Worldwide industrial solutions company Harsco Corporation
(NYSE:HSC) today reported third quarter 2011 results from
continuing operations.
Third Quarter 2011 Results
Third quarter 2011 diluted earnings per share from continuing
operations were $0.40, compared with $0.26 per share in the third
quarter of last year. Income from continuing operations was $32.4
million, compared with $21.8 million in the third quarter last
year. Sales increased by 14 percent in the quarter to $856 million,
from $752 million in last year's third quarter. Foreign
currency translation increased sales by approximately $28 million
and operating income by approximately $1.4 million, compared with
the third quarter of last year.
For the first nine months of 2011, diluted earnings per share
from continuing operations were $1.02, compared with $0.76 per
share in the first nine months of 2010. Income from continuing
operations was $85.2 million, compared with $65.8 million in the
first nine months of last year. Sales increased by 10 percent
to $2.5 billion, from $2.3 billion in last year's first nine
months. Foreign currency translation increased sales by
approximately $109 million and increased operating income by
approximately $4.2 million, compared with the first nine months of
2011.
Comment and Outlook
Commenting on the Company's results, Harsco Chairman, President
and Chief Executive Officer Salvatore D. Fazzolari said, "Results
for the third quarter were within the range of our previous
guidance and events generally unfolded as expected, except for
end-market conditions in the U.K. for our Harsco Infrastructure
business, which deteriorated more significantly than we
anticipated. In addition, we incurred certain other headwinds in
the third quarter, principally net exit costs of approximately $2.6
million in the Metals & Minerals business and higher LIFO costs
in excess of $1 million in the Rail business, which lowered overall
results for the third quarter.
"As expected, cash flow from operations improved significantly
in the third quarter and was more than double the level of the
second quarter of this year. Historically, we generate higher
levels of operating cash flow in the second half of the year,
compared with the first half. In regard to the use of these
cash flows, it continues to be our intention to take a balanced
approach.
"Our balance sheet remains in the best shape it has been in more
than a decade. There are no long-term debt maturities until late
2013 and over ninety percent of our debt has a fixed interest
rate.
"We are seeing a challenging macroeconomic environment across
many of our key end-markets, particularly in Western
Europe. In addition, we expect the sale of certain machines in
our Rail business to shift from the fourth quarter of 2011 to the
first quarter of 2012. Thus, it remains prudent for us to be
cautious as we conclude the year. As such, we are adjusting
our full-year 2011 guidance from a range of $1.35 to $1.45 to a new
range of $1.30 to $1.35. This implies an outlook for the fourth
quarter of 2011 for earnings per share from continuing operations
in the range of $0.28 to $0.33, which compares with $0.15 in the
fourth quarter of last year, excluding the restructuring
charge."
Third Quarter Business Review
Harsco Metals & Minerals
The Metals & Minerals operating results were impacted by
approximately $2.6 million of net exit costs, including costs from
the Company's decision not to renew certain lower return, long-term
contracts in the Metals part of the business, and substantially
lower stainless steel production (a 22 percent decline in volume)
in the Minerals part of the business.
Sales for this Segment in the third quarter increased
approximately $31 million to $400 million, up 8 percent from $369
million in last year's comparable quarter. Foreign currency
translation increased sales in the quarter by approximately $15
million, and operating income by approximately $1.3
million. Operating income in the third quarter decreased by
$3.1 million to $30.9 million or by approximately 9 percent from
operating income of $34.0 million in the third quarter last
year. Likewise, operating margins of 7.7 percent in the third
quarter were lower than the 9.2 percent in the third quarter of
2010.
This Segment is expected to show modest year-over-year
improvement in results in the fourth quarter. Steel production
for the remainder of 2011 is expected to slow from third quarter
2011 levels and, as discussed last quarter, stainless steel
production is expected to remain lower year-over-year. The
Company continues to see success in new contract signings and in
its efforts to exit existing lower return contracts, which should
increase future margins and returns on capital. The Segment
has also entered into two new strategic technology alliances which
the Company believes have the potential for future growth
opportunities.
Harsco Infrastructure
The Harsco Infrastructure Segment continued to benefit in the
third quarter from cost savings generated from the successful
implementation of its major restructuring plan announced at the end
of 2010. However, during the third quarter there was a
significant further deterioration in the operating results in the
United Kingdom due to that country's worsening economic
conditions. According to published reports in early September,
new construction orders in the U.K. had reached a thirty-year
low. Had it not been for the significant negative impact of
the U.K., the overall Infrastructure business results would have
been close to break-even for the third quarter. As a result of the
further decline of the U.K. market and the slowdown in Western
Europe, the Company is currently reviewing additional
countermeasures and cost reduction actions to improve future
results.
Sales in the third quarter increased approximately 11 percent to
$282 million, from $254 million in the third quarter of last
year. Foreign currency translation increased sales by
approximately $12 million in the third quarter compared with the
third quarter of 2010, but did not have a material impact on
operating income. An operating loss of ($3.3) million was
incurred in the third quarter, compared with an operating loss of
($13.6) million in the third quarter of last year and an operating
loss of ($5.1) million in the second quarter of this year on sales
of $298 million.
The Company expects Infrastructure's fourth quarter loss to be
higher than those of both the second and the third quarters of
2011, due principally to the U.K. market conditions and an expected
seasonal slow-down in business activity in the fourth quarter, but
expects to show measurable improvement over last year's fourth
quarter, excluding the restructuring charge.
Harsco Rail
Operating margins in the third quarter of 13.3 percent were
lower than the 20.4 percent in the comparable quarter of the prior
year. Lower operating income and margins in the third quarter
were the result of several factors, including higher year-over-year
LIFO costs and the large sale at book value of previously used
machines, as well as business mix. Operating income in the
quarter decreased to $11.6 million from $14.4 million in the third
quarter of last year due to these items.
Sales in the third quarter increased approximately 24 percent to
$87 million, from $71 million in the third quarter of 2010. A
majority of the sales increase, however, was due to the
aforementioned large sale of machines sold at book
value. Foreign currency translation also increased sales in
the third quarter by almost $1 million, but did not have a material
impact on operating income.
Sequential improvement in operating income and margins is
expected in the fourth quarter of 2011 over the third quarter of
2011. As previously reported, however, fourth quarter 2011
results are expected to be tempered by the timing of several
machine sales that were expected to be delivered late in the fourth
quarter of 2011, but which are now expected to be delivered in the
first quarter of 2012. Nevertheless, total 2011 revenues for
this Segment are still expected to approximate those of 2010 and
again exceed the $300 million level.
The global demand for railway maintenance-of-way equipment,
parts, and services continues to be strong and the Class I
railroads in the United States continue to report increased freight
shipments, a positive indication of further opportunities for this
Segment going into 2012. The Company expects to enter 2012
with a solid order book.
Harsco Industrial
Operating margins of 16.1 percent were slightly lower than last
year's 17.6 percent, due in part to higher LIFO costs in the third
quarter of 2011, compared with the third quarter of 2010.
Sales in the third quarter increased 46 percent to $86 million
from last year's third quarter sales of $59 million. Likewise,
operating income increased approximately 33 percent to $13.8
million, from $10.3 million in the third quarter of last
year.
The fourth quarter of 2011 is expected to produce operating
income comparable to that of the fourth quarter of last
year. The longer-term outlook for this Segment remains
favorable as many of this Segment's manufactured products are
utilized in the energy markets. This, combined with the
Company's continued success in expanding this Segment globally, is
expected to result in significant growth.
Liquidity, Capital Resources and Other
Matters
As expected, net cash provided by operating activities for the
third quarter improved considerably over the first half of 2011 and
bettered last year's third quarter by 12 percent. Net cash provided
by operating activities for the third quarter of 2011 was $123
million, compared with $110 million for the third quarter of the
prior year. Net cash provided by operating activities for the
first nine months of 2011 was $190 million, compared with $236
million for the first nine months of the prior year. The
decline in cash from operations is due principally to higher
working capital from increased sales and $17 million in cash used
for the restructuring of the Harsco Infrastructure Segment.
The total debt to capital ratio at September 30, 2011 was 38.0
percent, unchanged from June 30, 2011 and only 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 $917 million as of September 30, 2011, compared with
$884.9 million at the end of 2010.
Economic Value Added (EVA®) increased in the third quarter and
first nine months of 2011 over the comparable periods in 2010, due
principally to higher earnings.
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;
risk and uncertainty associated with intangible assets; 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
13950424. 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) |
|
|
|
Three Months Ended
September 30 |
Nine Months Ended
September 30 |
(In thousands, except per share
amounts) |
2011 |
2010 |
2011 |
2010 |
Revenues from continuing
operations: |
|
|
|
|
Service revenues |
$ 682,885 |
$ 627,901 |
$ 2,059,928 |
$ 1,865,333 |
Product revenues |
172,979 |
124,500 |
450,082 |
415,994 |
Total
revenues |
855,864 |
752,401 |
2,510,010 |
2,281,327 |
|
|
|
|
|
Costs and expenses from continuing
operations: |
|
|
|
|
Cost of services sold |
545,008 |
493,181 |
1,643,202 |
1,481,099 |
Cost of products sold |
126,395 |
81,569 |
305,833 |
263,597 |
Selling, general and
administrative expenses |
129,006 |
131,405 |
407,957 |
401,496 |
Research and development
expenses |
1,577 |
1,293 |
4,290 |
2,979 |
Other (income)
expense |
3,050 |
883 |
4,431 |
(2,020) |
Total costs and
expenses |
805,036 |
708,331 |
2,365,713 |
2,147,151 |
|
|
|
|
|
Operating income from
continuing operations |
50,828 |
44,070 |
144,297 |
134,176 |
|
|
|
|
|
Interest income |
683 |
737 |
2,022 |
1,849 |
Interest expense |
(12,230) |
(15,709) |
(36,809) |
(47,239) |
|
|
|
|
|
Income from continuing
operations before income taxes and equity income |
39,281 |
29,098 |
109,510 |
88,786 |
|
|
|
|
|
Income tax expense |
(7,078) |
(7,391) |
(24,813) |
(23,295) |
Equity in income of unconsolidated
entities, net |
194 |
120 |
530 |
309 |
|
|
|
|
|
Income from continuing
operations |
32,397 |
21,827 |
85,227 |
65,800 |
|
|
|
|
|
Discontinued
operations: |
|
|
|
|
Loss on disposal of
discontinued business |
(636) |
(1,406) |
(2,708) |
(6,195) |
Income tax benefit
related to discontinued business |
229 |
511 |
1,018 |
2,716 |
Loss from discontinued
operations |
(407) |
(895) |
(1,690) |
(3,479) |
Net Income |
31,990 |
20,932 |
83,537 |
62,321 |
Less: Net income
attributable to noncontrolling interests |
(190) |
(753) |
(2,579) |
(4,445) |
Net Income attributable to
Harsco Corporation |
$ 31,800 |
$ 20,179 |
$ 80,958 |
$ 57,876 |
|
|
|
|
|
Amounts attributable to Harsco
Corporation common stockholders: |
|
|
|
|
Income from continuing
operations, net of tax |
$ 32,207 |
$ 21,074 |
$ 82,648 |
$ 61,355 |
Loss from discontinued
operations, net of tax |
(407) |
(895) |
(1,690) |
(3,479) |
Net income
attributable to Harsco Corporation common
stockholders |
$ 31,800 |
$ 20,179 |
$ 80,958 |
$ 57,876 |
|
|
|
|
|
Weighted-average shares of common stock
outstanding |
80,767 |
80,574 |
80,737 |
80,559 |
Basic earnings (loss) per common share
attributable to Harsco Corporation common stockholders: |
|
|
|
|
Continuing operations |
$ 0.40 |
$ 0.26 |
$ 1.02 |
$ 0.76 |
Discontinued
operations |
(0.01) |
(0.01) |
(0.02) |
(0.04) |
Basic earnings per share
attributable to Harsco Corporation common
stockholders |
$ 0.39 |
$ 0.25 |
$ 1.00 |
$ 0.72 |
|
|
|
|
|
Diluted weighted-average shares of common
stock outstanding |
81,037 |
80,762 |
80,997 |
80,747 |
Diluted earnings (loss) per common share
attributable to Harsco Corporation common stockholders: |
|
|
|
|
Continuing operations |
$ 0.40 |
$ 0.26 |
$ 1.02 |
$ 0.76 |
Discontinued
operations |
(0.01) |
(0.01) |
(0.02) |
(0.04) |
Diluted earnings per share
attributable to Harsco Corporation common
stockholders |
$ 0.39 |
$ 0.25 |
$ 1.00 |
$ 0.72 |
|
|
|
HARSCO CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited) |
|
|
(In
thousands) |
September 30
2011 |
December 31
2010 |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 106,288 |
$ 124,238 |
Trade accounts receivable,
net |
656,526 |
585,301 |
Other receivables |
28,071 |
29,299 |
Inventories |
276,625 |
271,617 |
Other current
assets |
123,572 |
144,491 |
Total current
assets |
1,191,082 |
1,154,946 |
Property, plant and equipment, net |
1,369,202 |
1,366,973 |
Goodwill |
688,859 |
690,787 |
Intangible assets, net |
101,036 |
120,959 |
Other assets |
145,541 |
135,555 |
Total
assets |
$ 3,495,720 |
$ 3,469,220 |
LIABILITIES |
|
|
Current liabilities: |
|
|
Short-term borrowings |
$ 59,027 |
$ 31,197 |
Current maturities of long-term
debt |
2,623 |
4,011 |
Accounts payable |
267,066 |
261,509 |
Accrued compensation |
95,645 |
83,928 |
Income taxes payable |
7,866 |
9,718 |
Dividends payable |
16,546 |
16,505 |
Insurance liabilities |
25,884 |
25,844 |
Advances on contracts |
114,983 |
128,794 |
Other current
liabilities |
206,461 |
206,358 |
Total current
liabilities |
796,101 |
767,864 |
Long-term debt |
855,736 |
849,724 |
Deferred income taxes |
37,690 |
35,642 |
Insurance liabilities |
62,340 |
62,202 |
Retirement plan liabilities |
197,929 |
223,777 |
Other liabilities |
51,890 |
61,866 |
Total
liabilities |
2,001,686 |
2,001,075 |
EQUITY |
|
|
Harsco Corporation
stockholders' equity: |
|
|
Common stock |
139,798 |
139,514 |
Additional paid-in capital |
146,511 |
141,298 |
Accumulated other comprehensive
loss |
(204,729) |
(185,932) |
Retained earnings |
2,105,211 |
2,073,920 |
Treasury
stock |
(738,016) |
(737,106) |
Total Harsco
Corporation stockholders' equity |
1,448,775 |
1,431,694 |
Noncontrolling
interests |
45,259 |
36,451 |
Total
equity |
1,494,034 |
1,468,145 |
Total liabilities
and equity |
$ 3,495,720 |
$ 3,469,220 |
|
|
HARSCO
CORPORATION CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited) |
|
|
Three Months
Ended September 30 |
Nine Months
Ended September 30 |
(In thousands) |
2011 |
2010 |
2011 |
2010 |
|
|
|
|
|
Cash flows from operating
activities: |
|
|
|
|
Net income |
$ 31,990 |
$ 20,932 |
$ 83,537 |
$ 62,321 |
Adjustments to reconcile net
income to net cash provided (used) by operating activities: |
|
|
|
|
Depreciation |
69,699 |
69,511 |
207,330 |
209,428 |
Amortization |
8,655 |
9,016 |
25,950 |
27,033 |
Equity in income of
unconsolidated entities, net |
(194) |
(120) |
(530) |
(309) |
Dividends or distributions from
unconsolidated entities |
-- |
-- |
160 |
176 |
Other, net |
318 |
(2,934) |
(3,674) |
(17,271) |
Changes in assets and
liabilities, net of acquisitions and dispositions of
businesses: |
|
|
|
|
Accounts receivable |
10,055 |
23,830 |
(76,972) |
(57,299) |
Inventories |
7,840 |
(4,761) |
(6,667) |
8,606 |
Accounts payable |
(6,232) |
(2,248) |
3,150 |
14,524 |
Accrued interest payable |
6,246 |
9,882 |
6,651 |
21,252 |
Accrued compensation |
11,721 |
2,639 |
13,640 |
16,429 |
Harsco Infrastructure Segment
Restructuring Program accrual |
(5,551) |
-- |
(16,697) |
-- |
Other assets
and liabilities |
(11,305) |
(15,418) |
(45,771) |
(48,910) |
|
|
|
|
|
Net cash provided
by operating activities |
123,242 |
110,329 |
190,107 |
235,980 |
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
Purchases of property, plant
and equipment |
(73,944) |
(55,352) |
(240,820) |
(129,942) |
Proceeds from sales of
assets |
3,792 |
2,133 |
37,180 |
18,421 |
Purchases of businesses, net of
cash acquired |
(1,938) |
-- |
(1,938) |
(27,643) |
Other investing
activities |
6,284 |
(4,813) |
10,115 |
(3,093) |
|
|
|
|
|
Net cash used by
investing activities |
(65,806) |
(58,032) |
(195,463) |
(142,257) |
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
Short-term borrowings, net |
(28,656) |
(54,404) |
28,941 |
(50,919) |
Current maturities and
long-term debt: |
|
|
|
|
Additions |
48,498 |
318,377 |
215,422 |
499,267 |
Reductions |
(48,301) |
(74,528) |
(210,761) |
(251,646) |
Cash dividends paid on common
stock |
(16,557) |
(16,496) |
(49,599) |
(49,460) |
Dividends paid to
noncontrolling interests |
(2,722) |
(1,072) |
(3,322) |
(5,020) |
Purchases of noncontrolling
interests |
-- |
(1,159) |
-- |
(1,159) |
Contributions of equity from
noncontrolling interests |
8,414 |
88 |
9,074 |
442 |
Common stock
issued-options |
338 |
382 |
1,668 |
820 |
Other financing
activities |
(1) |
(369) |
(1) |
(369) |
|
|
|
|
|
Net cash provided
(used) by financing activities |
(38,987) |
170,819 |
(8,578) |
141,956 |
|
|
|
|
|
Effect of exchange rate changes on
cash |
(7,456) |
4,769 |
(4,016) |
474 |
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents |
10,993 |
227,885 |
(17,950) |
236,153 |
|
|
|
|
|
Cash and cash equivalents at beginning
of period |
95,295 |
102,452 |
124,238 |
94,184 |
|
|
|
|
|
Cash and cash equivalents at end
of period |
$ 106,288 |
$ 330,337 |
$ 106,288 |
$ 330,337 |
|
|
|
|
|
Harsco
Corporation |
|
|
|
|
REVIEW OF OPERATIONS BY
SEGMENT (Unaudited) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2011 |
Three Months Ended
September 30, 2010 |
(In thousands) |
Revenues |
Operating Income
(loss) |
Revenues |
Operating Income
(loss) |
|
|
|
|
|
Harsco Metals &
Minerals |
$400,478 |
$30,907 |
$369,351 |
$34,026 |
|
|
|
|
|
Harsco Infrastructure |
282,319 |
(3,296) |
253,569 |
(13,643) |
|
|
|
|
|
Harsco Rail |
87,438 |
11,636 |
70,675 |
14,401 |
|
|
|
|
|
Harsco Industrial |
85,629 |
13,750 |
58,726 |
10,345 |
|
|
|
|
|
General Corporate |
-- |
(2,169) |
80 |
(1,059) |
|
|
|
|
|
Consolidated Totals |
$855,864 |
$50,828 |
$752,401 |
$44,070 |
|
|
|
|
|
|
Nine Months Ended
September 30, 2011 |
Nine Months Ended
September 30, 2010 |
(In thousands) |
Revenues |
Operating Income
(loss) |
Revenues |
Operating Income
(loss) |
|
|
|
|
|
Harsco Metals &
Minerals |
$1,216,004 |
$94,764 |
$1,089,801 |
$94,012 |
|
|
|
|
|
Harsco Infrastructure |
842,220 |
(25,875) |
766,851 |
(46,467) |
|
|
|
|
|
Harsco Rail |
227,985 |
42,279 |
252,404 |
56,429 |
|
|
|
|
|
Harsco Industrial |
223,801 |
37,468 |
172,091 |
32,439 |
|
|
|
|
|
General Corporate |
-- |
(4,339) |
180 |
(2,237) |
|
|
|
|
|
Consolidated Totals |
$2,510,010 |
$144,297 |
$2,281,327 |
$134,176 |
CONTACT: Investor Contact
Eugene M. Truett
717.975.5677
etruett@harsco.com
Media Contact
Kenneth D. Julian
717.730.3683
kjulian@harsco.com
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