Worldwide industrial solutions company Harsco Corporation
(NYSE:HSC) today reported second quarter 2011 results from
continuing operations.
Second Quarter 2011 Highlights
Second quarter 2011 diluted earnings per share from continuing
operations were $0.47, compared with $0.40 per share in the second
quarter of last year. Income from continuing operations was $39.2
million, compared with $34.3 million in the second quarter last
year. Sales increased by 11 percent in the quarter to $875 million,
from $787 million in last year's second quarter. Foreign currency
translation increased sales by approximately $62 million and
operating income by approximately $2.7 million, when compared with
the second quarter of last year.
For the first six months of 2011, diluted earnings per share
from continuing operations were $0.62, compared with $0.50 per
share in the first half of 2010. Income from continuing operations
was $52.8 million, compared with $44.0 million in the first half of
last year. Sales increased by 8 percent in the first half of 2011
to $1.7 billion, from $1.5 billion in last year's first half.
Foreign currency translation increased sales by approximately $80
million and increased operating income by approximately
$2.8 million, when compared with the first six months of
2010.
Comment
Commenting on the Company's results, Harsco Chairman, President
and Chief Executive Officer Salvatore D. Fazzolari said, "We
continue to be pleased with the overall performance of our
operations. In addition to achieving results above the upper
end of our previous guidance for the second quarter of this year,
the quarter also benefited by $8 million ($0.07 per diluted share)
from the reduction of estimated costs related to the first phase of
our large equipment order to the Ministry of Railways
of China.
"While we experienced some headwinds in the quarter within our
Harsco Metals & Minerals Segment from lower stainless steel
production at mills served, as well as lower stainless steel scrap
pricing, both of which negatively affected margins, overall revenue
growth was achieved and new contract bidding activity remains
strong.
"Within our Harsco Infrastructure Segment, we are clearly
achieving the substantial cost savings that we had anticipated as a
result of our fourth quarter 2010 restructuring actions. While
certain end-market challenges remain, particularly in the United
Kingdom, the operating loss in the quarter was substantially
reduced, both year-over-year and sequentially from the first
quarter of the current year.
"Both our Harsco Rail and Harsco Industrial Segments continue to
perform well as we expand both businesses across the globe.
"While we are encouraged by our results in the second quarter
and the first half of 2011, it remains prudent for us to continue
to view the near-term outlook with a degree of caution,
particularly due to certain global market
uncertainties. Nevertheless, we are for the second time this
year raising our full-year 2011 earnings guidance by $0.05, from
$1.30 to $1.40 diluted earnings per share from continuing
operations to a new range of $1.35 to $1.45.
"This increased guidance for 2011 is based on the following
factors. On the positive side, the expected full-year results
factor in the lower cost of sales benefit from Harsco Rail
that was realized in the second quarter as well as an anticipated
lower effective tax rate for the second half of the year. The
following factors were also considered in developing guidance: the
impact of lower stainless steel scrap pricing in the Metals &
Minerals Segment for both the second quarter and the remainder of
the year; higher due diligence costs as we continue to review
acquisition opportunities; a further deterioration of the United
Kingdom economy and construction market affecting the
Infrastructure Segment; and the timing of a Rail machine sale for
China that has been re-staged for delivery from late in the fourth
quarter of this year to early in the first quarter of 2012.
"Our present outlook for third quarter 2011 earnings from
continuing operations is in the range of $0.37 to $0.42 per share,
which compares with $0.26 per share in the third quarter of
2010."
Second Quarter Business Review
Harsco Metals & Minerals
Sales in the second quarter increased approximately $48 million
to $424 million, up 13 percent from $376 million in last
year's comparable quarter. Foreign currency translation
increased sales in the quarter by approximately $34 million, and
operating income by approximately $3.3 million. Operating
income in the quarter decreased by $5.4 million to $35.3 million or
13 percent from last year's operating income of
$40.7 million. Likewise, operating margins of 8.3 percent
in the quarter were lower than the 10.8 percent in the second
quarter of 2010. Last year's second quarter included a net
asset gain of approximately $3.0 million that was not repeated in
this year's second quarter, resulting in lower operating margins on
a comparative basis by approximately 70 basis points. Furthermore,
operating income and margins in this year's second quarter were
both negatively affected by reduced commodity prices in the
minerals and recycling technologies product group. The Company's
on-site services to metal producers performed well in the
quarter.
The outlook for this Segment remains favorable, with the
expectation of further new contract signings in the second half of
2011 and a continuation of strong bidding activity
longer-term. Looking ahead specifically to the second half of
2011, the Company expects lower stainless steel scrap pricing to
negatively affect the minerals and recycling technologies product
group, but this should be offset by continued favorable performance
in the on-site services to metal producers. Overall this Segment is
expected to show year-over-year improvement for the second half of
2011.
Harsco Infrastructure
Sales in the second quarter increased approximately 14 percent
to $298 million, from $263 million in the second quarter of last
year. Foreign currency translation increased sales by
approximately $26 million in the quarter when compared with the
second quarter of 2010, but had a negative effect on operating
income in the quarter of approximately $0.9 million. An
operating loss of $5.1 million was incurred in the quarter,
compared with an operating loss of $13.6 million in the second
quarter of last year and an operating loss of $17.5 million in the
first quarter of this year.
As expected, this Segment is beginning to realize the forecasted
savings from the successful implementation of the major
restructuring plan announced at the end of 2010. The Company
continues to expect such savings will approximate $40 million in
2011, with full annualized savings of $60 million starting in
2012. While average rental rates and utilization rates have
stabilized in recent quarters, uncertainties remain in key end
markets, particularly in the United Kingdom, several other European
countries and, to a lesser degree, the United States.
The outlook for this Segment continues to be underpinned by the
expected restructuring savings. This Segment should continue
to show sequential improvement from the second quarter but is still
expected to post operating losses in the third and fourth
quarters. Longer-term, the full annualized cost savings of
approximately $60 million starting next year should position the
business to achieve break-even or better in 2012.
Harsco Rail
As expected, sales in the second quarter of 2011 decreased to
$78 million, down approximately 10 percent from sales of $86
million in last year's second quarter. However, operating
income in the quarter increased to $22.5 million, from $21.6
million in the comparable quarter of last year. Income in the
quarter benefited by $8 million pre-tax due to a change in
estimated costs related to the first phase of the China Ministry of
Railways equipment order.
Excluding this $8 million item, operating margins in the second
quarter of 2011 were 18.6 percent, compared with 25.0 percent in
the second quarter of last year. Sales, income and margins in
last year's second quarter benefited from the timing of equipment
deliveries, which as previously discussed were heavily weighted in
the second quarter and first half of 2010.
The outlook for this Segment continues to be favorable, and
results in the second half should exceed last year's second
half. However, this year's second half results will be
impacted by the timing of a major machine sale to China which had
been expected to be delivered late in the fourth quarter of 2011,
but is now expected to be delivered early in the first quarter of
2012. The longer-term outlook for the Segment remains
favorable. The global demand for railway maintenance-of-way
equipment, parts and services continues to be strong. Closer
to home, the Class I railroads in the United States continue to
report improved earnings and increased freight shipments, a
positive indication of further opportunities for the Rail business
going into 2012.
Harsco Industrial
Sales in the quarter increased approximately 22 percent to $75
million, from last year's second quarter sales of $61
million. Operating income in the second quarter was
$13.0 million, compared with operating income of $13.7 million
last year. Operating margins in the quarter were 17.4 percent,
lower than operating margins of 22.4 percent in last year's second
quarter. The decline in operating income and margins in the
quarter was the result of product mix and to a lesser extent higher
LIFO costs.
The outlook for this Segment continues to be favorable as the
business expands across the globe and bidding activity is very
strong. The second half 2011 performance is expected to
slightly improve over last year's comparable period.
Liquidity, Capital Resources and Other
Matters
Net cash provided by operating activities for the first half of
2011 was $66.9 million, compared with $125.7 million for the prior
year. The decline in cash from operations is due principally to
higher working capital from increased sales and timing of cash
receipts. Over $40 million in cash was collected during the
first few days of July that had been forecasted for receipt in late
June. Also, working capital was adversely affected by $15
million in cash used for the fourth quarter 2010 restructuring of
Harsco Infrastructure. As in prior years, the Company expects
that the preponderance of cash flow from operations will be
realized in the second half, particularly the fourth quarter.
Net cash used by investing activities was $129.7 million,
compared with $84.2 million in the first half of 2010. The
increase in capital expenditures is due to contract renewals and
new contract signings, principally in the Metals & Minerals
Segment, where bidding activity remains strong.
The total debt to capital ratio at June 30, 2011 was 38.0
percent, unchanged from March 31, 2011 and slightly higher than the
37.6 percent ratio at December 31, 2010, which was the Company's
lowest level since 1998. Total debt outstanding stood at
$948.5 million as of June 30, 2011, compared with $884.9 million at
the end of 2010.
Economic Value Added (EVA®) improved in the second quarter and
first half of 2011 over the comparable periods in 2010, due
principally to higher earnings and to a lesser extent lower capital
employed.
Forward Looking Statements
This news release contains forward-looking statements based on
management's current expectations, estimates and
projections. All statements that address expectations or
projections about the future, including statements about the
company's strategy for growth, product development, market
position, expected expenditures and financial results are
forward-looking statements. Some of the forward-looking
statements may be identified by words like "may," "could,"
"believes," "expects," "anticipates," "plans," "intends,"
"projects," "indicates," and similar expressions. These
statements are not guarantees of future performance and involve a
number of risks, uncertainties and assumptions. Many factors,
including those discussed more fully elsewhere in this release and
in documents filed with the Securities and Exchange Commission by
Harsco, particularly its latest annual report on Form 10-K and
quarterly report on Form 10-Q, as well as others, could cause
results to differ materially from those stated. These factors
include, but are not limited to, changes in the worldwide business
environment in which the Company operates, including general
economic conditions; changes in currency exchange rates, interest
rates, commodity and fuel costs and capital costs; changes in the
performance of the equity and debt 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; changes in governmental laws and regulations, including
environmental, tax and import tariff standards; market and
competitive changes, including pricing pressures, market demand and
acceptance for new products, services, and technologies; 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; the seasonal nature of the Company's business; our
ability to successfully enter into new contracts and complete new
acquisitions or joint ventures in the timeframe contemplated or at
all; the recent global financial and credit crisis, which could
result in our customers curtailing development projects,
construction, production and capital expenditures, which, in turn,
could reduce the demand for our products and services and,
accordingly, our sales, margins and profitability; 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;
the successful integration of the Company's strategic acquisitions;
the amount and timing of repurchases of the Company's common stock,
if any; our ability to successfully implement cost-reduction
initiatives, including the achievement of expected cost savings in
the expected timeframe; and other risk factors listed from time to
time in the Company's SEC reports. The Company undertakes no
duty to update forward-looking statements.
Conference Call
As previously announced, the Company will hold a conference call
today at 10:00 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 call can also be
accessed by telephone by dialing (800) 611-4920, or (973)
200-3957 for international callers. Enter Conference ID number
80877159. Listeners are advised to dial in at least five
minutes prior to the call. Replays will be available via the
Harsco website.
About Harsco
Harsco Corporation is a global solutions company serving major
industries that are fundamental to worldwide infrastructure
development and economic growth. Harsco's common stock is a
component of the S&P MidCap 400 Index and the Russell 1000
Index. Additional information can be found at www.harsco.com.
The Harsco Corporation logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=361
HARSCO
CORPORATION |
CONSOLIDATED STATEMENTS
OF INCOME (Unaudited) |
(In thousands, except per
share amounts) |
|
Three Months Ended June
30 |
Six Months Ended
June 30 |
|
2011 |
2010 |
2011 |
2010 |
Revenues from continuing
operations: |
|
|
|
|
Service revenues |
$723,516 |
$638,387 |
$1,377,043 |
$1,237,433 |
Product revenues |
151,575 |
148,134 |
277,103 |
291,494 |
Total
revenues |
875,091 |
786,521 |
1,654,146 |
1,528,927 |
|
|
|
|
|
Costs and expenses from continuing
operations: |
|
|
|
|
Cost of services
sold |
572,216 |
501,287 |
1,098,194 |
987,919 |
Cost of products
sold |
94,997 |
89,228 |
179,438 |
182,029 |
Selling, general and
administrative expenses |
141,162 |
133,763 |
278,951 |
270,090 |
Research and development
expenses |
1,373 |
770 |
2,713 |
1,685 |
Other (income)
expenses |
910 |
(394) |
1,381 |
(2,903) |
Total costs and
expenses |
810,658 |
724,654 |
1,560,677 |
1,438,820 |
|
|
|
|
|
Operating income from
continuing operations |
64,433 |
61,867 |
93,469 |
90,107 |
|
|
|
|
|
Interest income |
619 |
651 |
1,339 |
1,111 |
Interest expense |
(12,644) |
(15,411) |
(24,579) |
(31,530) |
|
|
|
|
|
Income from continuing
operations before income taxes and equity income |
52,408 |
47,107 |
70,229 |
59,688 |
|
|
|
|
|
Income tax expense |
(13,335) |
(12,870) |
(17,735) |
(15,904) |
Equity in income of unconsolidated
entities, net |
125 |
59 |
336 |
189 |
|
|
|
|
|
Income from continuing
operations |
39,198 |
34,296 |
52,830 |
43,973 |
|
|
|
|
|
Discontinued
operations: |
|
|
|
|
Loss from discontinued
business |
(744) |
(4,626) |
(2,072) |
(4,788) |
Income tax benefit
related to discontinued business |
286 |
1,791 |
789 |
2,204 |
Loss from discontinued
operations |
(458) |
(2,835) |
(1,283) |
(2,584) |
Net Income |
38,740 |
31,461 |
51,547 |
41,389 |
Less: Net income
attributable to noncontrolling interests |
(1,013) |
(1,798) |
(2,389) |
(3,692) |
Net Income attributable to
Harsco Corporation |
$37,727 |
$29,663 |
$49,158 |
$37,697 |
|
|
|
|
|
Amounts attributable to Harsco
Corporation common stockholders: |
|
|
|
|
Income from continuing
operations, net of tax |
$38,185 |
$32,498 |
$50,441 |
$40,281 |
Loss from discontinued
operations, net of tax |
(458) |
(2,835) |
(1,283) |
(2,584) |
Net income
attributable to Harsco Corporation common
stockholders |
$37,727 |
$29,663 |
$49,158 |
$37,697 |
|
|
|
|
|
Weighted-average shares of common stock
outstanding |
80,749 |
80,559 |
80,722 |
80,551 |
Basic earnings (loss) per common share
attributable to Harsco Corporation common stockholders: |
|
|
|
|
Continuing operations |
$0.47 |
$0.40 |
$0.62 |
$0.50 |
Discontinued
operations |
(0.01) |
(0.04) |
(0.02) |
(0.03) |
Basic earnings per share
attributable to Harsco Corporation common
stockholders |
$ 0.47 (a) |
$ 0.37 (a) |
$ 0.61 (a) |
$0.47 |
|
|
|
|
|
Diluted weighted-average shares of common
stock outstanding |
81,010 |
80,735 |
80,977 |
80,739 |
Diluted earnings (loss) per common share
attributable to Harsco Corporation common stockholders: |
|
|
|
|
Continuing operations |
$0.47 |
$0.40 |
$0.62 |
$0.50 |
Discontinued
operations |
(0.01) |
(0.04) |
(0.02) |
(0.03) |
Diluted earnings per share
attributable to Harsco Corporation common
stockholders |
$ 0.47 (a) |
$ 0.37 (a) |
$ 0.61 (a) |
$0.47 |
(a) Does not total due to
rounding. |
|
|
|
HARSCO CORPORATION |
|
|
CONSOLIDATED BALANCE SHEETS
(Unaudited) |
|
|
(In thousands) |
|
|
|
June 30 |
December 31 |
|
2011 |
2010 |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$95,295 |
$124,238 |
Trade accounts receivable,
net |
699,255 |
585,301 |
Other receivables |
29,652 |
29,299 |
Inventories |
295,520 |
271,617 |
Other current assets |
112,432 |
144,491 |
Total current
assets |
1,232,154 |
1,154,946 |
Property, plant and equipment, net |
1,439,796 |
1,366,973 |
Goodwill |
711,872 |
690,787 |
Intangible assets, net |
107,566 |
120,959 |
Other assets |
128,658 |
135,555 |
Total
assets |
$3,620,046 |
$3,469,220 |
LIABILITIES |
|
|
Current liabilities: |
|
|
Short-term borrowings |
$89,561 |
$31,197 |
Current maturities of long-term
debt |
3,471 |
4,011 |
Accounts payable |
282,503 |
261,509 |
Accrued compensation |
88,974 |
83,928 |
Income taxes payable |
8,479 |
9,718 |
Dividends payable |
16,542 |
16,505 |
Insurance liabilities |
23,486 |
25,844 |
Advances on contracts |
113,962 |
128,794 |
Other current
liabilities |
201,066 |
206,358 |
Total current
liabilities |
828,044 |
767,864 |
Long-term debt |
855,490 |
849,724 |
Deferred income taxes |
46,897 |
35,642 |
Insurance liabilities |
63,095 |
62,202 |
Retirement plan liabilities |
210,430 |
223,777 |
Other liabilities |
66,975 |
61,866 |
Total
liabilities |
2,070,931 |
2,001,075 |
EQUITY |
|
|
Harsco Corporation
stockholders' equity: |
|
|
Common stock |
139,773 |
139,514 |
Additional paid-in capital |
145,363 |
141,298 |
Accumulated other comprehensive
loss |
(128,010) |
(185,932) |
Retained earnings |
2,089,986 |
2,073,920 |
Treasury stock |
(738,016) |
(737,106) |
Total Harsco Corporation
stockholders' equity |
1,509,096 |
1,431,694 |
Noncontrolling
interests |
40,019 |
36,451 |
Total
equity |
1,549,115 |
1,468,145 |
Total liabilities
and equity |
$3,620,046 |
$3,469,220 |
|
|
|
HARSCO CORPORATION |
|
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited) |
|
|
(In thousands) |
|
|
|
Six Months
Ended |
|
June 30 |
|
2011 |
2010 |
|
|
|
Cash flows from operating
activities: |
|
|
Net income |
$51,547 |
$41,389 |
Adjustments to reconcile net income to
net cash provided (used) by operating activities: |
|
|
Depreciation |
137,631 |
139,918 |
Amortization |
17,295 |
18,016 |
Equity in income of
unconsolidated entities, net |
(336) |
(189) |
Dividends or distributions from
unconsolidated entities |
160 |
176 |
Other, net |
(3,992) |
(14,337) |
Changes in assets and liabilities, net of
acquisitions and dispositions of businesses: |
|
|
Accounts receivable |
(87,027) |
(81,129) |
Inventories |
(14,507) |
13,367 |
Accounts payable |
9,382 |
16,771 |
Accrued interest payable |
405 |
11,370 |
Accrued compensation |
1,919 |
13,790 |
Harsco Infrastructure Segment
Restructuring Program accrual |
(11,146) |
-- |
Other assets and
liabilities |
(34,466) |
(33,492) |
|
|
|
Net cash provided
by operating activities |
66,865 |
125,650 |
|
|
|
Cash flows from investing
activities: |
|
|
Purchases of property, plant
and equipment |
(166,876) |
(74,590) |
Proceeds from sale of
assets |
33,388 |
16,288 |
Purchases of businesses, net of
cash acquired |
-- |
(27,643) |
Other investing
activities |
3,831 |
1,720 |
|
|
|
Net cash used by
investing activities |
(129,657) |
(84,225) |
|
|
|
Cash flows from financing
activities: |
|
|
Short-term borrowings, net |
57,597 |
3,485 |
Current maturities and long-term
debt: |
|
|
Additions |
166,924 |
180,890 |
Reductions |
(162,460) |
(177,117) |
Cash dividends paid on common stock |
(33,042) |
(32,964) |
Dividends paid to noncontrolling
interests |
(600) |
(3,948) |
Contributions of equity from noncontrolling
interests |
660 |
354 |
Common stock issued-options |
1,330 |
437 |
|
|
|
Net cash provided
(used) by financing activities |
30,409 |
(28,863) |
|
|
|
Effect of exchange rate changes on
cash |
3,440 |
(4,294) |
|
|
|
Net increase (decrease) in cash and cash
equivalents |
(28,943) |
8,268 |
|
|
|
Cash and cash equivalents at beginning
of period |
124,238 |
94,184 |
|
|
|
Cash and cash equivalents at end
of period |
$95,295 |
$102,452 |
|
|
|
|
|
HARSCO CORPORATION |
|
|
|
|
REVIEW OF OPERATIONS BY
SEGMENT (Unaudited) |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
Three Months
Ended |
|
June 30,
2011 |
June 30,
2010 |
|
|
|
|
|
|
Sales |
Operating Income
(loss) |
Sales |
Operating Income
(loss) |
|
|
|
|
|
Harsco Metals &
Minerals |
$423,789 |
$35,252 |
$376,188 |
$40,702 |
|
|
|
|
|
Harsco Infrastructure |
298,334 |
(5,088) |
262,653 |
(13,551) |
|
|
|
|
|
Harsco Rail |
77,945 |
22,520 |
86,327 |
21,614 |
|
|
|
|
|
Harsco Industrial |
75,023 |
13,044 |
61,313 |
13,716 |
|
|
|
|
|
General Corporate |
-- |
(1,295) |
40 |
(614) |
|
|
|
|
|
Consolidated Totals |
$875,091 |
$64,433 |
$786,521 |
$61,867 |
|
|
|
|
|
|
Six Months
Ended |
Six Months
Ended |
|
June 30,
2011 |
June 30,
2010 |
|
|
|
|
|
(In thousands) |
Sales |
Operating Income
(loss) |
Sales |
Operating Income
(loss) |
|
|
|
|
|
Harsco Metal &
Minerals |
$815,526 |
$63,857 |
$720,450 |
$59,986 |
|
|
|
|
|
Harsco Infrastructure |
559,901 |
(22,579) |
513,282 |
(32,823) |
|
|
|
|
|
Harsco Rail |
140,547 |
30,643 |
181,729 |
42,029 |
|
|
|
|
|
Harsco Industrial |
138,172 |
23,718 |
113,366 |
22,094 |
|
|
|
|
|
General Corporate |
-- |
(2,170) |
100 |
(1,179) |
|
|
|
|
|
Consolidated Totals |
$1,654,146 |
$93,469 |
$1,528,927 |
$90,107 |
CONTACT: Investor Contact
Eugene M. Truett
717.975.5677
etruett@harsco.com
Media Contact
Kenneth D. Julian
717.730.3683
kjulian@harsco.com
Harsco (NYSE:HSC)
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From May 2024 to Jun 2024
Harsco (NYSE:HSC)
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