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
October 20, 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 October 20, 2005, Harsco Corporation issued a press release announcing its earnings for the third quarter and first nine 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 October 20, 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) |
||
|
October 20, 2005
(Date) |
/s/ SALVATORE D. FAZZOLARI
Salvatore D. Fazzolari Senior Vice President, Chief Financial Officer & Treasurer |
| Exhibit Index | ||
| 99.1 | Press release dated October 20, 2005 | |
EXHIBIT 99.1
Harsco Reports Record Third Quarter Diluted EPS of $0.95, Up 28%; Company Raises 2005 Earnings Guidance
- Third quarter sales up 13 percent to a record $697 million - Third quarter operating margins up 120 basis points, and up 110 basis points through the first nine months - Cash from operations up 40 percent year-to-date to a record $233 million - Company raises its full year 2005 guidance for diluted EPS from continuing operations to $3.27 - $3.32, from previous $3.17 - $3.27
HARRISBURG, Pa., Oct. 20, 2005 (PRIMEZONE) -- Worldwide industrial services and products company Harsco Corporation (NYSE:HSC) today reported new records for sales, income from continuing operations, and earnings per diluted share from continuing operations for the third quarter and first nine months of the year. Cash flow from operations through the first nine months also set a new record.
For the third quarter of 2005, diluted earnings per share (EPS) from continuing operations were a record $0.95, an increase of 28 percent from $0.74 in the third quarter of 2004. Third quarter income from continuing operations, also a record, was up 30 percent to $40.0 million from $30.7 million last year. Overall operating margins improved by approximately 120 basis points to 10.0 percent, up from 8.8 percent in last year's comparable quarter, reflecting a significant improvement in operating income from three of the Company's four operating groups. Third quarter sales were up 13 percent to a record $697 million, compared with $617 million in the same period last year. Positive foreign currency translation contributed approximately $4.9 million to this year's third quarter sales and $1.2 million to pre-tax income. Also included in the quarter was a one-time $0.02 per share tax benefit from an approximately $1.0 million tax refund from an international jurisdiction.
For comparison, last year's third quarter included income from discontinued operations of $7.9 million after-tax, or $0.19 per share, from the favorable settlement of a long-standing Federal Excise Tax (FET) dispute with the U.S. Government concerning U.S. Army five-ton trucks formerly produced by the Company.
For the first nine months of 2005, sales, income from continuing operations, and diluted earnings per share from continuing operations were all records. Income from continuing operations was $104.9 million, or $2.49 per diluted share, compared with income from continuing operations of $78.5 million, or $1.89 per diluted share in the first nine months of 2004. This year's results represent increases in income and diluted EPS of 34 percent and 32 percent, respectively. Sales for the first nine months of 2005 were $2.03 billion, an increase of 14 percent from sales of $1.79 billion in the same period a year ago. Positive foreign currency translation contributed approximately $34.6 million to this year's first nine month sales and $3.7 million to pre-tax income.
The first nine months of last year included income from discontinued operations of $7.7 million after-tax, or $0.19 per share, principally representing the previously mentioned favorable settlement of the FET dispute.
Commenting on the Company's performance, Harsco Chairman, President and Chief Executive Officer Derek C. Hathaway said, "We continue to be pleased with the operating income balance and geographical diversity of the Company, which again has provided the foundation for record results and the growing consistency and predictability of revenue and income streams. Our Access Services, Engineered Products & Services and Gas Technologies operating groups each achieved a gain of at least 50 percent in operating income in this third quarter compared with the comparable period last year.
"With the continued investment of our strong cash flows in new contract services and other opportunities for growth, and with appropriate consideration to the benefits of further acquisitions in our industrial services businesses, such as our planned acquisition of the Hunnebeck Group GmbH announced several weeks ago, we remain confident in our ability to meet our stated financial objectives."
Third Quarter Business Review
Mill Services
Sales in the third quarter 2005 increased 4 percent to $255 million from $245 million in last year's third quarter. However, higher energy costs, announced production cut backs by global steel customers, and higher severance costs resulted in a modest 7 percent decline in third quarter operating income to $23.1 million from $25.0 million last year. Operating margins decreased by some 110 basis points in the third quarter of 2005 to 9.1 percent from 10.2 percent in the third quarter of 2004. However, for the nine months of 2005, margins are up 10 basis points year-over-year to 10.5 percent. Positive foreign currency translation contributed approximately $5.6 million to sales and $0.9 million to operating income in the third quarter.
The outlook for Mill Services remains positive. The Company continues to actively pursue new contract signings for additional services with existing customers as well as potential new customers, in addition to seeking other areas of future growth potential. Worldwide steel demand continues to be substantial, with industry sources predicting a 3 percent increase in demand to 998 million metric tons this year, and further growth of another 4 to 5 percent next year.
Access Services
Sales both internationally and in North America again increased in the third quarter, for a combined increase of 11 percent to $195 million, up from $176 million in last year's third quarter. Foreign currency translation decreased sales by approximately $1.0 million in the quarter. Operating income for the quarter grew a strong 55 percent to $20.9 million from $13.4 million last year, led by an approximately 165 percent improvement in operating income from North America operations and a 33 percent increase from international operations. The effect of foreign currency translation on operating income was not material. Pension expense was reduced by approximately $0.9 million compared with last year. Also contributing to operating income was a $1.6 million pre-tax gain in North America from the disposal of assets related to the closing of a branch location.
Operating margins increased by 310 basis points to 10.7 percent from 7.6 percent in last year's third quarter, benefiting from higher rental equipment utilization, better market conditions and improved pricing, particularly in the U.S., as well as the previously mentioned gain on disposal of assets.
The outlook for nonresidential construction activity continues to be favorable. U.S. industry sources are estimating nonresidential construction spending in constant dollars to be up in the mid-to-high single digits in 2006. It should be noted that these industry estimates may not fully reflect the impact on construction activity as a result of the recent U.S. hurricanes. In addition, the Company continues to expand its international Access Services presence with the recent announcements of the opening of its first branch in Ukraine and the planned purchase of Europe's third-largest provider of highly engineered construction formwork and scaffolding access equipment services, Hunnebeck Group GmbH. The Hunnebeck acquisition is expected to be completed in the fourth quarter, subject to regulatory approval.
Engineered Products and Services ("All Other")
Sales in the third quarter increased 34 percent to $149 million from $112 million last year. Operating income increased to $20.9 million from $13.7 million in the third quarter of last year, up some 53 percent. Operating margins improved by 180 basis points to 14.0 percent, from 12.2 percent last year. The effect of foreign currency translation on sales and income was not material for this group.
Four of the five operating units of this business group posted increased sales, operating income, and operating margins in the third quarter of 2005 compared with the third quarter of 2004. Results were led by the strong performance of this group's largest unit, Harsco Track Technologies, reflecting increased contracting services activity and higher equipment and parts sales, in part due to the advancement of certain deliveries into the third quarter. Also notable was the strong performance of the Company's Air-X-Changers, IKG and Patterson-Kelley business units. Only Reed Minerals produced results slightly below last year, primarily due to the difficulty in obtaining rail cars to deliver its products throughout the quarter, and to a lesser extent higher energy costs.
The outlook continues to be positive for the Engineered Products and Services Group. While Harsco Track Technologies will have a difficult fourth quarter comparison due to its record performance and high volume of deliveries in last year's fourth quarter, coupled with its modest advancement of some deliveries into this year's third quarter, the 2006 outlook for this division is positive. International bidding remains strong and recent signings of new contract services in North America are expected to establish a solid foundation for further growth. Air-X-Changers continues to benefit from increased oil and natural gas drilling, and IKG Industries and Reed Minerals are expected to see some benefit from post-Katrina reconstruction. Patterson-Kelley is expected to continue to benefit from increased market acceptance of its new products.
Gas Technologies
Sales in the third quarter were up 16 percent to $98 million compared with $84 million last year. Operating income of $5.2 million was more than double last year's income of $2.4 million. Operating margins improved by 240 basis points in the third quarter of 2005 to 5.3 percent from 2.9 percent last year. As expected, income and margins were positively affected in the quarter by $4.0 million in lower commodity costs, particularly steel, compared with last year's third quarter. It should be noted that last year's third quarter was negatively affected by $4.1 million in higher commodity costs from 2003. The effect of foreign currency translation was not material.
This Segment represented 7.4 percent of the Company's total operating income in the third quarter. Efforts continue to lower costs and improve margins for the valve product line, as well as to improve results within this Segment's other product lines.
General Corporate
The effective tax rate from continuing operations for the third quarter of 2005 was 30.8 percent, compared with 27.1 percent in the third quarter of last year. The rate in this year's third quarter benefited from a one-time $0.02 per share or $1.0 million from an international tax refund. The effective tax rate for the fourth quarter is expected to be approximately 33.4 percent, excluding the effect of dividend repatriations under the American Jobs Creation Act of 2004.
Liquidity, Capital Resources and Other Matters
Net cash provided by operating activities in the third quarter was $98 million, up 42 percent from $69 million in last year's third quarter. Net cash used by investing activities was $69 million, a 29 percent increase over $54 million last year. The increased use of cash reflects the Company's higher investment in organic growth initiatives, which represented approximately 51 percent of year-to-date capital expenditures. Net cash provided by operating activities for the first nine months of 2005 was a record $233 million, compared with $166 million in 2004, an increase of 40 percent.
Total debt decreased by $14 million in the quarter to $611 million, from $625 million at the end of the second quarter. The Company's debt-to-capital ratio improved to 38.9 percent at the end of the third quarter, compared with 40.3 percent at the end of the second quarter and 40.6 percent at the prior year-end.
Meaningful improvement continues to be achieved in Economic Value Added (EVA(R)), with further improvements realized in the third quarter. For the first nine months of 2005, EVA has improved in eight of the Company's nine business units.
Outlook
For the fourth quarter, the Company is forecasting earnings from continuing operations in the range of $0.79 to $0.84 per diluted share, compared with $0.84 per diluted share in last year's fourth quarter. As noted above, the Company's Harsco Track Technologies (HTT) division delivered a significant number of units in last year's fourth quarter, principally to international customers. In 2005, HTT's sales and operating income have been much more weighted toward the first nine months of the year. Also, the effective tax rate in the fourth quarter of 2004 was 26.4 percent, compared with the 33.4 percent anticipated for this year's fourth quarter as discussed above.
With continued improved operating results in the third quarter and first nine months of 2005, and considering the $0.02 per share one-time tax benefit in the third quarter as discussed above, the Company is increasing its full year guidance for earnings from continuing operations to a range of $3.27 to $3.32 per diluted share, from the previous range of $3.17 to $3.27 per diluted share. This represents an increase of 20 to 22 percent over the $2.73 per diluted share reported in 2004.
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 9304061.
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 approximately 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 Nine Months Ended
September 30 September 30
2005 2004 2005 2004
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Revenues from continuing
operations:
Service sales $ 472,183 $439,956 $1,440,543 $1,286,563
Product sales 225,286 177,332 593,134 504,575
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Total revenues 697,469 617,288 2,033,677 1,791,138
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Costs and expenses from
continuing operations:
Cost of services sold 350,169 325,453 1,069,975 956,839
Cost of products sold 182,477 145,292 482,633 410,772
Selling, general and
administrative
expenses 95,090 90,594 287,338 268,053
Research and
development expenses 620 590 1,991 1,971
Other (income) expenses (502) 907 347 4,480
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Total costs and
expenses 627,854 562,836 1,842,284 1,642,115
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Operating income from
continuing operations 69,615 54,452 191,393 149,023
Equity in income (loss)
of unconsolidated
entities, net (29) 38 92 210
Interest income 879 454 2,024 1,655
Interest expense (9,921) (10,092) (30,783) (30,412)
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Income from continuing
operations before
income taxes and 60,544 44,852 162,726 120,476
minority interest
Income tax expense (18,624) (12,147) (51,380) (35,616)
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Income from continuing
operations before
minority interest 41,920 32,705 111,346 84,860
Minority interest in
net income (1,898) (2,031) (6,458) (6,349)
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Income from continuing
operations 40,022 30,674 104,888 78,511
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Discontinued operations:
Loss from operations of
discontinued business (111) (203) (452) (619)
Gain/(loss) on disposal
of discontinued business 66 (36) 261 (124)
Income/(loss) related
to discontinued
defense business (6) 12,529 26 12,753
Income tax benefit
(expense) 19 (4,411) 62 (4,298)
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Income/(loss) from
discontinued operations (32) 7,879 (103) 7,712
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Net Income $ 39,990 $ 38,553 $ 104,785 $ 86,223
=====================================================================
Average shares of
common stock
outstanding 41,693 41,165 41,603 41,061
Basic earnings per
common share:
Continuing
operations $ 0.96 $ 0.75 $ 2.52 $ 1.91
Discontinued
operations -- 0.19 -- 0.19
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Basic earnings per
common share $ 0.96 $ 0.94 $ 2.52 $ 2.10
=====================================================================
Diluted average shares
of common stock
outstanding 42,112 41,589 42,046 41,525
Diluted earnings per
common share:
Continuing
operations $ 0.95 $ 0.74 $ 2.49 $ 1.89
Discontinued
operations -- 0.19 -- 0.19
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Diluted earnings per
common share $ 0.95 $ 0.93 $ 2.49 $ 2.08
=====================================================================
Harsco Corporation
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
September 30 December 31
2005 2004(a)
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ASSETS
Current assets:
Cash and cash equivalents $ 113,231 $ 94,093
Accounts receivable, net 566,996 555,191
Inventories 246,622 217,026
Other current assets 62,405 58,614
Assets held for sale 36,316 932
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Total current assets 1,025,570 925,856
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Property, plant and equipment, net 949,732 932,298
Goodwill, net 401,964 433,125
Other assets 105,566 98,477
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Total assets $ 2,482,832 $ 2,389,756
=====================================================================
LIABILITIES
Current liabilities:
Short-term borrowings $ 7,148 $ 16,145
Current maturities of long-term debt 6,512 14,917
Accounts payable 204,876 220,322
Accrued compensation 60,848 63,776
Income taxes 47,550 40,227
Dividends payable 12,519 12,429
Insurance liabilities 57,266 23,470
Other current liabilities 198,905 187,111
Liabilities associated with assets
held for sale 15,945 691
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Total current liabilities 611,569 579,088
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Long-term debt 597,718 594,747
Deferred income taxes 109,433 95,702
Insurance liabilities 56,889 53,960
Retirement plan liabilities 93,591 97,586
Other liabilities 52,787 54,483
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Total liabilities 1,521,987 1,475,566
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STOCKHOLDERS' EQUITY
Common stock 85,256 84,889
Additional paid-in capital 152,340 139,532
Accumulated other comprehensive expense (160,094) (127,491)
Retained earnings 1,487,926 1,420,637
Treasury stock (603,261) (603,377)
Unearned stock-based compensation (1,322) --
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Total stockholders' equity 960,845 914,190
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Total liabilities and
stockholders' equity $ 2,482,832 $ 2,389,756
=====================================================================
(a) Reclassified for comparative purposes.
Harsco Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
September 30 September 30
2005 2004(a) 2005 2004(a)
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Cash flows from
operating activities:
Net income $ 39,990 $ 38,553 $ 104,785 $ 86,223
Adjustments to reconcile
net income to net cash
provided (used) by
operating activities:
Depreciation 47,844 45,047 145,307 133,448
Amortization 625 670 1,895 1,859
Equity in income of
unconsolidated
entities, net 29 (38) (92) (210)
Dividends or
distributions from
unconsolidated
entities 60 -- 60 544
Other, net (308) (11,593) 4,270 (5,823)
Changes in assets and
liabilities, net of
acquisitions and
dispositions of
businesses:
Accounts receivable (50,297) (10,161) (57,577) (67,015)
Inventories 6,416 (27,393) (43,060) (54,079)
Accounts payable (29) 5,104 2,654 16,710
Accrued interest
payable 4,208 4,467 18,385 17,752
Accrued
compensation 8,172 5,753 484 7,849
Other assets and
liabilities 41,382 18,459 55,468 28,567
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Net cash provided by
operating activities 98,092 68,868 232,579 165,825
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Cash flows from
investing activities:
Purchases of property,
plant and equipment (73,470) (54,727) (209,247) (153,883)
Purchase of businesses,
net of cash acquired 1,135 -- (7,011) (5,165)
Proceeds from sales
of assets 2,858 816 17,353 3,564
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Net cash used by
investing activities (69,477) (53,911) (198,905) (155,484)
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Cash flows from
financing activities:
Short-term borrowings,
net (including re-
classifications to
long-term debt) (56,160) (729) (937) 1,610
Current maturities and
long-term debt:
Additions 78,420 53,825 147,482 152,829
Reductions (including
reclassifications
to short-term (27,605) (35,499) (120,956) (121,409)
borrowings)
Cash dividends paid
on common stock (12,496) (11,314) (37,407) (33,831)
Common stock issued
- options 2,265 2,376 8,336 10,350
Other financing
activities (29) (2,183) (3,532) (4,778)
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Net cash provided
(used) by financing
activities (15,605) 6,476 (7,014) 4,771
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Effect of exchange rate
changes on cash 670 492 (7,522) (1,863)
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Net increase in cash and
cash equivalents 13,680 21,925 19,138 13,249
Cash and cash equivalents
at beginning of period 99,551 71,534 94,093 80,210
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Cash and cash equivalents
at end of period $113,231 $ 93,459 $ 113,231 $ 93,459
=====================================================================
(a) Reclassified for comparative purposes.
Harsco Corporation
REVIEW OF OPERATIONS BY SEGMENT (Unaudited)
(In thousands)
Three Months Ended Three Months Ended
September 30, 2005 September 30, 2004
Operating Operating
Income Income
Sales (loss) Sales (loss)
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Mill Services Segment $254,857 $ 23,095 $ 244,904 $ 24,958
Access Services Segment 195,353 20,867 176,338 13,446
Gas Technologies Segment 98,010 5,168 84,448 2,444
Engineered Products and
Services ("all other")
Category 149,249 20,872 111,598 13,667
General Corporate -- (387) -- (63)
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Consolidated Totals $697,469 $ 69,615 $ 617,288 $ 54,452
=====================================================================
Nine Months Ended Nine Months Ended
September 30, 2005 September 30, 2004
Operating Operating
Income Income
Sales (loss) Sales (loss)
---------------------------------------------------------------------
Mill Services Segment $794,778 $ 83,500 $723,445 $ 75,056
Access Services Segment 585,527 51,486 517,273 31,168
Gas Technologies Segment 270,178 10,896 244,964 10,799
Engineered Products and
Services ("all other")
Category 383,194 48,183 305,456 33,007
General Corporate -- (2,672) -- (1,007)
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Consolidated Totals $2,033,677 $191,393 $1,791,138 $149,023
=====================================================================
CONTACT: Harsco Corporation
Media Contact
Kenneth Julian
717.730.3683
kjulian@harsco.com
Investor Contact
Eugene M. Truett
717.975.5677
etruett@harsco.com