Press Release Details

• Q2 Operating Income Above Guidance; Strong Rail Performance and Lower Corporate Spending Contributed to Positive Results
  
• Initial Project Orion Initiatives Nearing Completion; 90 percent of Organizational Changes Complete and 56 percent of Underperforming Sites Now Finalized; Exploring Additional Cost Reduction and Business Enhancement Initiatives to Strengthen M&M Business
  
• 2015 Operating Income Outlook Reduced to Range of $120 Million to $135 Million Mainly due to External Changes in Commodity Demand; Free Cash Flow Expected to be Between $60 Million to $80 Million

CAMP HILL, Pa., Aug. 5, 2015 (GLOBE NEWSWIRE) -- Harsco Corporation (NYSE:HSC) today reported second quarter 2015 results. Diluted earnings per share from continuing operations in the second quarter of 2015 were $0.08. This result compares with adjusted diluted earnings per share of $0.19 in the second quarter of 2014. On a U.S. GAAP ("GAAP") basis, second quarter 2014 diluted loss per share from continuing operations was $0.17 which included Project Orion severance and exited site costs, contract termination charges and other adjustments.

Operating income for the second quarter of 2015 was $36 million, which was above the guidance range of $30 million to $35 million provided by the Company. Also, the Company's second quarter 2015 earnings included an equity loss of approximately $8 million ($0.06 per share after tax) from the Brand Energy joint venture, which was impacted by inter-company foreign currency ("FX") losses.

"The second quarter was somewhat stronger than anticipated given favorable performance in Rail, and overall, our Q2 performance builds on the positive financial results reported in Q1," said President and CEO Nick Grasberger. "Our Industrial business managed well through a challenging market environment and Metals & Minerals progressed against its key improvement initiatives. Looking forward, however, we now expect that the second half of the year will be more difficult than anticipated a few months ago. Sustained weakness in the metals and energy markets, along with site-exit costs and operating challenges at a few M&M locations in South America, lead us to lower our outlook for the balance of the year."

"We remain confident in the internal progress and core strategies within each of our businesses. Industrial has improved its competitive position, while Rail is positioned to capitalize on numerous growth opportunities. In M&M, the initial improvement initiatives have fundamentally strengthened this business over the past year while we continue to evaluate further options to improve its returns. Overall, we see considerable value within the Harsco businesses and we remain focused on balancing our portfolio and achieving our financial targets."

Harsco Corporation—Selected Second Quarter Results

Consolidated Second Quarter Operating Results

Total revenues were $456 million due to revenue decreases as anticipated in the Company's Metals & Minerals and Industrial segments compared with the prior-year quarter. Foreign currency translation negatively affected second quarter 2015 revenues by approximately $45 million.

Operating income from continuing operations was $36 million, compared with adjusted operating income of $43 million in the prior-year quarter. As a result, operating margin decreased modestly by 20 basis points versus the prior-year period adjusted operating margin. FX translation negatively impacted operating income by approximately $2 million in this year's quarter. 

Second Quarter Business Review

Metals & Minerals

Revenues decreased 19 percent to $294 million, primarily as a result of FX translation, the non-renewal or exiting of certain contracts and lower nickel-related sales. Operating income declined in comparison with the prior-year quarter's adjusted operating income as the cost reduction and other benefits realized under Project Orion, as well as lower bad debt expenses were more than offset by the above items. The segment adjusted operating margin was relatively stable at 6.3 percent versus 6.5 percent in last year's second quarter. 

Industrial

Revenues declined 11 percent to $92 million, primarily due to sales volume changes for each of the segment's major products. Meanwhile, operating income declined as reduced product demand and facility moving costs were only partially offset by lower selling and administrative costs. As a result, the segment's operating margin decreased to 15.7 percent compared with 16.9 percent in the comparable quarter last year.

Rail

Revenues were mostly unchanged compared with the prior-year period as higher equipment sales were offset by lower after-market parts revenues and contract services. Operating income and operating margin decreased mainly as a result of product sales mix.

Cash Flow

Free cash flow was $10 million in the second quarter of 2015, compared with $20 million in the prior-year period. This cash flow performance reflects lower net cash provided by operating activities and non-core asset sales, partially offset by reduced capital expenditures compared with last year's quarter.

Financial Position

At the end of the second quarter, the Company maintained net debt of approximately $876 million and its net debt to EBITDA ratio stood at 2.8x as per its financial covenants. In Q3 2015, the Company monetized a cross-currency interest rate swap agreement. The $75 million of cash proceeds from this transaction will reduce the Company's net borrowings and provide additional financial flexibility. Also, the Company continues to evaluate options to refinance its 2015 Notes and expects to address this financing need in the coming months.

Project Orion (Metals & Minerals Improvement Plan)

The key initiatives under Project Orion continue to progress according to expectations and the initial work-streams of the initiative are nearing completion. 'Harsco Way' is driving operational and cultural benefits throughout the business, and the Bid & Contract Management function is delivering improved contract outcomes with increased operational and financial rigor in its processes. Meanwhile, the simplification of the business structure through workforce change at and above the site level is now approximately 90 percent complete. On-going benefits derived from these and other operational actions now total nearly $35 million, as compared to targeted benefits of $35 million to $40 million. The business also continues to proactively address underperforming sites, and to date, solutions have been finalized at 56 percent of the original underperforming locations. Lastly, the Company continues to evaluate additional cost-reduction and business levers in M&M to improve margins and capital returns in the face of heightened external pressures on the business. More details on these additional initiatives will be communicated in the future.

2015 Outlook

The 2015 Outlook has been revised for the year to reflect current expectations for lower steel production, weaker commodity prices and demand, the impact of site exits and start-ups and additional operating costs in Metals & Minerals. Additionally, this outlook reflects reduced end-market consumption for the Company's Industrial products as a result of capital spending trends among U.S. energy companies and a higher effective tax rate given the geographic distribution of anticipated earnings. Key highlights in the Outlook are included below. The Outlook also includes adjusted earnings per share, which is partially dependent on anticipated equity income from the Brand Energy joint venture, where impacts from various financial uncertainties such as foreign exchange and income taxes are assumed to be limited in the forecast period.

Full Year 2015

• Adjusted operating income for the full year is expected to range from $120 million to $135 million; compared with $155 million in 2014 and a previous range of $145 million to $160 million.
• Free cash flow in the range of $60 million to $80 million; compared with $52 million in 2014 and a previous range of $75 million and $100 million.
• Net interest expense is forecasted to range from $48 million to $52 million; unchanged.
• Equity income from the Brand Energy Joint Venture is expected to be $4 million to $6 million; unchanged.
• Effective tax rate is expected to range from 42 percent to 44 percent before Brand Energy Joint Venture equity income; changed from 35 percent to 37 percent.
• Adjusted earnings per share for the full year in the range of $0.41 to $0.55; compared with $0.76 per share in 2014 and a previous range of $0.68 to $0.82.
• Adjusted return on invested capital is expected to range from 6.0 percent to 6.5 percent; compared with 6.8 percent in 2014 and a previous range of 7.0 to 8.0 percent.

Q3 2015

• Adjusted operating income of $20 million to $25 million in Q3 2015; compared with $49 million in the prior-year quarter.
• Adjusted earnings per share of $0.05 to $0.09 in Q3 2015; compared with $0.31 in the prior-year quarter.

Conference Call

As previously announced, 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 83825745. 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 August 19, 2015 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; statements made regarding Project Orion and 2015 Outlook; 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) the ability to successfully implement the Company's strategic initiatives and portfolio optimization and the impact of such initiatives, such as the Harsco Metals & Minerals Segment's Improvement Plan ("Project Orion"); (19) the ability of the strategic venture between the Company and Clayton, Dubilier & Rice ("CD&R") to effectively integrate the Company's Infrastructure business and the Brand Energy & Infrastructure Services business and realize the synergies contemplated by the transaction; (20) the Company's ability to realize cost savings from the divestiture of the Infrastructure business, as well as the transaction being accretive to earnings and improving operating margins and return on capital; (21) the amount ultimately realized from the Company's exit from the strategic venture between the Company and CD&R and the timing of such exit; (22) implementation of environmental remediation matters; (23) risk and uncertainty associated with intangible assets; and (24) 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, 2014, as revised on Form 8-K filed on June 1, 2015. The Company cautions that these factors may not be exhaustive and that many of these factors are beyond the Company's ability to control or predict. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. The Company undertakes no duty to update forward-looking statements except as may be required by law.

About Harsco

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.

CONTACT: Investor Contact
         David Martin
         717.612.5628
         damartin@harsco.com

         Media Contact
         Kenneth Julian
         717.730.3683
         kjulian@harsco.com