Provides Preliminary Third Quarter
Operating Results
Harsco Corporation (NYSE:HSC) (the “Company”) today announced that
it is seeking to raise new senior secured credit facilities (the
“New Credit Facilities”), comprising a $400 million revolving
credit facility and a $550 million term loan B facility. Upon
the closing of the New Credit Facilities, the Company intends to
amend and extend its existing credit facilities, redeem its
existing 5.75% Senior Notes due 2018 (the “Notes”) in accordance
with the indenture governing such Notes and to pay related fees and
expenses.
Goldman Sachs and Citigroup are acting as joint bookrunners and
joint lead arrangers for the New Credit Facilities.
The consummation and actual terms of the New Credit Facilities
are subject to a number of factors, including market conditions,
negotiation and execution of definitive documents and satisfaction
of customary closing conditions. The terms of the New Credit
Facilities could materially differ from those outlined above and
there can be no guarantee that the Company will enter into the New
Credit Facilities or that the Company will redeem the Notes or
refinance its existing credit facilities on favorable terms, or at
all.
This press release shall not constitute an offer to sell or a
solicitation of an offer to purchase the Notes or any other loans
or securities.
Third Quarter and Full Year UpdateFor the third
quarter 2016, the Company currently expects U.S. GAAP operating
income of $29 million. This preliminary expectation compares
with the Company’s previous operating income guidance for the third
quarter of 2016 of $27 million to $32 million. Positive
performance in Metals & Minerals and lower Corporate spending
benefited results compared to prior expectations, offsetting the
impacts in Rail from continued demand weakness within the North
American market. Additionally, Harsco expects to have
generated $60 million of free cash flow in the quarter, with each
operating business contributing positive free cash flow during
Q3. As a result, the Company now expects to be near the
high-end of its prior guidance range for free cash flow of $65
million to $80 million for full year 2016. Adjusted operating
income for the full year 2016 is still expected to be within the
Company’s previous guidance range of $105 million to $120
million. Also, the Company’s net debt decreased more than
$200 million in the third quarter and its net debt to adjusted
EBITDA ratio at quarter-end is expected to approximate 2.2x,
according to the Company's credit agreement, as compared with 2.9x
at the end of the second quarter.
Harsco will provide further information on its performance in
the third quarter of 2016 and its anticipated outlook for the
remainder of year when it reports quarterly financial
results on November 3, 2016. Details on its
scheduled earnings release and conference call are as follows:
- Earnings Release: Thursday, November 3, 2016 before NYSE
market opening via public newswire distribution and the Harsco
Corporation website at www.harsco.com.
- Teleconference: Thursday, November 3, 2016 at 9:00 am
ET. Internet broadcast in listen-only mode at www.harsco.com.
The call can also be accessed by telephone by dialing
(800) 611-4920, or (973) 200-3957 for international
callers. Listeners are advised to dial in approximately five
minutes prior to the call. Enter Conference ID number
87961546.
- Replay: available after completion of the live call at
www.harsco.com, and also by telephone through November 17, 2016 by
dialing (855) 859-2056, (404) 537-3406 or (800) 585-8367.
Forward-Looking StatementsThis press release
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including without
limitation, statements regarding the terms of the offering and the
Notes and the use of proceeds from the offering, that are subject
to risks, uncertainties and other factors that could cause actual
results or outcomes to differ materially from those reflected in
the forward-looking statements. These forward-looking
statements include, but are not limited to, plans, objectives,
expectations and intentions and other statements contained in this
press release that are not historical facts. There are a
number of important factors that could cause the actual results or
outcomes to differ materially from those indicated by these
forward-looking statements, including, without limitation, those
set forth in the risk factors listed from time to time in our
reports filed with the SEC. The Company expressly disclaim
any obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements contained herein as a
result of new information, future events or otherwise.
Factors that could cause actual results to differ, perhaps
materially, from those implied by forward-looking statements
include, but are not limited to: (1) changes in the worldwide
business environment in which the Company operates, including
general economic conditions; (2) changes in currency exchange
rates, interest rates, commodity and fuel costs and capital costs;
(3) changes in the performance of equity and bond markets that
could affect, among other things, the valuation of the assets
in the Company's pension plans and the accounting for pension
assets, liabilities and expenses; (4) changes in governmental laws
and regulations, including environmental, occupational health and
safety, tax and import tariff standards; (5) market and competitive
changes, including pricing pressures, market demand and acceptance
for new products, services and technologies; (6) the Company's
inability or failure to protect its intellectual property rights
from infringement in one or more of the many countries in which the
Company operates; (7) failure to effectively prevent,
detect or recover from breaches in the Company's cybersecurity
infrastructure; (8) unforeseen business disruptions in one or more
of the many countries in which the Company operates due to
political instability, civil disobedience, armed hostilities,
public health issues or other calamities; (9) disruptions
associated with labor disputes and increased operating costs
associated with union organization; (10) the seasonal nature of the
Company's business; (11) the Company's ability to successfully
enter into new contracts and complete new acquisitions or strategic
ventures in the time-frame contemplated, or at all; (12) the
integration of the Company's strategic acquisitions; (13) the
amount and timing of repurchases of the Company's common stock, if
any; (14) the prolonged recovery in global financial and credit
markets and economic conditions generally, which could result in
the Company's customers curtailing development projects,
construction, production and capital expenditures, which, in turn,
could reduce the demand for the Company's products and services
and, accordingly, the Company's revenues, margins and
profitability; (15) the outcome of any disputes with customers,
contractors and subcontractors; (16) the financial condition of the
Company's customers, including the ability of customers (especially
those that may be highly leveraged and those with inadequate
liquidity) to maintain their credit availability; (17) the
Company's ability to successfully implement and receive the
expected benefits of cost-reduction and restructuring initiatives,
including the achievement of expected cost savings in the expected
time frame and the ability to reduce its net debt; (18) the ability
to successfully implement the Company's strategic initiatives and
portfolio optimization and the impact of such initiatives, such as
the Harsco Metals & Minerals Segment's Improvement Plan
("Project Orion"); (19) implementation of environmental remediation
matters; (20) risk and uncertainty associated with intangible
assets; (21) the impact of a transaction, if any, resulting from
the Company's determination to explore strategic options for the
separation of the Harsco Metals & Minerals Segment; and (22)
other risk factors listed from time to time in the Company's SEC
reports. A further discussion of these, along with other
potential risk factors, can be found in Part I, Item 1A, "Risk
Factors," of the Company's Annual Report on Form 10-K for the year
ended December 31, 2015. The Company cautions that these
factors may not be exhaustive and that many of
these factors are beyond the Company's ability to control
or predict. Accordingly, forward-looking statements should
not be relied upon as a prediction of actual results. The
Company undertakes no duty to update forward-looking statements
except as may be required by law.
About Harsco CorporationHarsco Corporation is a
diversified industrial company providing a range of onsite services
and engineered products to the global steel, energy and railway
sectors. Harsco’s common stock is a component of the S&P
SmallCap 600 Index and the Russell 2000 Index. Additional
information can be found at www.harsco.com.
|
HARSCO
CORPORATIONREVIEW OF OPERATIONS BY SEGMENT
(unaudited) |
|
|
Three Months Ended |
|
|
September 30, 2016 |
|
|
(Preliminary Results) |
(In thousands) |
|
Revenues |
|
OperatingIncome
(Loss) |
Harsco Metals &
Minerals |
|
$ |
247,691 |
|
|
$ |
24,066 |
|
Harsco Industrial |
|
63,422 |
|
|
6,312 |
|
Harsco Rail |
|
56,674 |
|
|
4,599 |
|
General Corporate |
|
— |
|
|
(6,401 |
) |
Consolidated
Totals |
|
$ |
367,787 |
|
|
$ |
28,576 |
|
|
|
|
|
|
HARSCO CORPORATIONRECONCILIATION OF
FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES
(unaudited) |
|
|
Three Months Ended |
|
|
September 30, 2016 |
(In thousands) |
|
(Preliminary Results) |
Net cash provided by
operating activities |
|
$ |
76,173 |
|
Less maintenance
capital expenditures (a) |
|
(15,806 |
) |
Less growth capital
expenditures (b) |
|
(1,964 |
) |
Plus capital
expenditures for strategic ventures (c) |
|
17 |
|
Plus total proceeds
from sales of assets (d) |
|
2,063 |
|
Free cash flow |
|
$ |
60,483 |
|
(a) Maintenance capital expenditures are necessary to sustain
the Company’s current revenue streams and include contract
renewal.(b) Growth capital expenditures, for which management has
discretion as to amount, timing and geographic placement, expand
the Company's revenue base and create additional future cash
flow. (c) Capital expenditures for strategic ventures
represent the partner’s share of capital expenditures in certain
ventures consolidated in the Company’s financial statements.(d)
Asset sales are a normal part of the business model, primarily for
the Harsco Metals & Minerals Segment.
The Company's management believes that Free cash flow, which is
a non-U.S. GAAP financial measure, is meaningful to investors
because management reviews cash flows generated from (used in)
operations less capital expenditures net of asset sales
proceeds. It is important to note that free cash flow does
not represent the total residual cash flow available for
discretionary expenditures since other non-discretionary
expenditures, such as mandatory debt service requirements, are not
deducted from the measure. This measure should be considered
in addition to, rather than as a substitute for, other information
provided in accordance with U.S. GAAP.
|
|
|
HARSCO
CORPORATION |
|
|
NET
DEBT (unaudited) |
|
|
|
|
|
September 30, 2016 |
(In thousands) |
|
(Preliminary Results) |
|
|
|
Components of
Debt: |
|
|
Short-term borrowings |
|
$ |
5,279 |
|
Current maturities of long-term
debt |
|
20,760 |
|
Long-term debt |
|
649,511 |
|
Total Debt |
|
675,550 |
|
|
|
|
Less: Cash and
cash equivalents |
|
(79,911 |
) |
|
|
|
Net Debt |
|
$ |
595,639 |
|
|
|
|
HARSCO
CORPORATION |
|
|
RECONCILIATION OF OPERATING INCOME FROM CONTINUING
OPERATIONS AND ADJUSTED EBITDA (unaudited) |
|
|
|
|
|
Three Months Ended |
|
|
September 30, 2016 |
(In thousands) |
|
(Preliminary Results) |
|
|
|
Net loss from
continuing operations, as reported (a) |
|
$ |
(31,169 |
) |
|
|
|
Add back (Deduct): |
|
|
Income tax expense |
|
5,079 |
|
Equity in income of unconsolidated
entities, net |
|
(3,205 |
) |
Change in fair value to unit
adjustment liability and loss on dilution and sale of equity method
investment |
|
44,788 |
|
Interest income |
|
(673 |
) |
Interest expense |
|
13,756 |
|
Depreciation and amortization |
|
34,601 |
|
Adjusted EBITDA |
|
$ |
63,177 |
|
|
|
|
Total Revenues |
|
$ |
367,787 |
|
|
|
|
Adjusted EBITDA
margin |
|
17.2 |
% |
(a) There were no unusual items impacting Operating income from
continuing operations during the three months ended September 30,
2016.
Adjusted EBITDA is a non-GAAP financial measure. Adjusted
EBITDA consists of net income (loss) from continuing operations, as
adjusted to add back (i) income tax expense (benefit), (ii)
interest income and interest expense, (iii) depreciation and
amortization, (iv) change in fair value to unit adjustment
liability and loss on the dilution and sale of equity method
investment and (iv) equity in income (loss) of unconsolidated
entities, net. In addition, Adjusted EBITDA adds back
certain non-cash, extraordinary or non-recurring items. We
believe that Adjusted EBITDA is meaningful to investors because
management reviews Adjusted EBITDA in assessing and evaluating our
performance. However, this measure should be considered in
addition to, rather than as substitutes for, net income (loss) from
continuing operations and other information provided in accordance
with GAAP. Our method of calculating adjusted EBITDA may
differ from the methods used by other companies and, as a result,
Adjusted EBITDA as presented may not be comparable to other
similarly titled measures disclosed by other companies.
|
|
|
HARSCO
CORPORATION |
|
|
RECONCILIATION OF OPERATING INCOME FROM CONTINUING
OPERATIONS BY SEGMENT AND ADJUSTED EBITDA BY SEGMENT
(unaudited) |
|
|
|
|
|
Three Months Ended |
|
|
September 30, 2016 |
(In thousands) |
|
(Preliminary Results) |
|
|
|
Operating
Income from Continuing Operations
(a): |
|
|
Harsco Metals & Minerals |
|
$ |
24,066 |
|
Harsco Industrial |
|
6,312 |
|
Harsco Rail |
|
4,599 |
|
Corporate |
|
(6,401 |
) |
Operating income from continuing
operations |
|
$ |
28,576 |
|
|
|
|
Depreciation
and Amortization: |
|
|
Harsco Metals & Minerals |
|
$ |
30,245 |
|
Harsco Industrial |
|
1,827 |
|
Harsco Rail |
|
1,441 |
|
Corporate |
|
1,088 |
|
Depreciation and amortization |
|
$ |
34,601 |
|
|
|
|
Adjusted
EBITDA: |
|
|
Harsco Metals & Minerals |
|
$ |
54,311 |
|
Harsco Industrial |
|
8,139 |
|
Harsco Rail |
|
6,040 |
|
Corporate |
|
(5,313 |
) |
Adjusted EBITDA |
|
$ |
63,177 |
|
|
|
|
Total
Revenue |
|
$ |
367,787 |
|
|
|
|
Adjusted
EBITDA, as % of Total Revenue |
|
17.2 |
% |
(a) There were no unusual items impacting Operating income from
continuing operations during the three months ended September 30,
2016.
Adjusted EBITDA by segment is a non-GAAP financial
measure. Adjusted EBITDA by segment consists of Adjusted
operating income from continuing operations by segment adjusted to
add back depreciation and amortization by segment (excluding
amortization of deferred financing costs). We believe
Adjusted EBITDA by segment is meaningful to investors because
management reviews Adjusted EBITDA by segment in assessing and
evaluating performance. However, this measure should be
considered in addition to, rather than as substitutes for Operating
income from continuing operations by segment and other information
provided in accordance with GAAP. Our method of calculating
Adjusted EBITDA by segment may differ from methods used by other
companies and, as a result, Adjusted EBITDA by segment as presented
may not be comparable to other similarly titled measures disclosed
by other companies.
Investor Contact
David Martin
717.612.5628
damartin@harsco.com
Media Contact
Kenneth Julian
717.730.3683
kjulian@harsco.com
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