Harsco Corporation Reports Third Quarter 2019 Results

• Q3 GAAP Operating Income of $47 Million
   
• Adjusted Operating Income Excluding Unusual Items and Acquisition-Related Amortization Expense Totaled $57 Million and Adjusted Operating Margin Reached 13.5 Percent; Results Were Consistent with Guidance
   
• Repurchased 1.4 Million Harsco Shares for $26 Million in Q3; $19 Million Remaining Under Share Repurchase Program at Quarter End
   
• Company's Net Leverage Ratio Declined to 2.2x
   
• Successfully Integrated Clean Earth During Quarter and On Pace to Achieve Targeted Synergies
   
• Issued 2018-2019 Environmental, Social and Governance (ESG) Report Highlighting Company's Corporate Sustainability Initiatives and Accomplishments
   
• 2019 Adjusted Operating Income Now Expected to Increase Nearly 10% Year-over-Year at Guidance Midpoint; Full Year Range is Now $209 Million to $214 Million

CAMP HILL, Pa., Oct. 29, 2019 (GLOBE NEWSWIRE) -- Harsco Corporation (NYSE: HSC) today reported third quarter 2019 results. On a U.S. GAAP ("GAAP") basis, third quarter of 2019 diluted earnings per share from continuing operations were $0.22. Unusual items during the quarter included acquisition integration and strategy costs as well as further costs to implement Harsco Rail's productivity improvement initiative. Adjusted diluted earnings per share from continuing operations in the third quarter of 2019 were $0.36 excluding unusual items and acquisition-related amortization expense.

These figures compare with third quarter of 2018 GAAP diluted earnings per share from continuing operations of $0.29 and adjusted diluted earnings per share from continuing operations excluding acquisition-related amortization expense of $0.32.

GAAP operating income from continuing operations for the third quarter of 2019 was $47 million. Excluding unusual items and acquisition-related amortization expense, adjusted operating income was $57 million, compared to the Company's previously provided guidance range of $56 million to $61 million.

“Harsco had a solid third quarter, delivering financial results largely in line with our expectations, while at the same time successfully integrating Clean Earth and continuing our transformation to a single thesis environmental solutions company,” said Chairman and CEO Nick Grasberger. “The effectiveness of our growth and improvement initiatives, coupled with our portfolio transition, has allowed Harsco to maintain strong profitability and margins despite market headwinds in our Environmental segment.”

Mr. Grasberger continued, “Consistent with our focus on environmental solutions, Harsco released the Company’s most comprehensive environmental, social and governance report to date. The report outlines our accomplishments across these areas and showcases sustainability as an important foundation for our strategy. We expect to create long-term shareholder value as we continue to provide critical sustainable services and products to our customers and pursue higher-growth and less-cyclical businesses with attractive margins.”

Harsco Corporation—Selected Third Quarter Results

Note: Income statement details above and commentary below reflect that Harsco Industrial has been reclassified as Discontinued Operations. Also, adjusted operating income references below excludes unusual items and acquisition-related amortization expense.

Consolidated Third Quarter Operating Results
Total revenues from continuing operations were $423 million, an increase of 20 percent compared with the prior-year quarter given the acquisition of Clean Earth in the current year. Foreign currency translation negatively impacted third quarter 2019 revenues by approximately $9 million compared with the prior-year period. Note that 2018 figures account for the previous Harsco Industrial segment as discontinued operations.

GAAP operating income from continuing operations was $47 million and adjusted operating income was $57 million for the third quarter of 2019. These figures compare with GAAP operating income from continuing operations of $42 million and adjusted operating income of $44 million in the same quarter of last year.

Adjusted operating income in Environmental increased 8 percent relative to the prior-year quarter, despite macroeconomic challenges within the global steel industry and foreign exchange impacts, while Rail earnings declined as anticipated given the comparison to very strong results in the third quarter of 2018. The remainder of the change in adjusted operating income is attributable to the inclusion of Clean Earth.

The Company's GAAP and adjusted operating margins in the third quarter of 2019 were 11.0 percent and 13.5 percent, respectively.

Third Quarter Business Review

Environmental

Revenues totaled $261 million, a modest decrease from the prior-year quarter due to the impact of foreign currency translation. On a constant currency basis, revenues were essentially unchanged. The segment's operating income and adjusted operating income totaled $33 million and $34 million, respectively, in the third quarter of 2019. These figures compare with GAAP operating income of $29 million and adjusted operating income of $32 million in the prior-year period. The increase in adjusted operating earnings is attributable to new site and applied products contributions and lower administrative spending, partially offset by site exits and the impact of foreign exchange. Lastly, the segment's operating margin was 12.6 percent and adjusted operating margin was 13.1 percent in the third quarter of 2019.

Clean Earth

Note: The 2018 financial information provided above and discussed below for Clean Earth is not incorporated within Harsco's consolidated results and is provided only for comparison purposes.

Revenues totaled $88 million, representing an increase of 23 percent compared with the prior-year quarter. The improvement can be attributed to strong volume growth and pricing-mix benefits for contaminated and hazardous material processing as well as previously-completed acquisitions. Segment operating income in the third quarter of 2019 totaled $11 million, or $16 million when excluding unusual items and acquisition-related amortization expense. These figures compare favorably with $4 million and $8 million, respectively, in the prior-year period. Higher earnings in 2019 are the result of the above mentioned factors. Lastly, the segment's operating margin was 12.9 percent and adjusted operating margin was 18.7 percent in the third quarter of 2019.

Rail

Revenues totaled $75 million, a decrease that had been anticipated compared with a strong third quarter of 2018. The segment's operating income in the third quarter of 2019 totaled $12 million, or $13 million when excluding unusual items in the period. These figures compare with GAAP and adjusted operating income of $19 million in the prior-year quarter. The change in earnings performance relative to the 2018 quarter is the result of volume and product mix changes for equipment and after-market parts, partially offset by manufacturing cost improvements. As a result, the segment's operating margin was 16.2 percent in the third quarter of 2019 (17.5 percent on adjusted basis), compared with 23.0 percent in the same quarter of 2018.

Cash Flow
Net cash provided by operating activities totaled $45 million in the third quarter of 2019, compared with net cash provided by operating activities of $48 million in the prior-year period. Further, free cash flow was $5 million (before transaction expenses) in the third quarter of 2019, compared with $20 million in the prior-year period. The change in free cash flow compared with the prior-year quarter is principally attributable to growth-related capital spending.

2019 Outlook
The Company expects full-year revenues to grow mid-single digits and adjusted earnings to increase nearly 10 percent compared with 2018. This growth reflects continued strength in Rail and Clean Earth, where the Company's guidance is unchanged. This full year outlook is also updated to reflect external economic pressures within the Environmental segment, where performance for the balance of the year is expected to be impacted by lower underlying steel output and commodity prices as well as changes in foreign exchange rates.

Despite these challenges, adjusted earnings in Environmental during the second-half of the year are expected to increase relative to the comparable period of 2018. Prior growth investments as well as lower administrative costs are anticipated to support this growth. With this revised outlook, Environmental adjusted operating income for the full year is now expected to be similar to or slightly above 2018 adjusted earnings before considering foreign exchange impacts.

Summary guidance for Clean Earth, Rail and Corporate, as well as key consolidated highlights in the Outlook for full-year 2019 and Q4 2019, are as follows:

Clean Earth is expected to generate revenues of approximately $160 million in second-half of 2019 and adjusted operating income of $32 million to $35 million for this period. These ranges point to strong year-on-year growth for Clean Earth, where the positive business drivers include underlying organic growth, previous acquisitions, new waste-streams and lower operating costs. For Rail, adjusted operating income is anticipated to be significantly higher than 2018 due to increased global demand for equipment, after-market parts and Protran Technology products as well as productivity initiatives.

Lastly, Corporate spending for 2019 is expected to range from $24 million to $25 million, also unchanged from the Company's second-quarter earnings report.

Note: 2019 Outlook includes Harsco Industrial for the first-half of 2019. Restated 2018 financial information to reflect Harsco Industrial as Discontinued Operations is included in the supporting schedules.

Note: Restated 2018 financial information to reflect Harsco Industrial as Discontinued Operations is included in the supporting schedules.

Conference Call

The Company will hold a conference call today at 9:00 a.m. Eastern Time to discuss its results and respond to questions from the investment community. The conference call will be broadcast live through the Harsco Corporation website at www.harsco.com. The Company will refer to a slide presentation that accompanies its formal remarks. The slide presentation will be available on the Company’s website.

The call can also be accessed by telephone by dialing (800) 611-4920, or (973) 200-3957 for international callers. Enter Conference ID number 9057279. Listeners are advised to dial in at least five minutes prior to the call.

Replays will be available via the Harsco website and also by telephone through November 12, 2019 by dialing (800) 585-8367, (855) 859-2056 or (404) 537-3406.

Forward-Looking Statements

The nature of the Company's business and the many countries in which it operates subject it to changing economic, competitive, regulatory and technological conditions, risks and uncertainties. In accordance with the "safe harbor" provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, the Company provides the following cautionary remarks regarding important factors that, among others, could cause future results to differ materially from the results contemplated by forward-looking statements, including the expectations and assumptions expressed or implied herein. Forward-looking statements contained herein could include, among other things, statements about management's confidence in and strategies for performance; expectations for new and existing products, technologies and opportunities; and expectations regarding growth, sales, cash flows, and earnings. Forward-looking statements can be identified by the use of such terms as "may," "could," "expect," "anticipate," "intend," "believe," "likely," "estimate," "outlook," "plan" or other comparable terms.

Factors that could cause actual results to differ, perhaps materially, from those implied by forward-looking statements include, but are not limited to: (1) changes in the worldwide business environment in which the Company operates, including general economic conditions; (2) changes in currency exchange rates, interest rates, commodity and fuel costs and capital costs; (3) changes in the performance of equity and bond markets that could affect, among other things, the valuation of the assets in the Company's pension plans and the accounting for pension assets, liabilities and expenses; (4) changes in governmental laws and regulations, including environmental, occupational health and safety, tax and import tariff standards and amounts; (5) market and competitive changes, including pricing pressures, market demand and acceptance for new products, services and technologies; (6) the Company's inability or failure to protect its intellectual property rights from infringement in one or more of the many countries in which the Company operates; (7) failure to effectively prevent, detect or recover from breaches in the Company's cybersecurity infrastructure; (8) unforeseen business disruptions in one or more of the many countries in which the Company operates due to political instability, civil disobedience, armed hostilities, public health issues or other calamities; (9) disruptions associated with labor disputes and increased operating costs associated with union organization; (10) the seasonal nature of the Company's business; (11) the Company's ability to successfully enter into new contracts and complete new acquisitions or strategic ventures in the time-frame contemplated, or at all; (12) the integration of the Company's strategic acquisitions; (13) potential severe volatility in the capital markets; (14) failure to retain key management and employees; (15) the amount and timing of repurchases of the Company's common stock, if any; (16) the outcome of any disputes with customers, contractors and subcontractors; (17) the financial condition of the Company's customers, including the ability of customers (especially those that may be highly leveraged and those with inadequate liquidity) to maintain their credit availability; (18) implementation of environmental remediation matters; (19) risk and uncertainty associated with intangible assets; and (20) other risk factors listed from time to time in the Company's SEC reports. A further discussion of these, along with other potential risk factors, can be found in Part I, Item 1A, "Risk Factors," of the Company's Annual Report on Form 10-K for the year ended December 31, 2018, together with those described in Item 1A, "Risk Factors," of the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2019. The Company cautions that these factors may not be exhaustive and that many of these factors are beyond the Company's ability to control or predict. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. The Company undertakes no duty to update forward-looking statements except as may be required by law.

About Harsco
Harsco Corporation is a global market leader providing environmental solutions for industrial and specialty waste streams and innovative technologies for the rail sector. Based in Camp Hill, PA, the 11,000-employee company operates in more than 30 countries. Harsco’s common stock is a component of the S&P SmallCap 600 Index and the Russell 2000 Index. Additional information can be found at www.harsco.com.

Investor Contact:
David Martin
717.612.5628
damartin@harsco.com

Media Contact:
Jay Cooney
717.730.3683
jcooney@harsco.com

(a) Does not total due to rounding.

1. The Company's acquisition of Clean Earth closed on June 28, 2019.
2. The operating results of the former Harsco Industrial Segment have been reflected as discontinued operations in the Company's Condensed Consolidated Statement of Operations for all periods presented.

1. Consultant costs at Corporate associated with supporting and executing the Company's growth strategy (Q3 2019 $2.7 million pre-tax; nine months 2019 $17.9 million pre-tax).
2. Costs at Corporate related to the unused bridge financing commitment and Term Loan B amendment (nine months 2019 $7.4 million pre-tax) and the amendment of the Company's existing Senior Secured Credit Facility in order to reduce the interest rate applicable to the Term Loan Facility (nine months 2018 $1.0 million pre-tax).
3. Harsco Environmental Segment provision for doubtful accounts related to a customer in the U.K. entering administration (Q3 $0.8 million pre-tax; nine months 2019 $6.2 million pre-tax).
4. Costs associated with a productivity improvement initiative in the Harsco Rail Segment (Q3 2019 $0.8 million pre-tax; nine months 2019 $4.6 million pre-tax).
5. Fair value adjustment to contingent consideration liability related to the acquisition of Altek (Q3 2019 $0.9 million pre-tax; nine months 2019 $4.4 million pre-tax; Q3 2018 and nine months 2018 $0.4 million pre-tax).  The Company adjusts Operating income and Diluted earnings per share from continuing operations to exclude the impact of the change in fair value to the acquisition-related contingent consideration liability for the Altek acquisition because it believes that the adjustment for this item more closely correlates the reported financial measures with the ordinary and ongoing course of the Company's operations.
6. Harsco Environmental Segment site exit related (Q3 2019 $0.2 million pre-tax; nine months 2019 $2.4 million pre-tax).
7. Harsco Clean Earth Segment severance recognized (Q3 and nine month 2019 $1.3 million pre-tax).
8. Harsco Environmental Segment adjustment to previously accrued amounts related to the disposal of certain slag material in Latin America (nine months 2018 $3.2 million pre-tax).
9. Costs associated with the acquisition of Altek recorded in the Harsco Environmental Segment (nine months 2018 $0.8 million pre-tax) and at Corporate (nine months 2018 $0.4 million pre-tax).
10. Adjustment of certain existing deferred tax asset valuation allowances as a result of  a site exit in a certain jurisdiction in 2019 and the Altek acquisition in 2018 (Q3 and nine months 2019 $2.8 million; nine months 2018 $8.3 million).
11. Unusual items are tax-effected at the global effective tax rate, before discrete items, in effect at the time the unusual item is recorded, except for unusual items from countries where no tax benefit can be realized, in which case a zero percent tax rate is used. 
12. Does not total due to rounding. 

The Company’s management believes Adjusted diluted earnings per share before acquisition amortization expense, which is a non-U.S. GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.

1. Prior period amounts have been updated to reflect the former Harsco Industrial Segment as discontinued operations.
2. Fair value adjustment to contingent consideration liability related to the acquisition of Altek (Q4 2018 $3.4 million pre-tax). The Company adjusts Operating income and Diluted earnings per share from continuing operations to exclude the impact of the change in fair value to the acquisition-related contingent consideration liability for the Altek acquisition because it believes that the adjustment for this item more closely correlates the reported financial measures with the ordinary and ongoing course of the Company's operations.
3. Costs associated with a productivity improvement initiative in the Harsco Rail Segment (Q4 2018 $0.6 million pre-tax).
4. The Company recorded a benefit (expense) as a result of revaluing net deferred tax assets and liabilities as a result of U.S. tax reform (Q4 2018 $15.4 million benefit).

The Company’s management believes Adjusted diluted earnings per share before acquisition amortization expense and including discontinued operations, which is a non-U.S. GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Inclusion of discontinued operations, which relate principally to the Harsco Industrial Segment, provides comparability to prior periods. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.

1. Prior period amounts have been updated to reflect the former Harsco Industrial Segment as discontinued operations.
2. Harsco Environmental adjustment to previously accrued amounts related to the disposal of certain slag material in Latin America ($3.2 million pre-tax).
3. Fair value adjustment to contingent consideration liability related to the acquisition of Altek ($2.9 million pre-tax).  The Company adjusts Operating income and Diluted earnings per share from continuing operations to exclude the impact of the change in fair value to the acquisition-related contingent consideration liability for the Altek acquisition because it believes that the adjustment for this item more closely correlates the reported financial measures with the ordinary and ongoing course of the Company's operations. 
4. Costs associated with the acquisition of Altek recorded in the Harsco Environmental Segment ($0.8 million pre-tax) and at Corporate ($0.4 million pre-tax).
5. Loss on early extinguishment of debt associated with amending the Company's existing Senior Secured Credit Facility in order to reduce the interest rate applicable to the Term Loan Facility ($1.0 million pre-tax). 
6. Costs associated with a productivity improvement initiative in the Harsco Rail Segment ($0.6 million pre-tax).
7. Unusual items are tax-effected at the global effective tax rate, before discrete items, in effect at the time the unusual item is recorded, except for unusual items from countries where no tax benefit can be realized, in which case a zero percent tax rate is used. 
8. The Company recorded a benefit (expense) as a result of revaluing net deferred tax assets and liabilities as a result of U.S. tax reform ($15.4 million benefit).
9. Adjustment of certain existing deferred tax asset valuation allowances as a result of the Altek acquisition ($8.3 million). 
10. Does not total due to rounding.

The Company’s management believes Adjusted diluted earnings per share before acquisition amortization expense and including discontinued operations, which is a non-U.S. GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Inclusion of discontinued operations, which relate principally to the Harsco Industrial Segment, provides comparability to prior periods. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.

1. Includes results for the Harsco Clean Earth Segment for the period from July 1, 2019 to December 31, 2019.
2. Excludes results for the former Harsco Industrial Segment.
3. Includes results for the former Harsco Industrial Segment for the period from January 1, 2019 to June 30, 2019.
4. Does not total due to rounding.

The Company’s management believes Adjusted diluted earnings per share before estimated acquisition amortization expense, which is a non-U.S. GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Inclusion of discontinued operations, which relate principally to the Harsco Industrial Segment, provides comparability to prior periods. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.

The Company’s management believes Adjusted operating income (loss) before acquisition amortization expense, which is a non-U.S. GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.

The Company’s management believes Adjusted operating income (loss) before acquisition amortization expense, which is a non-U.S. GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.

1. The operating results of the former Harsco Industrial Segment have been reflected as discontinued operations in the Company's Condensed Consolidated Statement of Operations for all periods presented.

The Company’s management believes Adjusted operating income (loss) before acquisition amortization expense and including discontinued operations, which is a non-U.S. GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Inclusion of discontinued operations, which relate principally to the Harsco Industrial Segment, provides comparability to prior periods. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.

1. The operating results of the former Harsco Industrial Segment have been reflected as discontinued operations in the Company's Condensed Consolidated Statement of Operations for all periods presented.

The Company’s management believes Adjusted operating income (loss) before acquisition amortization expense and including discontinued operations, which is a non-U.S. GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Inclusion of discontinued operations, which relates principally to the Harsco Industrial Segment, provides comparability to prior periods. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.

1. The operating results of the former Harsco Industrial Segment have been reflected as discontinued operations in the Company's Condensed Consolidated Statement of Operations for all periods presented.

The Company’s management believes Adjusted operating income (loss) before acquisition amortization expense and including discontinued operations, which is a non-U.S. GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Inclusion of discontinued operations, which relates principally to the Harsco Industrial Segment, provides comparability to prior periods. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.

1. The operating results of the former Harsco Industrial Segment have been reflected as discontinued operations in the Company's Condensed Consolidated Statement of Operations for all periods presented.

The Company’s management believes Adjusted operating income (loss) before acquisition amortization expense and including discontinued operations, which is a non-U.S. GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Inclusion of discontinued operations, which relates principally to the Harsco Industrial Segment, provides comparability to prior periods. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.

1. Includes results for the Harsco Clean Earth Segment for the period from July 1, 2019 to December 31, 2019.
2. Excludes results for the former Harsco Industrial Segment.
3. Includes results for the former Harsco Industrial Segment for the period from January 1, 2019 to June 30, 2019.

The Company’s management believes Adjusted operating income before acquisition amortization expense, which is a non-U.S. GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. Exclusion of acquisition-related intangible asset amortization expense, the amount of which can vary by the timing, size and nature of the Company’s acquisitions, facilitates more consistent internal comparisons of operating results over time between the Company’s newly acquired and long-held businesses, and comparisons with both acquisitive and non-acquisitive peer companies. It is important to note that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Inclusion of discontinued operations, which relate principally to the Harsco Industrial Segment, provides comparability to prior periods. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.

1. Capital expenditures for strategic ventures represent the partner’s share of capital expenditures in certain ventures consolidated in the Company’s financial statements.
2. Asset sales are a normal part of the business model, primarily for the Harsco Environmental Segment.
3. Expenditures directly related to the Company's acquisition and divestiture transactions.

The Company's management believes that Free cash flow before growth capital expenditures, which is a non-U.S. GAAP financial measure, is meaningful to investors because management reviews cash flows generated from operations less capital expenditures net of asset sales proceeds and transaction-related expenditures for planning and performance evaluation purposes. The Company’s management also believes that free cash flow before growth capital expenditures, which is a non-U.S. GAAP financial measure, is meaningful to investors because management uses this as a key factor in the deployment of capital for strategic planning purposes. It is important to note that free cash flow and free cash flow before growth capital expenditures do not represent the total residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements and settlements of foreign currency forward exchange contracts, are not deducted from these measures. These measures should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.

1. Capital expenditures for strategic ventures represent the partner’s share of capital expenditures in certain ventures consolidated in the Company’s financial statements.
2. Asset sales are a normal part of the business model, primarily for the Harsco Environmental Segment.

The Company's management believes that Free cash flow before growth capital expenditures, which is a non-U.S. GAAP financial measure, is meaningful to investors because management reviews cash flows generated from operations less capital expenditures net of asset sales proceeds and transaction-related expenditures for planning and performance evaluation purposes. The Company’s management also believes that free cash flow before growth capital expenditures, which is a non-U.S. GAAP financial measure, is meaningful to investors because management uses this as a key factor in the deployment of capital for strategic planning purposes. It is important to note that free cash flow and free cash flow before growth capital expenditures do not represent the total residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements and settlements of foreign currency forward exchange contracts, are not deducted from these measures. These measures should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.

The Company's management believes that Free cash flow before growth capital expenditures, which is a non-U.S. GAAP financial measure, is meaningful to investors because management reviews cash flows generated from operations less capital expenditures net of asset sales proceeds and transaction-related expenditures for planning and performance evaluation purposes. The Company’s management also believes that free cash flow before growth capital expenditures, which is a non-U.S. GAAP financial measure, is meaningful to investors because management uses this as a key factor in the deployment of capital for strategic planning purposes. It is important to note that free cash flow and free cash flow before growth capital expenditures do not represent the total residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements and settlements of foreign currency forward exchange contracts, are not deducted from these measures. These measures should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.

1. Return on invested capital excluding unusual items is net income (loss) excluding unusual items, and after-tax interest expense, divided by average capital for the year. The Company uses a trailing twelve month average for computing average capital.
2. Unusual items are tax-effected at the global effective tax rate, before discrete items, in effect at the time the unusual item is recorded except for unusual items from countries where no tax benefit can be realized, in which case a zero percent tax rate is used.
3. The Company’s effective tax rate approximated 23% for the trailing twelve months for the period ended September 30, 2019.

The Company’s management believes Return on invested capital, which is a non-U.S. GAAP financial measure, is meaningful in evaluating the efficiency and effectiveness of the capital invested in the Company’s business. Exclusion of unusual items permits evaluation and comparison of results for the Company’s core business operations, and it is on this basis that management internally assesses the Company’s performance. This measure should be considered in addition to, rather than as a substitute for, net income or other information provided in accordance with U.S. GAAP.

The Company's management believes Adjusted Harsco Clean Earth Segment operating income before acquisition amortization expense, which is a non-U.S. GAAP financial measure, is useful to investors because it provides an overall understanding of the Clean Earth Segment for comparative purposes. Exclusion of acquisition related amortization expense permits evaluation of comparison of results for the Company's core business operations, and it is on this basis that management internally assesses the Company's performance.

Source: Harsco Corporation