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
Date of Report (Date of earliest event reported) July 27, 2006
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.) |
|
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
________________________________________________________________________________
(Former name or former address, if changed since last report)
| 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 27, 2006, Harsco Corporation issued a press release announcing its earnings for the second quarter and first six months of 2006. A copy of the press release is attached hereto as Exhibit 99.1.
This information is being furnished in this report and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (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 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 27, 2006
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 27, 2006
(Date) |
/s/ SALVATORE D. FAZZOLARI
Salvatore D. Fazzolari President, Chief Financial Officer and Treasurer |
| Exhibit Index | ||
| 99.1 | Press release dated July 27, 2006 | |
EXHIBIT 99.1
Harsco Reports 29 Percent Increase in Second Quarter Earnings; Company Sees Growth Continuing in Second Half and Beyond and Raises Full-Year Outlook
-- Second quarter diluted EPS from continuing operations up 29
percent to a record $1.28; sales up 24 percent to a record $866
million
-- Improvement led by a 72 percent increase in operating income from
the Company's Access Services Segment
-- Company raises its full-year 2006 guidance for diluted EPS from
continuing operations to $4.32 to $4.42, from $4.00 to $4.10
HARRISBURG, Pa., July 27, 2006 (PRIMEZONE) -- Worldwide industrial services and products company Harsco Corporation (NYSE:HSC) today reported record second quarter 2006 results from continuing operations.
Second quarter 2006 diluted EPS from continuing operations was $1.28, up 29 percent from $0.99 in the second quarter of 2005. Income from continuing operations was $54.1 million, compared with $41.8 million last year, an increase of 29 percent. Overall operating margins improved by 60 basis points to 11.3 percent from 10.7 percent in last year's comparable period. Second quarter sales were up 24 percent to $866 million, from $696 million last year. Second quarter performance benefited from the Company's November 21, 2005 acquisition of Huennebeck Group GmbH and the December 29, 2005 acquisition of the Northern Hemisphere steel mill services operations of Brambles Industrial Services. Both acquisitions were accretive in the second quarter of 2006. Compared with the second quarter of 2005, sales in the second quarter of 2006 were reduced as a result of the sale of the Company's U.K.-based Youngman manufacturing operation on October 1, 2005. Positive foreign currency translation contributed approximately $4.4 m illion to this year's second quarter sales and $0.8 million to pre-tax income.
For the first six months of 2006, sales, income from continuing operations, and diluted earnings per share were all records. Income from continuing operations was $88.3 million, or $2.09 per diluted share, compared with income from continuing operations of $64.9 million, or $1.54 per diluted share in the first six months of 2005, an increase in both income and diluted EPS of 36 percent. Sales for the first six months of 2006 were $1.64 billion, an increase of 22 percent from $1.34 billion in the same period a year ago. Foreign currency translation reduced first half sales by $12.2 million, but contributed $0.8 million to pre-tax income.
Commenting on the Company's results, Harsco Chairman and Chief Executive Officer Derek C. Hathaway said, "Our strategies for securing Harsco's long-term growth through increasing internationalization and a focused, industrial services-based portfolio are now clearly paying off. The excellent results of the second quarter and first half of 2006 reflect strong organic growth across our core industrial service markets, as well as the added contributions of 2005's late-year acquisitions. We look for Harsco's gathering strength to continue through the second half of 2006 and into 2007, supported by our market-leading services and products to the global steel, infrastructure and energy markets.
"We see many opportunities to continue strengthening our position, not only in our current major markets but also in key economies where substantial programs for infrastructure modernization and expansion are underway. Within the next three to five years, it is our objective to approximately double our presence in the Latin American, Asia/Pacific, Middle East and Africa, and Eastern European markets to approximately 30 percent of total Harsco revenues, and with a growing revenue base overall. This further geographic balancing of our revenue profile, already more than 60 percent international, will complement our existing market leadership positions in North America and Western Europe with expanded opportunities to further accelerate our worldwide momentum, and without dependence on any one region's economic or political circumstances."
Second Quarter Business Review
Mill Services
Sales in the second quarter of 2006 increased by 27 percent to $344 million from $271 million in last year's second quarter. Organic sales growth contributed $13 million, or approximately 5 percent; the acquisitions of Evulca on May 13, 2005 and the Brambles Northern Hemisphere steel mill services operations on December 29, 2005 contributed $56 million, or 21 percent; and positive foreign currency translation increased sales by $3 million, or approximately 1 percent. Operating income increased by 15 percent to $38.5 million in the second quarter, up from $33.4 million in the second quarter of last year. Foreign currency translation contributed $0.9 million to pre-tax income in the quarter. While operating margins decreased to 11.2 percent from 12.3 percent in the same period last year, they were up 90 basis points sequentially from the first quarter of 2006. Included in last year's second quarter 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.
The improved results for the second quarter of 2006 reflect the Brambles acquisition, strong global steel production, new contract signings, and the effectiveness of the Company's ongoing cost control initiatives.
The second half outlook remains positive. The Brambles acquisition is expected to continue to be accretive, global steel production is forecast to continue to be up year-over-year, and the Company foresees new contract signings in coming quarters. In addition, the Company will continue to aggressively manage its costs to protect its margins.
Access Services
Second quarter 2006 sales increased 31 percent to $270 million from $207 million last year. Organic sales growth contributed $20 million, or approximately 10 percent; the net effect of the November 21, 2005 acquisition of Huennebeck Group and the October 1, 2005 sale of the U.K.-based Youngman manufacturing business contributed $42 million, or 20 percent; and positive foreign currency translation increased sales by $1 million, or approximately 1 percent. Operating income increased by 72 percent to $36.7 million in the second quarter, up from $21.3 million in the comparable period of last year. Positive foreign currency translation increased operating income by approximately $0.1 million in the quarter. Operating margins increased by approximately 330 basis points to 13.6 percent from 10.3 percent in the second quarter of 2005.
The improved second quarter performance was the result of better than expected sales and income from the Huennebeck acquisition and strong organic operating results due to improving non-residential construction and industrial plant maintenance market conditions in North America, Europe and the Middle East.
The outlook for the second half of 2006 and 2007 is positive. The Company expects that Huennebeck will continue to be accretive in the second half of 2006. Market data indicates the beginning of a multi-year global upswing in non-residential infrastructure build. In addition, the Company expects further market share gains due to geographic expansion and signings of new industrial plant maintenance contracts for its growing range of access services.
Engineered Products and Services ("All Other")
Sales in the second quarter of 2006 increased 19 percent to $152 million from $128 million last year. Operating income increased to $22.0 million, up 20 percent from $18.3 million in the second quarter of last year. Foreign currency translation in the quarter decreased sales by $0.3 million, but had a positive $0.1 million impact on operating income. Operating margins improved to 14.5 percent, up some 20 basis points from 14.3 percent last year.
All five of the operating units in this Group registered increased sales in the second quarter of this year compared with the second quarter of 2005, due to strong end-market demand. Four of the five units also recorded higher operating income, with only Reed Minerals showing lower income in the quarter compared with last year's second quarter due to continued higher transportation and energy costs.
Strength in the non-residential construction, rail transportation and energy markets give the Company confidence in the outlook for this group of operations. Backlogs remain high and new bookings are favorable for future growth.
Gas Technologies
Sales in the second quarter were up 11 percent to $99 million from $90 million last year. Operating income of $1.2 million was down 66 percent from last year's $3.6 million. Operating margins were 1.2 percent compared with 4.0 percent in the second quarter of last year. Income in the second quarter of 2006 was negatively impacted by higher commodity and retrospective insurance costs. Without these higher commodity costs and insurance charge, quarterly operating income would have been comparable to last year and margins would have been approximately 80 basis points lower. The effect of foreign currency translation was minimal.
The Company anticipates a stronger second half for this segment as increasingly robust end market demand is driving improved backlogs for the Company's high pressure cylinders, cryogenic tanks, and propane tanks, the segment's three largest product sectors. The second half also typically benefits from seasonality factors, notably in propane tanks. The Company continues to move forward in its cost containment and operational improvement programs, particularly in its valve business, in its efforts to bring this segment to more historical levels of earnings and margins.
Liquidity, Capital Resources and Other Matters
Net cash provided by operating activities for the second quarter of 2006 was a record $114 million, a 33 percent increase over the $86 million for the comparable period of last year. Net cash used by investing activities was $98 million, a 38 percent increase over the $71 million last year. The increased use of cash was due primarily to higher capital expenditures for organic growth, capital initiatives to improve operational efficiencies, and capital expenditures for the businesses acquired in the fourth quarter of 2005. Net cash provided by operating activities for the first six months of 2006 was a record $184 million, compared with $134 million in 2005, an increase of 37 percent.
During the first half, the Company's total debt decreased by some $3 million to $1.0 billion as of June 30, 2006. The debt-to-capital ratio decreased by 260 basis points to 47.8 percent at the end of the second quarter of 2006, down from 50.4 percent at the end of 2005.
Consistent with the quarterly results, meaningful improvement in Economic Value Added (EVA(r)) continued to be achieved in the second quarter and first half of 2006.
Outlook
The Company continues to see strong end markets which underpin its confidence in delivering positive results for the second half of 2006. As a result, the Company is raising its guidance for diluted EPS from continuing operations to $4.32 - $4.42 from the previous range of $4.00 - $4.10 per diluted share. Using the midpoint of the guidance, this reflects an increase of 17 percent over 2005's diluted EPS from continuing operations of $3.73. As previously noted, 2005's fourth quarter results included a one-time $0.06 per share benefit under the American Jobs Creation Act. No further benefits from this legislation are expected. Consistent with the Company's strategic plan of investing for growth at certain international locations, the Company also recorded in 2005's fourth quarter a one-time income tax benefit of $3.6 million, or $0.09 per diluted share. Without these one-time $0.15 per share-benefits, the midpoint of the Company's new guidance for 2006 reflects an increase in EPS of approximately 22 percent ov er the prior year.
For the 2006 third quarter, the Company is forecasting earnings from continuing operations in the range of $1.20 to $1.25 per diluted share, a 26 to 32 percent increase over the $0.95 in the third quarter of 2005.
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. Enter Conference ID number 1397169. 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 1397169.
About Harsco
Harsco Corporation is a diversified, worldwide industrial services and products company with four market-leading business groups that provide mill services, access services, engineered products and services, and gas containment and control technologies to customers around the globe. The Company employs approximately 21,000 people in 45 countries of operation. 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.primezone.com/newsroom/prs/?pkgid=361
Harsco Corporation
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
2006 2005 2006 2005
=====================================================================
Revenues from continuing
operations:
Service sales $ 636,393 $498,787 $1,209,024 $ 968,360
Product sales 229,123 197,360 426,045 367,848
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Total revenues 865,516 696,147 1,635,069 1,336,208
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Costs and expenses from
continuing operations:
Cost of services sold 457,133 367,401 879,957 719,806
Cost of products sold 184,430 158,914 340,654 300,156
Selling, general and
administrative
expenses 123,914 95,212 244,484 192,248
Research and develop-
ment expenses 719 711 1,410 1,370
Other (income) expenses 1,679 (593) 3,546 849
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Total costs and
expenses 767,875 621,645 1,470,051 1,214,429
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Operating income from
continuing operations 97,641 74,502 165,018 121,779
Equity in income of
unconsolidated entities,
net 102 42 163 120
Interest income 918 567 1,808 1,145
Interest expense (14,617) (10,419) (28,707) (20,862)
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Income from continuing
operations before
income taxes and
minority interest 84,044 64,692 138,282 102,182
Income tax expense (27,908) (20,647) (45,581) (32,757)
---------------------------------------------------------------------
Income from continuing
operations before
minority interest 56,136 44,045 92,701 69,425
Minority interest in
net income (2,078) (2,232) (4,393) (4,560)
---------------------------------------------------------------------
Income from continuing
operations 54,058 41,813 88,308 64,865
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Discontinued operations:
Loss from operations of
discontinued business (290) (316) (280) (341)
Gain on disposal of
discontinued business -- 204 -- 195
Income/(loss) related to
discontinued defense
business (6) (6) (12) 32
Income tax expense 112 44 110 43
---------------------------------------------------------------------
Loss from discontinued
operations (184) (74) (182) (71)
---------------------------------------------------------------------
Net Income $53,873(a) $ 41,739 $ 88,126 $ 64,794
=====================================================================
Average shares of common
stock outstanding 41,961 41,612 41,892 41,558
Basic earnings per
common share:
Continuing operations $ 1.29 $ 1.00 $ 2.11 $ 1.56
Discontinued
operations -- -- -- --
-----------------------------------------------------------------------
Basic earnings per
common share $ 1.28(a) $ 1.00 $ 2.10(a) $ 1.56
=====================================================================
Diluted average shares
of common stock
outstanding 42,222 42,046 42,169 42,012
Diluted earnings per
common share:
Continuing operations $ 1.28 $ 0.99 $ 2.09 $ 1.54
Discontinued
operations -- -- -- --
---------------------------------------------------------------------
Diluted earnings per
common share $ 1.28 $ 0.99 $ 2.09 $ 1.54
=====================================================================
(a) Does not total due to rounding.
Harsco Corporation
CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30 December 31
(In thousands) 2006 2005 (a)
---------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 88,270 $ 120,929
Accounts receivable, net 706,355 666,252
Inventories 269,882 251,080
Other current assets 62,986 60,436
Assets held-for-sale 2,815 2,326
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Total current assets 1,130,308 1,101,023
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Property, plant and equipment, net 1,224,883 1,139,808
Goodwill, net 578,357 559,629
Intangible assets, net 80,126 78,839
Other assets 94,670 96,505
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Total assets $ 3,108,344 $ 2,975,804
=====================================================================
LIABILITIES
Current liabilities:
Short-term borrowings $ 63,378 $ 97,963
Current maturities of long-term debt 12,374 6,066
Accounts payable 251,779 247,179
Accrued compensation 71,316 75,742
Income taxes payable 42,790 42,284
Dividends payable 13,650 13,580
Insurance liabilities 44,601 47,244
Other current liabilities 247,345 218,345
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Total current liabilities 747,233 748,403
---------------------------------------------------------------------
Long-term debt 931,293 905,859
Deferred income taxes 118,161 123,334
Insurance liabilities 57,498 55,049
Retirement plan liabilities 103,016 98,946
Other liabilities 51,999 50,319
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Total liabilities 2,009,200 1,981,910
---------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock 85,592 85,322
Additional paid-in capital 164,188 152,899
Accumulated other comprehensive loss (134,498) (167,318)
Retained earnings 1,587,067 1,526,216
Treasury stock (603,205) (603,225)
---------------------------------------------------------------------
Total stockholders' equity 1,099,144 993,894
---------------------------------------------------------------------
Total liabilities and stockholders'
equity $ 3,108,344 $ 2,975,804
=====================================================================
(a) Reclassified for comparative purposes.
Harsco Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
(In thousands) 2006 2005 2006 2005
---------------------------------------------------------------------
Cash flows from operating
activities:
Net income $ 53,873 $ 41,739 $ 88,126 $ 64,794
Adjustments to reconcile
net income to net
cash provided (used) by
operating activities:
Depreciation 60,973 48,703 119,388 97,463
Amortization 1,921 610 3,757 1,270
Equity in income of
unconsolidated
entities, net (102) (42) (163) (120)
Other, net 3,386 760 5,722 4,578
Changes in assets and
liabilities, net of
acquisitions and
dispositions of
businesses:
Accounts receivable (42,821) (16,409) (15,358) (7,280)
Inventories 13,660 (16,843) (13,950) (49,476)
Accounts payable 678 2,090 (9,572) 2,683
Accrued interest
payable 8,389 8,803 13,098 14,177
Accrued compensation 7,247 5,824 (7,296) (7,689)
Other assets and
liabilities 7,263 11,108 556 14,086
---------------------------------------------------------------------
Net cash provided by
operating activities 114,467 86,343 184,308 134,486
---------------------------------------------------------------------
Cash flows from investing
activities:
Purchases of property,
plant and equipment (99,866) (77,476) (166,807) (135,777)
Net use of cash
associated with the
purchases of businesses (3,199) (8,147) (935) (8,147)
Proceeds from sale of
assets 4,564 14,138 5,889 14,496
Other investing
activities 118 -- 118 --
---------------------------------------------------------------------
Net cash used by
investing activities (98,383) (71,485) (161,735) (129,428)
---------------------------------------------------------------------
Cash flows from financing
activities:
Short-term borrowings,
net (including
reclassifications
to/from long-term
debt) (51,863) 29,314 (41,511) 55,223
Current maturities and
long-term debt:
Additions 146,340 44,541 206,181 69,062
Reductions (including
reclassifications
to/from short-term
borrowings) (114,237) (51,599) (206,722) (93,351)
Cash dividends paid on
common stock (13,624) (12,477) (27,204) (24,911)
Common stock issued-
options 4,269 1,662 10,614 6,071
Other financing
activities (1,203) (1,160) (3,469) (3,503)
---------------------------------------------------------------------
Net cash provided
(used) by financing
activities (30,318) 10,281 (62,111) 8,591
---------------------------------------------------------------------
Effect of exchange rate
changes on cash 3,652 (3,993) 6,879 (8,191)
---------------------------------------------------------------------
Net increase (decrease)
in cash and cash
equivalents (10,582) 21,146 (32,659) 5,458
Cash and cash equivalents
at beginning of period 98,852 78,405 120,929 94,093
---------------------------------------------------------------------
Cash and cash equivalents
at end of period $ 88,270 $ 99,551 $ 88,270 $ 99,551
=====================================================================
Harsco Corporation
REVIEW OF OPERATIONS BY SEGMENT (Unaudited)
(In thousands)
Three Months Ended Three Months Ended
June 30, 2006 June 30, 2005
Operating Operating
Sales Income (loss) Sales Income (loss)
---------------------------------------------------------------------
Mill Services
Segment $ 344,295 $ 38,529 $ 271,286 $ 33,404
Access Services
Segment 269,660 36,652 206,597 21,253
Gas Technologies
Segment 99,494 1,223 90,034 3,630
Engineered Products &
Services
("all other")
Category 152,067 22,001 128,230 18,280
General Corporate -- (764) -- (2,065)
---------------------------------------------------------------------
Consolidated Totals $ 865,516 $ 97,641 $ 696,147 $ 74,502
=====================================================================
Six Months Ended Six Months Ended
June 30, 2006 June 30, 2005
Operating Operating
Sales Income (loss) Sales Income (loss)
---------------------------------------------------------------------
Mill Services
Segment $ 670,530 $ 72,109 $ 539,921 $ 60,405
Access Services
Segment 495,454 53,435 390,174 30,619
Gas Technologies
Segment 186,982 3,550 172,168 5,728
Engineered Products &
Services
("all other")
Category 282,103 37,439 233,945 27,311
General Corporate -- (1,515) -- (2,284)
---------------------------------------------------------------------
Consolidated Totals $1,635,069 $ 165,018 $1,336,208 $ 121,779
=====================================================================
CONTACT: Harsco Corporation
Media Contact
Kenneth D. Julian
(717) 730-3683
kjulian@harsco.com
Eugene M. Truett
Investor Contact
(717) 975-5677
etruett@harsco.com