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 GuidanceRepurchased 1.4 Million Harsco Shares for $26 Million in Q3; $19 Million Remaining Under Share Repurchase Program at Quarter EndCompany’s Net Leverage Ratio Declined to 2.2xSuccessfully Integrated Clean Earth During Quarter and On Pace to Achieve Targeted SynergiesIssued 2018-2019 Environmental, Social and Governance (ESG) Report Highlighting Company’s Corporate Sustainability Initiatives and Accomplishments2019 Adjusted Operating Income Now Expected to Increase Nearly 10% Year-over-Year at Guidance Midpoint; Full Year Range is Now $209 Million to $214 MillionCAMP 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.”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 ReviewEnvironmentalRevenues 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 EarthNote: 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.RailRevenues 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.
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