- Q2 GAAP Operating Income of $42 Million, Exceeding Guidance Range
- Q2 Performance Reflects Strong Operational Performance and Favorable Underlying Market Trends Across Business Segments
- Quarterly Revenues Increased 7 Percent Compared with the Prior-Year Quarter, and Diluted Earnings per Share Increased Versus Prior-Year Quarter to $0.22 in Q2 2017
- Full-Year GAAP and Adjusted Operating Income Guidance Increased to Between $125 Million and $140 Million; Compares with Prior Range of $115 Million to $130 Million
- 2017 Free Cash Flow Expected to be Between $80 Million and $95 Million as Compared with Prior Range of $70 Million to $85 Million
CAMP HILL, Pa., Aug. 03, 2017 (GLOBE NEWSWIRE) -- Harsco Corporation (NYSE:HSC) today reported second quarter 2017 results. Diluted earnings per share from continuing operations in the second quarter of 2017 were $0.22. This figure compares with a GAAP diluted loss per share from continuing operations of $0.35 and adjusted diluted earnings per share from continuing operations of $0.15 in the second quarter of 2016. The prior-year GAAP figure included a forward loss provision related to the Company's railway maintenance equipment contracts with the federal railway system in Switzerland.
Operating income from continuing operations for the second quarter of 2017 was $42 million, which exceeded the guidance range of $32 million to $38 million previously provided by the Company.
“Q2 proved to be another strong quarter for Harsco,” said President and CEO Nick Grasberger. “Each business executed well and underlying market conditions were supportive in the quarter. As a result, our three businesses exceeded expectations in the second quarter. Looking forward, we expect our internal momentum to continue, which along with an improved market outlook within our Metals & Industrial businesses, lead us to raise our outlook for operating income and free cash flow for the year. Beyond achieving these financial targets, we remain focused on developing our product and business capabilities and strengthening our returns. Lastly, we remain confident in the earnings potential of Harsco and our ability to create value for our shareholders in the future.”
Harsco Corporation—Selected Second Quarter Results
| ($ in millions, except per share amounts) | Q2 2017 | Q2 2016 | ||||||
| Revenues | $ | 395 | $ | 370 | ||||
| Operating income from continuing operations - GAAP | $ | 42 | $ | 1 | ||||
| Operating margin from continuing operations - GAAP | 10.8 | % | 0.4 | % | ||||
| Diluted EPS from continuing operations | $ | 0.22 | $ | (0.35 | ) | |||
| Unusual items per diluted share | $ | — | $ | 0.50 | ||||
| Adjusted operating income - excluding unusual items | $ | 42 | $ | 41 | ||||
| Adjusted operating margin - excluding unusual items | 10.8 | % | 11.2 | % | ||||
| Adjusted diluted EPS from continuing operations - excluding unusual items | $ | 0.22 | $ | 0.15 | ||||
| Return on invested capital (TTM) - excluding unusual items | 9.6 | % | 6.0 | % | ||||
Consolidated Second Quarter Operating Results
Total revenues were $395 million, an increase of 7 percent compared with the prior-year quarter. This change is attributable to higher revenues in each of the Company’s segments. Foreign currency translation negatively impacted second quarter 2017 revenues by approximately $5 million.
GAAP operating income from continuing operations for the second quarter of 2017 was $42 million. This figure compares with GAAP operating income of $1 million and adjusted operating income of $41 million in the same quarter last year. Operating income in the Metals & Minerals and Industrial segments improved in comparison with the prior-year quarter, while adjusted operating income was consistent in the Rail segment. The Company's operating margin was 10.8 percent versus an adjusted operating margin of 11.2 percent the in second quarter of 2016.
Second Quarter Business Review
Metals & Minerals
| ($ in millions) | Q2 2017 | Q2 2016 | %Change | ||||||||
| Revenues | $ | 259 | $ | 254 | 2 | % | |||||
| Operating income - GAAP | $ | 32 | $ | 31 | 4 | % | |||||
| Operating margin - GAAP | 12.4 | % | 12.2 | % | |||||||
| Customer liquid steel tons (millions) | 37.0 | 34.8 | 6 | % | |||||||
Revenues increased 2 percent to $259 million, as higher steel output and service levels as well as increased nickel-related sales offset the impact from foreign exchange translation. Meanwhile, operating income increased 4 percent due to the above positive factors, and the segment's operating margin improved by 20 basis points to 12.4 percent versus last year’s second quarter.
Industrial
| ($ in millions) | Q2 2017 | Q2 2016 | %Change | ||||||||
| Revenues | $ | 74 | $ | 66 | 11 | % | |||||
| Operating income - GAAP | $ | 9 | $ | 7 | 25 | % | |||||
| Operating margin - GAAP | 12.4 | % | 11.0 | % | |||||||
Revenues increased 11 percent to $74 million, as increased demand for air-cooled heat exchangers from U.S. energy customers fully offset lower sales of industrial grating and fencing. The prior-year quarter benefited from the sale of high-security fencing for the new Mexico City International Airport, as previously announced. The improved demand for heat exchangers led to an increase in operating income, and as a result, the segment’s operating margin increased to 12.4 percent from 11.0 percent in the comparable quarter last year.
Rail
| ($ in millions) | Q2 2017 | Q2 2016 | %Change | ||||||||
| Revenues | $ | 62 | $ | 50 | 24 | % | |||||
| Operating income - GAAP | $ | 8 | $ | (32 | ) | nmf | |||||
| Operating margin - GAAP | 12.8 | % | nmf | ||||||||
| Adjusted operating income - excluding unusual items (1) | $ | 8 | $ | 8 | — | ||||||
| Adjusted operating margin - excluding unusual items (1) | 12.8 | % | 16.2 | % | |||||||
| (1) no unusual items in Q2 2017; nmf=not meaningful | |||||||||||
Revenues increased 24 percent to $62 million as a result of higher original equipment shipments, mainly to international customers. These sales offset the impact of lower after-market parts sales and contract services compared with the prior-year period. Operating income totaled $8 million in comparison with a GAAP operating loss of $32 million and adjusted operating income of $8 million in the prior-year quarter. Operating income in this year's second quarter was comparable with adjusted operating income in the previous year as a result of the above trends as well as higher administrative expenses, including marketing and severance costs, in this year's second quarter. Given these factors and a less favorable product sales mix, the segment's operating margin decreased to 12.8 percent versus an adjusted operating margin of 16.2 percent in last year's second quarter.
Cash Flow
Net cash provided by operating activities totaled $53 million in the second quarter of 2017, compared with $32 million in the prior-year period. Further, free cash flow was $30 million in the second quarter of 2017, compared with $19 million in the prior-year period. This cash flow improvement reflects increased net cash from operating activities, principally as a result of working capital changes and the timing of interest payments, partially offset by an increase in net capital expenditures.
2017 Outlook
The Company's 2017 Outlook is improved to reflect raised forecasts for the Metals & Minerals and Industrial segments as compared with the guidance previously provided as part of the Company's first quarter 2017 results. For Metals & Minerals, the updated outlook reflects higher service levels in certain geographies and expectations for Applied Products performance, as well as new contract additions and recent foreign exchange rates. As a result, it is anticipated that operational savings, new sites and services, higher customer steel output, and increased commodities prices will support an increase in adjusted operating income in this segment for the year compared with 2016. Meanwhile, the Industrial outlook is again improved to reflect increased capital spending for heat exchangers from U.S. energy customers. This trend, along with improved demand for commercial boilers and water heaters, is expected to lead to an increase in Industrial operating income for the year.
These positives offset a more cautious outlook for the Rail segment. Second-quarter timing benefits are to reverse through the balance of the year, and the Company's guidance now reflects lower anticipated or delayed spending for equipment and after-market parts in North America compared with the prior 2017 forecast. As a result, adjusted operating income in Rail is expected to modestly decline from 2016 as higher international demand for equipment and parts as well as Intelligent Solutions is likely to be offset by persistent weakness in the North American market. Lastly, Corporate spending is still projected to increase compared with 2016 largely as a result of higher pension and other benefit program costs as well as professional fees.
Key highlights in the Outlook are included below.
Full Year 2017
- Operating income for the full year is expected to range from $125 million to $140 million; this compares with guidance of $115 million to $130 million previously and GAAP operating income of $63 million and adjusted operating income of $116 million in 2016.
- Free cash flow is expected in the range of $80 million to $95 million, including net capital expenditures of between $85 million and $95 million; compared with free cash flow guidance of $70 million to $85 million previously and $100 million in 2016.
- Net interest expense is forecasted to range from $45 million to $47 million.
- The effective tax rate is expected to range from 36 percent to 38 percent.
- GAAP and adjusted earnings per share for the full year are currently expected in the range of $0.55 to $0.69; this compares with guidance of $0.47 to $0.61 previously and a GAAP loss per share of $1.07 and adjusted earnings per share of $0.48 per share in 2016.
- Adjusted return on invested capital is expected to range from 9.0 percent to 10.0 percent; compared with 6.9 percent in 2016.
Q3 2017
- Adjusted operating income of $30 million to $37 million; compared with GAAP operating income of $29 million in the prior-year quarter.
- Adjusted earnings per share of $0.13 to $0.18; compared with a GAAP loss per share of $0.41 and adjusted earnings per share of $0.14 in the prior-year quarter.
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 53065331. 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 August 17, 2017 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," "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; (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) the amount and timing of repurchases of the Company's common stock, if any; (14) the prolonged recovery in global financial and credit markets and economic conditions generally, which could result in the Company's customers curtailing development projects, construction, production and capital expenditures, which, in turn, could reduce the demand for the Company's products and services and, accordingly, the Company's revenues, margins and profitability; (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 and those with inadequate liquidity) 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 the year ended December 31, 2016. 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 serves key industries that are fundamental to worldwide economic development, including steel and metals production, railways and energy. 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.
| HARSCO CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30 | June 30 | |||||||||||||||
| (In thousands, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Revenues from continuing operations: | ||||||||||||||||
| Service revenues | $ | 251,306 | $ | 249,626 | $ | 491,915 | $ | 475,120 | ||||||||
| Product revenues | 143,592 | 120,307 | 275,524 | 248,094 | ||||||||||||
| Total revenues | 394,898 | 369,933 | 767,439 | 723,214 | ||||||||||||
| Costs and expenses from continuing operations: | ||||||||||||||||
| Cost of services sold | 192,690 | 191,508 | 381,591 | 381,325 | ||||||||||||
| Cost of products sold | 100,727 | 125,388 | 199,593 | 218,632 | ||||||||||||
| Selling, general and administrative expenses | 55,606 | 49,520 | 110,747 | 100,304 | ||||||||||||
| Research and development expenses | 1,329 | 956 | 2,160 | 1,838 | ||||||||||||
| Other expenses | 2,072 | 1,247 | 2,966 | 10,370 | ||||||||||||
| Total costs and expenses | 352,424 | 368,619 | 697,057 | 712,469 | ||||||||||||
| Operating income from continuing operations | 42,474 | 1,314 | 70,382 | 10,745 | ||||||||||||
| Interest income | 493 | 552 | 1,005 | 1,087 | ||||||||||||
| Interest expense | (12,405 | ) | (13,805 | ) | (24,058 | ) | (26,168 | ) | ||||||||
| Change in fair value to the unit adjustment liability and loss on dilution of equity method investment | — | (1,489 | ) | — | (13,706 | ) | ||||||||||
| Income (loss) from continuing operations before income taxes and equity income (loss) | 30,562 | (13,428 | ) | 47,329 | (28,042 | ) | ||||||||||
| Income tax expense | (11,234 | ) | (12,000 | ) | (17,487 | ) | (9,834 | ) | ||||||||
| Equity income (loss) of unconsolidated entities, net | — | (694 | ) | — | 2,481 | |||||||||||
| Income (loss) from continuing operations | 19,328 | (26,122 | ) | 29,842 | (35,395 | ) | ||||||||||
| Discontinued operations: | ||||||||||||||||
| Income on disposal of discontinued business | 628 | 2,886 | 40 | 2,380 | ||||||||||||
| Income tax expense related to discontinued business | (225 | ) | (1,065 | ) | (14 | ) | (878 | ) | ||||||||
| Income from discontinued operations | 403 | 1,821 | 26 | 1,502 | ||||||||||||
| Net income (loss) | 19,731 | (24,301 | ) | 29,868 | (33,893 | ) | ||||||||||
| Less: Net income attributable to noncontrolling interests | (693 | ) | (1,872 | ) | (1,940 | ) | (3,149 | ) | ||||||||
| Net income (loss) attributable to Harsco Corporation | $ | 19,038 | $ | (26,173 | ) | $ | 27,928 | $ | (37,042 | ) | ||||||
| Amounts attributable to Harsco Corporation common stockholders: | ||||||||||||||||
| Income (loss) from continuing operations, net of tax | $ | 18,635 | $ | (27,994 | ) | $ | 27,902 | $ | (38,544 | ) | ||||||
| Income from discontinued operations, net of tax | 403 | 1,821 | 26 | 1,502 | ||||||||||||
| Net income (loss) attributable to Harsco Corporation common stockholders | $ | 19,038 | $ | (26,173 | ) | $ | 27,928 | $ | (37,042 | ) | ||||||
| Weighted-average shares of common stock outstanding | 80,535 | 80,337 | 80,460 | 80,288 | ||||||||||||
| Basic earnings (loss) per common share attributable to Harsco Corporation common stockholders: | ||||||||||||||||
| Continuing operations | $ | 0.23 | $ | (0.35 | ) | $ | 0.35 | $ | (0.48 | ) | ||||||
| Discontinued operations | 0.01 | 0.02 | — | 0.02 | ||||||||||||
| Basic earnings (loss) per share attributable to Harsco Corporation common stockholders | $ | 0.24 | $ | (0.33 | ) | $ | 0.35 | $ | (0.46 | ) | ||||||
| Diluted weighted-average shares of common stock outstanding | 82,850 | 80,337 | 82,558 | 80,288 | ||||||||||||
| Diluted earnings (loss) per common share attributable to Harsco Corporation common stockholders: | ||||||||||||||||
| Continuing operations | $ | 0.22 | $ | (0.35 | ) | $ | 0.34 | $ | (0.48 | ) | ||||||
| Discontinued operations | — | 0.02 | — | 0.02 | ||||||||||||
| Diluted earnings (loss) per share attributable to Harsco Corporation common stockholders | $ | 0.23 | (a) | $ | (0.33 | ) | $ | 0.34 | $ | (0.46 | ) | |||||
(a) Does not total due to rounding.
| HARSCO CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) | ||||||||
| (In thousands) | June 30 2017 | December 31 2016 | ||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 58,105 | $ | 69,831 | ||||
| Restricted cash | 4,671 | 2,048 | ||||||
| Trade accounts receivable, net | 289,280 | 236,554 | ||||||
| Other receivables | 22,340 | 21,053 | ||||||
| Inventories | 201,851 | 187,681 | ||||||
| Other current assets | 32,840 | 33,108 | ||||||
| Total current assets | 609,087 | 550,275 | ||||||
| Property, plant and equipment, net | 484,100 | 490,255 | ||||||
| Goodwill | 393,804 | 382,251 | ||||||
| Intangible assets, net | 39,972 | 41,567 | ||||||
| Deferred income tax assets | 106,044 | 106,311 | ||||||
| Other assets | 13,277 | 10,679 | ||||||
| Total assets | $ | 1,646,284 | $ | 1,581,338 | ||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Short-term borrowings | $ | 5,985 | $ | 4,259 | ||||
| Current maturities of long-term debt | 16,248 | 25,574 | ||||||
| Accounts payable | 118,633 | 107,954 | ||||||
| Accrued compensation | 44,210 | 46,658 | ||||||
| Income taxes payable | 7,742 | 4,301 | ||||||
| Insurance liabilities | 11,949 | 11,850 | ||||||
| Advances on contracts and other customer advances | 124,902 | 117,329 | ||||||
| Other current liabilities | 135,191 | 109,748 | ||||||
| Total current liabilities | 464,860 | 427,673 | ||||||
| Long-term debt | 617,674 | 629,239 | ||||||
| Insurance liabilities | 23,344 | 25,265 | ||||||
| Retirement plan liabilities | 310,278 | 319,597 | ||||||
| Other liabilities | 43,232 | 42,001 | ||||||
| Total liabilities | 1,459,388 | 1,443,775 | ||||||
| HARSCO CORPORATION STOCKHOLDERS’ EQUITY | ||||||||
| Common stock | 141,039 | 140,625 | ||||||
| Additional paid-in capital | 178,435 | 172,101 | ||||||
| Accumulated other comprehensive loss | (591,735 | ) | (606,722 | ) | ||||
| Retained earnings | 1,177,907 | 1,150,688 | ||||||
| Treasury stock | (761,717 | ) | (760,391 | ) | ||||
| Total Harsco Corporation stockholders’ equity | 143,929 | 96,301 | ||||||
| Noncontrolling interests | 42,967 | 41,262 | ||||||
| Total equity | 186,896 | 137,563 | ||||||
| Total liabilities and equity | $ | 1,646,284 | $ | 1,581,338 | ||||
| HARSCO CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30 | June 30 | |||||||||||||||
| (In thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net income (loss) | $ | 19,731 | $ | (24,301 | ) | $ | 29,868 | $ | (33,893 | ) | ||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||
| Depreciation | 30,288 | 32,655 | 60,495 | 65,736 | ||||||||||||
| Amortization | 1,987 | 2,962 | 4,008 | 5,926 | ||||||||||||
| Change in fair value to the unit adjustment liability and loss on dilution of equity method investment | — | 1,489 | — | 13,706 | ||||||||||||
| Contract estimated forward loss provision for Harsco Rail Segment | — | 40,050 | — | 40,050 | ||||||||||||
| Deferred income tax expense (benefit) | 3,654 | (2,290 | ) | 3,433 | (2,857 | ) | ||||||||||
| Equity in (income) loss of unconsolidated entities, net | — | 694 | — | (2,481 | ) | |||||||||||
| Dividends from unconsolidated entities | — | — | 19 | 16 | ||||||||||||
| Other, net | 2,803 | 811 | 5,708 | 1,871 | ||||||||||||
| Changes in assets and liabilities: | ||||||||||||||||
| Accounts receivable | (14,924 | ) | (12,941 | ) | (42,806 | ) | 3,011 | |||||||||
| Inventories | (5,541 | ) | (11,383 | ) | (6,296 | ) | (23,791 | ) | ||||||||
| Accounts payable | 4,800 | (457 | ) | 4,259 | (16,308 | ) | ||||||||||
| Accrued interest payable | (120 | ) | (6,704 | ) | 166 | (36 | ) | |||||||||
| Accrued compensation | 7,987 | 5,014 | (4,365 | ) | 1,237 | |||||||||||
| Advances on contracts and other customer advances | 3,519 | 7,886 | (1,479 | ) | (1,109 | ) | ||||||||||
| Retirement plan liabilities, net | (2,840 | ) | (3,633 | ) | (11,221 | ) | (13,871 | ) | ||||||||
| Other assets and liabilities | 1,559 | 1,796 | 4,990 | (8,534 | ) | |||||||||||
| Net cash provided by operating activities | 52,903 | 31,648 | 46,779 | 28,673 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Purchases of property, plant and equipment | (23,711 | ) | (15,225 | ) | (40,700 | ) | (32,176 | ) | ||||||||
| Proceeds from sales of assets | 528 | 2,296 | 1,534 | 5,115 | ||||||||||||
| Purchases of businesses, net of cash acquired | — | — | — | (26 | ) | |||||||||||
| Other investing activities, net | 4,137 | (6,043 | ) | 4,170 | (616 | ) | ||||||||||
| Net cash used by investing activities | (19,046 | ) | (18,972 | ) | (34,996 | ) | (27,703 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Short-term borrowings, net | (1,353 | ) | 2,315 | 2,302 | 1,949 | |||||||||||
| Current maturities and long-term debt: | ||||||||||||||||
| Additions | — | 21,009 | 24,000 | 50,019 | ||||||||||||
| Reductions | (32,367 | ) | (32,687 | ) | (46,712 | ) | (75,608 | ) | ||||||||
| Cash dividends paid on common stock | — | — | — | (4,105 | ) | |||||||||||
| Dividends paid to noncontrolling interests | (1,769 | ) | (1,702 | ) | (1,769 | ) | (1,702 | ) | ||||||||
| Purchase of noncontrolling interests | — | (4,731 | ) | — | (4,731 | ) | ||||||||||
| Stock-based compensation - Employee taxes paid | (1,273 | ) | (91 | ) | (1,326 | ) | (91 | ) | ||||||||
| Proceeds from cross-currency interest rate swap termination | — | — | — | 16,625 | ||||||||||||
| Deferred financing costs | (6 | ) | (1 | ) | (42 | ) | (895 | ) | ||||||||
| Other financing activities, net | (368 | ) | — | (368 | ) | — | ||||||||||
| Net cash used by financing activities | (37,136 | ) | (15,888 | ) | (23,915 | ) | (18,539 | ) | ||||||||
| Effect of exchange rate changes on cash and cash equivalents, including restricted cash | 1,626 | 2,045 | 3,029 | 7,051 | ||||||||||||
| Net decrease in cash and cash equivalents, including restricted cash | (1,653 | ) | (1,167 | ) | (9,103 | ) | (10,518 | ) | ||||||||
| Cash and cash equivalents, including restricted cash, at beginning of period | 64,429 | 70,405 | 71,879 | 79,756 | ||||||||||||
| Cash and cash equivalents, including restricted cash, at end of period | $ | 62,776 | $ | 69,238 | $ | 62,776 | $ | 69,238 | ||||||||
| HARSCO CORPORATION REVIEW OF OPERATIONS BY SEGMENT (Unaudited) | ||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||
| June 30, 2017 | June 30, 2016 | |||||||||||||||
| (In thousands) | Revenues | Operating Income (Loss) | Revenues | Operating Income (Loss) | ||||||||||||
| Harsco Metals & Minerals | $ | 259,306 | $ | 32,177 | $ | 253,560 | $ | 30,927 | ||||||||
| Harsco Industrial | 73,563 | 9,151 | 66,270 | 7,300 | ||||||||||||
| Harsco Rail | 61,994 | 7,961 | 50,103 | (31,948 | ) | |||||||||||
| Corporate | 35 | (6,815 | ) | — | (4,965 | ) | ||||||||||
| Consolidated Totals | $ | 394,898 | $ | 42,474 | $ | 369,933 | $ | 1,314 | ||||||||
| Six Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2017 | June 30, 2016 | |||||||||||||||
| (In thousands) | Revenues | Operating Income (Loss) | Revenues | Operating Income (Loss) | ||||||||||||
| Harsco Metals & Minerals | $ | 506,340 | $ | 58,606 | $ | 483,232 | $ | 37,868 | ||||||||
| Harsco Industrial | 139,448 | 11,955 | 128,139 | 13,771 | ||||||||||||
| Harsco Rail | 121,582 | 13,947 | 111,843 | (27,042 | ) | |||||||||||
| General Corporate | 69 | (14,126 | ) | — | (13,852 | ) | ||||||||||
| Consolidated Totals | $ | 767,439 | $ | 70,382 | $ | 723,214 | $ | 10,745 | ||||||||
| HARSCO CORPORATION RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS EXCLUDING UNUSUAL ITEMS TO DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS AS REPORTED (Unaudited) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30 | June 30 | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Diluted earnings (loss) per share from continuing operations as reported (a) | $ | 0.22 | $ | (0.35 | ) | $ | 0.34 | $ | (0.48 | ) | ||||||
| Harsco Rail Segment forward contract loss provision (b) | — | 0.50 | — | 0.50 | ||||||||||||
| Net loss on dilution of equity method investment (c) | — | — | — | 0.13 | ||||||||||||
| Harsco Metals & Minerals Segment site exit charges (d) | — | — | — | 0.06 | ||||||||||||
| Harsco Metals & Minerals Segment separation costs (e) | — | — | — | 0.04 | ||||||||||||
| Taxes on above unusual items (f) | — | — | — | (0.07 | ) | |||||||||||
| Adjusted diluted earnings per share from continuing operations excluding unusual items | $ | 0.22 | $ | 0.15 | $ | 0.34 | $ | 0.18 | ||||||||
(a) No unusual items were excluded in the three and six months ended June 30, 2017.
(b) Harsco Rail Segment forward contract loss provision related to the Company's contracts with the federal railway system of Switzerland (Q2 and six months 2016 $40.1 million pre-tax)
(c) Loss on the dilution of the Company's investment in Brand Energy & Infrastructure Services recorded at Corporate (six months 2016 $10.3 million pre-tax).
(d) Harsco Metals & Minerals Segment charges primarily attributable to site exit costs (six months 2016 $5.1 million pre-tax).
(e) Costs associated with Harsco Metals & Minerals Segment separation recorded at Corporate (six months 2016 $3.3 million pre-tax).
(f) 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.
The Company’s management believes Adjusted diluted earnings per share from continuing operations excluding unusual items, 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. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.
| HARSCO CORPORATION RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS EXCLUDING UNUSUAL ITEMS TO DILUTED LOSS PER SHARE FROM CONTINUING OPERATIONS AS REPORTED (Unaudited) | ||||
| Three Months Ended | ||||
| September 30 | ||||
| 2016 | ||||
| Diluted loss per share from continuing operations as reported | $ | (0.41 | ) | |
| Net loss on dilution and sale of equity investment (a) | 0.54 | |||
| Expense of deferred financing costs (b) | 0.01 | |||
| Taxes on above unusual items (c) | — | |||
| Adjusted diluted earnings per share from continuing operations excluding unusual items | $ | 0.14 | ||
(a) Loss on the dilution and sale of the Company's investment in Brand Energy & Infrastructure Services recorded at Corporate ($43.5 million pre-tax).
(b) Expense of deferred financing costs associated with the Company's repayment of approximately $85 million on its Term Loan Facility recorded at Corporate ($1.1 million pre-tax)
(c) 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.
The Company’s management believes Adjusted diluted earnings per share from continuing operations excluding unusual items, 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. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.
| HARSCO CORPORATION RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS EXCLUDING UNUSUAL ITEMS TO DILUTED LOSS PER SHARE FROM CONTINUING OPERATIONS AS REPORTED (Unaudited) | ||||
| Twelve Months Ended | ||||
| December 31 | ||||
| 2016 | ||||
| Diluted loss per share from continuing operations as reported | $ | (1.07 | ) | |
| Net loss on dilution and sale of equity investment (a) | 0.66 | |||
| Harsco Rail Segment forward contract loss provision (b) | 0.56 | |||
| Loss on early extinguishment of debt (c) | 0.44 | |||
| Harsco Metals & Minerals Segment site exit and underperforming contract charges, net (d) | 0.06 | |||
| Harsco Metals & Minerals Segment separation costs (e) | 0.04 | |||
| Expense of deferred financing costs (f) | 0.01 | |||
| Harsco Metals & Minerals Segment cumulative translation adjustment liquidation (g) | (0.01 | ) | ||
| Taxes on above unusual items (h) | (0.21 | ) | ||
| Adjusted diluted earnings per share from continuing operations excluding unusual items | $ | 0.48 | ||
(a) Loss on the dilution and sale of the Company's investment in Brand Energy & Infrastructure Services recorded at Corporate ($53.8 million pre-tax).
(b) Harsco Rail Segment forward contract loss provision related to the Company's contracts with the federal railway system of Switzerland ($45.1 million pre-tax).
(c) Loss on early extinguishment of debt recorded at Corporate ($35.3 million pre-tax).
(d) Harsco Metals & Minerals Segment charges primarily attributable to site exit and underperforming contract costs ($5.1 million pre-tax).
(e) Costs associated with Harsco Metals & Minerals Segment separation recorded at Corporate ($3.3 million pre-tax).
(f) Expense of deferred financing costs associated with the Company's repayment of approximately $85 million on its Term Loan Facility recorded at Corporate ($1.1 million pre-tax).
(g) Harsco Metals & Minerals Segment gain related to the liquidation of cumulated translation adjustment related to an exited country ($1.2 million pre-tax).
(h) 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.
The Company’s management believes Adjusted diluted earnings per share from continuing operations excluding unusual items, 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. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.
| HARSCO CORPORATION REVIEW OF OPERATIONS BY SEGMENT EXCLUDING UNUSUAL ITEMS (Unaudited) | ||||||||||||||||||||
(In thousands) | Harsco Metals & Minerals | Harsco Industrial | Harsco Rail | Corporate | Consolidated Totals | |||||||||||||||
| Three Months Ended June 30, 2017: | ||||||||||||||||||||
| Operating income (loss) as reported (a) | $ | 32,177 | $ | 9,151 | $ | 7,961 | $ | (6,815 | ) | $ | 42,474 | |||||||||
| Revenues as reported | $ | 259,306 | $ | 73,563 | $ | 61,994 | $ | 35 | $ | 394,898 | ||||||||||
| Operating margin (%) | 12.4 | % | 12.4 | % | 12.8 | % | 10.8 | % | ||||||||||||
| Three Months Ended June 30, 2016: | ||||||||||||||||||||
| Adjusted operating income (loss) excluding unusual items | $ | 30,927 | $ | 7,300 | $ | 8,102 | $ | (4,965 | ) | $ | 41,364 | |||||||||
| Revenues as reported | $ | 253,560 | $ | 66,270 | $ | 50,103 | $ | — | $ | 369,933 | ||||||||||
| Adjusted operating margin (%) excluding unusual items | 12.2 | % | 11.0 | % | 16.2 | % | 11.2 | % | ||||||||||||
| Six Months Ended June 30, 2017: | ||||||||||||||||||||
| Operating income (loss) as reported (a) | $ | 58,606 | $ | 11,955 | $ | 13,947 | $ | (14,126 | ) | $ | 70,382 | |||||||||
| Revenues as reported | $ | 506,340 | $ | 139,448 | $ | 121,582 | $ | 69 | $ | 767,439 | ||||||||||
| Operating margin (%) | 11.6 | % | 8.6 | % | 11.5 | % | 9.2 | % | ||||||||||||
| Six Months Ended June 30, 2016: | ||||||||||||||||||||
| Adjusted operating income (loss) excluding unusual items | $ | 42,968 | $ | 13,771 | $ | 13,008 | $ | (10,565 | ) | $ | 59,182 | |||||||||
| Revenues as reported | $ | 483,232 | $ | 128,139 | $ | 111,843 | $ | — | $ | 723,214 | ||||||||||
| Adjusted operating margin (%) excluding unusual items | 8.9 | % | 10.7 | % | 11.6 | % | 8.2 | % | ||||||||||||
(a) No unusual items were excluded in the three and six months ended June 30, 2017.
The Company’s management believes Adjusted operating margin (%) excluding unusual items, 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. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.
| HARSCO CORPORATION RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS) EXCLUDING UNUSUAL ITEMS BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited) | ||||||||||||||||||||
| (In thousands) | Harsco Metals & Minerals | Harsco Industrial | Harsco Rail | Corporate | Consolidated Totals | |||||||||||||||
| Three Months Ended June 30, 2017: | ||||||||||||||||||||
| Operating income (loss) as reported (a) | $ | 32,177 | $ | 9,151 | $ | 7,961 | $ | (6,815 | ) | $ | 42,474 | |||||||||
| Revenues as reported | $ | 259,306 | $ | 73,563 | $ | 61,994 | $ | 35 | $ | 394,898 | ||||||||||
| Three Months Ended June 30, 2016: | ||||||||||||||||||||
| Operating income (loss) as reported | $ | 30,927 | $ | 7,300 | $ | (31,948 | ) | $ | (4,965 | ) | $ | 1,314 | ||||||||
| Harsco Rail Segment forward contract loss provision | — | — | 40,050 | — | 40,050 | |||||||||||||||
| Adjusted operating income (loss) excluding unusual items | $ | 30,927 | $ | 7,300 | $ | 8,102 | $ | (4,965 | ) | $ | 41,364 | |||||||||
| Revenues as reported | $ | 253,560 | $ | 66,270 | $ | 50,103 | $ | — | $ | 369,933 | ||||||||||
(a) No unusual items were excluded in the three months ended June 30, 2017.
The Company’s management believes Adjusted operating income (loss) excluding unusual items, 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. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.
| HARSCO CORPORATION RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS) EXCLUDING UNUSUAL ITEMS BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited) | |||||||||||||||||||||
| (In thousands) | Harsco Metals & Minerals | Harsco Industrial | Harsco Rail | Corporate | Consolidated Totals | ||||||||||||||||
| Six Months Ended June 30, 2017: | |||||||||||||||||||||
| Operating income (loss) as reported (a) | $ | 58,606 | $ | 11,955 | $ | 13,947 | $ | (14,126 | ) | $ | 70,382 | ||||||||||
| Revenues as reported | $ | 506,340 | $ | 139,448 | $ | 121,582 | $ | 69 | $ | 767,439 | |||||||||||
| Six Months Ended June 30, 2016: | |||||||||||||||||||||
| Operating income (loss) as reported | $ | 37,868 | $ | 13,771 | $ | (27,042 | ) | $ | (13,852 | ) | $ | 10,745 | |||||||||
| Harsco Rail Segment forward contract loss provision | — | — | 40,050 | — | 40,050 | ||||||||||||||||
| Harsco Metals & Minerals Segment site exit charges | 5,100 | — | — | — | 5,100 | ||||||||||||||||
| Harsco Metals & Minerals Segment separation costs | — | — | — | 3,287 | 3,287 | ||||||||||||||||
| Adjusted operating income (loss) excluding unusual items | $ | 42,968 | $ | 13,771 | $ | 13,008 | $ | (10,565 | ) | $ | 59,182 | ||||||||||
| Revenues as reported | $ | 483,232 | $ | 128,139 | $ | 111,843 | $ | — | $ | 723,214 | |||||||||||
(a) No unusual items were excluded in the six months ended June 30, 2017.
The Company’s management believes Adjusted operating income (loss) excluding unusual items, 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. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.
| HARSCO CORPORATION RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS) EXCLUDING UNUSUAL ITEMS BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited) | |||||||||||||||||||||
| (In thousands) | Harsco Metals & Minerals | Harsco Industrial | Harsco Rail | Corporate | Consolidated Totals | ||||||||||||||||
| Twelve Months Ended December 31, 2016: | |||||||||||||||||||||
| Operating income (loss) as reported | $ | 81,634 | $ | 23,182 | $ | (17,527 | ) | $ | (23,820 | ) | $ | 63,469 | |||||||||
| Harsco Rail Segment forward contract loss provision | — | — | 45,050 | — | 45,050 | ||||||||||||||||
| Harsco Metals & Minerals Segment site exit | 5,100 | — | — | — | 5,100 | ||||||||||||||||
| Harsco Metals & Minerals Segment separation costs | — | — | — | 3,287 | 3,287 | ||||||||||||||||
| Harsco Metals & Minerals Segment cumulative translation adjustment liquidation | (1,157 | ) | — | — | — | (1,157 | ) | ||||||||||||||
| Adjusted operating income (loss), excluding unusual items | $ | 85,577 | $ | 23,182 | $ | 27,523 | $ | (20,533 | ) | $ | 115,749 | ||||||||||
| Revenues as reported | $ | 965,540 | $ | 247,542 | $ | 238,107 | $ | 34 | $ | 1,451,223 | |||||||||||
The Company’s management believes Adjusted operating income (loss) excluding unusual items, 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. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.
| 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) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net cash provided by operating activities | $ | 52,903 | $ | 31,648 | $ | 46,779 | $ | 28,673 | ||||||||
| Less capital expenditures | (23,711 | ) | (15,225 | ) | (40,700 | ) | (32,176 | ) | ||||||||
| Plus capital expenditures for strategic ventures (a) | 337 | 79 | 396 | 95 | ||||||||||||
| Plus total proceeds from sales of assets (b) | 528 | 2,296 | 1,534 | 5,115 | ||||||||||||
| Free cash flow | $ | 30,057 | $ | 18,798 | $ | 8,009 | $ | 1,707 | ||||||||
(a) Capital expenditures for strategic ventures represent the partner’s share of capital expenditures in certain ventures consolidated in the Company’s financial statements.
(b) Asset sales are a normal part of the business model, primarily for the Harsco Metals & Minerals Segment.
The Company's management believes that Free cash flow, which is a non-U.S. GAAP financial measure, is meaningful to investors because management reviews cash flows generated from (used in) operations less capital expenditures net of asset sales proceeds. 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, are not deducted from the measure. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.
| HARSCO CORPORATION RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited) | ||||
| Twelve Months Ended | ||||
| December 31 | ||||
| (In thousands) | 2016 | |||
| Net cash provided by operating activities | $ | 159,785 | ||
| Less capital expenditures | (69,340 | ) | ||
| Plus capital expenditures for strategic ventures (a) | 170 | |||
| Plus total proceeds from sales of assets (b) | 9,305 | |||
| Free cash flow | $ | 99,920 | ||
(a) Capital expenditures for strategic ventures represent the partner’s share of capital expenditures in certain ventures consolidated in the Company’s financial statements.
(b) Asset sales are a normal part of the business model, primarily for the Harsco Metals & Minerals Segment.
The Company's management believes that Free cash flow, which is a non-U.S. GAAP financial measure, is meaningful to investors because management reviews cash flows generated from (used in) operations less capital expenditures net of asset sales proceeds. 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, are not deducted from the measure. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.
| HARSCO CORPORATION RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited) | ||||||||
| Projected Twelve Months Ending December 31 | ||||||||
| 2017 | ||||||||
| (In millions) | Low | High | ||||||
| Net cash provided by operating activities | $ | 175 | $ | 180 | ||||
| Less capital expenditures | (101 | ) | (92 | ) | ||||
| Plus total proceeds from asset sales and capital expenditures for strategic ventures | 6 | 7 | ||||||
| Free Cash Flow | $ | 80 | $ | 95 | ||||
The Company's management believes that free cash flow, 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. 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, are not deducted from the measure. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP.
| HARSCO CORPORATION RECONCILIATION OF RETURN ON INVESTED CAPITAL EXCLUDING UNUSUAL ITEMS TO NET LOSS FROM CONTINUING OPERATIONS AS REPORTED (a) (Unaudited) | ||||||||
| Trailing Twelve Months for Period Ended June 30 | ||||||||
| (In thousands) | 2017 | 2016 | ||||||
| Loss from continuing operations | $ | (15,185 | ) | $ | (51,808 | ) | ||
| Unusual items: | ||||||||
| Net loss on dilution and sale of equity investment | 43,518 | 10,304 | ||||||
| Loss on early extinguishment of debt | 35,337 | — | ||||||
| Harsco Rail Segment forward contract loss provision | 5,000 | 40,050 | ||||||
| Expense of deferred financing costs | 1,125 | — | ||||||
| Harsco Metals & Minerals Segment cumulative translation adjustment liquidation | (1,157 | ) | — | |||||
| Harsco Metals & Minerals Segment contract termination charges | — | 13,484 | ||||||
| Harsco Metals & Minerals Segment separation costs | — | 13,209 | ||||||
| Harsco Metals & Minerals Segment site exit and underperforming contract charges, net | — | 10,077 | ||||||
| Harsco Metals & Minerals Segment salt cake processing and disposal charges | — | 7,000 | ||||||
| Harsco Metals & Minerals Segment Project Orion charges | — | 5,070 | ||||||
| Harsco Metals & Minerals Segment subcontractor settlement charge | — | 4,220 | ||||||
| Harsco Metals & Minerals Segment multi-employer pension plan charge | — | 1,122 | ||||||
| Harsco Infrastructure Segment loss on disposal | — | 1,000 | ||||||
| Taxes on above unusual items (b) | (11,512 | ) | (12,021 | ) | ||||
| Net income from continuing operations, as adjusted | 57,126 | 41,707 | ||||||
| After-tax interest expense (c) | 30,461 | 31,039 | ||||||
| Net operating profit after tax as adjusted | $ | 87,587 | $ | 72,746 | ||||
| Average equity | $ | 216,509 | $ | 300,556 | ||||
| Plus average debt | 700,588 | 904,177 | ||||||
| Average capital | $ | 917,097 | $ | 1,204,733 | ||||
| Return on invested capital excluding unusual items | 9.6 | % | 6.0 | % | ||||
(a) Return on invested capital excluding unusual items is net income (loss) from continuing operations 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.
(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) The Company’s effective tax rate approximated 37% on an adjusted basis for both periods for interest expense.
The Company’s management believes Return on invested capital excluding unusual items, 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.
| HARSCO CORPORATION RECONCILIATION OF RETURN ON INVESTED CAPITAL EXCLUDING UNUSUAL ITEMS TO NET LOSS FROM CONTINUING OPERATIONS AS REPORTED (a) (Unaudited) | ||||
| Year Ended December 31 | ||||
| (In thousands) | 2016 | |||
| Loss from continuing operations | $ | (80,422 | ) | |
| Unusual items: | ||||
| Net loss on dilution and sale of equity investment | 53,822 | |||
| Harsco Rail Segment forward contract loss provision | 45,050 | |||
| Loss on early extinguishment of debt | 35,337 | |||
| Harsco Metals & Minerals Segment site exit and underperforming contract charges, net | 5,100 | |||
| Harsco Metals & Minerals Segment separation costs | 3,287 | |||
| Expense of deferred financing costs | 1,125 | |||
| Harsco Metals & Minerals Segment cumulative translation adjustment liquidation | (1,157 | ) | ||
| Taxes on above unusual items (b) | (17,335 | ) | ||
| Net income from continuing operations, as adjusted | 44,807 | |||
| After-tax interest expense (c) | 31,790 | |||
| Net operating profit after tax as adjusted | $ | 76,597 | ||
| Average equity | $ | 290,995 | ||
| Plus average debt | 821,559 | |||
| Average capital | $ | 1,112,554 | ||
| Return on invested capital excluding unusual items | 6.9 | % | ||
(a) Return on invested capital excluding unusual items is net income (loss) from continuing operations 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.
(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) The Company’s effective tax rate approximated 37% on an adjusted basis for both periods for interest expense.
The Company’s management believes Return on invested capital excluding unusual items, 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.