Company to pay its 209th consecutive cash dividend to stockholders in the quarter. The Company believes that the payment of dividends is an important component of the investment return to its stockholders, and remains confident in the ability of future cash flows to sustain this dividend history and record of appropriate increases. The Company traditionally considers increasing its dividend rate during its November Board of Directors meeting.
The fourth quarter is historically the Company's strongest quarter for free cash flow generation. The Company expects this to be the case again this year and anticipates fourth quarter free cash flow, including asset sales, to approximate $60 million to $70 million. With this, the Company anticipates further debt reduction by year-end. Since peaking in 2000, the Company expects to have reduced its total debt by approximately $275 million as of December 31, 2002.
EVA(r) performance in the quarter was down only slightly from last year's third quarter. The Company continued to make progress in its efforts to reduce and more effectively use its capital employed, and ultimately to increase EVA and the corresponding returns on invested capital.
Pension Liabilities
The dramatic third quarter declines in the U.K. equity markets (FTSE 100 index down 20 percent -- the worst quarter in 15 years) and interest rates (down 50 basis points) have significantly reduced the value of the Company's U.K. pension plan assets and materially increased the Company's U.K. pension plan liabilities. These declines unfortunately coincided with the Company's U.K. pension plan measurement date of September 30, 2002.
As a result, the Company's U.K. pension plan is under-funded by approximately $98 million as of the September 30, 2002 measurement date. At December 31, 2002, the Company will be required to recognize an additional minimum liability for both the under-funded position and for reclassification of a prepaid pension asset, as prescribed by accounting standards. The liability will be recorded as a non-cash, net-of-tax reduction to shareholders' equity, and will not affect net income for 2002. Thus, the Company's total non-cash adjustment to equity and the minimum liability at December 31, 2002 for the U.K. pension plan will be approximately $135 million after tax. It is important and essential to note that this adjustment to equity would be fully restored to the Company's Consolidated Balance Sheet when the fair market value of the pension plan assets exceeds the accumulated benefit obligation.
The Company's U.S. defined benefit pension plans are also being adversely affected by financial market conditions. As a result, the Company's U.S. pension plans may be somewhat under-funded as of October 31, 2002, the plans' measurement date. Assuming no further change in U.S. pension plan asset valuations and interest rates from September 30, 2002 to October 31, 2002, the Company would be required to either record a minor fourth-quarter adjustment to shareholders' equity at December 31, 2002, make voluntary cash contributions, or a combination of the two. Final decisions about U.S. pension plan funding will take into consideration the performance of the Company's U.S. pension fund investments in October.
The Company notes that it will be comfortably within its debt covenants and funding requirements after the adjustment to equity is recorded at December 31, 2002. The debt to capital ratio after the equity adjustment is expected to be in the area of 50 percent. There is currently no requirement to contribute additional cash to the plans in 2003 above the comparable 2002 level.
The adverse performance of the financial markets in the third quarter will likely cause the Company's 2003 pre-tax pension expense to increase in the area of $20 million or approximately $0.34 per share. This estimated increase takes into account the negative effects of the Company's contemplated changes in the actuarial assumptions for 2003 used to calculate pension expense, including reductions in the expected long-term rate of return on assets and in assumed discount rates. Future improvements in the financial markets could reverse this trend of increasing pension expense subsequent to 2003.
Outlook
The Mill Services segment is expected to perform with historic consistency in leading the Company's performance in the fourth quarter, reflecting increased steel mill production levels, particularly in the United States. The Company expects the Infrastructure segment's access equipment rental sector to remain soft. Results from the Gas and Fluid Control segment are not expected to show signs of improvement in the short term, with the exception of the specialty gas containment unit which continues to perform positively. Taking into account this mixed backdrop, the Company expects full year 2002 earnings from continuing operations, excluding net unusual costs, special charges and gains, to be in the range of $2.20 to $2.30 per share.
The Company's present view is that 2003 earnings from continuing operations, excluding net unusual costs, special charges and gains and before the inclusion of the estimated increased pension expense of approximately $0.34 per share, will be in the range of $2.65 to $2.75 per share. This view is underpinned by the considerable restructuring of the Company that was undertaken in 2002, some of which will continue into 2003. Full-year free cash flow is expected to exceed $100 million. "We believe that the combination of our already-achieved reduction in worldwide headcount of nearly ten percent, our divestitures of under-performing businesses, and the ongoing sale of other assets brighten the outlook for 2003," Mr. Hathaway said.
As previously announced, Harsco will hold a conference call today at 2:00 p.m. Eastern Time (ET) to discuss its 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 can also be accessed 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 5:00 p.m. ET today until approximately 4:00 p.m. ET Tuesday, October 29. 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 5780132.
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, cash flow, 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, non-residential construction and industrial gas markets; currency exchange rates; interest rates; and capital costs; (2) changes in governmental laws and regulations, including taxes; (3) changes in the performance of equity and bond markets, particularly in the U.S. and U.K., which could affect the valuation of assets in the Company's pension plans and the Company's accounting for pension assets and liabilities; (4) market and competitive changes, including pricing pressures, market demand and acceptance for new products, services, and technologies; (5) effects of unstable governments and business conditions in emerging economies; and (6) 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 industrial services and products company with market-leading businesses serving the worldwide infrastructure development, steel and metals, railway transportation, and gas and energy industries. The Company employs approximately 18,000 people in more than 40 countries of operation. Additional information can be found at www.harsco.com.
Harsco Corporation
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001(a) 2002 2001(a)
--------- --------- ---------- ----------
Revenues from
continuing
operations:
Service sales $ 342,668 $ 331,302 $ 988,226 $ 989,057
Product sales 167,851 178,991 491,241 536,374
--------- --------- ---------- ----------
Total revenues 510,519 510,293 1,479,467 1,525,431
--------- --------- ---------- ----------
Costs and expenses
from continuing
operations:
Cost of services
sold 249,731 239,027 718,839 714,305
Cost of products
sold 134,024 143,327 388,253 431,438
Selling, general,
and administrative
expenses 78,200 73,886 237,223 232,600
Research and
development
expenses 642 1,417 2,206 2,887
Other (income)
expense (137) 323 2,901 4,148
--------- --------- ---------- ----------
Total costs and
expenses 462,460 457,980 1,349,422 1,385,378
--------- --------- ---------- ----------
Operating income
from continuing
operations 48,059 52,313 130,045 140,053
Equity in income
(loss) of
affiliates, net 138 225 428 (1,823)
Interest income 1,008 2,133 3,238 4,552
Interest expense (11,109) (12,919) (33,559) (41,632)
--------- --------- ---------- ----------
Income from
continuing
operations before
income taxes and
minority interest 38,096 41,752 100,152 101,150
Provision for
income taxes 11,736 13,139 30,927 33,929
--------- --------- ---------- ----------
Income from
continuing
operations before
minority interest 26,360 28,613 69,225 67,221
Minority interest
in net income 1,665 1,194 4,698 3,646
--------- --------- ---------- ----------
Income from
continuing
operations 24,695 27,419 64,527 63,575
--------- --------- ---------- ----------
Discontinued
operations:
Loss from
operations of
discontinued
businesses (548) (896) (2,582) (2,912)
Gain on disposal
of discontinued
businesses 2,071 -- 4,939 --
Provision for
income taxes (546) 313 (851) 1,019
--------- --------- ---------- ----------
Income (loss) from
discontinued
operations 977 (583) 1,506 (1,893)
--------- --------- ---------- ----------
Net Income $ 25,672 $ 26,836 $ 66,033 $ 61,682
========= ========= ========== ==========
Average shares of
common stock
outstanding 40,514 39,898 40,304 39,845
Basic earnings per
common share:
Continuing
operations .61 .69 1.60 1.60
Discontinued
operations .02 (.02) .04 (.05)
-------- -------- --------- ---------
Basic earnings per
common share $ .63 $ .67 $ 1.64 $ 1.55
======== ======== ========= =========
Diluted average
shares of common
shares outstanding 40,646 40,153 40,707 39,990
Diluted earnings
per common share:
Continuing
operations .61 .68 1.58 1.59
Discontinued
operations .02 (.01) .04 (.05)
-------- -------- --------- ---------
Diluted earnings
per common share $ .63 $ .67 $ 1.62 $ 1.54
======== ======== ========= =========
(a) In order to comply with the Financial Accounting Standards Board
(FASB) Statement No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," 2001 information has been
reclassified for comparative purposes.
Harsco Corporation
CONSOLIDATED BALANCE SHEET (Unaudited)
(In thousands)
September 30 December 31
2002 2001 (a)
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 76,426 $ 67,407
Accounts receivable, net 423,491 386,252
Inventories 180,524 174,644
Other current assets 73,192 68,546
----------- -----------
Total current assets 753,633 696,849
----------- -----------
Property, plant and
equipment, net 791,010 822,500
Goodwill, net 368,612 353,221
Other assets 193,749 180,439
Assets held for sale 10,173 37,757
----------- -----------
Total assets $ 2,117,177 $ 2,090,766
=========== ===========
LIABILITIES
Current liabilities:
Short-term borrowings $ 15,634 $ 29,560
Current maturities of
long-term debt 9,929 12,422
Accounts payable 160,728 162,481
Accrued compensation 40,066 37,245
Income taxes 34,542 35,061
Dividends payable 10,130 9,996
Other current liabilities 202,816 178,928
----------- -----------
Total current liabilities 473,845 465,693
----------- -----------
Long-term debt 663,144 720,133
Deferred income taxes 120,049 103,082
Insurance liabilities 50,205 49,019
Other liabilities 52,416 57,621
Liabilities associated with
assets held for sale 2,218 9,045
----------- -----------
Total liabilities 1,361,877 1,404,593
----------- -----------
SHAREHOLDERS' EQUITY
Common stock 83,767 83,106
Additional paid-in capital 110,096 94,597
Accumulated other
comprehensive expense (118,201) (135,263)
Retained earnings 1,283,423 1,247,680
----------- -----------
1,359,085 1,290,120
Treasury stock (603,785) (603,947)
Total shareholders' equity 755,300 686,173
----------- -----------
Total liabilities and
shareholders' equity $ 2,117,177 $ 2,090,766
=========== ===========
(a) In order to comply with the Financial Accounting Standards Board
(FASB) Statement No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," 2001 information has been
reclassified for comparative purposes.
Harsco Corporation
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001(a) 2002 2001(a)
-------- -------- --------- ---------
Cash flows from
operating
activities:
Net income $ 25,672 $ 26,836 $ 66,033 $ 61,682
Adjustments to
reconcile net
income to net
cash provided by
operating activities:
Depreciation 39,740 40,273 115,911 119,781
Amortization 407 4,360 1,245 13,078
Equity in (income)
loss of affiliates,
net (138) (225) (428) 1,823
Dividends or
distributions from
affiliates -- 737 144 845
Other, net 457 357 7,684 4,972
Changes in assets
and liabilities, net
of acquisitions and
dispositions of
businesses:
Accounts receivable (4,230) (13,549) (22,851) (45,760)
Inventories (2,225) 8,656 (5,968) 1,569
Accounts payable 16,403 (3,423) (12,713) (25,495)
Net disbursements
related to
discontinued
defense
business (549) (469) (1,054) (937)
Other assets and
liabilities 7,741 2,529 15,678 2,137
-------- -------- --------- ---------
Net cash provided by
operating activities 83,278 66,082 163,681 133,695
-------- -------- --------- ---------
Cash flows from
investing activities:
Purchases of property,
plant and equipment (26,112) (39,464) (86,132) (117,314)
Purchase of businesses,
net of cash acquired (436) (34) (436) (4,914)
Proceeds from sales of
assets 17,720 7,352 54,906 24,926
Other investing
activities 35 (34) 16 16
-------- -------- --------- ---------
Net cash (used) by
investing activities (8,793) (32,180) (31,646) (97,286)
-------- -------- --------- ---------
Cash flows from
financing activities:
Short-term borrowings,
net (20,073) (27,047) (19,553) (20,156)
Current maturities and
long-term debt:
Additions 14,288 48,139 103,093 155,470
Reductions (48,011) (49,925) (190,308) (140,113)
Cash dividends paid
on common stock (10,127) (9,561) (30,156) (28,670)
Common stock
issued-options 282 3,492 13,459 4,151
Common stock acquired
for treasury -- (117) -- (167)
Other financing
activities (289) (449) (3,586) (2,729)
-------- -------- --------- ---------
Net cash provided
(used) by financing
activities (63,930) (35,468) (127,051) (32,214)
-------- -------- --------- ---------
Effect of exchange rate
changes on cash (248) 241 4,034 (4,789)
Net decrease in cash
of discontinued
operations 1 -- 1 --
-------- -------- --------- ---------
Net increase (decrease)
in cash and cash
equivalents 10,308 (1,325) 9,019 (594)
Cash and cash
equivalents at
beginning of period 66,118 57,151 67,407 56,420
-------- -------- --------- ---------
Cash and cash
equivalents at end
of period $ 76,426 $ 55,826 $ 76,426 $ 55,826
======== ======== ========= =========
(a) In order to comply with the Financial Accounting Standards Board
(FASB) Statement No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," 2001 information has been
reclassified for comparative purposes.
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, 2002
Net sales from
continuing
operations to
unaffiliated
customers $222.8 $196.7 $ 91.0 $ -- $ -- $510.5
Operating income
(loss) from
continuing
operations $ 17.4 $ 26.0 $ 5.1 $ -- $ (0.4) $ 48.1
Equity in income
of affiliates,
net -- 0.1 -- -- -- 0.1
Interest income 0.1 1.0 -- -- (0.1) 1.0
Interest expense (7.3) (0.7) (0.1) -- (3.0) (11.1)
Income tax
(expense) benefit (3.0) (8.1) (2.1) -- 1.5 (11.7)
Minority interest
in net income (0.2) (1.5) -- -- -- (1.7)
Segment income
(loss) from
continuing
operations 7.0 16.8 2.9 -- (2.0) 24.7
Income from
discontinued
operations -- -- 1.0 -- -- 1.0
Segment net
income (loss) $ 7.0 $ 16.8 $ 3.9 $ -- $ (2.0) $ 25.7
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(a)
Net sales from
continuing
operations to
unaffiliated
customers $228.2 $184.4 $ 97.7 $ -- $ -- $510.3
Operating income
from continuing
operations $ 24.6 $ 21.5 $ 6.2 $ -- $ -- $ 52.3
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) (0.5) -- (1.7) (13.0)
Income tax
(expense) benefit (6.0) (6.2) (2.0) -- 1.1 (13.1)
Minority interest
in net income -- (1.1) -- -- -- (1.1)
Segment income
from continuing
operations 10.4 13.0 3.7 -- 0.3 27.4
Loss from
discontinued
operations -- -- (0.6) -- -- (0.6)
Segment net income $ 10.4 $ 13.0 $ 3.1 $ -- $ 0.3 $ 26.8
(a) In order to comply with the Financial Accounting Standards Board
(FASB) Statement No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," 2001 information has been
reclassified for comparative purposes.
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, 2002
Net sales from
continuing
operations to
unaffiliated
customers $ 646.2 $ 567.3 $ 266.0 $ -- $ -- $1,479.5
Operating income
(loss) from
continuing
operations $ 46.2 $ 66.7 $ 17.3 $ -- $ (0.1) $ 130.1
Equity in income
of affiliates,
net 0.3 0.1 -- -- -- 0.4
Interest income 0.5 2.6 -- -- 0.1 3.2
Interest expense (21.7) (2.9) (0.2) -- (8.8) (33.6)
Income tax
(expense) benefit (7.4) (20.9) (5.7) -- 3.1 (30.9)
Minority interest
in net (income)
loss (0.5) (4.3) 0.1 -- -- (4.7)
Segment income
(loss) from
continuing
operations 17.4 41.3 11.5 -- (5.7) 64.5
Income from
discontinued
operations -- -- 1.5 -- -- 1.5
Segment net
income (loss) $ 17.4 $ 41.3 $ 13.0 $ -- $ (5.7) $ 66.0
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(a)
Net sales from
continuing
operations to
unaffiliated
customers $ 669.4 $ 552.8 $ 303.2 $ -- $ -- $1,525.4
Operating income
(loss) from
continuing
operations $ 56.1 $ 61.6 $ 22.6 $ -- $ (0.2) $ 140.1
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) (1.2) -- (7.0) (41.7)
Income tax
(expense) benefit (11.9) (17.5) (7.8) 1.0 2.3 (33.9)
Minority interest
in net income (0.1) (3.5) -- -- -- (3.6)
Segment income
(loss) from
continuing
operations 19.0 36.8 13.7 (1.9) (4.0) 63.6
Loss from
discontinued
operations -- -- (1.9) -- -- (1.9)
Segment net
income (loss) $ 19.0 $ 36.8 $ 11.8 $ (1.9) $ (4.0) $ 61.7
(a) In order to comply with the Financial Accounting Standards Board
(FASB) Statement No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," 2001 information has been
reclassified for comparative purposes.
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, 2002
Net sales from
continuing
operations to
unaffiliated
customers $ 222.8 $ 196.7 $ 91.0 $ -- $ -- $ 510.5
Operating income
(loss) from
continuing
operations before
special items $ 17.4 $ 26.4 $ 5.3 $ -- $ (0.2) $ 48.9
Net unusual costs,
special (charges)
gains -- (0.4) (0.2) -- (0.2) (0.8)
Operating income
(loss) from
continuing
operations 17.4 26.0 5.1 -- (0.4) 48.1
Equity in income
of affiliates,
net -- 0.1 -- -- -- 0.1
Interest income 0.1 1.0 -- -- (0.1) 1.0
Interest expense (7.3) (0.7) (0.1) -- (3.0) (11.1)
Income tax
(expense) benefit (3.0) (8.1) (2.1) -- 1.5 (11.7)
Minority interest
in net income (0.2) (1.5) -- -- -- (1.7)
Segment income
(loss) from
continuing
operations 7.0 16.8 2.9 -- (2.0) 24.7
Income (loss) from
discontinued
operations
before special
items -- -- -- -- -- --
Net unusual costs,
special (charges)
gains - after tax -- -- 1.0 -- -- 1.0
Income from
discontinued
operations -- -- 1.0 -- -- 1.0
Segment net
income (loss) $ 7.0 $ 16.8 $ 3.9 $ -- $ (2.0) $ 25.7
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(a)
Net sales from
continuing
operations to
unaffiliated
customers $ 228.2 $ 184.4 $ 97.7 $ -- $ -- $ 510.3
Operating income
from continuing
operations
before special
items $ 23.3 $ 22.4 $ 5.6 $ -- $ 0.4 $ 51.7
Net unusual
costs, special
(charges) gains 1.3 (0.9) 0.6 -- (0.4) 0.6
Operating income
from continuing
operations 24.6 21.5 6.2 -- -- 52.3
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) (0.5) -- (1.7) (13.0)
Income tax
(expense)
benefit (6.0) (6.2) (2.0) -- 1.1 (13.1)
Minority interest
in net income -- (1.1) -- -- -- (1.1)
Segment income
from continuing
operations 10.4 13.0 3.7 -- 0.3 27.4
Loss from
discontinued
operations before
special items -- -- (0.4) -- -- (0.4)
Net unusual costs,
special
(charges)
gains - after tax -- -- (0.2) -- -- (0.2)
Loss from
discontinued
operations -- -- (0.6) -- -- (0.6)
Segment net
income $ 10.4 $ 13.0 $ 3.1 $ -- $ 0.3 $ 26.8
(a) In order to comply with the Financial Accounting Standards Board
(FASB) Statement No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," 2001 information has been
reclassified for comparative purposes.
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, 2002
Net sales from
continuing
operations to
unaffiliated
customers $ 646.2 $ 567.3 $ 266.0 $ -- $ -- $1,479.5
Operating income
(loss) from
continuing
operations
before
special items $ 47.3 $ 71.6 $ 18.6 $ -- $ (0.2) $ 137.3
Net unusual
costs, special
(charges) gains (1.1) (4.9) (1.3) -- 0.1 (7.2)
Operating income
(loss) from
continuing
operations 46.2 66.7 17.3 -- (0.1) 130.1
Equity in income
of affiliates,
net 0.3 0.1 -- -- -- 0.4
Interest income 0.5 2.6 -- -- 0.1 3.2
Interest expense (21.7) (2.9) (0.2) -- (8.8) (33.6)
Income tax
(expense)
benefit (7.4) (20.9) (5.7) -- 3.1 (30.9)
Minority interest
in (net income)
loss (0.5) (4.3) 0.1 -- -- (4.7)
Segment income
(loss) from
continuing
operations 17.4 41.3 11.5 -- (5.7) 64.5
Loss from
discontinued
operations before
special items -- -- (1.3) -- -- (1.3)
Net unusual
costs, special
(charges) gains -
after tax -- -- 2.8 -- -- 2.8
Income from
discontinued
operations -- -- 1.5 -- -- 1.5
Segment net
income (loss) $ 17.4 $ 41.3 $ 13.0 $ -- $ (5.7) $ 66.0
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(a)
Net sales from
continuing
operations to
unaffiliated
customers $ 669.4 $ 552.8 $ 303.2 $ -- $ -- $1,525.4
Operating income
from continuing
operations
before special
items $ 58.2 $ 66.9 $ 22.9 $ -- $ 0.7 $ 148.7
Net unusual
costs, special
(charges) gains (2.1) (5.3) (0.3) (2.9) (0.9) (11.5)
Operating income
(loss) from
continuing
operations 56.1 61.6 22.6 -- (0.2) 140.1(b)
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) (1.2) -- (7.0) (41.7)
Income tax
(expense)
benefit (11.9) (17.5) (7.8) 1.0 2.3 (33.9)
Minority interest
in net income (0.1) (3.5) -- -- -- (3.6)
Segment income
(loss) from
continuing
operations 19.0 36.8 13.7 (1.9) (4.0) 63.6
Loss from
discontinued
operations before
special items -- -- (1.6) -- -- (1.6)
Net unusual costs,
special (charges)
gains - after
tax -- -- (0.3) -- -- (0.3)
Loss from
discontinued
operations -- -- (1.9) -- -- (1.9)
Segment net
income (loss) $ 19.0 $ 36.8 $ 11.8 $ (1.9) $ (4.0) $ 61.7
(a) In order to comply with the Financial Accounting Standards Board
(FASB) Statement No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," 2001 information has been
reclassified for comparative purposes.
(b) 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.
Harsco Corporation
RECONCILIATION OF NET INCOME TO INCOME EXCLUDING NET UNUSUAL COSTS,
SPECIAL CHARGES AND GAINS
(In millions)
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
------- ------- ------- -------
Net income (GAAP basis) $ 25.7 $ 26.8 $ 66.0 $ 61.7
------- ------- ------- -------
Net unusual costs,
special (charges)
and gains:
Gains on sale of assets 6.7 1.2 10.1 3.5
Impaired asset
write-downs (0.3) (0.1) (0.3) (1.8)
Employee termination
benefit costs (2.8) (1.1) (4.8) (5.2)
Costs to exit S3Networks,
LLC equity investment -- -- -- (2.9)
Other exit costs (1.6) (0.5) (2.2) (1.7)
Provision for doubtful
accounts of steel mill
customers in bankruptcy (0.2) -- (3.8) (1.2)
Other items (1.1) 0.9 (1.8) (2.7)
------- ------- ------- -------
Net unusual costs,
special (charges)
and gains, before tax 0.7 0.4 (2.8) (12.0)
Tax (expense) benefit (0.2) (0.3) 0.8 4.0
------- ------- ------- -------
Net unusual costs,
special (charges)
and gains, after tax 0.5 0.1 (2.0) (8.0)
------- ------- ------- -------
Income excluding net
unusual costs,
special (charges)
and gains $ 25.2 $ 26.7 $ 68.0 $ 69.7
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