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CST: 14/07/2020 22:02:50   

Harsco Corporation Reports Third Quarter 2019 Results

259 Days ago

  • Q3 GAAP Operating Income of $47 Million

  • Adjusted Operating Income Excluding Unusual Items and Acquisition-Related Amortization Expense Totaled $57 Million and Adjusted Operating Margin Reached 13.5 Percent; Results Were Consistent with Guidance

  • Repurchased 1.4 Million Harsco Shares for $26 Million in Q3; $19 Million Remaining Under Share Repurchase Program at Quarter End

  • Company's Net Leverage Ratio Declined to 2.2x

  • Successfully Integrated Clean Earth During Quarter and On Pace to Achieve Targeted Synergies

  • Issued 2018-2019 Environmental, Social and Governance (ESG) Report Highlighting Company's Corporate Sustainability Initiatives and Accomplishments

  • 2019 Adjusted Operating Income Now Expected to Increase Nearly 10% Year-over-Year at Guidance Midpoint; Full Year Range is Now $209 Million to $214 Million

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

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

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

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

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

Harsco Corporation—Selected Third Quarter Results

($ in millions, except per share amounts)   Q3 2019   Q3 2018
Revenues   $ 423     $ 352  
Operating income from continuing operations - GAAP   $ 47     $ 42  
Operating margin from continuing operations - GAAP   11.0 %   11.9 %
Diluted EPS from continuing operations - GAAP   $ 0.22     $ 0.29  
Return on invested capital (TTM) - excluding unusual items and including discontinued operations   12.5 %    

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

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

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

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

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

Third Quarter Business Review

Environmental

($ in millions)   Q3 2019   Q3 2018   %Change
Revenues   $ 261     $ 269     (3 )%
Operating income - GAAP   $ 33     $ 29     12 %
Operating margin - GAAP   12.6 %   10.9 %    

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

Clean Earth

($ in millions)   Q3 2019   Q3 2018   %Change
Revenues   $ 88     $ 71     23 %
Operating income - GAAP   $ 11     $ 4     173 %
Operating margin - GAAP   12.9 %   5.8 %    

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

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

Rail

($ in millions)   Q3 2019   Q3 2018   %Change
Revenues   $ 75     $ 83     (10 )%
Operating income - GAAP   $ 12     $ 19     (36 )%
Operating margin - GAAP   16.2 %   23.0 %    

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

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

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

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

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

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

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

2019 Full Year Outlook    
  2019 Outlook 2019 Prior 2018 Actual
(as previously reported)
       
Projected Operating Income $171 - $176m $181 - 191m $191m
Adjusted Operating Income before Acquisition Amortization $209 - 214m $215 - 225m $194m
Projected Diluted Earnings Per Share $0.86 - 0.92 $0.89 - 1.02 $1.64
Adjusted Diluted Earnings Per Share (before Acquisition Amortization) $1.36 - 1.42 $1.38 - 1.51 $1.40
Free Cash Flow Before Growth Capital $120 - 130m $125 - 135m $104m
Free Cash Flow $40 - 50m $55 - 65m $73m
Adjusted Return on Invested Capital 12 - 13%    
Net Interest Expense $43 - 44m    
Non-Operating Defined Benefit Pension Expense $6m    
Effective Tax Rate, Excluding Any Unusual Items 25 - 27%    

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

Q4 2019 Outlook      
  Q4 2019 Q4 2018
(as previously reported)
 
       
Operating Income $47 - 52m $44m  
Adjusted Operating Income before Acquisition Amortization $53 - 58m $43m  
Diluted Earnings Per Share $0.25 - 0.31 $0.55  
Adjusted Diluted Earnings Per Share (before Acquisition Amortization) $0.30 - 0.36 $0.36  

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

Conference Call

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

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

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

Forward-Looking Statements

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

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

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


Investor Contact:
David Martin
717.612.5628
damartin@harsco.com

Media Contact:
Jay Cooney
717.730.3683
jcooney@harsco.com


HARSCO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
    Three   Nine
  Months Ended Months Ended
    September 30   September 30
(In thousands, except per share amounts)   2019   2018   2019   2018
Revenues from continuing operations:                
Service revenues   $ 316,667     $ 224,196     $ 784,190     $ 714,114  
Product revenues   106,488     127,367     319,765     301,796  
Total revenues   423,155     351,563     1,103,955     1,015,910  
Costs and expenses from continuing operations:                
Cost of services sold   239,519     174,937     608,230     554,005  
Cost of products sold   71,970     82,139     220,634     205,941  
Selling, general and administrative expenses   63,197     51,049     187,104     149,257  
Research and development expenses   1,341     1,344     3,210     3,171  
Other expenses, net   383     335     409     985  
Total costs and expenses   376,410     309,804     1,019,587     913,359  
Operating income from continuing operations   46,745     41,759     84,368     102,551  
Interest income   445     575     1,569     1,645  
Interest expense   (12,819 )   (5,620 )   (24,429 )   (16,891 )
Unused debt commitment and amendment fees; and loss on early extinguishment of debt   (158 )   (125 )   (7,593 )   (1,159 )
Defined benefit pension income (expense)   (1,356 )   934     (4,166 )   2,677  
Income from continuing operations before income taxes and equity income   32,857     37,523     49,749     88,823  
Income tax expense   (12,601 )   (11,054 )   (17,814 )   (16,750 )
Equity income of unconsolidated entities, net   81         151      
Income from continuing operations   20,337     26,469     32,086     72,073  
Discontinued operations:                
Gain on sale of discontinued business   527,980         527,980      
Income from discontinued businesses   272     10,866     23,958     32,099  
Income tax expense related to discontinued businesses   (110,732 )   (2,684 )   (112,701 )   (7,233 )
Income from discontinued operations   417,520     8,182     439,237     24,866  
Net income   437,857     34,651     471,323     96,939  
Less: Net income attributable to noncontrolling interests   (2,506 )   (1,804 )   (6,633 )   (5,795 )
Net income attributable to Harsco Corporation   $ 435,351     $ 32,847     $ 464,690     $ 91,144  
Amounts attributable to Harsco Corporation common stockholders:
Income from continuing operations, net of tax   $ 17,831     $ 24,665     $ 25,453     $ 66,278  
Income from discontinued operations, net of tax   417,520     8,182     439,237     24,866  
Net income attributable to Harsco Corporation common stockholders   $ 435,351     $ 32,847     $ 464,690     $ 91,144  
Weighted-average shares of common stock outstanding   79,666     80,950     79,966     80,821  
Basic earnings per common share attributable to Harsco Corporation common stockholders:
Continuing operations   $ 0.22     $ 0.3     $ 0.32     $ 0.82  
Discontinued operations   5.24     0.1     5.49     0.31  
Basic earnings per share attributable to Harsco Corporation common stockholders   $ 5.46     $ 0.41   (a) $ 5.81     $ 1.13  
Diluted weighted-average shares of common stock outstanding   81,110     83,879     81,749     83,690  
Diluted earnings per common share attributable to Harsco Corporation common stockholders:
Continuing operations   $ 0.22     $ 0.29     $ 0.31     $ 0.79  
Discontinued operations   5.15     0.1     5.37     0.3  
Diluted earnings per share attributable to Harsco Corporation common stockholders   $ 5.37     $ 0.39     $ 5.68     $ 1.09  

(a) Does not total due to rounding.



HARSCO CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
       
 

(In thousands)
                September 30
 2019

    December 31
 2018

ASSETS        
Current assets:        
Cash and cash equivalents   $ 75,458     $ 64,260  
Restricted cash   2,461     2,886  
Trade accounts receivable, net   310,662     246,427  
Insurance claim receivable   195,000     30,000  
Other receivables   24,343     23,770  
Inventories   149,984     116,185  
Current portion of contract assets   13,670     12,130  
Current portion of assets held-for-sale   42,368     75,232  
Other current assets   62,442     34,144  
Total current assets   876,388     605,034  
Property, plant and equipment, net   550,073     432,793  
Right-of-use assets, net   47,662      
Goodwill   725,106     404,713  
Intangible assets, net   301,100     69,207  
Deferred income tax assets   11,661     48,551  
Assets held-for-sale   28,659     55,331  
Other assets   17,842     17,238  
Total assets   $ 2,558,491     $ 1,632,867  
LIABILITIES        
Current liabilities:        
Short-term borrowings   $ 7,417     $ 10,078  
Current maturities of long-term debt   2,540     6,489  
Accounts payable   165,570     124,984  
Accrued compensation   40,394     50,201  
Income taxes payable   102,041     2,634  
Insurance liabilities   205,721     40,774  
Current portion of advances on contracts   46,813     29,407  
Current portion of operating lease liabilities   12,145      
Current portion of liabilities of assets held-for-sale   15,203     39,410  
Other current liabilities   128,790     113,019  
Total current liabilities   726,634     416,996  
Long-term debt   764,254     585,662  
Insurance liabilities   19,730     19,575  
Retirement plan liabilities   176,791     213,578  
Advances on contracts   344     37,675  
Operating lease liabilities   32,772      
Liabilities of assets held-for-sale   5,274     555  
Other liabilities   81,432     45,450  
Total liabilities   1,807,231     1,319,491  
HARSCO CORPORATION STOCKHOLDERS’ EQUITY        
Common stock   143,396     141,842  
Additional paid-in capital   198,007     190,597  
Accumulated other comprehensive loss   (587,759 )   (567,107 )
Retained earnings   1,784,871     1,298,752  
Treasury stock   (832,775 )   (795,821 )
Total Harsco Corporation stockholders’ equity   705,740     268,263  
Noncontrolling interests   45,520     45,113  
Total equity   751,260     313,376  
Total liabilities and equity   $ 2,558,491     $ 1,632,867  


HARSCO CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
    Three Months Ended   Nine Months Ended
    September 30   September 30
(In thousands)   2019   2018   2019   2018
Cash flows from operating activities:                
Net income   $ 437,857     $ 34,651     $ 471,323     $ 96,939  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation   29,824     30,319     89,681     92,324  
Amortization   6,149     3,054     11,941     7,620  
Deferred income tax expense   15,323     1,656     11,500     1,996  
Equity in income of unconsolidated entities, net   (81 )       (151 )    
Dividends from unconsolidated entities   125     88     125     88  
Gain on sale from discontinued business   (527,980 )       (527,980 )    
Loss on early extinguishment of debt
  5,314         5,314      
Other, net   (374 )   (552 )   2,187     2,485  
Changes in assets and liabilities:                
Accounts receivable   14,639     (7,577 )   (12,395 )   (29,022 )
Inventories   (22,980 )   (7,677 )   (43,477 )   (18,852 )
Contract assets   (5,200 )   (9,034 )   (5,269 )   (10,427 )
Right-of-use assets   3,976         11,204      
Accounts payable   (5,302 )   10,188     5,615     17,547  
Accrued interest payable   7,113     43     7,398     (15 )
Accrued compensation   1,723     5,607     (12,802 )   (10,438 )
Advances on contracts   (6,686 )   777     (17,067 )   (12,339 )
Operating lease liabilities   (4,025 )       (10,919 )    
Retirement plan liabilities, net   (5,654 )   (10,413 )   (18,800 )   (28,743 )
Income taxes payable - Gain on sale of discontinued business   102,940         102,940      
Other assets and liabilities   (2,044 )   (2,815 )   (20,339 )   (14,149 )
Net cash provided by operating activities   44,657     48,315     50,029     95,014  
Cash flows from investing activities:                
Purchases of property, plant and equipment   (55,870 )   (34,806 )   (147,071 )   (91,302 )
Purchases of businesses, net of cash acquired   (39,010 )       (623,495 )   (56,389 )
Proceeds from sale of business   599,685         599,685      
Proceeds from sales of assets   5,355     5,943     7,560     9,096  
Purchase of intangible assets   (721 )       (1,246 )    
Net payments from settlement of foreign currency forward exchange contracts   2,144     6,186     1,453     3,244  
Payments for interest rate swap terminations           (2,758 )    
Net cash provided (used) by investing activities   511,583     (22,677 )   (165,872 )   (135,351 )
Cash flows from financing activities:                
Short-term borrowings, net   (1,501 )   2,434     (1,417 )   (543 )
Current maturities and long-term debt:                
Additions   41,627     3,300     781,987     128,158  
Reductions   (601,283 )   (31,911 )   (604,616 )   (75,104 )
Dividends paid to noncontrolling interests   (5 )   (837 )   (3,103 )   (5,446 )
Sale of noncontrolling interests   3,150         4,026     477  
Common stock acquired for treasury   (25,752 )       (25,752 )    
Stock-based compensation - Employee taxes paid   (35 )   (71 )   (11,202 )   (3,685 )
Deferred financing costs   (1,609 )   (183 )   (11,073 )   (537 )
Net cash provided (used) by financing activities   (585,408 )   (27,268 )   128,850     43,320  
Effect of exchange rate changes on cash and cash equivalents, including restricted cash   (1,992 )   (906 )   (2,234 )   (4,641 )
Net increase (decrease) in cash and cash equivalents, including restricted cash   (31,160 )   (2,536 )   10,773     (1,658 )
Cash and cash equivalents, including restricted cash, at beginning of period   109,079     67,087     67,146     66,209  
Cash and cash equivalents, including restricted cash, at end of period   $ 77,919     $ 64,551     $ 77,919     $ 64,551  



HARSCO CORPORATION
REVIEW OF OPERATIONS BY SEGMENT (Unaudited)

    Three Months Ended   Three Months Ended
    September 30, 2019 (b)   September 30, 2018 (b)
(In thousands)   Revenues   Operating  Income (Loss)   Revenues   Operating Income (Loss)
Harsco Environmental   $ 260,883     $ 32,794     $ 268,881     $ 29,338  
Harsco Clean Earth (a)   87,639     11,308          
Harsco Rail   74,633     12,115     82,682     19,000  
Corporate       (9,472 )       (6,579 )
Consolidated Totals   $ 423,155     $ 46,745     $ 351,563     $ 41,759  
                 
    Nine Months Ended   Nine Months Ended
    September 30, 2019 (b)   September 30, 2018 (b)
(In thousands)   Revenues   Operating  Income (Loss)   Revenues   Operating Income (Loss)
Harsco Environmental   $ 791,533     $ 84,868     $ 805,924     $ 92,734  
Harsco Clean Earth (a)   87,639     11,308          
Harsco Rail   224,783     26,947     209,912     29,570  
Corporate       (38,755 )   74     (19,753 )
Consolidated Totals   $ 1,103,955     $ 84,368     $ 1,015,910     $ 102,551  
  1. The Company's acquisition of Clean Earth closed on June 28, 2019.
  2. The operating results of the former Harsco Industrial Segment have been reflected as discontinued operations in the Company's Condensed Consolidated Statement of Operations for all periods presented.


HARSCO CORPORATION
RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE BEFORE ACQUISITION AMORTIZATION EXPENSE TO DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS AS REPORTED
(Unaudited)
 
    Three Months Ended   Nine Months Ended  
    September 30   September 30  
    2019   2018   2019   2018  
Diluted earnings per share from continuing operations as reported   $ 0.22     $ 0.29     $ 0.31     $ 0.79    
Corporate strategic costs (a)   0.03         0.22        
Corporate unused debt commitment and amendment fees (b)           0.09     0.01    
Harsco Environmental Segment provision for doubtful accounts (c)   0.01         0.08        
Harsco Rail Segment improvement initiative costs (d)   0.01         0.06        
Harsco Environmental Segment change in fair value to contingent consideration liability (e)   (0.01 )       (0.05 )      
Harsco Environmental Segment site exit related (f)           (0.03 )      
Harsco Clean Earth Segment severance costs (g)   0.02         0.02        
Harsco Environmental Segment adjustment to slag disposal accrual (h)               (0.04 )  
Altek acquisition costs (i)               0.01    
Deferred tax asset valuation allowance adjustment (j)   0.03         0.03     (0.10 )  
Taxes on above unusual items (k)           (0.04 )      
Adjusted diluted earnings per share from continuing operations   $ 0.31     $ 0.30   (l) $ 0.67   (l) $ 0.68   (l)
Acquisition amortization expense, net of tax   0.06     0.02     0.10     0.05    
Adjusted diluted earnings per share before acquisition amortization expense   $ 0.36   (l) $ 0.32     $ 0.78   (l) $ 0.73    
  1. Consultant costs at Corporate associated with supporting and executing the Company's growth strategy (Q3 2019 $2.7 million pre-tax; nine months 2019 $17.9 million pre-tax).
  2. Costs at Corporate related to the unused bridge financing commitment and Term Loan B amendment (nine months 2019 $7.4 million pre-tax) and the amendment of the Company's existing Senior Secured Credit Facility in order to reduce the interest rate applicable to the Term Loan Facility (nine months 2018 $1.0 million pre-tax).
  3. Harsco Environmental Segment provision for doubtful accounts related to a customer in the U.K. entering administration (Q3 $0.8 million pre-tax; nine months 2019 $6.2 million pre-tax).
  4. Costs associated with a productivity improvement initiative in the Harsco Rail Segment (Q3 2019 $0.8 million pre-tax; nine months 2019 $4.6 million pre-tax).
  5. Fair value adjustment to contingent consideration liability related to the acquisition of Altek (Q3 2019 $0.9 million pre-tax; nine months 2019 $4.4 million pre-tax; Q3 2018 and nine months 2018 $0.4 million pre-tax).  The Company adjusts Operating income and Diluted earnings per share from continuing operations to exclude the impact of the change in fair value to the acquisition-related contingent consideration liability for the Altek acquisition because it believes that the adjustment for this item more closely correlates the reported financial measures with the ordinary and ongoing course of the Company's operations.
  6. Harsco Environmental Segment site exit related (Q3 2019 $0.2 million pre-tax; nine months 2019 $2.4 million pre-tax).
  7. Harsco Clean Earth Segment severance recognized (Q3 and nine month 2019 $1.3 million pre-tax).
  8. Harsco Environmental Segment adjustment to previously accrued amounts related to the disposal of certain slag material in Latin America (nine months 2018 $3.2 million pre-tax).
  9. Costs associated with the acquisition of Altek recorded in the Harsco Environmental Segment (nine months 2018 $0.8 million pre-tax) and at Corporate (nine months 2018 $0.4 million pre-tax).
  10. Adjustment of certain existing deferred tax asset valuation allowances as a result of  a site exit in a certain jurisdiction in 2019 and the Altek acquisition in 2018 (Q3 and nine months 2019 $2.8 million; nine months 2018 $8.3 million).
  11. Unusual items are tax-effected at the global effective tax rate, before discrete items, in effect at the time the unusual item is recorded, except for unusual items from countries where no tax benefit can be realized, in which case a zero percent tax rate is used. 
  12. Does not total due to rounding. 

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


HARSCO CORPORATION
RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE BEFORE ACQUISITION AMORTIZATION EXPENSE AND INCLUDING DISCONTINUED OPERATIONS TO DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS AS REPORTED (Unaudited)


    Three Months Ended
    December 31
    2018
Diluted earnings per share from continuing operations as reported (a)   $ 0.41  
Harsco Environmental Segment change in fair value to contingent consideration liability (b)   (0.04 )
Harsco Rail Segment improvement initiative costs (c)   0.01  
Impact of U.S. Tax reform on income tax expense (d)   (0.18 )
Adjusted diluted earnings per share from continuing operations before acquisition amortization expense   0.20  
Acquisition amortization expense, net of tax   0.02  
Adjusted diluted earnings per share from continuing operations before acquisition amortization expense   0.22  
Diluted earnings per share principally from the former Harsco Industrial Segment, excluding acquisition amortization expense   0.14  
Adjusted diluted earnings per share before acquisition amortization expense and including discontinued operations   $ 0.36  
  1. Prior period amounts have been updated to reflect the former Harsco Industrial Segment as discontinued operations.
  2. Fair value adjustment to contingent consideration liability related to the acquisition of Altek (Q4 2018 $3.4 million pre-tax). The Company adjusts Operating income and Diluted earnings per share from continuing operations to exclude the impact of the change in fair value to the acquisition-related contingent consideration liability for the Altek acquisition because it believes that the adjustment for this item more closely correlates the reported financial measures with the ordinary and ongoing course of the Company's operations.
  3. Costs associated with a productivity improvement initiative in the Harsco Rail Segment (Q4 2018 $0.6 million pre-tax).
  4. The Company recorded a benefit (expense) as a result of revaluing net deferred tax assets and liabilities as a result of U.S. tax reform (Q4 2018 $15.4 million benefit).

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


HARSCO CORPORATION
RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE BEFORE ACQUISITION AMORTIZATION EXPENSE AND INCLUDING DISCONTINUED OPERATIONS TO DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS AS REPORTED
(Unaudited)

 
    Twelve Months Ended  
    December 31  
    2018  
Diluted earnings per share from continuing operations as reported (a)   $ 1.20    
Harsco Environmental adjustment to slag disposal accrual (b)   (0.04 )  
Harsco Environmental Segment change in fair value to contingent consideration liability (c)   (0.04 )  
Altek acquisition costs (d)   0.01    
Loss on early extinguishment of debt (e)   0.01    
Harsco Rail Segment improvement initiative costs (f)   0.01    
Taxes on above unusual items (g)   (0.01 )  
Impact of U.S. tax reform on income tax benefit (expense) (h)   (0.18 )  
Deferred tax asset valuation allowance adjustment (i)   (0.10 )  
Adjusted diluted earnings per share from continuing operations   0.88   (j)
Acquisition amortization expense, net of tax   0.07    
Adjusted diluted earnings per share from continuing operations excluding acquisition amortization expense   0.94   (j)
Diluted earnings per share from the former Harsco Industrial Segment, excluding acquisition amortization expense   0.45    
Adjusted diluted earnings per share before acquisition amortization expense and including discontinued operations   $ 1.40   (j)
  1. Prior period amounts have been updated to reflect the former Harsco Industrial Segment as discontinued operations.
  2. Harsco Environmental adjustment to previously accrued amounts related to the disposal of certain slag material in Latin America ($3.2 million pre-tax).
  3. Fair value adjustment to contingent consideration liability related to the acquisition of Altek ($2.9 million pre-tax).  The Company adjusts Operating income and Diluted earnings per share from continuing operations to exclude the impact of the change in fair value to the acquisition-related contingent consideration liability for the Altek acquisition because it believes that the adjustment for this item more closely correlates the reported financial measures with the ordinary and ongoing course of the Company's operations. 
  4. Costs associated with the acquisition of Altek recorded in the Harsco Environmental Segment ($0.8 million pre-tax) and at Corporate ($0.4 million pre-tax).
  5. Loss on early extinguishment of debt associated with amending the Company's existing Senior Secured Credit Facility in order to reduce the interest rate applicable to the Term Loan Facility ($1.0 million pre-tax). 
  6. Costs associated with a productivity improvement initiative in the Harsco Rail Segment ($0.6 million pre-tax).
  7. Unusual items are tax-effected at the global effective tax rate, before discrete items, in effect at the time the unusual item is recorded, except for unusual items from countries where no tax benefit can be realized, in which case a zero percent tax rate is used. 
  8. The Company recorded a benefit (expense) as a result of revaluing net deferred tax assets and liabilities as a result of U.S. tax reform ($15.4 million benefit).
  9. Adjustment of certain existing deferred tax asset valuation allowances as a result of the Altek acquisition ($8.3 million). 
  10. Does not total due to rounding.

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


HARSCO CORPORATION
RECONCILIATION OF PROJECTED DILUTED EARNINGS PER SHARE AND ADJUSTED DILUTED EARNINGS PER SHARE BEFORE ESTIMATED ACQUISITION AMORTIZATION EXPENSE TO DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS
(Unaudited)

    Projected Three Months Ending December 31   Projected Twelve Months Ending December 31
    2019   2019
    Low   High   Low   High
Diluted earnings per share from continuing operations (a)(b)   $ 0.25     $ 0.31     $ 0.59     $ 0.65  
Diluted earnings per share from discontinued operations before acquisition amortization expense (c)           0.26     0.26  
Project diluted earnings per share   0.25     0.31     0.85     0.91  
Corporate strategic and transaction related costs           0.22     0.22  
Corporate unused debt commitment and amendment fees           0.09     0.09  
Harsco Environmental Segment provision for doubtful accounts           0.08     0.08  
Harsco Environmental Segment site exit cost related           (0.03 )   (0.03 )
Harsco Clean Earth Segment severance costs           0.02     0.02  
Deferred tax asset valuation allowance adjustment           0.03     0.03  
Harsco Rail Segment improvement initiative costs           0.06     0.06  
Harsco Environmental Segment change in fair value to contingent consideration liability           (0.05 )   (0.05 )
Taxes on above unusual items           (0.04 )   (0.04 )
Adjusted diluted earnings per share   0.25     0.31     1.23     1.29  
Estimated acquisition amortization expense, net of tax   0.05     0.05     0.13     0.13  
Adjusted diluted earnings per share before estimated acquisition amortization expense   $ 0.30     $ 0.36     $ 1.36     $ 1.42  
  1. Includes results for the Harsco Clean Earth Segment for the period from July 1, 2019 to December 31, 2019.
  2. Excludes results for the former Harsco Industrial Segment.
  3. Includes results for the former Harsco Industrial Segment for the period from January 1, 2019 to June 30, 2019.

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


HARSCO CORPORATION
RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS) BEFORE ACQUISITION AMORTIZATION EXPENSE BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited)

(In thousands)   Harsco
Environmental
  Harsco Clean
Earth
  Harsco 
Rail
  Corporate   Consolidated
Totals
                     
Three Months Ended September 30, 2019:                
Operating income (loss) as reported   $ 32,794     $ 11,308     $ 12,115     $ (9,472 )   $ 46,745  
Corporate strategic costs               2,743     2,743  
Harsco Clean Earth Segment severance costs       1,254             1,254  
Harsco Environmental Segment change in fair value to contingent consideration liability   (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 )
Adjusted operating income (loss)   32,547     12,562     12,960     (6,729 )   51,340  
Acquisition amortization expense   1,751     3,834     84         5,669  
Adjusted operating income (loss) before acquisition amortization expense   $ 34,298     $ 16,396     $ 13,044     $ (6,729 )   $ 57,009  
Revenues as reported   $ 260,883     $ 87,639     $ 74,633     $     $ 423,155  
Adjusted operating margin (%)   13.1 %   18.7 %   17.5 %       13.5 %
                     
Three Months Ended September 30, 2018:                
Operating income (loss) as reported   $ 29,338     $     $ 19,000     $ (6,579 )   $ 41,759  
Harsco Environmental Segment change in fair value to contingent consideration liability   412                 412  
Adjusted operating income (loss)   29,750         19,000     (6,579 )   42,171  
Acquisition amortization expense   1,872         71         1,943  
Adjusted operating income (loss) before acquisition amortization expense   $ 31,622     $     $ 19,071     $ (6,579 )   $ 44,114  
Revenues as reported   $ 268,881     $     $ 82,682     $     $ 351,563  
Adjusted operating margin (%)   11.8 %       23.1 %       12.5 %

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


HARSCO CORPORATION
RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS) BEFORE ACQUISITION AMORTIZATION EXPENSE BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited)


(In thousands)
  Harsco
Environmental
  Harsco
Clean Earth
  Harsco 
Rail
  Corporate   Consolidated
Totals
                     
Nine Months Ended September 30, 2019:                
Operating income (loss) as reported   $ 84,868     $ 11,308     $ 26,947     $ (38,755 )   $ 84,368  
Corporate strategic costs               17,872     17,872  
Harsco Environmental provision for doubtful accounts   6,174                 6,174  
Harsco Rail Segment improvement initiative costs           4,645         4,645  
Harsco Environmental Segment change in fair value to contingent consideration liability   (4,416 )               (4,416 )
Harsco Environmental Segment site exit related   (2,427 )               (2,427 )
Harsco Clean Earth Segment severance costs       1,254             1,254  
Adjusted operating income (loss)   84,199     12,562     31,592     (20,883 )   107,470  
Acquisition amortization expense   5,436     3,834     238         9,508  
Adjusted operating income (loss) before acquisition amortization expense   $ 89,635     $ 16,396     $ 31,830     $ (20,883 )   $ 116,978  
Revenues as reported   $ 791,533     $ 87,639     $ 224,783     $     $ 1,103,955  
Adjusted operating margin (%)   11.3 %   18.7 %   14.2 %       10.6 %
                     
Nine Months Ended September 30, 2018:                
Operating income (loss) as reported   $ 92,734     $     $ 29,570     $ (19,753 )   $ 102,551  
Harsco Environmental adjustment to slag disposal accrual   (3,223 )               (3,223 )
Altek acquisition costs   753             431     1,184  
Harsco Environmental Segment change in fair value to contingent consideration liability   412                 412  
Adjusted operating income (loss)   90,676         29,570     (19,322 )   100,924  
Acquisition amortization expense   3,734         235         3,969  
Adjusted operating income (loss) before acquisition amortization expense   $ 94,410     $     $ 29,805     $ (19,322 )   $ 104,893  
Revenues as reported   $ 805,924     $     $ 209,912     $ 74     $ 1,015,910  
Adjusted operating margin (%)   11.7 %       14.2 %       10.3 %

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


HARSCO CORPORATION
RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS) BEFORE ACQUISITION AMORTIZATION EXPENSE AND INCLUDING DISCONTINUED OPERATIONS BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited)

 
(In thousands)   Harsco
Environmental
  Harsco
Industrial (a)
  Harsco 
Rail
  Corporate   Consolidated Totals
                     
Three Months Ended December 31, 2018:                
Operating income (loss) as reported (b)   $ 28,461     $     $ 7,771     $ (8,086 )   $ 28,146  
Harsco Environmental Segment change in fair value to contingent consideration liability   (3,351 )               (3,351 )
Harsco Rail Segment improvement initiative costs           640         640  
Adjusted operating income (loss)   25,110         8,411     (8,086 )   25,435  
Acquisition amortization expense   1,819         71         1,890  
Adjusted operating income (loss) before acquisition amortization expense   26,929         8,482     (8,086 )   27,325  
Discontinued operations - Harsco Industrial including acquisition amortization expense       15,956             15,956  
Adjusted operating income (loss) before acquisition amortization expense and including discontinued operations   $ 26,929     $ 15,956     $ 8,482     $ (8,086 )   $ 43,281  
  1. The operating results of the former Harsco Industrial Segment have been reflected as discontinued operations in the Company's Condensed Consolidated Statement of Operations for all periods presented.

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


HARSCO CORPORATION
RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS) BEFORE ACQUISITION AMORTIZATION EXPENSE AND INCLUDING DISCONTINUED OPERATIONS BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited)

 
(In thousands)   Harsco
Environmental
  Harsco
Industrial (a)
  Harsco 
Rail
  Corporate   Consolidated Totals
                     
Twelve Months Ended December 31, 2018:                
Operating income (loss) as reported   $ 121,195     $     $ 37,341     $ (27,839 )   $ 130,697  
Harsco Environmental adjustment to slag disposal accrual   (3,223 )               (3,223 )
Harsco Environmental Segment change in fair value to contingent consideration liability   (2,939 )               (2,939 )
Altek acquisition costs   753             431     1,184  
Harsco Rail Segment improvement initiative costs           640         640  
Adjusted operating income (loss)   115,786         37,981     (27,408 )   126,359  
Acquisition amortization expense   5,553         306         5,859  
Adjusted operating income (loss) before acquisition amortization expense   121,339         38,287     (27,408 )   132,218  
Discontinued operations - Harsco Industrial before acquisition amortization expense       62,036             62,036  
Adjusted operating income (loss) before acquisition amortization expense and including discontinued operations   $ 121,339     $ 62,036     $ 38,287     $ (27,408 )   $ 194,254  
  1. The operating results of the former Harsco Industrial Segment have been reflected as discontinued operations in the Company's Condensed Consolidated Statement of Operations for all periods presented.

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


HARSCO CORPORATION
RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS) BEFORE ACQUISITION AMORTIZATION EXPENSE AND INCLUDING DISCONTINUED OPERATIONS BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited)
 
    For the Three Months Ended   For the Year Ended
(In thousands)   March 31, 2018   June 30, 2018   September 30, 2018   December 31, 2018   December 31, 2018
                     
Operating income (a)   $ 22,728     $ 38,064     $ 41,759     $ 28,146     $ 130,697  
Harsco Environmental adjustment to slag disposal accrual       (3,223 )           (3,223 )
Harsco Environmental Segment change in fair value to contingent consideration liability           412     (3,351 )   (2,939 )
Altek acquisition costs       1,184             1,184  
Harsco Rail Segment improvement initiative costs               640     640  
Adjusted operating income   22,728     36,025     42,171     25,435     126,359  
Acquisition amortization expense   829     1,197     1,943     1,890     5,859  
Adjusted operating income before acquisition amortization expense   23,557     37,222     44,114     27,325     132,218  
Discontinued operations - Harsco Industrial before acquisition amortization expense   14,265     16,013     15,802     15,956     62,036  
Adjusted operating income before acquisition amortization expense and including discontinued operations   $ 37,822     $ 53,235     $ 59,916     $ 43,281     $ 194,254  
  1. The operating results of the former Harsco Industrial Segment have been reflected as discontinued operations in the Company's Condensed Consolidated Statement of Operations for all periods presented.

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


HARSCO CORPORATION
RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS) BEFORE ACQUISITION AMORTIZATION EXPENSE AND INCLUDING DISCONTINUED OPERATIONS BY SEGMENT TO OPERATING INCOME (LOSS) AS REPORTED BY SEGMENT (Unaudited)
 
    For the Three Months Ended   For the Six
Months Ended
(In thousands)   March 31, 2019   June 30, 2019   June 30, 2019
             
Operating income (a)   $ 19,824     $ 17,799     $ 37,623  
Corporate strategic costs   2,739     12,390     15,129  
Harsco Environmental Segment provision for doubtful accounts       5,359     5,359  
Harsco Rail Segment improvement initiative costs   2,648     1,152     3,800  
Harsco Environmental Segment change in fair value to contingent consideration liability   369     (3,879 )   (3,510 )
Harsco Environmental site exit related   (2,271 )       (2,271 )
Adjusted operating income   23,309     32,821     56,130  
Acquisition amortization expense   1,939     1,900     3,839  
Adjusted operating income before acquisition amortization expense   25,248     34,721     59,969  
Discontinued operations - Harsco Industrial before acquisition amortization expense   18,834     20,560     39,394  
Adjusted operating income before acquisition amortization expense and including discontinued operations   $ 44,082     $ 55,281     $ 99,363  
  1. The operating results of the former Harsco Industrial Segment have been reflected as discontinued operations in the Company's Condensed Consolidated Statement of Operations for all periods presented.

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


HARSCO CORPORATION
RECONCILIATION OF PROJECTED OPEARTING INCOME AND ADJUSTED OPERATING INCOME BEFORE ACQUISITION AMORTIZATION EXPENSE TO OPERATING INCOME (Unaudited)
 
    Projected
Three Months Ended
  Projected
Twelve Months Ended
    December 31, 2019   December 31, 2019
(In millions)   Low   High   Low   High
Operating income from continuing operations (a) (b)   $ 47     $ 52     $ 132     $ 137  
Operating income from the former Harsco Industrial Segment before acquisition amortization (c)           39     39  
Project operating income   47     52     171     176  
Corporate strategic and transaction related costs           18     18  
Harsco Environmental Segment provision for doubtful accounts           6     6  
Harsco Rail Segment improvement initiative costs           5     5  
Harsco Environmental Segment change in fair value to contingent consideration liability           (4 )   (4 )
Harsco Environmental Segment site exit related           (2 )   (2 )
Adjusted operating income   47     52     194     199  
Estimated acquisition amortization expense   6     6     15     15  
Adjusted operating income before acquisition amortization expense   $ 53     $ 58     $ 209     $ 214  
  1. Includes results for the Harsco Clean Earth Segment for the period from July 1, 2019 to December 31, 2019.
  2. Excludes results for the former Harsco Industrial Segment.
  3. Includes results for the former Harsco Industrial Segment for the period from January 1, 2019 to June 30, 2019.

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


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

    Three Months Ended   Nine Months Ended
    September 30   September 30
(In thousands)   2019   2018   2019   2018
Net cash provided by operating activities   $ 44,657     $ 48,315     $ 50,029     $ 95,014  
Less capital expenditures   (55,870 )   (34,806 )   (147,071 )   (91,302 )
Less purchase of intangible assets   (721 )       (1,246 )    
Plus capital expenditures for strategic ventures (a)   1,461     437     4,831     972  
Plus total proceeds from sales of assets (b)   5,355     5,943     7,560     9,096  
Plus transaction-related expenditures (c)   10,390         26,380      
Free cash flow   5,272     19,889     (59,517 )   13,780  
Add growth capital expenditures   25,587     6,875     56,190     19,017  
Free cash flow before growth capital expenditures   $ 30,859     $ 26,764     $ (3,327 )   $ 32,797  
  1. Capital expenditures for strategic ventures represent the partner’s share of capital expenditures in certain ventures consolidated in the Company’s financial statements.
  2. Asset sales are a normal part of the business model, primarily for the Harsco Environmental Segment.
  3. Expenditures directly related to the Company's acquisition and divestiture transactions.

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


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

    Twelve Months Ended
    December 31
(In thousands)   2018
Net cash provided by operating activities   $ 192,022  
Less capital expenditures   (132,168 )
Plus capital expenditures for strategic ventures (a)   1,595  
Plus total proceeds from sales of assets (b)   11,887  
Free cash flow   73,336  
Add growth capital expenditures   30,655  
Free cash flow before growth capital expenditures   $ 103,991  
  1. Capital expenditures for strategic ventures represent the partner’s share of capital expenditures in certain ventures consolidated in the Company’s financial statements.
  2. Asset sales are a normal part of the business model, primarily for the Harsco Environmental Segment.

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


HARSCO CORPORATION
RECONCILIATION OF CASH FLOW BEFORE GROWTH CAPITAL EXPENDITURES TO NET CASH PROVIDED BY OPERATING ACTIVITIES
(Unaudited)

    Projected
Twelve Months Ending 
December 31
    2019
(In millions)   Low   High
Net cash provided by operating activities   $ 184     $ 204  
Less capital expenditures   (186 )   (194 )
Plus total proceeds from asset sales and capital expenditures for strategic ventures   16     14  
Transaction related expenses   26     26  
Free cash flow   40     50  
Add growth capital expenditures   80     80  
Free cash flow before growth capital expenditures   $ 120     $ 130  

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


HARSCO CORPORATION
RECONCILIATION OF RETURN ON INVESTED CAPITAL TO NET INCOME AS REPORTED (a)
(Unaudited)

   
    Trailing Twelve Months for Period Ended
(In thousands)   September 30, 2019
Net income as reported   $ 519,397  
     
Gain on sale of discontinued business   (527,980 )
Corporate strategic costs   17,872  
Transaction-related costs for discontinued operations   8,263  
Harsco Environmental Segment change in fair value to contingent consideration liability   (7,767 )
Unused debt commitment and amendment fees; and loss on early extinguishment of debt   7,435  
Harsco Environmental Segment provision for doubtful accounts   6,174  
Loss on extinguishment of debt in discontinued operations   5,314  
Harsco Rail Segment improvement initiative costs   5,285  
Harsco Environmental Segment site exit related   (2,427 )
Harsco Clean Earth Segment severance costs   1,254  
Taxes on above unusual items (b)   102,899  
Impact of U.S. tax reform on income tax benefit   (15,409 )
Deferred tax asset valuation allowance adjustment   (465 )
Net income from continuing operations, as adjusted   119,845  
After-tax interest expense (c)   25,669  
     
Net operating profit after tax as adjusted   $ 145,514  
     
Average equity   $ 431,499  
Plus average debt   733,341  
Average capital   $ 1,164,840  
     
Return on invested capital   12.5 %
  1. Return on invested capital excluding unusual items is net income (loss) excluding unusual items, and after-tax interest expense, divided by average capital for the year. The Company uses a trailing twelve month average for computing average capital.
  2. Unusual items are tax-effected at the global effective tax rate, before discrete items, in effect at the time the unusual item is recorded except for unusual items from countries where no tax benefit can be realized, in which case a zero percent tax rate is used.
  3. The Company’s effective tax rate approximated 23% for the trailing twelve months for the period ended September 30, 2019.

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


HARSCO CORPORATION
RECONCILIATION OF ADJUSTED HARSCO CLEAN EARTH SEGMENT OPERATING INCOME BEFORE ACQUISITION AMORTIZATION EXPENSE TO HARSCO CLEAN EARTH SEGMENT OPERATING INCOME
(Unaudited)

     
    Three Months Ended
September 30
(In millions)   2018
Operating income   $ 4,278  
Acquisition amortization expense   3,649  
Adjusted operating income before acquisition amortization expense   $ 7,927  
Revenues as reported   $ 71,117  
Adjusted operating margin (%)   11.1 %

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

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