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 24, 2003
(Date of earliest event reported)
Harsco Corporation
(Exact name of registrant as specified in its charter)
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DE |
1-3970 |
23-1483991 |
||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
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P.O. Box 8888 Camp Hill PA, 17011 |
17001-8888 |
|||
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: 717-763-7064
Item 7. Financial Statements and Exhibits.
(c) Exhibit 99.1. Press release dated July 24, 2003
Item 9. Regulation FD Disclosure.
The following information is furnished pursuant to Item 9, "Regulation FD Disclosure" and Item 12, "Results of Operations and Financial Condition." This information shall not be filed for purposes of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or 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.
| Exhibit Index | |||
| 99.1 | Press release dated July 24, 2003 | ||
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Harsco Corporation
(Registrant) |
||
|
July 24, 2003
(Date) |
/s/ SALVATORE D. FAZZOLARI
Salvatore D. Fazzolari Senior Vice President, Chief Financial Officer & Treasurer |
EXHIBIT 99.1
Harsco Reports Second Quarter 2003 Results
HARRISBURG, Pa., July 24, 2003 (PRIMEZONE) --
-- Second quarter diluted earnings per share of $0.62 from continuing
operations vs. $0.61 in prior year
-- Income from continuing operations up three percent to
$25.5 million, led by Mill Services Segment; revenues up
five percent
-- Second quarter actions include strategic mill services acquisition
and declaration of Company's 213th consecutive quarterly cash
dividend
Worldwide industrial services and products company Harsco Corporation (NYSE:HSC) today reported second quarter 2003 income from continuing operations of $25.5 million, or $0.62 diluted earnings per share on sales of $536 million. This compares with income from continuing operations of $24.8 million, or $0.61 diluted earnings per share on sales of $510 million in the second quarter of 2002. Including discontinued operations, second quarter 2003 diluted earnings per share were $0.63, compared with $0.64 in the second quarter of 2002.
Affecting results in the second quarter of 2003 was increased pension expense from continuing operations of $4.0 million pre-tax, partially offset by income of $0.8 million pre-tax from the termination of a post-retirement benefit plan. Positive foreign currency translation increased sales by approximately $32 million and pre-tax income by approximately $3 million in the quarter.
For the first six months of 2003, income from continuing operations was $37.9 million, or $0.93 diluted earnings per share on sales of $1.0 billion. This compares with income from continuing operations of $39.8 million, or $0.98 diluted earnings per share on sales of $969 million in the first six months of 2002. Including discontinued operations, first half 2003 diluted earnings per share of $0.94 compared with $0.99 in the first half of 2002.
Affecting results in the first six months of 2003 were increased pension expense from continuing operations of $9.3 million pre-tax, partially offset by income of $4.9 million pre-tax from the termination of certain post-retirement benefit plans. Positive foreign currency translation increased sales by approximately $62 million and pre-tax income by approximately $5 million in the first six months of 2003.
Commenting on the Company's results, Harsco Chairman, President and Chief Executive Officer Derek C. Hathaway said, "Our second quarter diluted earnings per share from continuing operations of $0.62 evidences good sequential progress from the $0.31 diluted earnings per share recorded in the first quarter, our seasonally weakest quarter. Our performance met analysts' consensus expectations and was within the range of our previously stated guidance. These results were achieved despite the very difficult manufacturing environment and the continued downturn in non-residential construction spending.
"Our strategy for growing the industrial services businesses was again validated by strong performance from our Mill Services Segment. We announced five new mill services contracts during the quarter and also acquired the mill services unit of C. J. Langenfelder & Son, which gives us an expanded presence with two major North American steel producers. We expect this acquisition to add $0.01 - $0.02 per share in earnings in the second half of 2003, and approximately $0.05 per share in 2004. Interest in our wide range of value-adding mill services remains strong, and future contract awards are expected.
"Also during the quarter our Harsco Track Technologies unit received a significant new contract for track repair and renewal services from North America's largest railroad. This in combination with sizable international sales orders for new track maintenance equipment provides added support for future quarters, particularly in 2004, given customary production lead times.
"Two of our manufacturing units, Gas and Fluid Control and IKG Industries, continue to operate in very difficult macro environments. The prospect of any near-term improvement in these two manufacturing businesses is unclear. While there is some indication of a modest pick-up in regional manufacturing activity, the timing of a widespread market turnaround remains unpredictable. We continue to modify our business model in each manufacturing operation to adjust to these difficult market conditions.
"Our accelerated investments to grow and strengthen our industrial services businesses continue unabated, underpinned by strong operating cash flows. Given the prospect for continued solid performance from industrial services offsetting the protracted decline in the manufacturing businesses, we anticipate 2003 full-year earnings from continuing operations to be at the lower end of our previous guidance of $2.25 - $2.36 per diluted share, which includes $3.4 million after-tax in the first six months of 2003 from the termination of certain post-retirement benefits and anticipated full year higher pension expense of approximately $12.4 million after-tax. For the nearer term, we foresee third quarter 2003 earnings from continuing operations in the range of $0.60 to $0.65 per diluted share."
Second Quarter Business Segment Review
Mill Services -- Sales increased 16 percent to $204 million from $175 million in last year's second quarter. Positive foreign currency translation increased sales 10 percent, while organic growth and higher mill production volumes were responsible for 6 percent. Operating income increased to $25.7 million, while operating margins improved to 12.6 percent from 10.2 percent last year. Positive foreign currency translation increased operating income by approximately $2.1 million in this year's second quarter.
Affecting results in the quarter were increased pension expense of $1.4 million pre-tax and net reorganization costs of $0.5 million pre-tax, partially offset by income of $0.8 million pre-tax from the termination of a post-retirement benefit plan. The positive improvement for the second quarter reflects new contracts and higher production at certain international mill locations, the Company's Six Sigma cost reduction initiatives, and the recovery of a bad debt expense of approximately $1.7 million pre-tax. The second quarter of 2002 included an increase of $2.8 million pre-tax in bad debt expense as a result of a customer bankruptcy.
Access Services -- Second quarter sales increased by 9 percent to $158 million from $145 million last year. The sales increase was principally due to positive foreign exchange translation. Operating income declined by 4 percent in the quarter to $10.8 million. Operating margins declined to 6.8 percent compared with 7.8 percent in the second quarter of 2002, due primarily to increased pension expense of $1.7 million pre-tax.
Operating performance in the SGB international access business exceeded last year's results despite additional pension costs of approximately $1.5 million pre-tax. This improvement was due primarily to the Company's Six Sigma cost reduction initiatives, improved operating performance from international operations outside the U.K., and positive foreign exchange translation, which increased sales by approximately $12 million and operating income by approximately $1 million in the quarter. This performance was offset by continued softness in the North American non-residential construction market served by Patent Construction Systems, which resulted in lower rental revenues for the Company. The rental business is the highest margin product line in the Access Services Segment.
Gas and Fluid Control -- Sales in the second quarter were $81 million, compared with $91 million in the prior year's quarter, a decline of 11 percent. Operating income declined by 44 percent to $4.6 million from $8.2 million last year. Likewise, operating margins declined to 5.7 percent from 9.0 percent year-over-year. Positive foreign currency translation increased sales by $1.4 million, but had no material effect on operating income.
Affecting segment results in the quarter were increased pension expense of $0.4 million pre-tax and severance and closure costs of $0.2 million pre-tax.
The generally weak manufacturing economy continues to negatively affect results of this segment. Decreased demand for composite vessels, high pressure cylinders, and cryogenic tanks more than offset a slight improvement in second quarter results from propane products and the Air-X-Changers business unit. In addition, the abnormally cold and wet spring in the U.S. adversely impacted valve sales to the propane grill markets. The Company continues to focus on reducing costs and improving operating efficiencies, but until the demand for durable goods turns up, this segment's operating results will continue to be pressured.
Other Infrastructure Products and Services -- Second quarter sales declined by 5 percent to $93.7 million from $98.6 million last year. Operating income declined from $11.2 million to $8.6 million, or 23 percent. Operating margins also declined, to 9.2 percent from 11.4 percent last year. The reduced results compared with last year were due largely to the continued poor performance of IKG Industries. Also negatively affecting results in the quarter was increased pension expense of $0.4 million pre-tax. The effect of foreign currency translation was not material.
In the second quarter of 2003, IKG incurred an operating loss of $2.7 million compared with operating income of $1.2 million in the second quarter of 2002. Lower product sales and margins due to the difficult market environment, and $2.1 million pre-tax from reorganization costs and an asset write-down were the primary reasons for the shortfall in performance.
Harsco Track Technologies had a successful quarter, with improved sales, operating income and margins due to higher equipment shipments to international customers and effective cost controls.
The Reed Minerals unit matched its results from last year's second quarter, while Patterson-Kelley recorded a slight improvement over last year.
Other Information
Year-to-date cash flow generation from operations continued to be strong, as follows:
$Millions
----------------------
Y-T-D 2003 Y-T-D 2002
------------------------------------------------------------------
Net cash provided by operating
activities - GAAP $90 $80
Less Capital Expenditures (63) (60)
Less Dividends (21) (20)
--- ---
Free cash flow $ 6 $ 0
=== ===
For the first half of the year, net cash provided by operating activities was $90 million compared with $80 million last year. This increase reflects working capital improvements and changes to other assets and liabilities. Capital expenditures increased by $3 million for the year as the Company continues to execute its stated strategy of growing its mill services and railway products and services businesses. The Company expects capital expenditures to continue to increase during the remainder of year. Free cash flow increased by approximately $6 million for the first half of the year. The Company views free cash flow as an important measure of the excess cash available to management to invest in business growth and other strategic initiatives, including debt reduction. As the Company's growth investment strategy gains momentum, it is expected that the free cash flow amount will correspondingly decrease.
In addition to the above cash flow information, $13.0 million in cash was realized during the first six months of 2003 from the sale of underperforming assets, compared with $37.2 million for the comparable period last year. Also, $23.5 million in cash was used in the second quarter of 2003 for industrial services business growth, with the acquisition of a mill services business and a small product line for the international access business. There were no such expenditures in the first quarter of this year or the first six months of last year.
Harsco traditionally generates a significant amount of its cash from operations during the second half of the year (approximately 70 percent in 2002) and expects to do so again this year. As such, the Company anticipates a significant increase in its capital expenditures for growth in 2003.
Compared with results at December 31, 2002, total debt has increased by approximately $9 million, due primarily to foreign exchange translation and the historical timing of the Company's cash flows. Despite this slight increase in debt, the Company's debt-to-capital ratio has declined by 230 basis points since year-end 2002 to 47.5 percent, due mainly to the positive effect of foreign exchange rates on shareholders' equity. The ratio of net debt (total debt less cash) to capital improved to 45.0 percent at June 30, 2003, compared with 46.9 percent at December 31, 2002. First-half Economic Value Added (EVA(r)) improved slightly over last year's first six months.
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. This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 which may be impacted by such conditions, risks, and uncertainties. As a result of changes in these conditions, risks, and uncertainties, future results could 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.
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 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 p.m. 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 1379413.
About Harsco
Harsco Corporation is a diversified, $2 billion industrial services and products company whose market-leading businesses provide mill services, access services, gas and fluid control products, and other infrastructure products and services to customers worldwide. The Company employs approximately 17,500 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
2003 2002(a) 2003 2002(a)
---------------------------------------------------------------------
Revenues from continuing
operations:
Service sales $374,119 $335,690 $ 721,722 $645,558
Product sales 162,341 174,655 302,640 323,390
---------------------------------------------------------------------
Total revenues 536,460 510,345 1,024,362 968,948
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Costs and expenses from
continuing operations:
Cost of services sold 272,486 241,922 534,223 469,109
Cost of products sold 131,356 136,899 245,293 254,229
Selling, general and
administrative expenses 81,453 80,629 161,965 159,023
Research and development
expenses 800 707 1,672 1,564
Other expense 1,399 1,702 2,337 3,037
---------------------------------------------------------------------
Total costs and expenses 487,494 461,859 945,490 886,962
---------------------------------------------------------------------
Operating income from
continuing operations 48,966 48,486 78,872 81,986
Equity in income of
affiliates, net 99 85 261 290
Interest income 379 866 1,076 2,229
Interest expense (10,259) (11,223) (20,526) (22,449)
---------------------------------------------------------------------
Income from continuing
operations before income
taxes and minority
interest 39,185 38,214 59,683 62,056
Income tax expense (12,135) (11,799) (18,485) (19,191)
---------------------------------------------------------------------
Income from continuing
operations before
minority interest 27,050 26,415 41,198 42,865
Minority interest in
net income (1,596) (1,588) (3,274) (3,033)
---------------------------------------------------------------------
Income from continuing
operations 25,454 24,827 37,924 39,832
---------------------------------------------------------------------
Discontinued operations:
Income (loss) from
operations of
discontinued business 3 (715) (209) (2,034)
Gain on disposal of
discontinued business 233 2,868 528 2,868
Income tax expense (85) (779) (115) (304)
---------------------------------------------------------------------
Income from discontinued
operations 151 1,374 204 530
---------------------------------------------------------------------
Net Income $ 25,605 $ 26,201 $ 38,128 $ 40,362
=====================================================================
Average shares of
common stock outstanding 40,615 40,353 40,579 40,198
Basic earnings per
common share:
Continuing operations $ .63 $ .62 $ .93 $ .99
Discontinued operations -- .03 .01 .01
---------------------------------------------------------------------
Basic earnings per
common share $ .63 $ .65 $ .94 $ 1.00
=====================================================================
Diluted average shares of
common shares outstanding 40,872 40,938 40,764 40,738
Diluted earnings per
common share:
Continuing operations $ .62 $ .61 $ .93 $ .98
Discontinued operations .01 .03 .01 .01
---------------------------------------------------------------------
Diluted earnings per
common share $ .63 $ .64 $ .94 $ .99
=====================================================================
(a) In order to comply with the Financial Accounting Standards Board
(FASB) Statement No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," 2002 information has been
reclassified for comparative purposes.
HARSCO CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
June 30 December 31
2003 2002
--------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 63,975 $ 70,132
Accounts receivable, net 438,981 388,872
Inventories 183,806 181,712
Other current assets 54,927 61,686
--------------------------------------------------------------------
Total current assets 741,689 702,402
--------------------------------------------------------------------
Property, plant and equipment,
net 838,233 807,935
Goodwill, net 386,357 377,220
Other assets 102,840 102,493
Assets held for sale 2,118 9,247
--------------------------------------------------------------------
Total assets $ 2,071,237 $ 1,999,297
====================================================================
LIABILITIES
Current liabilities:
Short-term borrowings $ 16,806 $ 22,362
Current maturities of long-term
debt 9,791 11,695
Accounts payable 162,552 166,871
Accrued compensation 37,795 39,456
Income taxes 46,146 43,411
Dividends payable 10,682 10,642
Other current liabilities 185,823 179,413
--------------------------------------------------------------------
Total current liabilities 469,595 473,850
--------------------------------------------------------------------
Long-term debt 622,525 605,613
Deferred income taxes 64,329 62,096
Insurance liabilities 46,412 44,090
Other liabilities 150,182 167,069
Liabilities associated with
assets held for sale 1,977 2,039
--------------------------------------------------------------------
Total liabilities 1,355,020 1,354,757
--------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common stock 83,988 83,793
Additional paid-in capital 115,105 110,639
Accumulated other comprehensive
expense (192,809) (242,978)
Retained earnings 1,313,656 1,296,855
--------------------------------------------------------------------
1,319,940 1,248,309
Treasury stock (603,723) (603,769)
--------------------------------------------------------------------
Total shareholders' equity 716,217 644,540
--------------------------------------------------------------------
Total liabilities and shareholders'
equity $ 2,071,237 $ 1,999,297
====================================================================
HARSCO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended Six Months Ended
June 30 June 30
2003 2002(a) 2003 2002(a)
---------------------------------------------------------------------
Cash flows from operating
activities:
Net income $ 25,605 $ 26,201 $ 38,128 $ 40,362
Adjustments to reconcile
net income to net cash
provided (used) by
operating activities:
Depreciation 40,878 38,196 80,773 76,171
Amortization 345 501 718 838
Equity in income of
affiliates, net (100) (85) (262) (290)
Dividends or
distributions from
affiliates 1,335 144 1,335 144
Other, net 1,991 5,820 2,498 7,227
Changes in assets and
liabilities, net of
acquisitions and
dispositions of
businesses:
Accounts receivable (14,836) (9,302) (36,460) (18,621)
Inventories 7,928 9,022 335 (3,744)
Accounts payable (4,791) (8,402) (10,880) (29,115)
Net disbursements
related to
discontinued defense
business (200) (214) (434) (505)
Other assets and
liabilities 997 9,509 14,577 7,936
---------------------------------------------------------------------
Net cash provided by
operating activities 59,152 71,390 90,328 80,403
---------------------------------------------------------------------
Cash flows from investing
activities:
Purchases of property,
plant and equipment (32,608) (28,765) (62,789) (60,020)
Purchase of businesses,
net of cash acquired (23,486) -- (23,486) --
Proceeds from sales of
assets 673 26,722 12,957 37,186
Other investing activities -- (19) -- (19)
---------------------------------------------------------------------
Net cash used by
investing activities (55,421) (2,062) (73,318) (22,853)
---------------------------------------------------------------------
Cash flows from financing
activities:
Short-term borrowings, net (4,428) 13,083 (10,968) 520
Current maturities and
long-term debt:
Additions 32,159 27,669 82,292 88,805
Reductions (53,888) (107,713) (81,107) (142,296)
Cash dividends paid on
common stock (10,643) (10,033) (21,286) (20,029)
Common stock
issued-options 3,857 9,566 4,047 13,177
Other financing
activities (3,555) (1,920) (3,552) (3,298)
---------------------------------------------------------------------
Net cash used by
financing activities (36,498) (69,348) (30,574) (63,121)
---------------------------------------------------------------------
Effect of exchange
rate changes on cash 6,532 5,685 7,407 4,282
---------------------------------------------------------------------
Net increase (decrease)
in cash and cash
equivalents (26,235) 5,665 (6,157) (1,289)
Cash and cash equivalents
at beginning of period 90,210 60,453 70,132 67,407
---------------------------------------------------------------------
Cash and cash equivalents
at end of period $ 63,975 $ 66,118 $ 63,975 $ 66,118
=====================================================================
(a) In order to comply with the Financial Accounting Standards Board
(FASB) Statement No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," 2002 information has been
reclassified for comparative purposes.
HARSCO CORPORATION
REVIEW OF OPERATIONS BY SEGMENT(a) (Unaudited)
(In millions)
Three Months Ended Three Months Ended
June 30, 2003 June 30, 2002(b)
Operating
Income Operating
Sales(c) (loss)(d) Sales(c) Income(d)
---------------------------------------------------------------------
Mill Services Segment $ 203.7 $ 25.7 $ 175.1 $ 17.8
Access Services Segment 157.9 10.8 145.2 11.3
Gas and Fluid Control
Segment 81.2 4.6 91.4 8.2
Other Infrastructure
Products and Services 93.7 8.6 98.6 11.2
General Corporate -- (0.7) -- --
---------------------------------------------------------------------
Consolidated Totals $ 536.5 $ 49.0 $ 510.3 $ 48.5
=====================================================================
Six Months Ended Six Months Ended
June 30, 2003 June 30, 2002(b)
Operating
Income Operating
Sales(c) (loss)(d) Sales(c) Income(d)
---------------------------------------------------------------------
Mill Services Segment $ 392.0 $ 42.4 $ 336.2 $ 32.5
Access Services Segment 305.3 15.4 278.6 19.4
Gas and Fluid Control
Segment 157.3 7.6 173.9 12.4
Other Infrastructure
Products and Services 169.8 12.8 180.2 17.4
General Corporate -- 0.7 -- 0.3
---------------------------------------------------------------------
Consolidated Totals $1,024.4 $ 78.9 $ 968.9 $ 82.0
=====================================================================
(a) Segment information for prior periods has been reclassified to
conform with the current presentation.
(b) In order to comply with the Financial Accounting Standards Board
(FASB) Statement No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," 2002 information has been
reclassified for comparative purposes.
(c) Sales from continuing operations.
(d) Operating income (loss) from continuing operations.
The Harsco Corporation logo is available at: http://media.primezone.com/prs/single/?pkgid=361
CONTACT: Harsco Corporation
Media Contact
Kenneth Julian
(717) 730-3683
kjulian@harsco.com
Analyst Contact
Eugene M. Truett
(717) 975-5677
etruett@harsco.com
www.harsco.com