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
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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 (see General Instructions A.2. below):
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On August 3, 2021, Harsco Corporation (the “Company”) issued a press release announcing its earnings for the second quarter ended June 30, 2021. A copy of the press release is attached hereto as Exhibit 99.1.
The 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.
The following exhibits are furnished as part of the Current Report on Form 8-K:
| Exhibit 99.1 | ||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Harsco Corporation | ||||||||
| Date: August 3, 2021 | /s/ PETER F. MINAN | |||||||
| Peter F. Minan | ||||||||
| Senior Vice President and Chief Financial Officer | ||||||||
Exhibit 99.1
Investor Contact David Martin 717.612.5628 damartin@harsco.com | Media Contact Jay Cooney 717.730.3683 jcooney@harsco.com | ||||
FOR IMMEDIATE RELEASE
HARSCO CORPORATION REPORTS SECOND QUARTER 2021 RESULTS
•Second Quarter Revenues Totaled $570 Million, an Increase of 27 Percent and 8 Percent, Respectively, From the Prior Year and Sequential Quarters
•Q2 GAAP Operating Income of $36 Million and GAAP Diluted Earnings Per Share of $0.18
•Adjusted Q2 EBITDA Totaled $78 Million; At Upper-End of Previous Guidance Range
•Q2 Adjusted Earnings Per Share of $0.28
•Full Year 2021 Adjusted EBITDA Guidance Range Unchanged At $295 Million To $310 Million
CAMP HILL, PA (August 3, 2021) - Harsco Corporation (NYSE: HSC) today reported second quarter 2021 results. On a U.S. GAAP ("GAAP") basis, second quarter of 2021 diluted earnings per share from continuing operations were $0.18 including certain strategic costs. Adjusted diluted earnings per share from continuing operations in the second quarter of 2021 were $0.28. These figures compare with a second quarter of 2020 GAAP diluted loss per share from continuing operations of $0.14 and adjusted diluted earnings per share from continuing operations of $0.13.
GAAP operating income from continuing operations for the second quarter of 2021 was $36 million. Adjusted EBITDA totaled $78 million in the quarter, compared to the Company's previously provided guidance range of $73 million to $79 million.
“Harsco continued to experience strong growth and operational momentum during the second quarter in each of our businesses," said Chairman and CEO Nick Grasberger. “The underlying business strength has broadened to include certain businesses that had lagged earlier in the economic recovery, and was supported by our ongoing operational improvements and key initiatives. We have also continued to make good progress on our integration with Clean Earth, which remains one of our near term priorities along
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with the ongoing efforts to strengthening our financial position. I am confident that Harsco is well-positioned to benefit as the global economy strengthens further, and we expect to create additional shareholder value in the future through our ongoing business transformation.”
Harsco Corporation—Selected Second Quarter Results
| ($ in millions, except per share amounts) | Q2 2021 | Q2 2020 | Q1 2021 | |||||||||||||||||
| Revenues | $ | 570 | $ | 447 | $ | 529 | ||||||||||||||
| Operating income from continuing operations - GAAP | $ | 36 | $ | 2 | $ | 25 | ||||||||||||||
| Diluted EPS from continuing operations - GAAP | $ | 0.18 | $ | (0.14) | $ | 0.02 | ||||||||||||||
| Adjusted EBITDA - excluding unusual items | $ | 78 | $ | 59 | $ | 66 | ||||||||||||||
| Adjusted EBITDA margin - excluding unusual items | 13.7 | % | 13.2 | % | 12.4 | % | ||||||||||||||
| Adjusted diluted EPS from continuing operations - excluding unusual items | $ | 0.28 | $ | 0.13 | $ | 0.15 | ||||||||||||||
Note: Adjusted earnings per share and adjusted EBITDA details presented throughout this release are adjusted for unusual items; in addition, adjusted earnings per share details are adjusted for acquisition-related amortization expense.
Consolidated Second Quarter Operating Results
Consolidated total revenues from continuing operations were $570 million, an increase of 27 percent compared with the prior-year quarter. Each business segment realized meaningful revenue growth versus the comparable 2020 quarter. Foreign currency translation positively impacted second quarter 2021 revenues by approximately $16 million compared with the prior-year period, translating to an organic growth rate of 24 percent.
GAAP operating income from continuing operations was $36 million for the second quarter of 2021, compared with $2 million in the same quarter of last year. Meanwhile, adjusted EBITDA totaled $78 million in the second quarter of 2021 versus $59 million in the second quarter of 2020. This adjusted EBITDA increase is attributable to improved performance in each of the Company's business segments as a result of strengthening economic conditions, internal improvement actions and growth initiatives.
Second Quarter Business Review
Environmental
| ($ in millions) | Q2 2021 | Q2 2020 | Q1 2021 | |||||||||||||||||
| Revenues | $ | 273 | $ | 204 | $ | 258 | ||||||||||||||
| Operating income - GAAP | $ | 30 | $ | 14 | $ | 26 | ||||||||||||||
| Adjusted EBITDA - excluding unusual items | $ | 58 | $ | 40 | $ | 54 | ||||||||||||||
| Adjusted EBITDA margin - excluding unusual items | 21.2 | % | 19.7 | % | 20.8 | % | ||||||||||||||
Environmental revenues totaled $273 million in the second quarter of 2021, an increase of 34 percent compared with the prior-year quarter. This increase is principally attributable to improved demand
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for environmental services and applied products as well as favorable foreign exchange movements. The segment's GAAP operating income and adjusted EBITDA totaled $30 million and $58 million, respectively, in the second quarter of 2021. These figures compare with GAAP operating income of $14 million and adjusted EBITDA of $40 million in the prior-year period. The year-on-year improvement in adjusted earnings is attributable to increased services and products demand, as noted above.
Clean Earth
| ($ in millions) | Q2 2021 | Q2 2020 | Q1 2021 | |||||||||||||||||
| Revenues | $ | 196 | $ | 162 | $ | 189 | ||||||||||||||
| Operating income - GAAP | $ | 7 | $ | — | $ | 3 | ||||||||||||||
| Adjusted EBITDA - excluding unusual items | $ | 18 | $ | 11 | $ | 15 | ||||||||||||||
| Adjusted EBITDA margin - excluding unusual items | 9.4 | % | 7.0 | % | 7.7 | % | ||||||||||||||
Note: The 2020 financial information provided above and discussed below for Clean Earth does not include a corporate cost allocation for ESOL.
Clean Earth revenues totaled $196 million in the second quarter of 2021, an increase of 21 percent compared with the prior-year quarter. The revenue increase is attributable to increased environmental services demand within both the hazardous waste and contaminated-dredge materials lines of business. Segment operating income was $7 million and adjusted EBITDA totaled $18 million in the second quarter of 2021. These figures compare with zero operating income and adjusted EBITDA of $11 million, respectively, in the prior-year period. The improvement in adjusted earnings is attributable to the above factors as well as integration improvement benefits. These factors were partially offset by personnel investments to support the Clean Earth platform and certain other expenditures, including IT and rebranding related expenses, which will not occur beyond 2021. Lastly, Clean Earth's adjusted EBITDA margin increased to 9.4 percent in the second quarter of 2021 versus 7.0 percent in the comparable-quarter of 2020.
Rail
| ($ in millions) | Q2 2021 | Q2 2020 | Q1 2021 | |||||||||||||||||
| Revenues | $ | 101 | $ | 82 | $ | 82 | ||||||||||||||
| Operating income (loss) - GAAP | $ | 9 | $ | 9 | $ | 5 | ||||||||||||||
| Adjusted EBITDA - excluding unusual items | $ | 10 | $ | 10 | $ | 6 | ||||||||||||||
| Adjusted EBITDA margin - excluding unusual items | 10.1 | % | 12.2 | % | 7.3 | % | ||||||||||||||
Rail revenues increased 24 percent compared with the prior-year quarter to $101 million. This increase principally reflects higher global equipment revenues, including those under various long-term supply contracts. The segment's operating income and adjusted EBITDA totaled $9 million and $10 million, respectively, in the second quarter of 2021, and these figures are similar to results realized in the prior-year quarter. EBITDA performance year-on-year reflects higher equipment contributions, offset by a less favorable sales mix across other business-lines and higher SG&A costs.
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Cash Flow
Net cash provided by operating activities totaled $37 million in the second quarter of 2021, compared with net cash provided by operating activities of $33 million in the prior-year period. Free cash flow was $6 million in the second quarter of 2021, compared with $18 million in the prior-year period. The change in free cash flow compared with the prior-year quarter is principally related to higher capital expenditures, some of which were deferred from 2020, as well as the timing of working capital items.
2021 Outlook
The Company's 2021 guidance is unchanged relative to the outlook provided with the Company's first quarter 2021 results. Comments by business segments are as follows:
Environmental. For the year, the primary drivers for an increase in adjusted EBITDA compared with 2020 are expected to be favorable demand for underlying services and products as well as higher commodity prices.
Clean Earth. For the year, adjusted EBITDA is projected to increase due to the full-year impact of ESOL ownership, underlying organic growth for hazardous material services and integration benefits, partially offset by an additional allocation of Corporate costs and investments which include various non-recurring expenditures.
Rail. For the year, the primary drivers for an increase in adjusted EBITDA versus 2020 remain higher anticipated demand for equipment and technology products, as well as higher contract services contributions.
Lastly, adjusted Corporate spending is still expected to range from $36 million to $37 million for the year.
Summary Outlook highlights are as follows:
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| 2021 Full Year Outlook | |||||
| GAAP Operating Income | $118 - $133 million | ||||
| Adjusted EBITDA | $295 - $310 million | ||||
| GAAP Diluted Earnings Per Share | $0.42 - 0.57 | ||||
| Adjusted Diluted Earnings Per Share | $0.82 - 0.96 | ||||
| Free Cash Flow Before Growth Capital | $95 - $115 million | ||||
| Free Cash Flow | $35 - $55 million | ||||
| Net Interest Expense | $62 - $63 million | ||||
| Net Capital Expenditures | $150 - $170 million | ||||
| Effective Tax Rate, Excluding Any Unusual Items | 34 - 36% | ||||
| Q3 2021 Outlook | |||||
| GAAP Operating Income | $31 - $37 million | ||||
| Adjusted EBITDA | $75 - $81 million | ||||
| GAAP Diluted Earnings Per Share | $0.15 - 0.21 | ||||
| Adjusted Diluted Earnings Per Share | $0.23 - 0.29 | ||||
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 (833) 651-7826 or (414) 238-0989.
Enter Conference ID number 2147976.
Forward-Looking Statements
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The nature of the Company's business, together with the number of 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 changes in general economic conditions or changes due to COVID-19 and governmental and market reactions to COVID-19; (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 outcome of any disputes with customers, contractors and subcontractors; (16) the financial condition of the Company's customers, including the ability of customers (especially those that may be highly leveraged, have inadequate liquidity or whose business is significantly impacted by COVID-19) to maintain their credit availability; (17) implementation of environmental remediation matters; (18) risk and uncertainty associated with intangible assets and (19) 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
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the year ended December 31, 2020. 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 12,000-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.
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HARSCO CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30 | June 30 | |||||||||||||||||||||||||
| (In thousands, except per share amounts) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| Revenues from continuing operations: | ||||||||||||||||||||||||||
| Service revenues | $ | 436,732 | $ | 345,643 | $ | 861,181 | $ | 637,232 | ||||||||||||||||||
| Product revenues | 133,088 | 101,638 | 237,494 | 208,890 | ||||||||||||||||||||||
| Total revenues | 569,820 | 447,281 | 1,098,675 | 846,122 | ||||||||||||||||||||||
| Costs and expenses from continuing operations: | ||||||||||||||||||||||||||
| Cost of services sold | 348,509 | 285,941 | 683,015 | 522,549 | ||||||||||||||||||||||
| Cost of products sold | 105,862 | 78,201 | 192,438 | 158,061 | ||||||||||||||||||||||
| Selling, general and administrative expenses | 82,665 | 80,771 | 165,708 | 153,270 | ||||||||||||||||||||||
| Research and development expenses | 628 | 792 | 1,446 | 2,052 | ||||||||||||||||||||||
| Other (income) expenses, net | (4,063) | (292) | (4,975) | 5,441 | ||||||||||||||||||||||
| Total costs and expenses | 533,601 | 445,413 | 1,037,632 | 841,373 | ||||||||||||||||||||||
| Operating income from continuing operations | 36,219 | 1,868 | 61,043 | 4,749 | ||||||||||||||||||||||
| Interest income | 638 | 816 | 1,223 | 1,009 | ||||||||||||||||||||||
| Interest expense | (15,986) | (14,953) | (32,850) | (27,602) | ||||||||||||||||||||||
| Unused debt commitment fees, amendment fees and loss on extinguishment of debt | (50) | (1,432) | (5,308) | (1,920) | ||||||||||||||||||||||
| Defined benefit pension income | 3,974 | 1,723 | 7,927 | 3,312 | ||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes and equity income | 24,795 | (11,978) | 32,035 | (20,452) | ||||||||||||||||||||||
| Income tax benefit (expense) from continuing operations | (8,564) | 2,304 | (12,793) | 2,986 | ||||||||||||||||||||||
| Equity income (loss) of unconsolidated entities, net | (76) | 71 | (195) | 167 | ||||||||||||||||||||||
| Income (loss) from continuing operations | 16,155 | (9,603) | 19,047 | (17,299) | ||||||||||||||||||||||
| Discontinued operations: | ||||||||||||||||||||||||||
Gain (loss) on sale of discontinued business | — | (91) | — | 18,371 | ||||||||||||||||||||||
| Income (loss) from discontinued businesses | (1,451) | 524 | (3,242) | 299 | ||||||||||||||||||||||
| Income tax benefit (expense) from discontinued businesses | 376 | (285) | 840 | (9,599) | ||||||||||||||||||||||
| Income (loss) from discontinued operations, net of tax | (1,075) | 148 | (2,402) | 9,071 | ||||||||||||||||||||||
| Net income (loss) | 15,080 | (9,455) | 16,645 | (8,228) | ||||||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | (1,692) | (1,147) | (3,122) | (2,233) | ||||||||||||||||||||||
| Net income (loss) attributable to Harsco Corporation | $ | 13,388 | $ | (10,602) | $ | 13,523 | $ | (10,461) | ||||||||||||||||||
| Amounts attributable to Harsco Corporation common stockholders: | ||||||||||||||||||||||||||
| Income (loss) from continuing operations, net of tax | $ | 14,463 | $ | (10,750) | $ | 15,925 | $ | (19,532) | ||||||||||||||||||
| Income (loss) from discontinued operations, net of tax | (1,075) | 148 | (2,402) | 9,071 | ||||||||||||||||||||||
Net income (loss) attributable to Harsco Corporation common stockholders | $ | 13,388 | $ | (10,602) | $ | 13,523 | $ | (10,461) | ||||||||||||||||||
| Weighted-average shares of common stock outstanding | 79,265 | 78,987 | 79,177 | 78,874 | ||||||||||||||||||||||
| Basic earnings (loss) per common share attributable to Harsco Corporation common stockholders: | ||||||||||||||||||||||||||
| Continuing operations | $ | 0.18 | $ | (0.14) | $ | 0.20 | $ | (0.25) | ||||||||||||||||||
| Discontinued operations | (0.01) | — | (0.03) | 0.12 | ||||||||||||||||||||||
| Basic earnings (loss) per share attributable to Harsco Corporation common stockholders | $ | 0.17 | $ | (0.13) | (a) | $ | 0.17 | $ | (0.13) | |||||||||||||||||
| Diluted weighted-average shares of common stock outstanding | 80,774 | 78,987 | 80,397 | 78,874 | ||||||||||||||||||||||
| Diluted earnings (loss) per common share attributable to Harsco Corporation common stockholders: | ||||||||||||||||||||||||||
| Continuing operations | $ | 0.18 | $ | (0.14) | $ | 0.20 | $ | (0.25) | ||||||||||||||||||
| Discontinued operations | (0.01) | — | (0.03) | 0.12 | ||||||||||||||||||||||
| Diluted earnings (loss) per share attributable to Harsco Corporation common stockholders | $ | 0.17 | $ | (0.13) | (a) | $ | 0.17 | $ | (0.13) | |||||||||||||||||
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HARSCO CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) | ||||||||||||||
(In thousands) | June 30 2021 | December 31 2020 | ||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 77,870 | $ | 76,454 | ||||||||||
| Restricted cash | 4,417 | 3,215 | ||||||||||||
| Trade accounts receivable, net | 424,185 | 407,390 | ||||||||||||
| Other receivables | 38,316 | 34,253 | ||||||||||||
| Inventories | 157,616 | 173,013 | ||||||||||||
| Current portion of contract assets | 85,236 | 54,754 | ||||||||||||
Prepaid expenses | 58,416 | 56,099 | ||||||||||||
| Other current assets | 15,300 | 10,645 | ||||||||||||
| Total current assets | 861,356 | 815,823 | ||||||||||||
| Property, plant and equipment, net | 672,138 | 668,209 | ||||||||||||
Right-of-use assets, net | 94,276 | 96,849 | ||||||||||||
| Goodwill | 903,345 | 902,074 | ||||||||||||
| Intangible assets, net | 422,906 | 438,565 | ||||||||||||
| Deferred income tax assets | 10,626 | 15,274 | ||||||||||||
| Other assets | 57,452 | 56,493 | ||||||||||||
| Total assets | $ | 3,022,099 | $ | 2,993,287 | ||||||||||
| LIABILITIES | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Short-term borrowings | $ | 7,202 | $ | 7,450 | ||||||||||
| Current maturities of long-term debt | 8,514 | 13,576 | ||||||||||||
| Accounts payable | 206,180 | 218,039 | ||||||||||||
| Accrued compensation | 49,960 | 45,885 | ||||||||||||
| Income taxes payable | 7,856 | 3,499 | ||||||||||||
| Current portion of advances on contracts | 54,017 | 39,917 | ||||||||||||
Current portion of operating lease liabilities | 24,056 | 24,862 | ||||||||||||
| Other current liabilities | 193,128 | 184,727 | ||||||||||||
| Total current liabilities | 550,913 | 537,955 | ||||||||||||
| Long-term debt | 1,327,588 | 1,271,189 | ||||||||||||
| Retirement plan liabilities | 193,421 | 231,335 | ||||||||||||
| Advances on contracts | 15,934 | 45,017 | ||||||||||||
Operating lease liabilities | 68,484 | 69,860 | ||||||||||||
| Environmental liabilities | 29,046 | 29,424 | ||||||||||||
| Deferred tax liabilities | 31,312 | 40,653 | ||||||||||||
| Other liabilities | 56,018 | 54,455 | ||||||||||||
| Total liabilities | 2,272,716 | 2,279,888 | ||||||||||||
| HARSCO CORPORATION STOCKHOLDERS’ EQUITY | ||||||||||||||
| Common stock | 144,836 | 144,288 | ||||||||||||
| Additional paid-in capital | 209,992 | 204,078 | ||||||||||||
| Accumulated other comprehensive loss | (626,206) | (645,741) | ||||||||||||
| Retained earnings | 1,811,282 | 1,797,759 | ||||||||||||
| Treasury stock | (846,401) | (843,230) | ||||||||||||
| Total Harsco Corporation stockholders’ equity | 693,503 | 657,154 | ||||||||||||
| Noncontrolling interests | 55,880 | 56,245 | ||||||||||||
| Total equity | 749,383 | 713,399 | ||||||||||||
| Total liabilities and equity | $ | 3,022,099 | $ | 2,993,287 | ||||||||||
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HARSCO CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | ||||||||||||||||||||||||||
| Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||||||||||||
| (In thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||||||||
| Net income (loss) | $ | 15,080 | $ | (9,455) | $ | 16,645 | $ | (8,228) | ||||||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||||||||||||
| Depreciation | 32,156 | 31,579 | 64,904 | 61,512 | ||||||||||||||||||||||
| Amortization | 8,816 | 9,115 | 17,783 | 15,672 | ||||||||||||||||||||||
Deferred income tax benefit | (2,986) | (5,067) | (6,407) | (655) | ||||||||||||||||||||||
| Equity in (income) loss of unconsolidated entities, net | 76 | (71) | 195 | (167) | ||||||||||||||||||||||
| Loss (gain) on sale from discontinued business | — | 91 | — | (18,371) | ||||||||||||||||||||||
| Loss on early extinguishment of debt | — | — | 2,668 | — | ||||||||||||||||||||||
| Other, net | (3,277) | (237) | (2,149) | (2,244) | ||||||||||||||||||||||
| Changes in assets and liabilities, net of acquisitions and dispositions of businesses: | ||||||||||||||||||||||||||
| Accounts receivable | (7,038) | 38,584 | (23,484) | 16,534 | ||||||||||||||||||||||
| Inventories | 15,049 | (254) | 15,456 | (16,666) | ||||||||||||||||||||||
| Contract assets | (18,796) | (8,623) | (37,866) | (28,934) | ||||||||||||||||||||||
| Right-of-use assets | 7,129 | 8,405 | 13,897 | 11,834 | ||||||||||||||||||||||
| Accounts payable | (4,899) | (20,427) | (13,491) | (8,119) | ||||||||||||||||||||||
| Accrued interest payable | 7,183 | 6,951 | (137) | (2,940) | ||||||||||||||||||||||
| Accrued compensation | 6,242 | (2,015) | 4,701 | (4,767) | ||||||||||||||||||||||
| Advances on contracts | (3,653) | (4,628) | (13,351) | 35,836 | ||||||||||||||||||||||
| Operating lease liabilities | (6,756) | (8,238) | (13,506) | (11,596) | ||||||||||||||||||||||
| Retirement plan liabilities, net | (8,591) | (3,492) | (27,858) | (19,026) | ||||||||||||||||||||||
| Income taxes payable - Gain on sale of discontinued businesses | — | (376) | — | 3,467 | ||||||||||||||||||||||
| Other assets and liabilities | 968 | 1,215 | 15,530 | (1,621) | ||||||||||||||||||||||
| Net cash provided by operating activities | 36,703 | 33,057 | 13,530 | 21,521 | ||||||||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||||||||
| Purchases of property, plant and equipment | (41,264) | (23,319) | (68,646) | (51,213) | ||||||||||||||||||||||
| Purchase of businesses, net of cash acquired | — | (438,447) | — | (442,604) | ||||||||||||||||||||||
| Proceeds from sale of discontinued business, net | — | — | — | 37,219 | ||||||||||||||||||||||
| Proceeds from sales of assets | 6,180 | 1,767 | 10,042 | 3,952 | ||||||||||||||||||||||
| Expenditures for intangible assets | (64) | 16 | (132) | (42) | ||||||||||||||||||||||
| Proceeds from note receivable | 6,400 | — | 6,400 | — | ||||||||||||||||||||||
| Net proceeds (payments) from settlement of foreign currency forward exchange contracts | 449 | (10,562) | (978) | 765 | ||||||||||||||||||||||
| Other investing activities, net | 87 | 59 | 133 | 59 | ||||||||||||||||||||||
| Net cash used by investing activities | (28,212) | (470,486) | (53,181) | (451,864) | ||||||||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||||||||
| Short-term borrowings, net | 3,869 | (1,020) | 4,444 | 2,677 | ||||||||||||||||||||||
| Current maturities and long-term debt: | ||||||||||||||||||||||||||
| Additions | 30,645 | 475,726 | 465,518 | 528,601 | ||||||||||||||||||||||
| Reductions | (38,951) | (23,697) | (413,481) | (62,406) | ||||||||||||||||||||||
| Dividends paid to noncontrolling interests | (3,094) | — | (3,094) | — | ||||||||||||||||||||||
| Stock-based compensation - Employee taxes paid | (687) | (656) | (3,172) | (4,093) | ||||||||||||||||||||||
| Deferred financing costs | (1,303) | (296) | (7,828) | (1,928) | ||||||||||||||||||||||
| Other financing activities, net | (201) | (1,371) | (601) | (1,371) | ||||||||||||||||||||||
Net cash provided (used) by financing activities | (9,722) | 448,686 | 41,786 | 461,480 | ||||||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents, including restricted cash | 1,193 | 4,006 | 483 | (6,818) | ||||||||||||||||||||||
| Net increase (decrease) in cash and cash equivalents, including restricted cash | (38) | 15,263 | 2,618 | 24,319 | ||||||||||||||||||||||
| Cash and cash equivalents, including restricted cash, at beginning of period | 82,325 | 68,788 | 79,669 | 59,732 | ||||||||||||||||||||||
| Cash and cash equivalents, including restricted cash, at end of period | $ | 82,287 | $ | 84,051 | $ | 82,287 | $ | 84,051 | ||||||||||||||||||
10
HARSCO CORPORATION REVIEW OF OPERATIONS BY SEGMENT (Unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||
| June 30, 2021 | June 30, 2020 | |||||||||||||||||||||||||
| (In thousands) | Revenues | Operating Income (Loss) | Revenues | Operating Income (Loss) | ||||||||||||||||||||||
| Harsco Environmental | $ | 272,546 | $ | 30,223 | $ | 203,991 | $ | 13,563 | ||||||||||||||||||
| Harsco Clean Earth | 196,128 | 7,386 | 161,579 | (202) | ||||||||||||||||||||||
| Harsco Rail | 101,146 | 8,912 | 81,711 | 8,631 | ||||||||||||||||||||||
| Corporate | — | (10,302) | — | (20,124) | ||||||||||||||||||||||
| Consolidated Totals | $ | 569,820 | $ | 36,219 | $ | 447,281 | $ | 1,868 | ||||||||||||||||||
| Six Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30, 2021 | June 30, 2020 | |||||||||||||||||||||||||
| (In thousands) | Revenues | Operating Income (Loss) | Revenues | Operating Income (Loss) | ||||||||||||||||||||||
| Harsco Environmental | $ | 530,532 | $ | 56,158 | $ | 445,550 | $ | 24,083 | ||||||||||||||||||
| Harsco Clean Earth (a) | 385,407 | 10,564 | 240,391 | 4,043 | ||||||||||||||||||||||
| Harsco Rail | 182,736 | 13,576 | 160,181 | 15,103 | ||||||||||||||||||||||
| Corporate | — | (19,255) | — | (38,480) | ||||||||||||||||||||||
| Consolidated Totals | $ | 1,098,675 | $ | 61,043 | $ | 846,122 | $ | 4,749 | ||||||||||||||||||
(a) The Company's acquisition of ESOL closed on April 6, 2020.
11
HARSCO CORPORATION RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS TO DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS AS REPORTED (Unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30 | June 30 | |||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
Diluted earnings (loss) per share from continuing operations as reported | $ | 0.18 | $ | (0.14) | $ | 0.20 | $ | (0.25) | ||||||||||||||||||
| Corporate unused debt commitment fees, amendment fees and loss on extinguishment of debt (a) | — | 0.02 | 0.07 | 0.02 | ||||||||||||||||||||||
| Corporate strategic costs (b) | 0.02 | — | 0.02 | — | ||||||||||||||||||||||
| Corporate acquisition and integration costs (c) | — | 0.22 | — | 0.39 | ||||||||||||||||||||||
| Harsco Environmental Segment severance costs (d) | — | — | — | 0.07 | ||||||||||||||||||||||
| Taxes on above unusual items (e) | (0.01) | (0.05) | (0.02) | (0.08) | ||||||||||||||||||||||
Adjusted diluted earnings per share from continuing operations, including acquisition amortization expense | 0.20 | (g) | 0.05 | 0.27 | 0.15 | |||||||||||||||||||||
| Acquisition amortization expense, net of tax (f) | 0.08 | 0.08 | 0.16 | 0.14 | ||||||||||||||||||||||
Adjusted diluted earnings per share from continuing operations | $ | 0.28 | $ | 0.13 | $ | 0.43 | $ | 0.29 | ||||||||||||||||||
(a)Costs at Corporate associated with amending the Company's existing Senior Secured Credit Facilities to establish a New Term Loan the proceeds of which were used to repay in full the outstanding Term Loan A and Term Loan B, to extend the maturity date of the Revolving Credit Facility and to increase certain levels set forth in the total net leverage ratio covenant (Q2 2021 $0.1 million pre-tax; six months 2021 $5.3 million pre-tax) and costs associated with amending the Company's existing Senior secured Credit Facilities, to increase the net debt to consolidated adjusted EBITDA covenant ratio (Q2 2020 $1.4 million pre-tax; six months 2020 $1.9 million pre-tax).
(b)Certain strategic costs incurred at Corporate associated with supporting and executing the Company's growth strategy (Q2 and six months 2021 $1.7 million pre-tax).
(c)Acquisition and integration costs at Corporate (Q2 2020 $17.2 million pre-tax; six months 2020 $30.9 million pre-tax).
(d)Harsco Environmental Segment severance costs (six months 2020 $5.2 million pre-tax).
(e)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.
(f)Acquisition amortization expense was $8.2 million pre-tax and $16.4 million pre-tax for Q2 and six months 2021, respectively; and $8.4 million pre-tax and $14.3 million pre-tax for Q2 and six months 2020, respectively.
(g)Does not total due to rounding.
The Company’s management believes Adjusted diluted earnings per share from continuing operations, which is a non-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 GAAP.
12
HARSCO CORPORATION RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS TO DILUTED LOSS PER SHARE FROM CONTINUING OPERATIONS AS REPORTED (Unaudited) | |||||||||||
| Three Months Ended March 31 | |||||||||||
| 2021 | |||||||||||
| Diluted income per share from continuing operations as reported | $ | 0.02 | |||||||||
| Corporate unused debt commitment fees, amendment fees and loss on extinguishment of debt (a) | 0.07 | ||||||||||
| Taxes on above unusual items (b) | (0.01) | ||||||||||
| Adjusted diluted loss per share from continuing operations, including acquisition amortization expense | 0.07 | (d) | |||||||||
| Acquisition amortization expense, net of tax (c) | 0.08 | ||||||||||
Adjusted diluted earnings per share from continuing operations | $ | 0.15 | |||||||||
(a)Costs at Corporate associated with amending the Company's existing Senior Secured Credit Facilities to establish a New Term Loan the proceeds of which were used to repay in full the outstanding Term Loan A and Term Loan B, to extend the maturity date of the Revolving Credit Facility and to increase certain levels set forth in the total net leverage ratio covenant ($5.3 million pre-tax).
(b)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.
(c)Acquisition amortization expense was $8.2 million pre-tax.
(d)Does not total due to rounding.
The Company’s management believes Adjusted diluted earnings per share from continuing operations, which is a non-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 GAAP.
13
HARSCO CORPORATION RECONCILIATION OF PROJECTED ADJUSTED DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS TO DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS (Unaudited) | |||||||||||||||||||||||||||||
| Projected Three Months Ending September 30 | Projected Twelve Months Ending December 31 | ||||||||||||||||||||||||||||
| 2021 | 2021 | ||||||||||||||||||||||||||||
| Low | High | Low | High | ||||||||||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | 0.15 | $ | 0.21 | $ | 0.42 | $ | 0.57 | |||||||||||||||||||||
| Corporate unused debt commitment fees, amendment fees and loss on extinguishment of debt | — | — | 0.07 | 0.07 | |||||||||||||||||||||||||
| Corporate strategic costs | — | — | 0.02 | 0.02 | |||||||||||||||||||||||||
| Taxes on above unusual items | — | — | (0.02) | (0.02) | |||||||||||||||||||||||||
Adjusted diluted earnings per share from continuing operations, including acquisition amortization expense | 0.15 | 0.21 | 0.49 | 0.64 | |||||||||||||||||||||||||
| Estimated acquisition amortization expense, net of tax | 0.08 | 0.08 | 0.33 | 0.33 | |||||||||||||||||||||||||
| Adjusted diluted earnings per share from continuing operations | $ | 0.23 | $ | 0.29 | $ | 0.82 | $ | 0.96 | (a) | ||||||||||||||||||||
(a) Does not total due to rounding.
The Company’s management believes Adjusted diluted earnings per share from continuing operations, which is a non-GAAP financial measure, is useful to investors because it provides an overall understanding of the Company’s historical and future prospects. 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 GAAP.
14
HARSCO CORPORATION RECONCILIATION OF ADJUSTED EBITDA BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited) | ||||||||||||||||||||||||||||||||
| (In thousands) | Harsco Environmental | Harsco Clean Earth | Harsco Rail | Corporate | Consolidated Totals | |||||||||||||||||||||||||||
| Three Months Ended June 30, 2021: | ||||||||||||||||||||||||||||||||
| Operating income (loss) as reported | $ | 30,223 | $ | 7,386 | $ | 8,912 | $ | (10,302) | $ | 36,219 | ||||||||||||||||||||||
| Corporate strategic costs | — | — | — | 1,681 | 1,681 | |||||||||||||||||||||||||||
| Operating income (loss) excluding unusual items | 30,223 | 7,386 | 8,912 | (8,621) | 37,900 | |||||||||||||||||||||||||||
| Depreciation | 25,550 | 4,905 | 1,207 | 494 | 32,156 | |||||||||||||||||||||||||||
| Amortization | 2,035 | 6,063 | 85 | — | 8,183 | |||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 57,808 | $ | 18,354 | $ | 10,204 | $ | (8,127) | $ | 78,239 | ||||||||||||||||||||||
| Revenues as reported | $ | 272,546 | $ | 196,128 | $ | 101,146 | $ | 569,820 | ||||||||||||||||||||||||
| Adjusted EBITDA margin (%) | 21.2 | % | 9.4 | % | 10.1 | % | 13.7 | % | ||||||||||||||||||||||||
| Three Months Ended June 30, 2020: | ||||||||||||||||||||||||||||||||
| Operating income (loss) as reported | $ | 13,563 | $ | (202) | $ | 8,631 | $ | (20,124) | $ | 1,868 | ||||||||||||||||||||||
| Corporate acquisition and integration costs | — | — | — | 17,176 | 17,176 | |||||||||||||||||||||||||||
| Operating income (loss) excluding unusual items | 13,563 | (202) | 8,631 | (2,948) | 19,044 | |||||||||||||||||||||||||||
| Depreciation | 24,663 | 5,138 | 1,257 | 521 | 31,579 | |||||||||||||||||||||||||||
| Amortization | 1,921 | 6,347 | 83 | — | 8,351 | |||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 40,147 | $ | 11,283 | $ | 9,971 | $ | (2,427) | $ | 58,974 | ||||||||||||||||||||||
| Revenues as reported | $ | 203,991 | $ | 161,579 | $ | 81,711 | $ | 447,281 | ||||||||||||||||||||||||
| Adjusted EBITDA margin (%) | 19.7 | % | 7.0 | % | 12.2 | % | 13.2 | % | ||||||||||||||||||||||||
Consolidated Adjusted EBITDA is a non-GAAP financial measure and consists of income from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); unused debt commitment fees, amendment fees and loss on extinguishment of debt; and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs). The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals Consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for, net income from continuing operations, operating income from continuing operations and other information provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.
15
HARSCO CORPORATION RECONCILIATION OF ADJUSTED EBITDA BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited) | ||||||||||||||||||||||||||||||||
| (In thousands) | Harsco Environmental | Harsco Clean Earth (a) | Harsco Rail | Corporate | Consolidated Totals | |||||||||||||||||||||||||||
| Six Months Ended June 30, 2021: | ||||||||||||||||||||||||||||||||
Operating income (loss) as reported | $ | 56,158 | $ | 10,564 | $ | 13,576 | $ | (19,255) | $ | 61,043 | ||||||||||||||||||||||
| Corporate strategic costs | — | — | — | 1,681 | 1,681 | |||||||||||||||||||||||||||
| Operating income (loss) excluding unusual items | 56,158 | 10,564 | 13,576 | (17,574) | 62,724 | |||||||||||||||||||||||||||
| Depreciation | 51,267 | 10,242 | 2,418 | 977 | 64,904 | |||||||||||||||||||||||||||
Amortization | 4,083 | 12,146 | 170 | — | 16,399 | |||||||||||||||||||||||||||
Adjusted EBITDA | $ | 111,508 | $ | 32,952 | $ | 16,164 | $ | (16,597) | $ | 144,027 | ||||||||||||||||||||||
Revenues as reported | $ | 530,532 | $ | 385,407 | $ | 182,736 | $ | 1,098,675 | ||||||||||||||||||||||||
Adjusted EBITDA margin (%) | 21.0 | % | 8.5 | % | 8.8 | % | 13.1 | % | ||||||||||||||||||||||||
| Six Months Ended June 30, 2020: | ||||||||||||||||||||||||||||||||
Operating income (loss) as reported | $ | 24,083 | $ | 4,043 | $ | 15,103 | $ | (38,480) | $ | 4,749 | ||||||||||||||||||||||
Corporate acquisition and integration costs | — | — | — | 30,939 | 30,939 | |||||||||||||||||||||||||||
| Harsco Environmental Segment severance costs | 5,160 | — | — | — | 5,160 | |||||||||||||||||||||||||||
Operating income (loss) excluding unusual items | 29,243 | 4,043 | 15,103 | (7,541) | 40,848 | |||||||||||||||||||||||||||
| Depreciation | 50,038 | 7,759 | 2,472 | 1,034 | 61,303 | |||||||||||||||||||||||||||
Amortization | 3,857 | 10,245 | 167 | — | 14,269 | |||||||||||||||||||||||||||
Adjusted EBITDA | $ | 83,138 | $ | 22,047 | $ | 17,742 | $ | (6,507) | $ | 116,420 | ||||||||||||||||||||||
Revenues as reported | $ | 445,550 | $ | 240,391 | $ | 160,181 | $ | 846,122 | ||||||||||||||||||||||||
Adjusted EBITDA margin (%) | 18.7 | % | 9.2 | % | 11.1 | % | 13.8 | % | ||||||||||||||||||||||||
(a) The Company's acquisition of ESOL closed on April 6, 2020.
Consolidated Adjusted EBITDA is a non-GAAP financial measure and consists of income from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); unused debt commitment fees, amendment fees and loss on extinguishment of debt; and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs). The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals Consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for, net income from continuing operations, operating income from continuing operations and other information provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.
16
HARSCO CORPORATION RECONCILIATION OF ADJUSTED EBITDA BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited) | ||||||||||||||||||||||||||||||||
| (In thousands) | Harsco Environmental | Harsco Clean Earth | Harsco Rail | Corporate | Consolidated Totals | |||||||||||||||||||||||||||
| Three Months Ended March 31, 2021: | ||||||||||||||||||||||||||||||||
Operating income (loss) as reported | $ | 25,935 | $ | 3,178 | $ | 4,664 | $ | (8,953) | $ | 24,824 | ||||||||||||||||||||||
| Depreciation | 25,717 | 5,337 | 1,211 | 483 | 32,748 | |||||||||||||||||||||||||||
Amortization | 2,048 | 6,083 | 85 | — | 8,216 | |||||||||||||||||||||||||||
Adjusted EBITDA | $ | 53,700 | $ | 14,598 | $ | 5,960 | $ | (8,470) | $ | 65,788 | ||||||||||||||||||||||
Revenues as reported | $ | 257,986 | $ | 189,279 | $ | 81,590 | $ | 528,855 | ||||||||||||||||||||||||
Adjusted EBITDA margin (%) | 20.8 | % | 7.7 | % | 7.3 | % | 12.4 | % | ||||||||||||||||||||||||
Consolidated Adjusted EBITDA is a non-GAAP financial measure and consists of income from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); unused debt commitment fees, amendment fees and loss on extinguishment of debt; and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs). The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals Consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for, net income from continuing operations, operating income from continuing operations and other information provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.
17
HARSCO CORPORATION RECONCILIATION OF CONSOLIDATED ADJUSTED EBITDA TO CONSOLIDATED INCOME (LOSS) FROM CONTINUING OPERATIONS AS REPORTED (Unaudited) | ||||||||||||||
| Three Months Ended June 30 | ||||||||||||||
| (In thousands) | 2021 | 2020 | ||||||||||||
| Consolidated income (loss) from continuing operations | $ | 16,155 | $ | (9,603) | ||||||||||
| Add back (deduct): | ||||||||||||||
| Equity in (income) loss of unconsolidated entities, net | 76 | (71) | ||||||||||||
| Income tax (benefit) expense | 8,564 | (2,304) | ||||||||||||
| Defined benefit pension income | (3,974) | (1,723) | ||||||||||||
| Unused debt commitment fees, amendment fees and loss on extinguishment of debt | 50 | 1,432 | ||||||||||||
| Interest expense | 15,986 | 14,953 | ||||||||||||
| Interest income | (638) | (816) | ||||||||||||
| Depreciation | 32,156 | 31,579 | ||||||||||||
| Amortization | 8,183 | 8,351 | ||||||||||||
| Unusual items: | ||||||||||||||
| Corporate strategic costs | 1,681 | — | ||||||||||||
| Corporate acquisition and integration costs | — | 17,176 | ||||||||||||
| Consolidated Adjusted EBITDA | $ | 78,239 | $ | 58,974 | ||||||||||
Consolidated Adjusted EBITDA is a non-GAAP financial measure and consists of income from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); unused debt commitment fees, amendment fees and loss on extinguishment of debt; and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs). The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals Consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for, net income from continuing operations, operating income from continuing operations and other information provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.
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HARSCO CORPORATION RECONCILIATION OF CONSOLIDATED ADJUSTED EBITDA TO CONSOLIDATED INCOME (LOSS) FROM CONTINUING OPERATIONS AS REPORTED (Unaudited) | ||||||||||||||
| Six Months Ended June 30 | ||||||||||||||
| (In thousands) | 2021 | 2020 | ||||||||||||
| Consolidated income (loss) from continuing operations | 19,047 | $ | (17,299) | |||||||||||
| Add back (deduct): | ||||||||||||||
| Equity in (income) loss of unconsolidated entities, net | 195 | (167) | ||||||||||||
| Income tax expense (benefit) | 12,793 | (2,986) | ||||||||||||
| Defined benefit pension income | (7,927) | (3,312) | ||||||||||||
| Unused debt commitment and amendment fees | 5,308 | 1,920 | ||||||||||||
| Interest expense | 32,850 | 27,602 | ||||||||||||
| Interest income | (1,223) | (1,009) | ||||||||||||
| Depreciation | 64,904 | 61,303 | ||||||||||||
| Amortization | 16,399 | 14,269 | ||||||||||||
| Unusual items: | ||||||||||||||
| Corporate strategic costs | 1,681 | — | ||||||||||||
| Corporate acquisition and integration costs | — | 30,939 | ||||||||||||
| Harsco Environmental Segment severance costs | — | 5,160 | ||||||||||||
| Consolidated Adjusted EBITDA | $ | 144,027 | $ | 116,420 | ||||||||||
Consolidated Adjusted EBITDA is a non-GAAP financial measure and consists of income from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); unused debt commitment fees, amendment fees and loss on extinguishment of debt; and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs). The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals Consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for, net income from continuing operations, operating income from continuing operations and other information provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.
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HARSCO CORPORATION RECONCILIATION OF CONSOLIDATED ADJUSTED EBITDA TO CONSOLIDATED INCOME FROM CONTINUING OPERATIONS AS REPORTED (Unaudited) | ||||||||
| Three Months Ended March 31 | ||||||||
| (In thousands) | 2021 | |||||||
| Consolidated income from continuing operations | $ | 2,892 | ||||||
| Add back (deduct): | ||||||||
| Equity in income of unconsolidated entities, net | 119 | |||||||
| Income tax expense | 4,229 | |||||||
| Defined benefit pension income | (3,953) | |||||||
| Unused debt commitment fees, amendment fees and loss on extinguishment of debt | 5,258 | |||||||
| Interest expense | 16,864 | |||||||
| Interest income | (585) | |||||||
| Depreciation | 32,748 | |||||||
| Amortization | 8,216 | |||||||
| Consolidated Adjusted EBITDA | $ | 65,788 | ||||||
Consolidated Adjusted EBITDA is a non-GAAP financial measure and consists of income from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); unused debt commitment fees, amendment fees and loss on extinguishment of debt; and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs). The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals Consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for, net income from continuing operations, operating income from continuing operations and other information provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.
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HARSCO CORPORATION RECONCILIATION OF PROJECTED CONSOLIDATED ADJUSTED EBITDA TO PROJECTED CONSOLIDATED INCOME FROM CONTINUING OPERATIONS (Unaudited) | |||||||||||||||||||||||||||||
| Projected Three Months Ending September 30 | Projected Twelve Months Ending December 31 | ||||||||||||||||||||||||||||
| 2021 | 2021 | ||||||||||||||||||||||||||||
| (In millions) | Low | High | Low | High | |||||||||||||||||||||||||
| Consolidated income from continuing operations | $ | 13 | $ | 19 | $ | 46 | $ | 58 | |||||||||||||||||||||
| Add back: | |||||||||||||||||||||||||||||
| Income tax expense | 5 | 7 | 26 | 30 | |||||||||||||||||||||||||
| Net interest | 16 | 15 | 63 | 62 | |||||||||||||||||||||||||
| Defined benefit pension income | (4) | (4) | (14) | (14) | |||||||||||||||||||||||||
| Depreciation and amortization | 44 | 44 | 175 | 175 | |||||||||||||||||||||||||
| Consolidated Adjusted EBITDA | $ | 75 | (a) | $ | 81 | $ | 295 | (a) | $ | 310 | (a) | ||||||||||||||||||
(a) Does not total due to rounding.
Consolidated Adjusted EBITDA is a non-GAAP financial measure and consists of income from continuing operations adjusted to add back income tax expense; equity income of unconsolidated entities, net; net interest expense; defined benefit pension income (expense); unused debt commitment fees, amendment fees and loss on extinguishment of debt; and depreciation and amortization (excluding amortization of deferred financing costs); and excludes unusual items. Segment Adjusted EBITDA consists of operating income from continuing operations adjusted to exclude unusual items and add back depreciation and amortization (excluding amortization of deferred financing costs). The sum of the Segments’ Adjusted EBITDA and Corporate Adjusted EBITDA equals Consolidated Adjusted EBITDA. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for, net income from continuing operations, operating income from continuing operations and other information provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.
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HARSCO CORPORATION RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30 | June 30 | |||||||||||||||||||||||||
| (In thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| Net cash provided by operating activities | $ | 36,703 | $ | 33,057 | $ | 13,530 | $ | 21,521 | ||||||||||||||||||
| Less capital expenditures | (41,264) | (23,319) | (68,646) | (51,213) | ||||||||||||||||||||||
| Less expenditures for intangible assets | (64) | 16 | (132) | (42) | ||||||||||||||||||||||
| Plus capital expenditures for strategic ventures (a) | 926 | 225 | 1,798 | 1,364 | ||||||||||||||||||||||
| Plus total proceeds from sales of assets (b) | 6,180 | 1,767 | 10,042 | 3,952 | ||||||||||||||||||||||
| Plus transaction-related expenditures (c) | 3,920 | 5,961 | 18,004 | 15,940 | ||||||||||||||||||||||
| Plus taxes paid on sale of business | — | 376 | — | 376 | ||||||||||||||||||||||
| Free cash flow | $ | 6,401 | $ | 18,083 | $ | (25,404) | $ | (8,102) | ||||||||||||||||||
(a)Capital expenditures for strategic ventures represent the partner’s share of capital expenditures in certain ventures consolidated in the Company’s condensed consolidated financial statements.
(b)Asset sales are a normal part of the business model, primarily for the Harsco Environmental Segment.
(c)Expenditures directly related to the Company's acquisition and divestiture transactions and costs at Corporate associated with amending the Company's existing Senior Secured Credit Facilities.
The Company's management believes that Free cash flow, which is a non-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 and income taxes for planning and performance evaluation purposes. It is important to note that Free cash flow does 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 this measure. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP.
22
HARSCO CORPORATION RECONCILIATION OF PROJECTED FREE CASH FLOW TO PROJECTED NET CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited) | ||||||||||||||
| Projected Twelve Months Ending December 31 | ||||||||||||||
| 2021 | ||||||||||||||
| (In millions) | Low | High | ||||||||||||
| Net cash provided by operating activities | $ | 167 | $ | 207 | ||||||||||
| Less capital expenditures | (162) | (183) | ||||||||||||
| Plus total proceeds from asset sales and capital expenditures for strategic ventures | 12 | 13 | ||||||||||||
| Plus transaction related expenditures | 18 | 18 | ||||||||||||
| Free cash flow | 35 | 55 | ||||||||||||
| Add growth capital expenditures | 60 | 60 | ||||||||||||
| Free cash flow before growth capital expenditures | $ | 95 | $ | 115 | ||||||||||
The Company's management believes that Free cash flow, which is a non-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 and income taxes for planning and performance evaluation purposes. It is important to note that Free cash flow does 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 this measure. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP.
23