Harsco Corporation (NYSE:HSC) today reported fourth quarter and
full-year 2016 results. On a U.S. GAAP (“GAAP”) basis, fourth
quarter 2016 diluted loss per share from continuing operations was
$0.19, which included costs and charges related to the early
extinguishment of debt and an adjustment to the forward loss
provision related to the Company's railway maintenance contracts
with SBB. The forward loss provision of $5 million primarily
relates to a refinement of certain cost estimates for the second
contract with SBB as conceptual designs were finalized. These
costs relate to the life of the contract through 2020.
Excluding unusual items, adjusted diluted earnings per share from
continuing operations in the fourth quarter of 2016 were
$0.16. These figures compare with a GAAP diluted loss per
share from continuing operations of $0.08 and adjusted diluted
earnings per share from continuing operations of $0.11 in the
fourth quarter of 2015.
Operating income from continuing operations for the fourth
quarter of 2016 was $24 million. Excluding unusual items,
operating income for the fourth quarter of 2016 was $28 million,
which was within the guidance range of $20 million to $29 million
previously provided by the Company.
“We ended the year with a strong quarter and I am very pleased
with our accomplishments during the year,” said President and CEO
Nick Grasberger. “2016 proved to be a turning point for
Harsco. We exceeded the key financial targets established at
the beginning of the year, despite persistent end-market
weakness. Much of our success can be attributed to Metals
& Minerals, where we completed the major transformation actions
contemplated in M&M. Our M&M initiatives led to a
meaningful improvement in performance during 2016 and enabled the
business to achieve the targeted objectives we established nearly
three years ago. Also, our Corporate costs declined
significantly compared with 2015, our free cash flow reached a
multi-year high and our balance sheet is now the healthiest it has
been in years.”
“As we enter 2017, economic conditions are more favorable in
most relevant markets, and we currently expect our three businesses
to see an improvement in underlying performance over the course of
the year. However, our expectations are tempered by the
financial impacts of a stronger U.S. dollar and uncertainty
regarding the timing and pace of potential improvements in select
markets. As a result, our 2017 operating income is
anticipated to improve only modestly at the top-end of our guidance
range. We will maintain our operational and capital
discipline and utilize our free cash flow to further strengthen our
financial flexibility. Lastly, we remain optimistic about the
earnings and value potential of our businesses and will continue to
focus on our strategies to improve returns."
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Harsco
Corporation—Selected Fourth Quarter Results |
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($ in millions, except per share amounts) |
|
Q4 2016 |
|
Q4 2015 |
Revenues |
|
$ |
360 |
|
|
$ |
387 |
|
Operating income from continuing operations - GAAP |
|
$ |
24 |
|
|
$ |
6 |
|
Operating margin from continuing operations - GAAP |
|
6.7 |
% |
|
1.6 |
% |
Diluted EPS from continuing operations |
|
$ |
(0.19 |
) |
|
$ |
(0.08 |
) |
Unusual items per diluted share |
|
$ |
0.34 |
|
|
$ |
0.19 |
|
Adjusted operating income - excluding unusual items |
|
$ |
28 |
|
|
$ |
26 |
|
Adjusted operating margin - excluding unusual items |
|
7.8 |
% |
|
6.6 |
% |
Adjusted diluted EPS from continuing operations - excluding unusual
items (1) |
|
$ |
0.16 |
|
|
$ |
0.11 |
|
Return on invested capital (TTM) - excluding unusual items |
|
6.9 |
% |
|
6.3 |
% |
(1) Q4 2016 does not total due to rounding |
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Consolidated Fourth Quarter Operating
Results
Total revenues were $360 million, with the decrease attributable
to lower revenues in the Company’s Industrial and Metals &
Minerals segments, as expected. Foreign currency translation
negatively impacted fourth quarter 2016 revenues by approximately
$10 million.
GAAP operating income from continuing operations for the fourth
quarter of 2016 was $24 million, while operating income from
continuing operations excluding unusual items was $28 million in
the fourth quarter of 2016. These figures compare with GAAP
operating income of $6 million and adjusted operating income of $26
million in the same quarter last year. Adjusted operating
income in Metals & Minerals improved in comparison with the
prior-year quarter. Adjusted operating income in the Rail
segment was similar to the prior-year quarter, while operating
income declined in the Industrial segment. Meanwhile,
Corporate costs declined versus the prior-year period.
Lastly, adjusted operating margin increased 120 basis points versus
the adjusted operating margin in fourth quarter of 2015.
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Harsco
Corporation - Selected 2016 Results |
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($ in millions, except per share amounts) |
|
2016 |
|
2015 |
Revenues |
|
$ |
1,451 |
|
|
$ |
1,723 |
|
Operating income/(loss) from continuing operations - GAAP |
|
$ |
63 |
|
|
$ |
89 |
|
Operating margin from continuing operations - GAAP |
|
4.4 |
% |
|
5.1 |
% |
Diluted EPS from continuing operations |
|
$ |
(1.07 |
) |
|
$ |
0.09 |
|
Unusual items per diluted share |
|
$ |
1.55 |
|
|
$ |
0.46 |
|
Adjusted operating income - excluding unusual items |
|
$ |
116 |
|
|
$ |
135 |
|
Adjusted operating margin - excluding unusual items |
|
8.0 |
% |
|
7.9 |
% |
Adjusted diluted EPS from continuing operations - excluding unusual
items (1) |
|
$ |
0.48 |
|
|
$ |
0.56 |
|
Return on invested capital (TTM) - excluding unusual items |
|
6.9 |
% |
|
6.3 |
% |
(1) 2015 does not total due to rounding |
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Consolidated 2016 Results
Total revenues were $1.5 billion in 2016, compared with $1.7
billion in 2015, with the decline primarily the result of lower
revenues in the Company's Metals & Minerals and Industrial
segments. Metals & Minerals' revenues were negatively
impacted by site exits and foreign exchange rate changes as well as
reduced steel output and commodities pricing, while revenues in the
Industrial segment decreased due to lower customer demand for both
heat exchangers and industrial grating. Foreign currency
translation negatively impacted revenues by $51 million in
2016.
GAAP operating income from continuing operations was $63 million
in 2016, while operating income from continuing operations
excluding unusual items in 2016 was $116 million. These
figures compare with GAAP operating income of $89 million and
adjusted operating income of $135 million in 2015. During the
year, adjusted operating income in Metals & Minerals improved
mainly as a result of workforce reductions, a better mix of
contracts and operating cost improvements. Meanwhile,
operating income in Industrial decreased compared with 2015 due
lower customer demand for heat exchangers and industrial grating,
while adjusted operating income in Rail also declined, partially
given that the segment's 2015 operating income benefited from a
foreign exchange gain on cash advances of $11 million.
Lastly, Corporate costs decreased significantly versus 2015.
On a GAAP basis, diluted loss per share from continuing
operations in 2016 was $1.07, which included a site exit charge,
Metals & Minerals Separation costs, debt refinancing costs and
charges, a loss related to the selling of the Company's remaining
interest in Brand Energy, and a forward loss provision related to
the Company's railway maintenance equipment contracts with
SBB. Excluding unusual items, adjusted diluted earnings per
share from continuing operations were $0.48 in 2016. These
figures compare with GAAP diluted earnings per share from
continuing operations of $0.09 and adjusted diluted earnings per
share from continuing operations of $0.56 in 2015.
Fourth Quarter Business Review
Metals &
Minerals |
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($ in millions) |
|
Q4 2016 |
|
Q4 2015 |
|
%Change |
Revenues |
|
$ |
235 |
|
|
$ |
243 |
|
|
(4 |
)% |
Operating income - GAAP |
|
$ |
20 |
|
|
$ |
— |
|
|
nmf |
|
Operating margin - GAAP |
|
8.4 |
% |
|
0.2 |
% |
|
|
|
Adjusted operating income - excluding unusual items |
|
$ |
19 |
|
|
$ |
12 |
|
|
59 |
% |
Adjusted operating margin - excluding unusual items |
|
7.9 |
% |
|
4.8 |
% |
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Customer liquid steel tons (millions) |
|
34.5 |
|
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33.5 |
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|
3 |
% |
nmf=not meaningful |
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|
Revenues decreased 4 percent to $235 million, as the impacts
from exiting certain contracts and foreign exchange translation
offset higher steel output and service levels as well as increased
nickel-related sales. GAAP operating income totaled $20
million in comparison with GAAP operating income of less than $1
million in the prior-year quarter. The recently completed
quarter included a site exit adjustment while the prior-year
quarter included Project Orion Phase 3 implementation costs and
underperforming site exit charges. Meanwhile, adjusted
operating income increased 59 percent to $19 million mainly as a
result of workforce reductions and operating cost improvements as
well as increased steel production and nickel-related
profits. As a result, the segment's adjusted operating margin
improved by 310 basis points to 7.9 percent versus last year’s
fourth quarter.
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Industrial |
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|
|
|
|
|
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|
($ in millions) |
|
Q4 2016 |
|
Q4 2015 |
|
%Change |
Revenues |
|
$ |
56 |
|
|
$ |
75 |
|
|
(26 |
)% |
Operating income - GAAP |
|
$ |
3 |
|
|
$ |
12 |
|
|
(73 |
)% |
Operating margin - GAAP |
|
5.5 |
% |
|
15.4 |
% |
|
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|
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|
Revenues declined 26 percent to $56 million, principally due to
lower demand for industrial grating as well as heat exchangers from
U.S. energy customers. Operating income also declined due to
these factors as well as product sales mix. As a result, the
segment’s operating margin decreased to 5.5 percent compared with
15.4 percent in the comparable quarter last year.
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Rail |
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|
|
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|
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|
|
|
($ in millions) |
|
Q4 2016 |
|
Q4 2015 |
|
%Change |
Revenues |
|
$ |
70 |
|
|
$ |
69 |
|
|
1 |
% |
Operating income - GAAP |
|
$ |
5 |
|
|
$ |
10 |
|
|
(51 |
)% |
Operating margin - GAAP |
|
7.1 |
% |
|
14.6 |
% |
|
|
Adjusted operating income - excluding unusual items (1) |
|
$ |
10 |
|
|
$ |
10 |
|
|
nmf |
|
Adjusted operating margin - excluding unusual items (1) |
|
14.2 |
% |
|
14.6 |
% |
|
|
nmf=not meaningful |
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|
(1) no unusual items in Q4 2015 |
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|
Revenues increased 1 percent to $70 million as an increase in
after-market parts sales was offset by lower contract
services. GAAP operating income totaled $5 million including
the SBB forward loss provision. Excluding this item, adjusted
operating income totaled $10 million and the adjusted operating
margin was 14.2 percent, both of which are consistent with the
prior-year period as a result of the above trends.
Cash Flow
Net cash provided by operating activities totaled $55 million in
the fourth quarter of 2016, compared with $32 million in the
prior-year period. For the full-year, net cash provided by
operating activities was $160 million, compared with $122 million
in 2015.
Free cash flow was $38 million in the fourth quarter of 2016,
compared with $6 million in the prior-year period. For the
full-year, free cash flow was $100 million, compared with $24
million in 2015. The cash flow improvement for the fourth
quarter and full-year resulted from increased net cash provided by
operating activities, as detailed above, and reduced capital
expenditures.
Financial Position
At the end of the fourth quarter, the Company maintained net
debt of approximately $587 million, a modest decrease from the
third quarter of 2016. Meanwhile, the Company's Credit
Agreement net debt to adjusted EBITDA ratio was 2.3x, as compared
with a maximum leverage covenant of 4.0x under the Company's Credit
Agreement. The Company's borrowing capacity and available
cash totaled approximately $330 million at the end of the year.
2017 Outlook
The Company’s 2017 Guidance reflects an overall mixed outlook
across its services and products portfolio combined with the
expected financial impacts from a stronger U.S. dollar against
various currencies. For Metals & Minerals, adjusted
operating income is anticipated to be comparable with 2016 as
operational savings, new sites and a modest increase in customer
steel output and commodity prices are expected to be offset by
foreign exchange impacts, services mix and lower nickel and Applied
Products volumes. Meanwhile, Industrial earnings are
projected to slightly increase as improved demand for heat
exchangers and commercial boilers are expected to offset a less
favorable product mix and lower industrial grating demand, and in
Rail, adjusted earnings are also expected to modestly increase as
higher contributions from after-market parts, Intelligent Solutions
offerings, and international equipment sales are only partially
offset by weaker North American market demand and lower contract
services contributions. Both Industrial and Rail enter 2017
with modest backlogs and performance in each segment is projected
to improve as relevant markets strengthen during the year.
Lastly, Corporate spending is projected to increase compared with
2016 as a result of pension and various investments. Key
highlights in the Outlook are included below.
Full Year 2017
- GAAP and adjusted operating income for the full year is
expected to range from $100 million to $120 million; this compares
with GAAP operating income of $63 million and adjusted operating
income of $116 million in 2016.
- Free cash flow is expected in the range of $60 million to $80
million, including net capital expenditures of between $80 million
and $90 million; compared with free cash flow of $100 million and
net capital expenditures of $60 million in 2016.
- Net interest expense is forecasted to range from $45 million to
$47 million.
- Effective tax rate is expected to range from 39 percent to 41
percent.
- GAAP and adjusted earnings per share for the full year are
currently expected in the range of $0.32 to $0.50; this compares
with GAAP loss per share of $1.07 and adjusted earnings per share
of $0.48 per share in 2016.
- Adjusted return on invested capital is expected to range from
8.0 percent to 9.0 percent; compared with 6.9 percent in 2016.
Q1 2017
- Adjusted operating income of $15 million to $20 million;
compared with $18 million in the prior-year quarter.
- Adjusted (loss) earnings per share of $(0.01) to $0.04;
compared with $0.03 in the prior-year quarter.
Conference Call
The Company will hold a conference call today at 9:00 a.m.
Eastern Time to discuss its results and respond to questions from
the investment community. The conference call will be
broadcast live through the Harsco Corporation website at
www.harsco.com. The Company will refer to a slide
presentation that accompanies its formal remarks. The slide
presentation will be available on the Company’s website.
The call can also be accessed by telephone by dialing (800)
611-4920, or (973) 200-3957 for international callers. Enter
Conference ID number 51879990. Listeners are advised to dial
in at least five minutes prior to the call.
Replays will be available via the Harsco website and also by
telephone through March 10, 2017 by dialing (800) 585-8367, (855)
859-2056 or (404) 537-3406.
Forward-Looking Statements
The nature of the Company's business 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 Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, the Company provides the following cautionary
remarks regarding important factors that, among others, could cause
future results to differ materially from the results contemplated
by forward-looking statements, including the expectations and
assumptions expressed or implied herein. Forward-looking statements
contained herein could include, among other things, statements
about management's confidence in and strategies for performance;
expectations for new and existing products, technologies and
opportunities; and expectations regarding growth, sales, cash
flows, and earnings. Forward-looking statements can be identified
by the use of such terms as "may," "could," "expect," "anticipate,"
"intend," "believe," "likely," "estimate," "plan" or other
comparable terms.
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; (18) implementation of environmental remediation
matters; (19) risk and uncertainty associated with intangible
assets; (20) 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 (21)
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 and Part II, Item 1A, Risk Factors of the
Company’s Quarterly Report on Form 10-Q for the period ended
September 30, 2016. 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
Harsco Corporation serves key industries that are fundamental to
worldwide economic development, including steel and metals
production, railways and energy. 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.
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HARSCO CORPORATION |
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) |
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31 |
|
December 31 |
(In thousands, except per share amounts) |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues from
continuing operations: |
|
|
|
|
|
|
|
|
Service
revenues |
|
$ |
224,952 |
|
|
$ |
240,625 |
|
|
$ |
939,129 |
|
|
$ |
1,092,725 |
|
Product
revenues |
|
135,270 |
|
|
146,807 |
|
|
512,094 |
|
|
630,367 |
|
Total revenues |
|
360,222 |
|
|
387,432 |
|
|
1,451,223 |
|
|
1,723,092 |
|
Costs and
expenses from continuing operations: |
|
|
|
|
|
|
|
|
Cost of
services sold |
|
184,983 |
|
|
195,708 |
|
|
759,120 |
|
|
909,995 |
|
Cost of
products sold |
|
99,212 |
|
|
102,541 |
|
|
411,343 |
|
|
446,366 |
|
Selling,
general and administrative expenses |
|
49,838 |
|
|
55,221 |
|
|
200,391 |
|
|
242,112 |
|
Research
and development expenses |
|
1,532 |
|
|
1,020 |
|
|
4,280 |
|
|
4,510 |
|
Loss on
disposal of the Harsco Infrastructure Segment |
|
— |
|
|
— |
|
|
— |
|
|
1,000 |
|
Other
expenses |
|
509 |
|
|
26,744 |
|
|
12,620 |
|
|
30,573 |
|
Total costs and expenses |
|
336,074 |
|
|
381,234 |
|
|
1,387,754 |
|
|
1,634,556 |
|
Operating income from continuing operations |
|
24,148 |
|
|
6,198 |
|
|
63,469 |
|
|
88,536 |
|
Interest income |
|
715 |
|
|
623 |
|
|
2,475 |
|
|
1,574 |
|
Interest expense |
|
(11,660 |
) |
|
(11,992 |
) |
|
(51,584 |
) |
|
(46,804 |
) |
Loss on early
extinguishment of debt |
|
(35,337 |
) |
|
— |
|
|
(35,337 |
) |
|
— |
|
Change in fair value to
unit adjustment liability and loss on dilution and sale of equity
method investment |
|
— |
|
|
(1,999 |
) |
|
(58,494 |
) |
|
(8,491 |
) |
Income (loss) from continuing operations before income
taxes and equity income |
|
(22,134 |
) |
|
(7,170 |
) |
|
(79,471 |
) |
|
34,815 |
|
Income tax benefit
(expense) |
|
8,276 |
|
|
(733 |
) |
|
(6,637 |
) |
|
(27,678 |
) |
Equity in income of
unconsolidated entities, net |
|
— |
|
|
571 |
|
|
5,686 |
|
|
175 |
|
Income (loss) from continuing operations |
|
(13,858 |
) |
|
(7,332 |
) |
|
(80,422 |
) |
|
7,312 |
|
Discontinued
operations: |
|
|
|
|
|
|
|
|
Income
(loss) on disposal of discontinued business |
|
(727 |
) |
|
(704 |
) |
|
1,061 |
|
|
(1,553 |
) |
Income
tax benefit (expense) related to discontinued business |
|
269 |
|
|
260 |
|
|
(392 |
) |
|
573 |
|
Income (loss) from discontinued operations |
|
(458 |
) |
|
(444 |
) |
|
669 |
|
|
(980 |
) |
Net income
(loss) |
|
(14,316 |
) |
|
(7,776 |
) |
|
(79,753 |
) |
|
6,332 |
|
Less: Net
(income) loss attributable to noncontrolling interests |
|
(1,322 |
) |
|
781 |
|
|
(5,914 |
) |
|
(144 |
) |
Net income
(loss) attributable to Harsco Corporation |
|
$ |
(15,638 |
) |
|
$ |
(6,995 |
) |
|
$ |
(85,667 |
) |
|
$ |
6,188 |
|
Amounts
attributable to Harsco Corporation common
stockholders: |
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations, net of tax |
|
$ |
(15,180 |
) |
|
$ |
(6,551 |
) |
|
$ |
(86,336 |
) |
|
$ |
7,168 |
|
Income
(loss) from discontinued operations, net of tax |
|
(458 |
) |
|
(444 |
) |
|
669 |
|
|
(980 |
) |
Net income (loss) attributable to Harsco Corporation common
stockholders |
|
$ |
(15,638 |
) |
|
$ |
(6,995 |
) |
|
$ |
(85,667 |
) |
|
$ |
6,188 |
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
of common stock outstanding |
|
80,379 |
|
|
80,238 |
|
|
80,333 |
|
|
80,234 |
|
Basic earnings (loss) per common share attributable to
Harsco Corporation common stockholders: |
Continuing operations |
|
$ |
(0.19 |
) |
|
$ |
(0.08 |
) |
|
$ |
(1.07 |
) |
|
$ |
0.09 |
|
Discontinued operations |
|
(0.01 |
) |
|
(0.01 |
) |
|
0.01 |
|
|
(0.01 |
) |
Basic earnings
(loss) per share attributable to Harsco Corporation common
stockholders |
|
$ |
(0.19 |
) |
(a) |
$ |
(0.09 |
) |
|
$ |
(1.07 |
) |
(a) |
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
Diluted
weighted-average shares of common stock outstanding |
|
80,379 |
|
|
80,238 |
|
|
80,333 |
|
|
80,365 |
|
Diluted earnings (loss) per common share attributable to
Harsco Corporation common stockholders: |
Continuing operations |
|
$ |
(0.19 |
) |
|
$ |
(0.08 |
) |
|
$ |
(1.07 |
) |
|
$ |
0.09 |
|
Discontinued operations |
|
(0.01 |
) |
|
(0.01 |
) |
|
0.01 |
|
|
(0.01 |
) |
Diluted
earnings (loss) per share attributable to Harsco Corporation common
stockholders |
|
$ |
(0.19 |
) |
(a) |
$ |
(0.09 |
) |
|
$ |
(1.07 |
) |
(a) |
$ |
0.08 |
|
(a) Does
not total due to rounding. |
HARSCO
CORPORATION |
|
|
|
|
CONSOLIDATED
BALANCE SHEETS (Unaudited) |
|
|
|
|
|
|
|
|
|
(In thousands) |
|
December 31 2016 |
|
December 31 2015 |
ASSETS |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
71,879 |
|
|
$ |
79,756 |
|
Trade
accounts receivable, net |
|
236,554 |
|
|
254,877 |
|
Other
receivables |
|
21,053 |
|
|
30,395 |
|
Inventories |
|
187,681 |
|
|
216,967 |
|
Other
current assets |
|
60,523 |
|
|
82,527 |
|
Total current assets |
|
577,690 |
|
|
664,522 |
|
Investments |
|
1,944 |
|
|
252,609 |
|
Property, plant and
equipment, net |
|
490,255 |
|
|
564,035 |
|
Goodwill |
|
382,251 |
|
|
400,367 |
|
Intangible assets,
net |
|
41,567 |
|
|
53,043 |
|
Other assets |
|
87,679 |
|
|
126,621 |
|
Total assets |
|
$ |
1,581,386 |
|
|
$ |
2,061,197 |
|
LIABILITIES |
|
|
|
|
Current
liabilities: |
|
|
|
|
Short-term borrowings |
|
$ |
4,259 |
|
|
$ |
30,229 |
|
Current
maturities of long-term debt |
|
25,574 |
|
|
25,084 |
|
Accounts
payable |
|
107,954 |
|
|
136,018 |
|
Accrued
compensation |
|
46,658 |
|
|
38,899 |
|
Income
taxes payable |
|
4,301 |
|
|
4,408 |
|
Dividends
payable |
|
— |
|
|
4,105 |
|
Insurance
liabilities |
|
11,850 |
|
|
11,420 |
|
Advances
on contracts and other customer advances |
|
117,329 |
|
|
107,250 |
|
Due to
unconsolidated affiliate |
|
— |
|
|
7,733 |
|
Unit
adjustment liability |
|
— |
|
|
22,320 |
|
Other
current liabilities |
|
110,029 |
|
|
118,657 |
|
Total current liabilities |
|
427,954 |
|
|
506,123 |
|
Long-term debt |
|
629,239 |
|
|
845,621 |
|
Deferred income
taxes |
|
2,621 |
|
|
12,095 |
|
Insurance
liabilities |
|
25,265 |
|
|
30,400 |
|
Retirement plan
liabilities |
|
319,597 |
|
|
241,972 |
|
Due to unconsolidated
affiliate |
|
— |
|
|
13,674 |
|
Unit adjustment
liability |
|
— |
|
|
57,614 |
|
Other liabilities |
|
39,147 |
|
|
42,895 |
|
Total liabilities |
|
1,443,823 |
|
|
1,750,394 |
|
HARSCO
CORPORATION STOCKHOLDERS' EQUITY |
|
|
|
|
Common
stock |
|
140,625 |
|
|
140,503 |
|
Additional paid-in capital |
|
172,101 |
|
|
170,699 |
|
Accumulated other comprehensive loss |
|
(606,722 |
) |
|
(515,688 |
) |
Retained
earnings |
|
1,150,688 |
|
|
1,236,355 |
|
Treasury
stock |
|
(760,391 |
) |
|
(760,299 |
) |
Total Harsco Corporation stockholders’ equity |
|
96,301 |
|
|
271,570 |
|
Noncontrolling
interests |
|
41,262 |
|
|
39,233 |
|
Total equity |
|
137,563 |
|
|
310,803 |
|
Total liabilities and equity |
|
$ |
1,581,386 |
|
|
$ |
2,061,197 |
|
HARSCO CORPORATION |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) |
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31 |
|
December 31 |
(In thousands) |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
Net
income (loss) |
|
$ |
(14,316 |
) |
|
$ |
(7,776 |
) |
|
$ |
(79,753 |
) |
|
$ |
6,332 |
|
Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |
Depreciation |
|
30,799 |
|
|
34,309 |
|
|
129,083 |
|
|
144,652 |
|
Amortization |
|
2,400 |
|
|
2,820 |
|
|
12,403 |
|
|
11,823 |
|
Change in
fair value to the unit adjustment liability and loss on dilution
and sale of equity method investment |
|
— |
|
|
1,999 |
|
|
58,494 |
|
|
8,491 |
|
Contract
estimated forward loss provision for Harsco Rail Segment |
|
5,000 |
|
|
— |
|
|
45,050 |
|
|
— |
|
Loss on
early extinguishment of debt |
|
35,337 |
|
|
— |
|
|
35,337 |
|
|
— |
|
Deferred
income tax expense (benefit) |
|
(5,639 |
) |
|
(4,824 |
) |
|
(7,654 |
) |
|
5,174 |
|
Equity in
income of unconsolidated entities, net |
|
— |
|
|
(571 |
) |
|
(5,686 |
) |
|
(175 |
) |
Dividends
from unconsolidated entities |
|
— |
|
|
28 |
|
|
16 |
|
|
28 |
|
Other,
net |
|
5,761 |
|
|
5,916 |
|
|
2,085 |
|
|
(6,429 |
) |
Changes
in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
11,986 |
|
|
32,489 |
|
|
16,041 |
|
|
41,650 |
|
Inventories |
|
11,982 |
|
|
(8,334 |
) |
|
(12,313 |
) |
|
(44,806 |
) |
Accounts payable |
|
(9,454 |
) |
|
2,945 |
|
|
(20,285 |
) |
|
(401 |
) |
Accrued interest payable |
|
(9,442 |
) |
|
(10,411 |
) |
|
(3,197 |
) |
|
(2,753 |
) |
Accrued compensation |
|
4,384 |
|
|
(6,679 |
) |
|
8,865 |
|
|
(10,319 |
) |
Advances on contracts and other customer advances |
|
(867 |
) |
|
(8,343 |
) |
|
14,485 |
|
|
(795 |
) |
Retirement plan liabilities, net |
|
(3,269 |
) |
|
(3,478 |
) |
|
(20,420 |
) |
|
(24,593 |
) |
Harsco 2011/2012 Restructuring Program accrual |
|
— |
|
|
(93 |
) |
|
— |
|
|
(398 |
) |
Other
assets and liabilities |
|
(9,632 |
) |
|
2,408 |
|
|
(12,766 |
) |
|
(5,974 |
) |
Net cash provided by operating activities |
|
55,030 |
|
|
32,405 |
|
|
159,785 |
|
|
121,507 |
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment |
|
(19,394 |
) |
|
(31,969 |
) |
|
(69,340 |
) |
|
(123,552 |
) |
Proceeds
from sales of assets |
|
2,127 |
|
|
5,189 |
|
|
9,305 |
|
|
25,966 |
|
Purchases
of businesses, net of cash acquired |
|
— |
|
|
(83 |
) |
|
(26 |
) |
|
(7,788 |
) |
Proceeds
from sale of equity investment |
|
— |
|
|
— |
|
|
165,640 |
|
|
— |
|
Payment
of unit adjustment liability |
|
— |
|
|
(5,580 |
) |
|
— |
|
|
(22,320 |
) |
Other
investing activities, net |
|
10,250 |
|
|
5,296 |
|
|
17,308 |
|
|
(2,679 |
) |
Net cash provided (used) by investing
activities |
|
(7,017 |
) |
|
(27,147 |
) |
|
122,887 |
|
|
(130,373 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
Short-term borrowings, net |
|
(823 |
) |
|
17,664 |
|
|
(2,350 |
) |
|
18,875 |
|
Current
maturities and long-term debt: |
|
|
|
|
|
|
|
|
Additions |
|
669,892 |
|
|
335,003 |
|
|
720,727 |
|
|
427,996 |
|
Reductions |
|
(703,799 |
) |
|
(297,854 |
) |
|
(979,567 |
) |
|
(399,533 |
) |
Cash
dividends paid on common stock |
|
— |
|
|
(16,419 |
) |
|
(4,105 |
) |
|
(65,730 |
) |
Dividends
paid to noncontrolling interests |
|
— |
|
|
(2,939 |
) |
|
(1,702 |
) |
|
(4,498 |
) |
Purchase
of noncontrolling interests |
|
— |
|
|
— |
|
|
(4,731 |
) |
|
(395 |
) |
Common
stock acquired for treasury |
|
— |
|
|
— |
|
|
— |
|
|
(12,143 |
) |
Proceeds
from cross-currency interest rate swap termination |
|
— |
|
|
— |
|
|
16,625 |
|
|
75,057 |
|
Deferred
pension underfunding payment to unconsolidated affiliate |
|
— |
|
|
(7,688 |
) |
|
(20,640 |
) |
|
(7,688 |
) |
Deferred
financing costs |
|
(15,584 |
) |
|
(6,880 |
) |
|
(16,530 |
) |
|
(9,487 |
) |
Net cash provided (used) by financing
activities |
|
(50,314 |
) |
|
20,887 |
|
|
(292,273 |
) |
|
22,454 |
|
Effect of exchange rate
changes on cash |
|
(5,731 |
) |
|
(4,383 |
) |
|
1,724 |
|
|
3,325 |
|
Net increase (decrease)
in cash and cash equivalents |
|
(8,032 |
) |
|
21,762 |
|
|
(7,877 |
) |
|
16,913 |
|
Cash and cash
equivalents at beginning of period |
|
79,911 |
|
|
57,994 |
|
|
79,756 |
|
|
62,843 |
|
Cash and cash
equivalents at end of period |
|
$ |
71,879 |
|
|
$ |
79,756 |
|
|
$ |
71,879 |
|
|
$ |
79,756 |
|
HARSCO CORPORATIONREVIEW OF OPERATIONS BY
SEGMENT (Unaudited) |
|
|
|
Three Months Ended |
|
Three Months Ended |
|
|
December 31, 2016 |
|
December 31, 2015 |
(In thousands) |
|
Revenues |
|
OperatingIncome
(Loss) |
|
Revenues |
|
Operating Income (Loss) |
Harsco
Metals & Minerals |
|
$ |
234,617 |
|
|
$ |
19,700 |
|
|
$ |
243,261 |
|
|
$ |
438 |
|
Harsco
Industrial |
|
55,981 |
|
|
3,099 |
|
|
75,373 |
|
|
11,640 |
|
Harsco
Rail |
|
69,590 |
|
|
4,916 |
|
|
68,798 |
|
|
10,077 |
|
General
Corporate |
|
34 |
|
|
(3,567 |
) |
|
— |
|
|
(15,957 |
) |
Consolidated Totals |
|
$ |
360,222 |
|
|
$ |
24,148 |
|
|
$ |
387,432 |
|
|
$ |
6,198 |
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended |
|
Twelve Months Ended |
|
|
December 31, 2016 |
|
December 31, 2015 |
(In thousands) |
|
Revenues |
|
OperatingIncome
(Loss) |
|
Revenues |
|
OperatingIncome (Loss) |
Harsco
Metals & Minerals |
|
$ |
965,540 |
|
|
$ |
81,634 |
|
|
$ |
1,106,162 |
|
|
$ |
26,289 |
|
Harsco
Industrial |
|
247,542 |
|
|
23,182 |
|
|
357,256 |
|
|
57,020 |
|
Harsco
Rail |
|
238,107 |
|
|
(17,527 |
) |
|
259,674 |
|
|
50,896 |
|
General
Corporate |
|
34 |
|
|
(23,820 |
) |
|
— |
|
|
(45,669 |
) |
Consolidated Totals |
|
$ |
1,451,223 |
|
|
$ |
63,469 |
|
|
$ |
1,723,092 |
|
|
$ |
88,536 |
|
HARSCO CORPORATIONRECONCILIATION OF NET
DEBT TO TOTAL DEBT AS REPORTED (Unaudited) |
(In thousands) |
|
December 31 2016 |
|
December 31 2015 |
Short-term
borrowings |
|
$ |
4,259 |
|
|
$ |
30,229 |
|
Current maturities of
long-term debt |
|
25,574 |
|
|
25,084 |
|
Long-term debt |
|
629,239 |
|
|
845,621 |
|
Total debt |
|
659,072 |
|
|
900,934 |
|
Less: Cash and
cash equivalents |
|
(71,879 |
) |
|
(79,756 |
) |
Net debt |
|
587,193 |
|
|
821,178 |
|
|
The Company believes that the presentation of Net debt provides
useful information to investors because management reviews Net debt
as part of the management of the Company's overall liquidity,
financial flexibility, capital structure and leverage.
Furthermore, certain debt rating agencies, creditors and credit
analysts monitor the Company's Net debt as part of their
assessments of the Company's business.
|
|
HARSCO CORPORATION |
|
RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE FROM
CONTINUING OPERATIONS EXCLUDING UNUSUAL ITEMS TO DILUTED EARNINGS
(LOSS) PER SHARE FROM CONTINUING OPERATIONS AS REPORTED
(Unaudited) |
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
|
December 31 |
|
December 31 |
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
Diluted earnings (loss)
per share from continuing operations as reported |
|
$ |
(0.19 |
) |
|
$ |
(0.08 |
) |
|
$ |
(1.07 |
) |
|
$ |
0.09 |
|
|
Net loss on dilution
and sale of equity investment (a) |
|
— |
|
|
— |
|
|
0.66 |
|
|
— |
|
|
Harsco Rail Segment
forward contract loss provision (b) |
|
0.06 |
|
|
— |
|
|
0.56 |
|
|
— |
|
|
Loss on early
extinguishment of debt (c) |
|
0.43 |
|
|
— |
|
|
0.44 |
|
|
— |
|
|
Harsco Metals &
Minerals Segment site exit and underperforming contract charges,
net (d) |
|
— |
|
|
0.08 |
|
|
0.06 |
|
|
0.06 |
|
|
Harsco Metals &
Minerals Segment separation costs (e) |
|
— |
|
|
0.10 |
|
|
0.04 |
|
|
0.12 |
|
|
Expense of deferred
financing costs (f) |
|
— |
|
|
— |
|
|
0.01 |
|
|
— |
|
|
Harsco Metals &
Minerals Segment cumulative translation adjustment liquidation
(g) |
|
(0.01 |
) |
|
— |
|
|
(0.01 |
) |
|
— |
|
|
Harsco Metals &
Minerals Segment contract termination charges (h) |
|
— |
|
|
— |
|
|
— |
|
|
0.17 |
|
|
Harsco Metals &
Minerals Segment salt cake processing and disposal charges (i) |
|
— |
|
|
— |
|
|
— |
|
|
0.06 |
|
|
Harsco Metals &
Minerals Segment Project Orion charges (j) |
|
— |
|
|
0.06 |
|
|
— |
|
|
0.06 |
|
|
Harsco Metals &
Minerals Segment subcontractor settlement charge (k) |
|
— |
|
|
— |
|
|
— |
|
|
0.05 |
|
|
Harsco Metals &
Minerals Segment multi-employer pension plan charge (l) |
|
— |
|
|
— |
|
|
— |
|
|
0.01 |
|
|
Harsco Infrastructure
Segment loss on disposal (m) |
|
— |
|
|
— |
|
|
— |
|
|
0.01 |
|
|
Taxes on above unusual
items (n) |
|
(0.14 |
) |
|
(0.05 |
) |
|
(0.21 |
) |
|
(0.08 |
) |
|
Adjusted
diluted earnings per share from continuing operations excluding
unusual items |
|
$ |
0.16 |
|
(o) |
$ |
0.11 |
|
|
$ |
0.48 |
|
|
$ |
0.56 |
|
(o) |
|
- Loss on the dilution and sale of the Company's investment in
Brand Energy & Infrastructure Services recorded at Corporate
(Full year 2016 $53.8 million pre-tax).
- Harsco Rail Segment forward contract loss provision related the
Company's contracts with the federal railway system of Switzerland
(Q4 2016 $5.0 million pre-tax; Full year 2016 $45.1 million
pre-tax).
- Loss on early extinguishment of debt recorded at Corporate (Q4
and Full year 2016 $35.3 million pre-tax).
- Harsco Metals & Minerals Segment charges primarily
attributable to site exit and underperforming contract costs (Full
year 2016 $5.1 million pre-tax; Q4 2015 $6.4 million pre-tax; Full
year 2015 $5.0 million pre-tax).
- Costs associated with Harsco Metals & Minerals Segment
separation recorded at Corporate (Full year 2016 $3.3 million
pre-tax; Q4 2015 $8.2 million pre-tax; Full year $9.9 million
pre-tax).
- Expense of deferred financing costs associated with the
Company's repayment of approximately $85 million on its Term Loan
Facility recorded at Corporate (Full year 2016 $1.1 million
pre-tax).
- Harsco Metals & Minerals Segment gain related to the
liquidation of cumulated translation adjustment related to an
exited country (Q4 and Full year 2016 $1.2 million pre-tax).
- Harsco Metals & Minerals Segment charges related to a
contract terminations (Q4 2015 $0.3 pre-tax income; Full Year 2015
$13.5 million pre-tax loss).
- Harsco Metals & Minerals Segment charges incurred in
connection with the processing and disposal of salt cakes (Full
year 2015 $7.0 million pre-tax). The Company's Bahrain operations
are operated under a strategic venture for which its strategic
venture partner has a 35% minority interest. Accordingly, the
net impact of the charge to the Company's Net income (loss)
attributable to Harsco Corporation was $4.6 million.
- Harsco Metals & Minerals Segment Project Orion
restructuring charges (Q4 and Full year 2015 $5.1 million
pre-tax).
- Harsco Metals & Minerals Segment charges related to a
settlement with a subcontractor (Full year 2015 $4.2 million
pre-tax).
- Harsco Metals & Minerals Segment charges related to a
multi-employer pension plan (Full year 2015 $1.1 million
pre-tax).
- Loss resulting from the Harsco Infrastructure Transaction,
which was consummated in the fourth quarter of 2013 (Full year 2015
$1.0 million pre-tax).
- Unusual items are tax effected at the global effective tax
rate, before discrete items, in effect at the time the unusual item
is recorded except for unusual items from countries where no tax
benefit can be realized, in which case a zero percent tax rate is
used.
- Does not total due to rounding.
The Company’s management believes Adjusted diluted earnings per
share from continuing operations excluding unusual items, which is
a non-U.S. GAAP financial measure, is useful to investors because
it provides an overall understanding of the Company’s historical
and future prospects. Exclusion of unusual items permits
evaluation and comparison of results for the Company’s core
business operations, and it is on this basis that management
internally assesses the Company’s performance. 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 |
|
|
RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE FROM
CONTINUING OPERATIONS EXCLUDING UNUSUAL ITEMS TO DILUTED EARNINGS
(LOSS) PER SHARE FROM CONTINUING OPERATIONS AS REPORTED
(Unaudited) |
|
|
|
Three Months Ended |
|
|
March 31 |
|
|
2016 |
Diluted earnings (loss)
per share from continuing operations as reported |
|
$ |
(0.13 |
) |
Net loss on dilution of
equity method investment (a) |
|
0.13 |
|
Harsco Metals &
Minerals Segment site exit charges (b) |
|
0.06 |
|
Harsco Metals &
Minerals Segment separation costs (c) |
|
0.04 |
|
Taxes on above unusual
items (d) |
|
$ |
(0.07 |
) |
Adjusted
diluted earnings per share from continuing operations excluding
unusual items |
|
$ |
0.03 |
|
|
- Loss on the dilution of the Company's investment in Brand
recorded at Corporate (Q1 2016 $10.3 million pre-tax).
- Harsco Metals & Minerals Segment charges primarily
attributable to site exit costs (Q1 2016 $5.1 million
pre-tax).
- Costs associated with Harsco Metals & Minerals Segment
separation recorded at Corporate (Q1 2016 $3.3 million
pre-tax).
- Unusual items are tax effected at the global effective tax
rate, before discrete items, in effect at the time the unusual item
is recorded except for unusual items from countries where no tax
benefit can be realized, in which case a zero percent tax rate is
used.
The Company’s management believes Adjusted diluted earnings per
share from continuing operations excluding unusual items, which is
a non-U.S. GAAP financial measure, is useful to investors because
it provides an overall understanding of the Company’s historical
and future prospects. Exclusion of unusual items permits
evaluation and comparison of results for the Company’s core
business operations, and it is on this basis that management
internally assesses the Company’s performance. 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 |
REVIEW OF OPERATIONS BY SEGMENT EXCLUDING UNUSUAL
ITEMS (Unaudited) |
|
(In thousands) |
|
HarscoMetals &
Minerals |
|
HarscoIndustrial |
|
Harsco
Rail |
|
Corporate |
|
Consolidated Totals |
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended December 31, 2016: |
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income (loss) excluding unusual items |
|
$ |
18,543 |
|
|
$ |
3,099 |
|
|
$ |
9,916 |
|
|
$ |
(3,567 |
) |
|
$ |
27,991 |
|
Revenues as
reported |
|
$ |
234,617 |
|
|
$ |
55,981 |
|
|
$ |
69,590 |
|
|
$ |
34 |
|
|
$ |
360,222 |
|
Operating margin
(%) |
|
7.9 |
% |
|
5.5 |
% |
|
14.2 |
% |
|
|
|
7.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended December 31, 2015: |
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income (loss) excluding unusual items |
|
$ |
11,654 |
|
|
$ |
11,640 |
|
|
$ |
10,077 |
|
|
$ |
(7,788 |
) |
|
$ |
25,583 |
|
Revenues as
reported |
|
$ |
243,261 |
|
|
$ |
75,373 |
|
|
$ |
68,798 |
|
|
$ |
— |
|
|
$ |
387,432 |
|
Adjusted operating
margin (%) excluding unusual items |
|
4.8 |
% |
|
15.4 |
% |
|
14.6 |
% |
|
|
|
6.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, 2016: |
|
|
|
|
|
|
|
|
Adjusted operating
income (loss) excluding unusual items |
|
$ |
85,577 |
|
|
$ |
23,182 |
|
|
$ |
27,523 |
|
|
$ |
(20,533 |
) |
|
$ |
115,749 |
|
Revenues as
reported |
|
$ |
965,540 |
|
|
$ |
247,542 |
|
|
$ |
238,107 |
|
|
$ |
34 |
|
|
$ |
1,451,223 |
|
Adjusted operating
margin (%) excluding unusual items |
|
8.9 |
% |
|
9.4 |
% |
|
11.6 |
% |
|
|
|
8.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, 2015: |
|
|
|
|
|
|
|
|
Adjusted operating
income (loss) excluding unusual items |
|
$ |
62,162 |
|
|
$ |
57,020 |
|
|
$ |
50,896 |
|
|
$ |
(34,747 |
) |
|
$ |
135,331 |
|
Revenues as
reported |
|
$ |
1,106,162 |
|
|
$ |
357,256 |
|
|
$ |
259,674 |
|
|
$ |
— |
|
|
$ |
1,723,092 |
|
Adjusted operating
margin (%) excluding unusual items |
|
5.6 |
% |
|
16.0 |
% |
|
19.6 |
% |
|
|
|
7.9 |
% |
|
The Company’s management believes Adjusted operating margin (%)
excluding unusual items, which is a non-U.S. GAAP financial
measure, is useful to investors because it provides an overall
understanding of the Company’s historical and future
prospects. Exclusion of unusual items permits evaluation and
comparison of results for the Company’s core business operations,
and it is on this basis that management internally assesses the
Company’s performance. 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 |
RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS)
EXCLUDING UNUSUAL ITEMS BY SEGMENT TO OPERATING INCOME (LOSS) AS
REPORTED BY SEGMENT
(Unaudited) |
(In thousands) |
|
HarscoMetals &
Minerals |
|
HarscoIndustrial |
|
Harsco
Rail |
|
Corporate |
|
Consolidated Totals |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2016: |
|
|
|
|
|
|
|
|
Operating income as
reported |
|
$ |
19,700 |
|
|
$ |
3,099 |
|
|
$ |
4,916 |
|
|
$ |
(3,567 |
) |
|
$ |
24,148 |
|
Harsco Rail Segment
forward contract loss provision |
|
— |
|
|
— |
|
|
5,000 |
|
|
— |
|
|
5,000 |
|
Harsco Metals &
Minerals Segment cumulative translation adjustment liquidation |
|
(1,157 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(1,157 |
) |
Adjusted operating
income (loss), excluding unusual items |
|
$ |
18,543 |
|
|
$ |
3,099 |
|
|
$ |
9,916 |
|
|
$ |
(3,567 |
) |
|
$ |
27,991 |
|
Revenues as
reported |
|
$ |
234,617 |
|
|
$ |
55,981 |
|
|
$ |
69,590 |
|
|
$ |
34 |
|
|
$ |
360,222 |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2015: |
|
|
|
|
|
|
|
|
Operating income (loss)
as reported |
|
$ |
438 |
|
|
$ |
11,640 |
|
|
$ |
10,077 |
|
|
$ |
(15,957 |
) |
|
$ |
6,198 |
|
Harsco Metals &
Minerals Segment separation costs |
|
— |
|
|
— |
|
|
— |
|
|
8,169 |
|
|
8,169 |
|
Harsco Metals &
Minerals Segment site exit and underperforming contract charges,
net |
|
6,399 |
|
|
— |
|
|
— |
|
|
— |
|
|
6,399 |
|
Harsco Metals &
Minerals Segment Project Orion charges |
|
5,070 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,070 |
|
Harsco Metals &
Minerals Segment contract termination charges |
|
(253 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(253 |
) |
Adjusted operating
income (loss) excluding unusual items |
|
$ |
11,654 |
|
|
$ |
11,640 |
|
|
$ |
10,077 |
|
|
$ |
(7,788 |
) |
|
$ |
25,583 |
|
Revenues as
reported |
|
$ |
243,261 |
|
|
$ |
75,373 |
|
|
$ |
68,798 |
|
|
$ |
— |
|
|
$ |
387,432 |
|
|
The Company’s management believes Adjusted operating income
(loss) excluding unusual items, which is a non-U.S. GAAP financial
measure, is useful to investors because it provides an overall
understanding of the Company’s historical and future
prospects. Exclusion of unusual items permits evaluation and
comparison of results for the Company’s core business operations,
and it is on this basis that management internally assesses the
Company’s performance. 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 |
RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS)
EXCLUDING UNUSUAL ITEMS BY SEGMENT TO OPERATING INCOME (LOSS) AS
REPORTED BY SEGMENT (Unaudited) |
(In thousands) |
|
HarscoMetals &
Minerals |
|
HarscoIndustrial |
|
Harsco
Rail |
|
Corporate |
|
Consolidated Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, 2016: |
|
|
|
|
|
|
|
|
|
Operating income (loss)
as reported |
|
$ |
81,634 |
|
|
$ |
23,182 |
|
|
$ |
(17,527 |
) |
|
$ |
(23,820 |
) |
|
$ |
63,469 |
|
|
Harsco Rail Segment
forward contract loss provision |
|
— |
|
|
— |
|
|
45,050 |
|
|
— |
|
|
45,050 |
|
|
Harsco Metals &
Minerals Segment site exit |
|
5,100 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,100 |
|
|
Harsco Metals &
Minerals Segment separation costs |
|
— |
|
|
— |
|
|
— |
|
|
3,287 |
|
|
3,287 |
|
|
Harsco Metals &
Minerals Segment cumulative translation adjustment liquidation |
|
(1,157 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(1,157 |
) |
|
Adjusted operating
income (loss), excluding unusual items |
|
$ |
85,577 |
|
|
$ |
23,182 |
|
|
$ |
27,523 |
|
|
$ |
(20,533 |
) |
|
$ |
115,749 |
|
|
Revenues as
reported |
|
$ |
965,540 |
|
|
$ |
247,542 |
|
|
$ |
238,107 |
|
|
$ |
34 |
|
|
$ |
1,451,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, 2015: |
|
|
|
|
|
|
|
|
|
Operating income (loss)
as reported |
|
$ |
26,289 |
|
|
$ |
57,020 |
|
|
$ |
50,896 |
|
|
$ |
(45,669 |
) |
|
$ |
88,536 |
|
|
Harsco Metals &
Minerals Segment contract termination charges, net |
|
13,484 |
|
|
— |
|
|
— |
|
|
— |
|
|
13,484 |
|
|
Harsco Metals &
Minerals Segment separation costs |
|
— |
|
|
— |
|
|
— |
|
|
9,922 |
|
|
9,922 |
|
|
Harsco Metals &
Minerals Segment salt cake processing and disposal charges |
|
7,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
7,000 |
|
|
Harsco Metals &
Minerals Segment Project Orion charges |
|
5,070 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,070 |
|
|
Harsco Metals &
Minerals Segment site exit and underperforming contract
charges |
|
4,977 |
|
|
— |
|
|
— |
|
|
— |
|
|
4,977 |
|
|
Harsco Metals &
Minerals Segment subcontractor settlement charge |
|
4,220 |
|
|
— |
|
|
— |
|
|
— |
|
|
4,220 |
|
|
Harsco Metals &
Minerals Segment multi-employer pension plan charge |
|
1,122 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,122 |
|
|
Harsco Infrastructure
Segment loss on disposal |
|
— |
|
|
— |
|
|
— |
|
|
1,000 |
|
|
1,000 |
|
|
Adjusted operating
income (loss) excluding unusual items |
|
$ |
62,162 |
|
|
$ |
57,020 |
|
|
$ |
50,896 |
|
|
$ |
(34,747 |
) |
|
$ |
135,331 |
|
|
Revenues as
reported |
|
$ |
1,106,162 |
|
|
$ |
357,256 |
|
|
$ |
259,674 |
|
|
$ |
— |
|
|
$ |
1,723,092 |
|
|
|
The Company’s management believes Adjusted operating income
(loss) excluding unusual items, which is a non-U.S. GAAP financial
measure, is useful to investors because it provides an overall
understanding of the Company’s historical and future
prospects. Exclusion of unusual items permits evaluation and
comparison of results for the Company’s core business operations,
and it is on this basis that management internally assesses the
Company’s performance. 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 |
RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS)
EXCLUDING UNUSUAL ITEMS BY SEGMENT TO OPERATING INCOME (LOSS) AS
REPORTED BY SEGMENT (Unaudited) |
(In thousands) |
|
HarscoMetals &
Minerals |
|
HarscoIndustrial |
|
Harsco
Rail |
|
Corporate |
|
Consolidated Totals |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2016: |
|
|
|
|
|
|
|
|
Operating income (loss)
as reported |
|
$ |
6,941 |
|
|
$ |
6,471 |
|
|
$ |
4,906 |
|
|
$ |
(8,887 |
) |
|
$ |
9,431 |
|
Harsco Metals &
Minerals Segment site exit charges |
|
5,100 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,100 |
|
Harsco Metals &
Minerals Segment separation costs |
|
— |
|
|
— |
|
|
— |
|
|
3,287 |
|
|
3,287 |
|
Adjusted operating
income (loss), excluding unusual items |
|
$ |
12,041 |
|
|
$ |
6,471 |
|
|
$ |
4,906 |
|
|
$ |
(5,600 |
) |
|
$ |
17,818 |
|
Revenues as
reported |
|
$ |
229,672 |
|
|
$ |
61,869 |
|
|
$ |
61,740 |
|
|
$ |
— |
|
|
$ |
353,281 |
|
|
The Company’s management believes Adjusted operating income
(loss) excluding unusual items, which is a non-U.S. GAAP financial
measure, is useful to investors because it provides an overall
understanding of the Company’s historical and future
prospects. Exclusion of unusual items permits evaluation and
comparison of results for the Company’s core business operations,
and it is on this basis that management internally assesses the
Company’s performance. 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 |
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY
OPERATING ACTIVITIES (Unaudited) |
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31 |
|
December 31 |
(In thousands) |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Net cash provided by
operating activities |
|
$ |
55,030 |
|
|
$ |
32,405 |
|
|
$ |
159,785 |
|
|
$ |
121,507 |
|
Less capital
expenditures |
|
(19,394 |
) |
|
(31,969 |
) |
|
(69,340 |
) |
|
(123,552 |
) |
Plus capital
expenditures for strategic ventures (a) |
|
58 |
|
|
129 |
|
|
170 |
|
|
439 |
|
Plus total proceeds
from sales of assets (b) |
|
2,127 |
|
|
5,189 |
|
|
9,305 |
|
|
25,966 |
|
Free cash flow |
|
$ |
37,821 |
|
|
$ |
5,754 |
|
|
$ |
99,920 |
|
|
$ |
24,360 |
|
|
- Capital expenditures for strategic ventures represent the
partner’s share of capital expenditures in certain ventures
consolidated in the Company’s financial statements.
- 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 |
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY
OPERATING ACTIVITIES (Unaudited) |
|
|
Projected Twelve Months Ending December
31 |
|
|
2017 |
(In millions) |
|
Low |
|
High |
Net cash provided by
operating activities |
|
$ |
149 |
|
|
$ |
158 |
|
Less capital
expenditures |
|
(90 |
) |
|
(80 |
) |
Plus total proceeds
from asset sales and capital expenditures for strategic
ventures |
|
1 |
|
|
2 |
|
Free Cash Flow |
|
$ |
60 |
|
|
$ |
80 |
|
|
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 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 |
RECONCILIATION OF RETURN ON INVESTED CAPITAL EXCLUDING
UNUSUAL ITEMS TO NET LOSS FROM CONTINUING OPERATIONS AS REPORTED
(a) (Unaudited) |
|
|
Year Ended December 31 |
(In thousands) |
|
2016 |
|
2015 |
Income (loss) from
continuing operations |
|
$ |
(80,422 |
) |
|
$ |
7,312 |
|
Unusual items: |
|
|
|
|
Net loss on dilution
and sale of equity investment |
|
53,822 |
|
|
— |
|
Harsco Rail Segment
forward contract loss provision |
|
45,050 |
|
|
— |
|
Loss on early
extinguishment of debt |
|
35,337 |
|
|
— |
|
Harsco Metals &
Minerals Segment site exit and underperforming contract charges,
net |
|
5,100 |
|
|
4,977 |
|
Harsco Metals &
Minerals Segment separation costs |
|
3,287 |
|
|
9,922 |
|
Expense of deferred
financing costs |
|
1,125 |
|
|
— |
|
Harsco Metals &
Minerals Segment cumulative translation adjustment liquidation |
|
(1,157 |
) |
|
— |
|
Harsco Metals &
Minerals Segment contract termination charges |
|
— |
|
|
13,484 |
|
Harsco Metals &
Minerals Segment salt cake processing and disposal charges |
|
— |
|
|
7,000 |
|
Harsco Metals &
Minerals Segment Project Orion charges |
|
— |
|
|
5,070 |
|
Harsco Metals &
Minerals Segment subcontractor settlement charge |
|
— |
|
|
4,220 |
|
Harsco Metals &
Minerals Segment multi-employer pension plan charge |
|
— |
|
|
1,122 |
|
Harsco Infrastructure
Segment loss on disposal |
|
— |
|
|
1,000 |
|
Taxes on above unusual
items (b) |
|
(17,335 |
) |
|
(6,198 |
) |
Net income from
continuing operations, as adjusted |
|
44,807 |
|
|
47,909 |
|
After-tax interest
expense (c) |
|
31,790 |
|
|
29,486 |
|
|
|
|
|
|
Net operating profit
after tax as adjusted |
|
$ |
76,597 |
|
|
$ |
77,395 |
|
|
|
|
|
|
Average equity |
|
$ |
290,995 |
|
|
$ |
308,182 |
|
Plus average debt |
|
821,559 |
|
|
910,955 |
|
Average capital |
|
$ |
1,112,554 |
|
|
$ |
1,219,137 |
|
|
|
|
|
|
Return on
invested capital excluding unusual items |
|
6.9 |
% |
|
6.3 |
% |
|
- Return on invested capital excluding unusual items is net
income (loss) from continuing operations excluding unusual items,
and after-tax interest expense, divided by average capital for the
year. The Company uses a trailing twelve month average for
computing average capital.
- Unusual items are tax effected at the global effective tax
rate, before discrete items, in effect at the time the unusual item
is recorded except for unusual items from countries where no tax
benefit can be realized, in which case a zero percent tax rate is
used.
- The Company’s effective tax rate approximated 37% on an
adjusted basis for both periods for interest expense.
The Company’s management believes Return on invested capital
excluding unusual items, which is a non-U.S. GAAP financial
measure, is meaningful in evaluating the efficiency and
effectiveness of the capital invested in the Company’s
business. Exclusion of unusual items permits evaluation and
comparison of results for the Company’s core business operations,
and it is on this basis that management internally assesses the
Company’s performance. This measure should be considered in
addition to, rather than as a substitute for, net income or other
information provided in accordance with U.S. GAAP.
Investor Contact
David Martin
717.612.5628
damartin@harsco.com
Media Contact
Kenneth Julian
717.730.3683
kjulian@harsco.com
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