UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
July 26, 2005
(Date of earliest event reported)
Harsco Corporation
(Exact name of registrant as specified in its charter)
|
DE |
1-3970 |
23-1483991 |
||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
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350 Poplar Church Road, Camp Hill PA, 17011 |
17011 |
|||
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: 717-763-7064
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Item 2.02 Results of Operations and Financial Condition
On July 26, 2005, Harsco Corporation issued a press release announcing its earnings for the second quarter and first six months of 2005. A copy of the press release is attached hereto and incorporated by reference herein as Exhibit 99.1.
This information is being furnished in this report and shall not be considered "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
Exhibit 99.1. Press release dated July 26, 2005
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
Harsco Corporation
(Registrant) |
||
|
July 26, 2005
(Date) |
/s/ SALVATORE D. FAZZOLARI
Salvatore D. Fazzolari Senior Vice President, Chief Financial Officer & Treasurer |
| Exhibit Index | ||
| 99.1 | Press release dated July 26, 2005 | |
EXHIBIT 99.1
Harsco Reports Record Diluted EPS of $0.99 for the 2005 Second Quarter, Up 32%; Company Raises 2005 Earnings Guidance
-- Second quarter diluted EPS from continuing operations up
32 percent to a record $0.99; sales up 13 percent to a record
$696 million
-- Improvement led by a 48 percent increase in operating income
from the Company's Access Services Segment
-- Company raises its full year 2005 guidance for diluted EPS
from continuing operations to $3.17 - $3.27, from previous
$3.10 - $3.15
HARRISBURG, Pa., July 26, 2005 (PRIMEZONE) -- Worldwide industrial services and products company Harsco Corporation (NYSE:HSC) today reported record second quarter diluted earnings per share (EPS) from continuing operations of $0.99 for the second quarter of 2005, an increase of 32 percent from $0.75 in the second quarter of 2004. Income from continuing operations, also a record, was up 35 percent to $41.8 million from $31.0 million last year. Overall operating margins improved by approximately 140 basis points to 10.7 percent, up from 9.3 percent in last year's comparable quarter. Second quarter sales were up 13 percent to a record $696 million, compared with $618 million in the same period last year. Positive foreign currency translation contributed approximately $14 million to this year's second quarter sales and $1.3 million to pre-tax income.
For the first six months of 2005, sales, income from continuing operations, and diluted earnings per share were all records. Income from continuing operations was $64.9 million, or $1.54 per diluted share, compared with income from continuing operations of $47.8 million, or $1.15 per diluted share in the first six months of 2004, an increase in income and diluted EPS of 36 percent and 34 percent, respectively. Sales for the first six months of 2005 were $1.34 billion, an increase of 14 percent from sales of $1.17 billion in the same period a year ago. Positive foreign currency translation contributed approximately $30 million to this year's first six month sales and $2.5 million to pre-tax income.
Commenting on the Company's performance, Harsco Chairman, President and Chief Executive Officer Derek C. Hathaway said, "We are very pleased with our strong second quarter and first half 2005 performance. Particularly encouraging is the balance of our three key growth platforms, Mill Services, Access Services and Engineered Products and Services, with all three reporting double-digit growth in sales and operating income. The Gas Technologies Segment performed below last year's results.
"As we enter the second half of 2005, we anticipate the continuation of our overall growth, and have raised our full-year EPS guidance accordingly. Harsco's business and geographic diversity serve our growth strategies well. Additionally, our strong cash flows will allow us to take advantage of the many opportunities we see ahead for market share growth."
Second Quarter Business Review
Mill Services
Sales in the second quarter 2005 increased 12 percent to $271 million from $242 million in last year's second quarter. Growth was responsible for $19 million of the increase, or 8 percent, and positive foreign currency translation contributed approximately $10 million, or 4 percent. Operating income for the quarter rose 34 percent to $33.4 million, up from $24.8 million in the second quarter of last year. Included in income was $2.8 million in net pre-tax income, or approximately $0.05 per share, due to a gain on the disposal of assets related to exiting an underperforming contract, partially offset by reorganization costs. Operating margins rose 200 basis points to 12.3 percent in the second quarter, compared with 10.3 percent in the comparable quarter last year. Even without the $2.8 million pre-tax income, operating income for this segment would have been up some 23 percent to $30.6 million in the second quarter, with an operating margin of approximately 11.3 percent. Positive foreign currency translation increased operating income by approximately $0.7 million in the quarter. The quarter's improved results benefited from new contract signings as well as margin improvements from the Company's Six-Sigma and Economic Value Added (EVA(R)) initiatives.
The overall outlook for the Mill Services segment in the second half of 2005 remains positive. The third quarter will likely see some further moderating of production levels by some customers. By the fourth quarter, the Company expects to begin to see a return to overall growth in steel production in its markets served, as well as the continued contribution from additional contract signings.
Industry sources have indicated that global steel production for the first six months of 2005 increased by 7.6 percent compared with the first six months of last year. Excluding China, steel production was essentially flat year-over-year. To maintain existing pricing levels, a much more disciplined steel industry has been modifying production levels to bring inventories in-line with current demand. Steel inventories are expected to normalize toward the end of the year.
Access Services
Second quarter sales both internationally and in North America increased approximately 13 percent to $207 million from $183 million last year. Organic sales growth contributed $20 million, or approximately 11 percent, while positive foreign currency translation increased sales by approximately $4 million, or approximately 2 percent. Operating income grew a strong 48 percent in the quarter to $21.3 million, from $14.3 million last year. Positive foreign currency translation increased operating income by approximately $0.8 million while pension expense was reduced by approximately $1.0 million compared with last year. International operations posted a 61 percent increase in operating income, while results from North America showed an approximately 18 percent improvement. In last year's second quarter, operating income for North America included $1.3 million in pre-tax income from the termination of a post-retirement benefit. Operating margins in the second quarter this year benefited from higher rental equipme nt utilization and better market conditions and pricing, particularly in the U.S., improving 250 basis points to 10.3 percent from 7.8 percent in the second quarter of last year.
Nonresidential construction activity at the Company's international operations, particularly in the Middle East, remains strong, and is gaining momentum in the U.S. as well. Equipment-on-the-job for the Company's U.S. operations reached an all-time high for both the second quarter and first half of 2005, and rental rates were up some 5.8 percent over the first half of 2004. The second half outlook for Access Services remains positive.
Engineered Products and Services ("All Other")
Sales in the second quarter increased 17 percent to $128 million from $109 million last year. Operating income increased to $18.3 million from $13.2 million in the second quarter of last year, up approximately 39 percent. Operating margins improved to 14.3 percent, up 220 basis points from 12.1 percent last year. The effect of foreign currency translation on sales and income was not material for this group.
All five of the operating units in this business group posted increased sales and operating income in the second quarter of 2005 compared with the second quarter of 2004. In addition, four of the five units registered higher quarter-over-quarter operating margins. Performance of this group included improved results from Harsco Track Technologies, which continues to see strong sales and contracting activity; Air-X-Changers, where improving market conditions have resulted in increased volumes and backlogs; Reed Minerals, which continues to experience strong end-market growth; and Patterson-Kelley, where positive market acceptance of a new product and a better sales mix are both contributing to improved performance. IKG's sales and income were slightly ahead of last year's strong 2004 second quarter results.
The outlook continues to be positive for the Engineered Products and Services group. Overall product backlogs remain high and the Company is confident that its Harsco Track Technologies unit will be successful in obtaining new services contracts that should benefit its results in 2006 and beyond.
Gas Technologies
Sales in the second quarter were up 9 percent to $90 million compared with $83 million last year. Operating income of $3.6 million was down 31 percent from last year's $5.3 million. Operating margins declined to 4.0 percent from 6.3 percent in last year's comparable period. The effect of foreign currency translation was not material.
Three of this segment's five product lines posted higher sales and income in the quarter, including cylinders, composites and cryogenics. However, this positive performance was offset by below prior year performance from the valve and propane tank product lines. As expected, propane tank sales in the second quarter of 2005 continued to be impacted by the accelerated purchases made by customers during the first and second quarters last year in anticipation of rising steel costs and price increases. Valve products continue to be negatively impacted by pricing pressures and higher operating costs.
The Gas Technologies segment represented less than 5 percent of the Company's first half operating income. For the second half, this segment's performance is expected to improve due to the traditional seasonality of the propane business and continuing good performance in the cryogenics and cylinder businesses. Substantial initiatives are underway to lower costs and improve margins for the valve product line, as well as to improve results within this segment's other product lines. Benefits from these initiatives, as well as substantially lower cost of sales expense, are expected in the third and fourth quarters of 2005.
General Corporate
The effective income tax rate from continuing operations for the second quarter of 2005 was 31.9 percent, compared with 31.0 percent in the second quarter of last year. The increased tax rate for the second quarter of 2005 is primarily the result of the expiration of several foreign tax holidays. The tax rate for 2005 is expected to approximate 33 percent.
Second quarter general Corporate expense increased by $2.1 million over the comparable period last year, due principally to costs associated with growth initiatives.
Liquidity, Capital Resources and Other Matters
Net cash provided by operating activities in the second quarter was $86 million, up 34 percent from $65 million in last year's second quarter. Net cash used by investing activities was $71 million, an approximately 27 percent increase over $56 million last year. The increased use of cash reflects the Company's higher investment in organic growth initiatives, which represented just over 50 percent of year-to-date total capital expenditures. Net cash provided by operating activities for the first half of 2005 was a record $134 million, compared with $97 million in 2004, an increase of 38 percent.
Total debt increased slightly in the quarter to $625 million, from $623 million at the end of the first quarter. Despite this, the Company's debt-to-capital ratio of 40.3 percent at the end of the second quarter declined by approximately 30 basis points from the first quarter and previous year-end.
Meaningful improvement was again achieved in the second quarter in Economic Value Added (EVA(R)). For the first half of 2005, EVA has improved in eight of the Company's nine business units.
Outlook
With the improved results for the second quarter and first half of the year, the Company is increasing its full year guidance for earnings from continuing operations to a range of $3.17 to $3.27 per diluted share, from the previous range of $3.10 to $3.15 per diluted share. This is an increase of 16 to 20 percent over the $2.73 per diluted share in 2004.
The Company expects continued second half year-over-year growth from its Access Services and Engineered Products and Services groups and improved performance from its Gas Technologies segment, as well as other growth initiatives, to more than offset the potential effects from a strengthening dollar and higher fuel costs on a year-over-year basis. The Company expects third quarter 2005 results from the Mill Services Segment to approximate the third quarter of 2004, with fourth quarter performance showing an improvement over last year's comparable period.
For the third quarter of 2005, the Company is forecasting earnings from continuing operations in the range of $0.83 to $0.87 per diluted share, compared with $0.74 in the third quarter of 2004, a 12 to 18 percent improvement.
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 the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary remarks regarding important factors which, among others, could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied herein. Forward-looking statements include information about management's confidence and strategies for performance; expectations for new and existing products, technologies, and opportunities; and expectations regarding growth, sales, cash flows, earnings, and EVA. These statements are identified by the use of such terms as "may," "could," "expect," "anticipate," "intend," "believe," or other comparable terms.
Risk factors and uncertainties which could affect results 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, and capital costs; (3) changes in the performance of stock and bond markets, particularly in the United States and United Kingdom; (4) changes in governmental laws and regulations, including taxes and import tariffs; (5) market and competitive changes, including pricing pressures, market demand, and acceptance for new products, services, and technologies; (6) unforeseen business disruptions in one or more of the over 40 countries in which the Company operates due to political instability, civil disobedience, armed hostilities or other calamities; and (7) other risk factors listed from time to time in the Company's SEC reports. The Company cautions that these factors may not be exhaustive and that many of these factors are beyond the Company's abi lity 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.
Conference Call
As previously announced, the Company will hold a conference call today at 2:00 p.m. Eastern Time (ET) 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 (706) 634-5923 from outside the United States and Canada. Listeners are advised to dial in at least five minutes prior to the call. Replays will be available via the Harsco website, or by telephone beginning approximately 5:00 pm ET today. The telephone replay dial-in number is (800) 642-1687, or (706) 645-9291 from outside the United States and Canada. Enter Conference ID number 6927645.
About Harsco
Harsco Corporation is a diversified, global industrial services and engineered products company. Harsco's market-leading businesses provide mill services, access services, engineered products and services, and gas containment and control technologies to customers worldwide. The company employs 18,500 people in more than 40 countries of operation. Additional information about Harsco can be found at www.harsco.com.
Harsco Corporation
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
2005 2004 2005 2004
---------------------------------------------------------------------
Revenues from continuing
operations:
Service sales $ 498,787 $ 440,700 $ 968,360 $ 846,607
Product sales 197,360 176,877 367,848 327,243
---------------------------------------------------------------------
Total revenues 696,147 617,577 1,336,208 1,173,850
=====================================================================
Costs and expenses from
continuing operations:
Cost of services sold 367,401 326,594 719,806 631,386
Cost of products sold 158,914 141,284 300,156 265,480
Selling, general and
administrative
expenses 95,212 89,455 192,248 177,459
Research and
development expenses 711 676 1,370 1,381
Other (income) expenses (593) 1,953 849 3,573
---------------------------------------------------------------------
Total costs and
expenses 621,645 559,962 1,214,429 1,079,279
=====================================================================
Operating income from
continuing operations 74,502 57,615 121,779 94,571
Equity in income of
unconsolidated entities,
net 42 74 120 172
Interest income 567 488 1,145 1,201
Interest expense (10,419) (10,038) (20,862) (20,320)
---------------------------------------------------------------------
Income from continuing
operations before
income taxes and
minority interest 64,692 48,139 102,182 75,624
Income tax expense (20,647) (14,942) (32,757) (23,469)
---------------------------------------------------------------------
Income from continuing
operations before
minority interest 44,045 33,197 69,425 52,155
Minority interest in
net income (2,232) (2,217) (4,560) (4,318)
---------------------------------------------------------------------
Income from continuing
operations 41,813 30,980 64,865 47,837
---------------------------------------------------------------------
Discontinued operations:
Loss from operations of
discontinued business (316) (426) (341) (416)
Gain/(loss) on disposal
of discontinued business 204 59 195 (88)
Income/(loss) related to
discontinued defense
business (6) -- 32 224
Income tax benefit 44 132 43 112
---------------------------------------------------------------------
Loss from discontinued
operations (74) (235) (71) (168)
---------------------------------------------------------------------
Net Income $ 41,739 $ 30,745 $ 64,794 $ 47,669
=====================================================================
Average shares of common
stock outstanding 41,612 41,080 41,558 41,009
Basic earnings per
common share:
Continuing operations $ 1.00 $ 0.75 $ 1.56 $ 1.17
Discontinued operations -- (0.01) -- --
Basic earnings per
common share $ 1.00 $ 0.75(a) $ 1.56 $ 1.16(a)
=====================================================================
Diluted average shares of
common stock outstanding 42,046 41,525 42,012 41,493
Diluted earnings per
common share:
Continuing operations $ 0.99 $ 0.75 $ 1.54 $ 1.15
Discontinued operations -- (0.01) -- --
---------------------------------------------------------------------
Diluted earnings per
common share $ 0.99 $ 0.74 $ 1.54 $ 1.15
=====================================================================
(a) Does not total due to rounding
Harsco Corporation
CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30 December 31
(In thousands) 2005 2004
---------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 99,551 $ 94,093
Accounts receivable, net 534,039 555,191
Inventories 262,922 217,026
Other current assets 59,098 58,614
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Total current assets 955,610 924,924
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Property, plant and equipment, net 925,340 932,298
Goodwill, net 412,652 433,125
Other assets 100,372 98,477
Assets held for sale 1,784 932
---------------------------------------------------------------------
Total assets $ 2,395,758 $ 2,389,756
=====================================================================
LIABILITIES
Current liabilities:
Short-term borrowings $ 63,104 $ 16,145
Current maturities of long-term debt 6,069 14,917
Accounts payable 213,024 220,322
Accrued compensation 53,272 63,776
Income taxes 47,451 40,227
Dividends payable 12,492 12,429
Other current liabilities 220,813 210,581
---------------------------------------------------------------------
Total current liabilities 616,225 578,397
---------------------------------------------------------------------
Long-term debt 556,136 594,747
Deferred income taxes 99,696 95,702
Insurance liabilities 55,567 53,960
Retirement plan liabilities 92,872 97,586
Other liabilities 49,999 54,483
Liabilities associated with assets
held for sale -- 691
---------------------------------------------------------------------
Total liabilities 1,470,495 1,475,566
---------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock 85,145 84,889
Additional paid-in capital 149,311 139,532
Accumulated other comprehensive expense (164,778) (127,491)
Retained earnings 1,460,457 1,420,637
Treasury stock (603,271) (603,377)
Unearned stock-based compensation (1,601) --
---------------------------------------------------------------------
Total stockholders' equity 925,263 914,190
---------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 2,395,758 $ 2,389,756
=====================================================================
Harsco Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
(In thousands) 2005 2004 2005 2004
=====================================================================
Cash flows from operating
activities:
Net income $ 41,739 $ 30,745 $ 64,794 $ 47,669
Adjustments to reconcile
net income to net cash
provided (used) by
operating activities:
Depreciation 48,703 44,430 97,463 88,401
Amortization 610 637 1,270 1,189
Equity in income of
unconsolidated entities,
net (42) (74) (120) (171)
Dividends or distributions
from unconsolidated
entities -- 88 -- 544
Other, net 760 2,648 4,578 5,770
Changes in assets and
liabilities, net of
acquisitions and
dispositions of
businesses:
Accounts receivable (16,409) (35,525) (7,280) (56,854)
Inventories (16,843) (11,096) (49,476) (26,686)
Accounts payable 2,090 15,030 2,683 11,606
Accrued interest
payable 8,803 8,008 14,177 13,285
Accrued compensation 5,824 5,661 (7,689) 2,096
Other assets and
liabilities 11,108 4,030 14,086 10,109
---------------------------------------------------------------------
Net cash provided by
operating activities 86,343 64,582 134,486 96,958
=====================================================================
Cash flows from investing
activities:
Purchases of property,
plant and equipment (77,476) (52,617) (135,777) (99,156)
Purchase of businesses,
net of cash acquired (8,147) (4,730) (8,147) (5,165)
Proceeds from sales
of assets 14,138 930 14,496 2,748
---------------------------------------------------------------------
Net cash used by
investing activities (71,485) (56,417) (129,428) (101,573)
=====================================================================
Cash flows from financing
activities:
Short-term borrowings, net 29,314 167 55,223 2,339
Current maturities and
long-term debt:
Additions 44,541 57,217 69,062 99,004
Reductions (including
reclassifications to
short-term borrowings) (51,599) (61,439) (93,351) (85,910)
Cash dividends paid on
common stock (12,477) (11,271) (24,911) (22,518)
Common stock issued-options 1,662 4,482 6,071 7,975
Other financing activities (1,160) (2,511) (3,503) (2,596)
---------------------------------------------------------------------
Net cash provided (used)
by financing activities 10,281 (13,355) 8,591 (1,706)
=====================================================================
Effect of exchange rate
changes on cash (3,993) (2,121) (8,191) (2,355)
---------------------------------------------------------------------
Net increase (decrease) in
cash and cash equivalents 21,146 (7,311) 5,458 (8,676)
Cash and cash equivalents
at beginning of period 78,405 78,845 94,093 80,210
---------------------------------------------------------------------
Cash and cash equivalents
at end of period $ 99,551 $ 71,534 $ 99,551 $ 71,534
=====================================================================
Harsco Corporation
REVIEW OF OPERATIONS BY SEGMENT (Unaudited)
(In thousands)
Three Months Ended Three Months Ended
June 30, 2005 June 30, 2004
Operating
Income Operating
Sales (loss) Sales Income
---------------------------------------------------------------------
Mill Services Segment $ 271,286 $ 33,404 $ 242,249 $ 24,849
Access Services Segment 206,597 21,253 183,127 14,322
Gas Technologies Segment 90,034 3,630 82,954 5,266
Engineered Products
& Services ("all other")
Category 128,230 18,280 109,247 13,177
General Corporate -- (2,065) -- 1
---------------------------------------------------------------------
Consolidated Totals $ 696,147 $ 74,502 $ 617,577 $ 57,615
=====================================================================
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2004
Operating Operating
Income Income
Sales (loss) Sales (loss)
---------------------------------------------------------------------
Mill Services Segment $ 539,921 $ 60,405 $ 478,542 $50,099
Access Services Segment 390,174 30,619 340,934 17,722
Gas Technologies Segment 172,168 5,728 160,516 8,354
Engineered Products
& Services ("all other")
Category 233,945 27,311 193,858 19,340
General Corporate -- (2,284) -- (944)
---------------------------------------------------------------------
Consolidated Totals $1,336,208 $121,779 $1,173,850 $94,571
=====================================================================
The Harsco Corporation logo is available at: http://media.primezone.com/prs/single/?pkgid=361
CONTACT: Harsco Corporation
Media Contact
Kenneth D. Julian
717-730-3683
kjulian@harsco.com
Investor Contact
Eugene M. Truett
717-975-5677
etruett@harsco.com