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Harsco Corporation Reports Third Quarter 2020 Results

Harsco Corporation
·20 min read
  • Third Quarter Revenues Increased 14 Percent From The Second Quarter To $509 Million As COVID-19 Business Impacts Began To Ease; Revenues Increased 20 Percent From Prior Year Third Quarter Due Mainly To ESOL Acquisition  

  • Third Quarter GAAP Operating Income Of $5 Million And GAAP Diluted Loss Per Share Of $0.10 Including Planned ESOL Integration Expenditures
     

  • Q3 Adjusted Earnings Per Share of $0.08
     

  • Adjusted Q3 EBITDA Of $59 Million
     

  • Net Cash Provided By Operating Activities Of $21 Million And Free Cash Flow Increased To $18 Million In Q3 As A Result Of Capital Spending Discipline And Working Capital Initiatives
     

  • Q4 Adjusted EBITDA Anticipated To Be Between $58 Million To $63 Million; Q4 Free Cash Flow Expected To Be Between $20 Million And $25 Million

CAMP HILL, Pa., Nov. 03, 2020 (GLOBE NEWSWIRE) -- Harsco Corporation (NYSE: HSC) today reported third quarter 2020 results. On a U.S. GAAP ("GAAP") basis, third quarter of 2020 diluted loss per share from continuing operations was $0.10 including acquisition integration costs. Adjusted diluted earnings per share from continuing operations in the third quarter of 2020 was $0.08. These figures compare with third quarter of 2019 GAAP diluted earnings per share from continuing operations of $0.22 and adjusted diluted earnings per share from continuing operations of $0.36.

GAAP operating income from continuing operations for the third quarter of 2020 was $5 million, while adjusted EBITDA excluding unusual items totaled $59 million in the quarter.

Underlying market fundamentals within Harsco Environmental and Clean Earth steadily improved during the quarter and our businesses continued to execute well, said Chairman and CEO Nick Grasberger. In recent months, we also have made strong progress on our key initiatives, including our focus on preserving financial flexibility and integrating ESOL. With respect to ESOL, during the third quarter we began executing on major improvement initiatives to strengthen operational and commercial performance, after spending our initial 100-days focused on foundation-building integration. We're confident these actions will enable us to achieve our long-term financial goals at ESOL.

Looking forward, while we expect business conditions to continue improving in the fourth quarter, our visibility remains limited and the economic environment remains fluid. In this context, we continue to focus on factors within our control, including the safety and well-being of our employees and operational excellence in all functions of our business, as well as ongoing cost and capital-spending management to preserve our financial flexibility. We believe these actions will position us to continue our progress towards becoming a single-thesis environmental solutions company and to capitalize on growth opportunities as the global economy recovers.


Harsco CorporationSelected Third Quarter Results

($ in millions, except per share amounts)

 

Q3 2020

 

Q3 2019

 

Q2 2020

Revenues

 

$

509

 

 

 

$

423

 

 

$

447

 

 

Operating income from continuing operations - GAAP

 

$

5

 

 

 

$

47

 

 

$

2

 

 

Diluted EPS from continuing operations - GAAP

 

$

(0.10

)

 

 

$

0.22

 

 

$

(0.14

)

 

Adjusted EBITDA - excluding unusual items

 

$

59

 

 

 

$

87

 

 

$

59

 

 

Adjusted EBITDA margin - excluding unusual items

 

11.6

 

%

 

20.5

%

 

13.2

 

%

Adjusted diluted EPS from continuing operations - excluding unusual items

 

$

0.08

 

 

 

$

0.36

 

 

$

0.13

 

 

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 Third Quarter Operating Results

Consolidated total revenues from continuing operations were $509 million, an increase of 20 percent compared with the prior-year quarter due to the acquisition of ESOL in April, 2020 and higher revenues in the Rail segment. Foreign currency translation impacts on third quarter 2020 revenues were nominal compared with the prior-year period.

GAAP operating income from continuing operations was $5 million for the third quarter of 2020, compared with $47 million in the same quarter of last year. Meanwhile, adjusted EBITDA totaled $59 million in the third quarter of 2020 versus $87 million in the third quarter of 2019. This EBITDA change is attributable to COVID-19 impacts in each business segment, partially offset by ESOL contributions following its acquisition earlier in 2020.

Third Quarter Business Review


Environmental

($ in millions)

 

Q3 2020

 

Q3 2019

 

Q2 2020

Revenues

 

$

223

 

 

$

261

 

 

$

204

 

Operating income - GAAP

 

$

12

 

 

$

33

 

 

$

14

 

Adjusted EBITDA - excluding unusual items

 

$

40

 

 

$

60

 

 

$

40

 

Adjusted EBITDA margin - excluding unusual items

 

17.9

%

 

22.9

%

 

19.7

%


Environmental revenues totaled $223 million in the third quarter of 2020, compared with $261 million in the prior-year quarter. The segment's GAAP operating income and adjusted EBITDA totaled $12 million and $40 million, respectively, in the third quarter of 2020. These figures compare with GAAP operating income of $33 million and adjusted EBITDA of $60 million in the prior-year period. The change in the segment's adjusted EBITDA relative to the prior-year quarter is principally attributable to lower demand for environmental services and applied products as a result of COVID-19. Environmental's adjusted EBITDA margin was 17.9 percent in the third quarter of 2020.


Clean Earth

($ in millions)

 

Q3 2020

 

Q3 2019

 

Q2 2020

Revenues

 

$

194

 

 

$

88

 

 

$

162

 

Operating income - GAAP

 

$

9

 

 

$

11

 

 

$

 

Adjusted EBITDA - excluding unusual items

 

20

 

 

19

 

 

$

11

 

Adjusted EBITDA margin - excluding unusual items

 

10.4

%

 

21.4

%

 

7.0

%

Note: The 2019 financial information provided above and discussed below for Clean Earth does not include a corporate cost allocation and does not include ESOL.


Clean Earth revenues totaled $194 million in the third quarter of 2020, compared with $88 million in the prior-year quarter. Segment operating income was $9 million and adjusted EBITDA totaled $20 million in the third quarter of 2020. These figures compare with $11 million and $19 million, respectively, in the prior-year period. The increase in revenues and adjusted EBITDA is attributable to the ESOL acquisition in the second quarter of 2020 and higher contributions from dredged material processing, partially offset by lower demand for hazardous and contaminated materials services as a result of the COVID-19 pandemic.

Rail

($ in millions)

 

Q3 2020

 

Q3 2019

 

2Q 2020

Revenues

 

$

93

 

 

$

75

 

 

$

82

 

Operating income - GAAP

 

$

4

 

 

$

12

 

 

$

9

 

Adjusted EBITDA - excluding unusual items

 

$

5

 

 

$

14

 

 

$

10

 

Adjusted EBITDA margin - excluding unusual items

 

5.8

%

 

19.1

%

 

12.2

%


Rail revenues increased 24 percent compared with the prior-year quarter to $93 million. This change reflects higher equipment sales including revenues from long-duration supply contracts. The segment's operating income and adjusted EBITDA totaled $4 million and $5 million, respectively, in the third quarter of 2020. These figures compare with operating income of $12 million and adjusted EBITDA of $14 million in the prior-year quarter. The EBITDA change year-on-year is attributable to a less favorable product mix and lower aftermarket parts and technology product volumes.

Cash Flow

Net cash provided by operating activities totaled $21 million in the third quarter of 2020, compared with net cash provided by operating activities of $45 million in the prior-year period. Free cash flow was $18 million (before transaction expenses) in the third quarter of 2020, compared with $5 million in the prior-year period. The improvement in free cash flow compared with the prior-year quarter is attributable to changes in net cash from operating activities, including cash generated from working capital, and lower capital expenditures.

Fourth Quarter Outlook

Underlying business conditions improved during the third quarter. However, the improvement realized was uneven and the pace of recovery varied within relevant end-markets. Fundamental improvement was most apparent within Harsco Environmental and Clean Earth and we expect these positive trends to continue in the fourth quarter. Meanwhile, Rail has yet to see a positive inflection as customers, particularly in North America, continue to defer capital spending as a result of pandemic-related pressures within the freight and passenger rail market. In total, the Company anticipates that its adjusted EBITDA in the fourth quarter will modestly improve, at the mid-point of guidance, versus the just-completed quarter. Specifically, Harsco expects its Q4 EBITDA to be within a range of $58 million to $63 million. This outlook also assumes that Corporate spending will be modestly higher in the fourth quarter compared with Q3 due to the timing of certain expenses.

Additionally, measures implemented earlier in 2020 to control costs remain in place and the Company is mindful that further cost actions may be necessary if the pace of economic recovery slows. The Company is also maintaining its capital spending and working capital discipline to support positive free cash flow. These ongoing actions are expected to enable Harsco to generate free cash flow of $20 million to $25 million in the final quarter of the year.

Lastly, this outlook is subject to certain risks related to COVID-19 and other factors and it assumes that any such factors will not alter the ongoing recovery in the fourth 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 Companys website.

The call can also be accessed by telephone by dialing (844) 467-8153 or (270) 855-8732. Enter Conference ID number 7674605. Listeners are advised to dial in at least five minutes prior to the call.

Forward-Looking Statements

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," "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 amount and timing of repurchases of the Company's common stock, if any; (16) the outcome of any disputes with customers, contractors and subcontractors; (17) the financial condition of the Company's customers, including the ability of customers (especially those that may be highly leveraged, have inadequate liquidity or whose business is significantly impacted by COVID-19) to maintain their credit availability; (18) implementation of environmental remediation matters; (19) risk and uncertainty associated with intangible assets and (20) other risk factors listed from time to time in the Company's SEC reports. A further discussion of these, along with other potential risk factors, can be found in Part I, Item 1A, "Risk Factors," of the Company's Annual Report on Form 10-K for the year ended December 31, 2019, together with those described in Item 1A, "Risk Factors," of the Company's Quarterly Report on Form 10-Q for the period ended June 30, 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 13,000-employee company operates in more than 30 countries. Harscos 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

 

Nine Months Ended

 

 

September 30

 

September 30

(In thousands, except per share amounts)

 

2020

 

2019

 

2020

 

2019

Revenues from continuing operations:

 

 

 

 

 

 

 

 

Service revenues

 

$

384,279

 

 

$

316,667

 

 

$

1,021,196

 

 

$

784,190

 

Product revenues

 

125,119

 

 

106,488

 

 

334,324

 

 

319,765

 

Total revenues

 

509,398

 

 

423,155

 

 

1,355,520

 

 

1,103,955

 

Costs and expenses from continuing operations:

 

 

 

 

 

 

 

 

Cost of services sold

 

313,136

 

 

239,519

 

 

835,277

 

 

608,230

 

Cost of products sold

 

99,043

 

 

71,970

 

 

257,512

 

 

220,634

 

Selling, general and administrative expenses

 

87,954

 

 

63,197

 

 

241,224

 

 

187,104

 

Research and development expenses

 

568

 

 

1,341

 

 

2,620

 

 

3,210

 

Other expenses, net

 

3,633

 

 

383

 

 

9,074

 

 

409

 

Total costs and expenses

 

504,334

 

 

376,410

 

 

1,345,707

 

 

1,019,587

 

Operating income from continuing operations

 

5,064

 

 

46,745

 

 

9,813

 

 

84,368

 

Interest income

 

604

 

 

445

 

 

1,613

 

 

1,569

 

Interest expense

 

(15,794

)

 

(12,819

)

 

(43,396

)

 

(24,429

)

Unused debt commitment and amendment fees

 

 

 

(158

)

 

(1,920

)

 

(7,593

)

Defined benefit pension income (expense)

 

1,859

 

 

(1,356

)

 

5,171

 

 

(4,166

)

Income (loss) from continuing operations before income taxes and equity income

 

(8,267

)

 

32,857

 

 

(28,719

)

 

49,749

 

Income tax benefit (expense)

 

1,654

 

 

(12,601

)

 

4,640

 

 

(17,814

)

Equity income of unconsolidated entities, net

 

9

 

 

81

 

 

176

 

 

151

 

Income (loss) from continuing operations

 

(6,604

)

 

20,337

 

 

(23,903

)

 

32,086

 

Discontinued operations:

 

 

 

 

 

 

 

 

Gain on sale of discontinued business

 

 

 

527,980

 

 

18,371

 

 

527,980

 

Income (loss) from discontinued businesses

 

(1,531

)

 

272

 

 

(1,232

)

 

23,958

 

Income tax expense related to discontinued businesses

 

(204

)

 

(110,732

)

 

(9,803

)

 

(112,701

)

Income (loss) from discontinued operations

 

(1,735

)

 

417,520

 

 

7,336

 

 

439,237

 

Net income (loss)

 

(8,339

)

 

437,857

 

 

(16,567

)

 

471,323

 

Less: Net income attributable to noncontrolling interests

 

(1,239

)

 

(2,506

)

 

(3,472

)

 

(6,633

)

Net income (loss) attributable to Harsco Corporation

 

$

(9,578

)

 

$

435,351

 

 

$

(20,039

)

 

$

464,690

 

Amounts attributable to Harsco Corporation common stockholders:

Income (loss) from continuing operations, net of tax

 

$

(7,843

)

 

$

17,831

 

 

$

(27,375

)

 

$

25,453

 

Income (loss) from discontinued operations, net of tax

 

(1,735

)

 

417,520

 

 

7,336

 

 

439,237

 

Net income (loss) attributable to Harsco Corporation common stockholders

 

$

(9,578

)

 

$

435,351

 

 

$

(20,039

)

 

$

464,690

 

Weighted-average shares of common stock outstanding

 

79,000

 

 

79,666

 

 

78,916

 

 

79,966

 

Basic earnings (loss) per common share attributable to Harsco Corporation common stockholders:

Continuing operations

 

$

(0.10

)

 

$

0.22

 

 

$

(0.35

)

 

$

0.32

 

Discontinued operations

 

(0.02

)

 

5.24

 

 

0.09

 

 

5.49

 

Basic earnings (loss) per share attributable to Harsco Corporation common stockholders

 

$

(0.12

)

 

$

5.46

 

 

$

(0.25

)

(a)

$

5.81

 

Diluted weighted-average shares of common stock outstanding

 

79,000

 

 

81,110

 

 

78,916

 

 

81,749

 

Diluted earnings (loss) per common share attributable to Harsco Corporation common stockholders:

Continuing operations

 

$

(0.10

)

 

$

0.22

 

 

$

(0.35

)

 

$

0.31

 

Discontinued operations

 

(0.02

)

 

5.15

 

 

0.09

 

 

5.37

 

Diluted earnings (loss) per share attributable to Harsco Corporation common stockholders

 

$

(0.12

)

 

$

5.37

 

 

$

(0.25

)

(a)

$

5.68

 

(a) Does not total due to rounding.



HARSCO CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited )

 

 

 

 

(In thousands)

 

September 30
2020

 

December 31
2019

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

83,859

 

 

$

57,259

 

Restricted cash

 

2,283

 

 

2,473

 

Trade accounts receivable, net

 

400,994

 

 

309,990

 

Other receivables

 

38,325

 

 

21,265

 

Inventories

 

170,037

 

 

156,991

 

Current portion of contract assets

 

53,256

 

 

31,166

 

Current portion of assets held-for-sale

 

 

 

22,093

 

Other current assets

 

66,219

 

 

51,575

 

Total current assets

 

814,973

 

 

652,812

 

Property, plant and equipment, net

 

640,887

 

 

561,786

 

Right-of-use assets, net

 

96,800

 

 

52,065

 

Goodwill

 

881,911

 

 

738,369

 

Intangible assets, net

 

443,682

 

 

299,082

 

Deferred income tax assets

 

11,871

 

 

14,288

 

Assets held-for-sale

 

 

 

32,029

 

Other assets

 

55,365

 

 

17,036

 

Total assets

 

$

2,945,489

 

 

$

2,367,467

 

LIABILITIES

 

 

 

 

Current liabilities:

 

 

 

 

Short-term borrowings

 

$

10,246

 

 

$

3,647

 

Current maturities of long-term debt

 

2,753

 

 

2,666

 

Accounts payable

 

230,948

 

 

176,755

 

Accrued compensation

 

41,320

 

 

37,992

 

Income taxes payable

 

3,872

 

 

18,692

 

Insurance liabilities

 

11,589

 

 

10,140

 

Current portion of advances on contracts

 

42,763

 

 

53,906

 

Current portion of operating lease liabilities

 

26,577

 

 

12,544

 

Current portion of liabilities of assets held-for-sale

 

 

 

11,344

 

Other current liabilities

 

169,898

 

 

137,208

 

Total current liabilities

 

539,966

 

 

464,894

 

Long-term debt

 

1,246,395

 

 

775,498

 

Insurance liabilities

 

16,267

 

 

18,515

 

Retirement plan liabilities

 

151,230

 

 

189,954

 

Advances on contracts

 

43,273

 

 

6,408

 

Operating lease liabilities

 

67,995

 

 

36,974

 

Liabilities of assets held-for-sale

 

 

 

12,152

 

Environmental liabilities

 

29,747

 

 

5,600

 

Deferred tax liabilities

 

43,178

 

 

24,242

 

Other liabilities

 

41,024

 

 

43,571

 

Total liabilities

 

2,179,075

 

 

1,577,808

 

HARSCO CORPORATION STOCKHOLDERS EQUITY

 

 

 

 

Common stock

 

144,268

 

 

143,400

 

Additional paid-in capital

 

206,113

 

 

200,595

 

Accumulated other comprehensive loss

 

(597,052

)

 

(587,622

)

Retained earnings

 

1,804,061

 

 

1,824,100

 

Treasury stock

 

(843,098

)

 

(838,893

)

Total Harsco Corporation stockholders equity

 

714,292

 

 

741,580

 

Noncontrolling interests

 

52,122

 

 

48,079

 

Total equity

 

766,414

 

 

789,659

 

Total liabilities and equity

 

$

2,945,489

 

 

$

2,367,467

 



HARSCO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited )

 

 

Three Months Ended September 30

 

Nine Months Ended September 30

(In thousands)

 

2020

 

2019

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(8,339

)

 

$

437,857

 

 

$

(16,567

)

 

$

471,323

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation

 

32,352

 

 

29,824

 

 

93,864

 

 

89,681

 

Amortization

 

9,049

 

 

6,149

 

 

24,721

 

 

11,941

 

Deferred income tax expense

 

3,001

 

 

15,323

 

 

2,346

 

 

11,500

 

Equity in income of unconsolidated entities, net

 

(9

)

 

(81

)

 

(176

)

 

(151

)

Dividends from unconsolidated entities

 

 

 

125

 

 

 

 

125

 

Gain on sale from discontinued business

 

 

 

(527,980

)

 

(18,371

)

 

(527,980

)

Loss on early extinguishment of debt

 

 

 

5,314

 

 

 

 

5,314

 

Other, net

 

1,908

 

 

(374

)

 

(336

)

 

2,187

 

Changes in assets and liabilities, net of acquisitions and dispositions of businesses:

 

 

 

 

 

 

 

 

Accounts receivable

 

9,774

 

 

14,639

 

 

26,308

 

 

(12,395

)

Income tax refunds receivable

 

(11,168

)

 

 

 

(11,168

)

 

 

Inventories

 

4,865

 

 

(22,980

)

 

(11,801

)

 

(43,477

)

Contract assets

 

2,159

 

 

(5,200

)

 

(26,775

)

 

(5,269

)

Right-of-use assets

 

6,361

 

 

3,976

 

 

18,195

 

 

11,204

 

Accounts payable

 

6,631

 

 

(5,302

)

 

(1,488

)

 

5,615

 

Accrued interest payable

 

(7,044

)

 

7,113

 

 

(9,984

)

 

7,398

 

Accrued compensation

 

6,562

 

 

1,723

 

 

1,795

 

 

(12,802

)

Advances on contracts

 

(16,691

)

 

(6,686

)

 

19,145

 

 

(17,067

)

Operating lease liabilities

 

(6,268

)

 

(4,025

)

 

(17,864

)

 

(10,919

)

Retirement plan liabilities, net

 

(4,876

)

 

(5,654

)

 

(23,902

)

 

(18,800

)

Income taxes payable - Gain on sale of discontinued businesses

 

(13,809

)

 

102,940

 

 

(10,342

)

 

102,940

 

Other assets and liabilities

 

6,297

 

 

(2,044

)

 

4,676

 

 

(20,339

)

Net cash provided by operating activities

 

20,755

 

 

44,657

 

 

42,276

 

 

50,029

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

(27,883

)

 

(55,870

)

 

(79,096

)

 

(147,071

)

Purchase of businesses, net of cash acquired

 

9,749

 

 

(39,010

)

 

(432,855

)

 

(623,495

)

Proceeds from sale of business, net

 

 

 

599,685

 

 

37,219

 

 

599,685

 

Proceeds from sales of assets

 

521

 

 

5,355

 

 

4,473

 

 

7,560

 

Expenditures for intangible assets

 

(127

)

 

(721

)

 

(169

)

 

(1,246

)

Net proceeds (payments) from settlement of foreign currency forward exchange contracts

 

(229

)

 

2,144

 

 

536

 

 

1,453

 

Payments for interest rate swap terminations

 

 

 

 

 

 

 

(2,758

)

Other investing activities, net

 

(256

)

 

 

 

(197

)

 

 

Net cash provided (used) by investing activities

 

(18,225

)

 

511,583

 

 

(470,089

)

 

(165,872

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Short-term borrowings, net

 

(965

)

 

(1,501

)

 

1,712

 

 

(1,417

)

Current maturities and long-term debt:

 

 

 

 

 

 

 

 

Additions

 

52,302

 

 

41,627

 

 

580,903

 

 

781,987

 

Reductions

 

(49,593

)

 

(601,283

)

 

(111,999

)

 

(604,616

)

Dividends paid to noncontrolling interests

 

 

 

(5

)

 

 

 

(3,103

)

Sale of noncontrolling interests

 

 

 

3,150

 

 

 

 

4,026

 

Common stock acquired for treasury

 

 

 

(25,752

)

 

 

 

(25,752

)

Stock-based compensation - Employee taxes paid

 

(95

)

 

(35

)

 

(4,188

)

 

(11,202

)

Payment of contingent consideration

 

(2,342

)

 

 

 

(2,342

)

 

 

Deferred financing costs

 

 

 

(1,609

)

 

(1,928

)

 

(11,073

)

Other financing activities, net

 

3

 

 

 

 

(1,368

)

 

 

Net cash provided (used) by financing activities

 

(690

)

 

(585,408

)

 

460,790

 

 

128,850

 

Effect of exchange rate changes on cash and cash equivalents, including restricted cash

 

251

 

 

(1,992

)

 

(6,567

)

 

(2,234

)

Net increase (decrease) in cash and cash equivalents, including restricted cash

 

2,091

 

 

(31,160

)

 

26,410

 

 

10,773

 

Cash and cash equivalents, including restricted cash, at beginning of period

 

84,051

 

 

109,079

 

 

59,732

 

 

67,146

 

Cash and cash equivalents, including restricted cash, at end of period

 

$

86,142

 

 

$

77,919

 

 

$

86,142

 

 

$

77,919

 



HARSCO CORPORATION
REVIEW OF OPERATIONS BY SEGMENT (Unaudited)

 

 

Three Months Ended

 

Three Months Ended

 

 

September 30, 2020 (b)

 

September 30, 2019 (b)

(In thousands)

 

Revenues

 

Operating
Income (Loss)

 

Revenues

 

Operating Income (Loss)

Harsco Environmental

 

$

222,507

 

$

12,317

 

 

$

260,883

 

$

32,794

 

Harsco Clean Earth (a)

 

194,098

 

8,902

 

 

87,639

 

11,308

 

Harsco Rail

 

92,793

 

4,059

 

 

74,633

 

12,115

 

Corporate

 

 

(20,214

)

 

 

(9,472

)

Consolidated Totals

 

$

509,398

 

$

5,064

 

 

$

423,155

 

$

46,745

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

Nine Months Ended

 

 

September 30, 2020 (b)

 

September 30, 2019 (b)

(In thousands)

 

Revenues

 

Operating
Income (Loss)

 

Revenues

 

Operating Income (Loss)

Harsco Environmental

 

$

668,057

 

$

36,400

 

 

$

791,533

 

$

84,868

 

Harsco Clean Earth (a)

 

434,489

 

12,945

87,639 11,308 Harsco Rail 252,974 19,162 224,783 26,947 Corporate (58,694) — (38,755)Consolidated Totals $1,355,520 $9,813 $1,103,955 $84,368


(a)

The Company's acquisition of ESOL closed on April 6, 2020 and the Company's acquisition of Clean Earth closed on June 28, 2019.

(b)

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



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

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Diluted earnings (loss) per share from continuing operations as reported

$

(0.10

)

$

0.22

$

(0.35

)

$

0.31

Corporate acquisition and integration costs (a)

0.13

0.03

0.53

0.22

Harsco Environmental Segment severance costs (b)

0.07

Corporate contingent consideration adjustments (c)

0.03

0.03

Corporate unused debt commitment and amendment fees (d)

0.02

0.09

Harsco Clean Earth Segment integration costs (e)

Harsco Environmental Segment provision for doubtful accounts (f)

0.01

0.08

Harsco Rail Segment improvement initiative costs (g)

0.01

0.06

Harsco Environmental Segment contingent consideration adjustments (h)

(0.01

)

(0.05

)

Harsco Environmental Segment site exit related (i)

(0.03

)

Harsco Clean Earth Segment severance costs (j)

0.02

0.02

Deferred tax asset valuation allowance adjustment (k)

0.03

0.03

Corporate acquisition related tax benefit (l)

(0.04

)

(0.04

)

Taxes on above unusual items (m)

(0.03

)

(0.11

)

(0.04

)

Adjusted diluted earnings per share from continuing operations, including acquisition amortization expense

$

(o)

$

0.31

$

0.15

$

0.67

(o)

Acquisition amortization expense, net of tax (n)

0.08

0.06

0.22

0.10

Adjusted diluted earnings per share from continuing operations

$

0.08

$

0.36

(o)

$

0.37

$

0.78

0


(a)

Costs at Corporate associated with supporting and executing the Company's growth strategy (Q3 2020 $10.6 million pre-tax; nine months 2020 $41.6 million pre-tax; Q3 2019 $2.7 million pre-tax; nine months 2019 $17.9 million pre-tax).

(b)

Harsco Environmental Segment severance costs (nine months 2020 $5.2 million pre-tax).

(c)

Adjustment to contingent consideration related to the acquisition of Clean Earth recorded on Corporate (Q3 and nine months 2020 $2.4 million pre-tax). The Company adjusts operating income and Diluted earnings per share from continuing operations to exclude the impact of the change in fair value to the acquisition-related contingent consideration liability for acquisitions because it believes that the adjustment for this item more closely correlates the reported financial measures with the ordinary and ongoing course of the Company's operations.

(d)

Costs at Corporate associated with amending the Company's existing Senior Secured Credit Facilities to increase the net debt to consolidated adjusted EBITDA ratio covenant (nine months 2020 $1.9 million pre-tax) and costs at Corporate related to the unused bridge financing commitment and Term Loan B amendment (nine months 2019 $7.4 million pre-tax).

(e)

Costs incurred in the Harsco Clean Earth Segment related to the integration of ESOL (Q3 and nine months 2020 $0.1 million, pre-tax).

(f)

Harsco Environmental Segment provision for doubtful accounts related to a customer in the U.K. entering administration (Q3 2019 $0.8 million and nine months 2019 $6.2 million pre-tax).

(g)

Costs associated with a productivity improvement initiative in the Harsco Rail Segment (Q3 2019 $0.8 million pre-tax; nine months 2019 $4.6 million pre-tax).

(h)

Fair value adjustment to contingent consideration liability related to the acquisition of Altek (Q3 2019 $0.9 million pre-tax; nine months $4.4 million pre-tax). The Company adjusts operating income and Diluted earnings per share from continuing operations to exclude the impact of the change in fair value to the acquisition-related contingent consideration liability for acquisitions because it believes that the adjustment for this item more closely correlates the reported financial measures with the ordinary and ongoing course of the Company's operations.

(i)

Harsco Environmental Segment site exit related (Q3 2019 $0.2 million pre-tax; nine months 2019 $2.4 million pre-tax).

(j)

Harsco Clean Earth Segment severance recognized (Q3 and nine month 2019 $1.3 million pre-tax).

(k)

Adjustment of certain existing deferred tax asset valuation allowances as a result of a site exit in a certain jurisdiction in 2019 (Q3 and nine months 2019 $2.8 million).

(l)

Acquisition related tax benefit recorded on Corporate assumed as part of the Clean Earth Acquisition (Q3 and nine months 2020 $2.8 million).

(m)

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.

(n)

Acquisition amortization expense was $8.3 million pre-tax and $22.5 million pre-tax for Q3 and nine months 2020, respectively; and $5.7 million pre-tax and $9.5 million pre-tax for Q3 and nine months 2019, respectively.

(o)

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.


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

June 30

2020

Diluted loss per share from continuing operations as reported

$

(0.14

)

Corporate acquisition and integration costs (a)

0.22

Corporate unused debt commitment and amendment fees (b)

0.02

Taxes on above unusual items (c)

(0.05

)

Adjusted diluted earnings per share from continuing operations, including acquisition amortization expense

$

0.05

Acquisition amortization expense, net of tax (d)

0.08

Adjusted diluted earnings per share from continuing operations

$

0.13


(a)

Costs at Corporate associated with supporting and executing the Company's growth strategy (Q2 2020 $17.2 million pre-tax).

(b)

Costs at Corporate associated with amending the Company's existing Senior Secured Credit Facilities to increase the net debt to consolidated adjusted EBITDA ratio covenant (Q2 2020 $1.4 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.

(d)

Acquisition amortization expense was $8.4 million pre-tax for Q2 2020.


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.


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

Three Months Ended September 30, 2020:

Operating income (loss) as reported

$

12,317

$

8,902

$

4,059

$

(20,214

)

$

5,064

Corporate acquisition and integration costs

10,645

10,645

Corporate contingent consideration adjustments

2,437

2,437

Harsco Clean Earth Segment integration costs

114

114

Operating income (loss) excluding unusual items

12,317

9,016

4,059

(7,132

)

18,260

Depreciation

25,588

5,010

1,258

497

$

32,353

Amortization

1,970

6,218

85

8,273

Adjusted EBITDA

$

39,875

$

20,244

$

5,402

$

(6,635

)

$

58,886

Revenues as reported

$

222,507

$

194,098

$

92,793

$

509,398

Adjusted EBITDA margin (%)

17.9

%

10.4

%

5.8

%

11.6

%

Three Months Ended September 30, 2019:

Operating income (loss) as reported

$

32,794

$

11,308

$

12,115

$

(9,472

)

$

46,745

Corporate acquisition and integration costs

2,743

2,743

Harsco Clean Earth Segment severance costs

1,254

1,254

Harsco Environmental Segment contingent consideration adjustments

(906

)

(906

)

Harsco Rail Segment improvement initiative costs

845

845

Harsco Environmental Segment provision for doubtful accounts

815

815

Harsco Environmental Segment site exit related

(156

)

(156

)

Operating income (loss) excluding unusual items

32,547

12,562

12,960

(6,729

)

51,340

Depreciation

25,557

2,359

1,192

716

29,824

Amortization

1,751

3,834

84

5,669

Adjusted EBITDA

$

59,855

$

18,755

$

14,236

$

(6,013

)

$

86,833

Revenues as reported

$

260,883

$

87,639

$

74,633

$

423,155

Adjusted EBITDA margin (%)

22.9

%

21.4

%

19.1

%

20.5

%

(a) The Company's acquisition of ESOL closed on April 6, 2020 and the Company's acquisition of Clean Earth closed on June 28, 2019.


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; defined benefit pension income (expense); unused debt commitment and amendment fees; 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 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.


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

Nine Months Ended September 30, 2020:

Operating income (loss) as reported

$

36,400

$

12,945

$

19,162

$

(58,694

)

$

9,813

Corporate acquisition and integration costs

41,584

41,584

Harsco Environmental Segment severance costs

5,160

5,160

Corporate contingent consideration adjustments

2,437

2,437

Harsco Clean Earth Segment integration costs

114

114

Operating income (loss) excluding unusual items

41,560

13,059

19,162

(14,673

)

59,108

Depreciation

75,626

12,769

3,730

1,531

93,656

Amortization

5,827

16,463

252

22,542

Adjusted EBITDA

$

123,013

$

42,291

$

23,144

$

(13,142

)

$

175,306

Revenues as reported

$

668,057

$

434,489

$

252,974

$

1,355,520

Adjusted EBITDA margin (%)

18.4

%

9.7

%

9.1

%

12.9

%

Nine Months Ended September 30, 2019:

Operating income (loss) as reported

$

84,868

$

11,308

$

26,947

$

(38,755

)

$

84,368

Corporate acquisition and integration costs

17,872

17,872

Harsco Environmental Segment provision for doubtful accounts

6,174

6,174

Harsco Rail Segment improvement initiative costs

4,645

4,645

Harsco Environmental Segment contingent consideration adjustments

(4,416

)

(4,416

)

Harsco Environmental Segment site exit related

(2,427

)

(2,427

)

Harsco Clean Earth Segment severance costs

1,254

1,254

Operating income (loss) excluding unusual items

84,199

12,562

31,592

(20,883

)

107,470

Depreciation

79,074

2,359

3,414

2,094

86,941

Amortization

5,436

3,834

238

9,508

Adjusted EBITDA

$

168,709

$

18,755

$

35,244

$

(18,789

)

$

203,919

Revenues as reported

$

791,533

$

87,639

$

224,783

$

1,103,955

Adjusted EBITDA margin (%)

21.3

%

21.4

%

15.7

%

18.5

%

(a) The Company's acquisition of ESOL closed on April 6, 2020 and the Company's acquisition of Clean Earth closed on June 28, 2019.


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; defined benefit pension income (expense); unused debt commitment and amendment fees; 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 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.


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

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

%

(a) The Company's acquisition of ESOL closed on April 6, 2020 and the Company's acquisition of Clean Earth closed on June 28, 2019.


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; defined benefit pension income (expense); unused debt commitment and amendment fees; 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 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.


HARSCO CORPORATION
RECONCILIATION OF CONSOLIDATED ADJUSTED EBITDA TO CONSOLIDATED LOSS FROM CONTINUING OPERATIONS AS REPORTED (Unaudited)

Three Months Ended
September 30

(In thousands)

2020

Consolidated loss from continuing operations

$

(6,604

)

Add back (deduct):

Equity in income of unconsolidated entities, net

(9

)

Income tax benefit

(1,654

)

Defined benefit pension income

(1,859

)

Interest expense

15,794

Interest income

(604

)

Depreciation

32,353

Amortization

8,273

Unusual items:

Corporate acquisition and integration costs

10,645

Corporate contingent consideration adjustments

2,437

Clean Earth Segment integration costs

114

Consolidated Adjusted EBITDA

$

58,886


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; defined benefit pension income (expense); unused debt commitment and amendment fees; 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 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.


HARSCO CORPORATION
RECONCILIATION OF PROJECTED CONSOLIDATED ADJUSTED EBITDA TO PROJECTED CONSOLIDATED INCOME FROM CONTINUING OPERATIONS
(Unaudited)

Projected
Three Months Ending
December 31

2020

(In millions)

Low

High

Consolidated income from continuing operations

$

1

$

3

Add back:

Income tax expense

1

4

Net interest

16

16

Defined benefit pension income

(2

)

(2

)

Depreciation and amortization

42

42

Consolidated Adjusted EBITDA

$

58

$

63


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; defined benefit pension income (expense); unused debt commitment and amendment fees; 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 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.


HARSCO CORPORATION
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited)

Three Months Ended

Nine Months Ended

September 30

September 30

(In thousands)

2020

2019

2020

2019

Net cash provided by operating activities

$

20,755

$

44,657

$

42,276

$

50,029

Less capital expenditures

(27,883

)

(55,870

)

(79,096

)

(147,071

)

Less expenditures for intangible assets

(127

)

(721

)

(169

)

(1,246

)

Plus capital expenditures for strategic ventures (a)

603

1,461

1,967

4,831

Plus total proceeds from sales of assets (b)

521

5,355

4,473

7,560

Plus transaction-related expenditures (c)

10,732

10,390

26,672

26,380

Plus taxes paid on sale of divested businesses (d)

13,809

14,185

Free cash flow

$

18,410

$

5,272

$

10,308

$

(59,517

)


(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 Environmental Segment.

(c)

Expenditures directly related to the Company's acquisition and divestiture transactions.

(d)

Income taxes paid on gains on the sale of discontinued businesses.


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.


HARSCO CORPORATION
RECONCILIATION OF PROJECTED FREE CASH FLOW TO PROJECTED NET CASH PROVIDED BY OPERATING ACTIVITIES (Unaudited)

Projected
Three Months Ending
December 31

2020

(In millions)

Low

High

Net cash provided by operating activities

$

50

$

60

Less capital expenditures

(31

)

(37

)

Plus total proceeds from asset sales and capital expenditures for strategic ventures

1

2

Free cash flow

$

20

$

25


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.

Investor Contact
David Martin
717.612.5628
damartin@harsco.com

Media Contact
Jay Cooney
717.730.3683
jcooney@harsco.com