-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, WB7dVzCpV7jfpQaCLP65vQtLJQ++VXilCLXo+R+Rq5qdvWDYT3WIe/7D+FI6CJoJ M6/+dRrMCm99TPB8ZcDF9g== 0000045876-95-000008.txt : 19950508 0000045876-95-000008.hdr.sgml : 19950508 ACCESSION NUMBER: 0000045876-95-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950505 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARSCO CORP CENTRAL INDEX KEY: 0000045876 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED STRUCTURAL METAL PRODUCTS [3440] IRS NUMBER: 231483991 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03970 FILM NUMBER: 95534745 BUSINESS ADDRESS: STREET 1: P O BOX 8888 CITY: CAMP HILL STATE: PA ZIP: 17001-8888 BUSINESS PHONE: 7177637064 MAIL ADDRESS: STREET 1: PO BOX 8888 CITY: CAMP HILL STATE: PA ZIP: 17001-8888 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-3970 HARSCO CORPORATION (Exact name of registrant as specified in its charter) Delaware (State of incorporation) 23-1483991 (I.R.S. Employer Identification No.) Camp Hill, Pennsylvania 17001-8888 (Address of principal executive offices) (Zip Code) Registrant's Telephone Number (717) 763-7064 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ( X ) NO ( ) Title of Each Class Outstanding Shares at March 31, 1995 ___________________ ____________________________________ Common Stock Par Value $1.25 25,239,521 Preferred Stock Purchase Rights 25,239,521 HARSCO CORPORATION AND SUBSIDIARY COMPANIES PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended March 31 (In thousands, except per share amounts) 1995 1994 __________________________________________________________________________________________ Revenues: Net sales $ 356,879 $ 318,672 Equity in income of unconsolidated entities 18,537 15,028 Gain on sale of investments - 5,867 Other revenues 526 4,101 __________________________________________________________________________________________ Total revenues 375,942 343,668 __________________________________________________________________________________________ Costs and expenses: Cost of sales 276,897 252,997 Selling, administrative and general expenses 49,625 47,660 Research and development 1,143 931 Facilities discontinuance and reorganization costs 1,313 17 Other (2,584) 1,034 __________________________________________________________________________________________ Total costs and expenses 326,394 302,639 __________________________________________________________________________________________ Income before interest, taxes, and minority interest 49,548 41,029 Interest income 1,497 1,481 Interest expense (7,510) (8,330) __________________________________________________________________________________________ Income before taxes and minority interest 43,535 34,180 Provision for income taxes 17,414 14,936 __________________________________________________________________________________________ Income before minority interest 26,121 19,244 Minority interest 661 616 __________________________________________________________________________________________ Net income $ 25,460 $ 18,628 __________________________________________________________________________________________ __________________________________________________________________________________________ Average shares of common stock outstanding 25,202 25,012 __________________________________________________________________________________________ __________________________________________________________________________________________ Net income per share $ 1.01 $ .74 __________________________________________________________________________________________ __________________________________________________________________________________________ Cash dividends declared per share $ .37 $ .35 __________________________________________________________________________________________ __________________________________________________________________________________________
See accompanying notes to consolidated financial statements. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31 December 31 (In thousands) 1995 1994 _________________________________________________________________________________________ ASSETS Current assets: Cash and cash equivalents $ 33,708 $ 43,550 Receivables 342,162 350,578 Inventories: Finished goods 28,762 25,641 Work in process 33,099 28,625 Raw material and purchased parts 59,861 53,338 Stores and supplies 15,085 13,595 __________________________________________________________________________________________ Total inventories 136,807 121,199 Other current assets 25,318 21,432 __________________________________________________________________________________________ Total current assets 537,995 536,759 __________________________________________________________________________________________ Property, plant and equipment, at cost 1,023,529 984,930 Allowance for depreciation (575,488) (549,962) __________________________________________________________________________________________ 448,041 434,968 __________________________________________________________________________________________ Cost in excess of net assets of companies acquired, net 211,824 213,480 Investments 42,487 43,711 Other assets 91,176 85,731 __________________________________________________________________________________________ $1,331,523 $1,314,649 __________________________________________________________________________________________ __________________________________________________________________________________________
See accompanying notes to consolidated financial statements. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31 December 31 (In thousands) 1995 1994 _________________________________________________________________________________________ LIABILITIES Current liabilities: Notes payable and current maturities $ 28,778 $ 25,738 Accounts payable 94,401 92,166 Accrued compensation 37,454 37,837 Other current liabilities 146,752 126,680 _________________________________________________________________________________________ Total current liabilities 307,385 282,421 Long-term debt 326,430 340,246 Deferred income taxes 25,100 29,217 Other liabilities 76,351 81,543 _________________________________________________________________________________________ 735,266 733,427 _________________________________________________________________________________________ SHAREHOLDERS' EQUITY Common stock and additional paid-in capital 136,799 134,499 Cumulative adjustments (18,790) (16,119) Retained earnings 670,116 653,996 Treasury stock (191,868) (191,154) _________________________________________________________________________________________ 596,257 581,222 _________________________________________________________________________________________ $1,331,523 $1,314,649 _________________________________________________________________________________________ _________________________________________________________________________________________
See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31 (In thousands) 1995 1994 __________________________________________________________________________________________ Cash flows from operating activities: Net income $ 25,460 $ 18,628 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 23,110 21,190 Amortization 2,538 2,363 Gain on sale of investments - (5,867) Equity in earnings of unconsolidated entities (18,537) (14,413) Dividends or distributions from unconsolidated entities 3,325 - Other, net (5,879) (1,926) Changes in assets and liabilities, net of acquisition of a business and formation of a partnership: Notes and accounts receivable 25,713 (4,466) Inventories (14,977) (4,026) Accounts payable (4,819) (11,205) Other assets and liabilities 10,644 (1,086) __________________________________________________________________________________________ Net cash provided (used) by operating activities 46,578 (9,808) __________________________________________________________________________________________ Cash flows from investing activities: Expenditures for property, plant and equipment, net of disposals (23,132) (15,200) Purchase of business, net of cash acquired (3,208) - Proceeds from sale of investment held available for sale - 7,617 Investments held-to-maturity: Purchases - (2,000) Maturities 1,000 6,005 Other investing activities 514 (6,943) __________________________________________________________________________________________ Net cash (used) by investing activities (24,826) (10,521) __________________________________________________________________________________________ Cash flows from financing activities: Short-term borrowings, net (3,342) (13,570) Current maturities and long-term debt Additions 15,109 34,414 Reductions (35,452) (3,321) Cash dividends paid on common stock (9,319) (8,741) Common stock issued-options 1,586 3,615 Other financing activities (221) - __________________________________________________________________________________________ Net cash provided (used) by financing activities (31,639) 12,397 __________________________________________________________________________________________ Effect of exchange rate changes on cash 45 (593) __________________________________________________________________________________________ Net (decrease) in cash and cash equivalents (9,842) (8,525) Cash and cash equivalents at beginning of period 43,550 58,740 __________________________________________________________________________________________ Cash and cash equivalents at end of period $ 33,708 $ 50,215 __________________________________________________________________________________________ __________________________________________________________________________________________ Reclassified
See accompanying notes to consolidated financial statements. REVIEW OF OPERATIONS BY GROUP (Unaudited)
Three Months Ended SALES March 31 (In millions ) 1995 1994 __________________________________________________________________________________________ Metal Reclamation and Mill Services $ 141.7 $ 118.0 Infrastructure and Construction * 93.0 91.4 Process Industry Products 122.2 109.3 __________________________________________________________________________________________ Total $ 356.9 $ 318.7 __________________________________________________________________________________________ __________________________________________________________________________________________
INCOME BEFORE TAX Three Months Ended AND MINORITY INTEREST March 31 (In millions ) 1995 1994 __________________________________________________________________________________________ Group operating profit: Metal Reclamation and Mill Services $ 14.1 $ 5.3 Infrastructure and Construction * 3.6 2.6 Process Industry Products 12.5 11.0 __________________________________________________________________________________________ 30.2 18.9 Facilities discontinuance and reorganization costs (1.2) (0.1) __________________________________________________________________________________________ Total group operating profit 29.0 18.8 Equity in income of unconsolidated entities 18.5 15.0 Gain on sale of investments - 5.9 Claim settlements - 3.8 Interest expense (7.5) (8.3) Unallocated income (expense) 3.5 (1.0) __________________________________________________________________________________________ Total pre-tax income $ 43.5 $ 34.2 __________________________________________________________________________________________ __________________________________________________________________________________________
*Note: Effective January 1, 1995, the Infrastructure, Construction and Transportation Group was renamed the Infrastructure and Construction Group due to the Company's announced exit from the school bus business. School bus sales and operating results are included under this Group. Cash payments for interest on all debt, net of amounts capitalized were $7,510,000 for the first quarter of 1995 and $9,159,000 for the first quarter of 1994. Cash payments for income taxes were $5,981,000 for the first quarter of 1995 and $7,018,000 for the first quarter of 1994. Notes to Consolidated Financial Statements __________________________________________ Receivables: As of March 31, 1995, Receivables include $62,415,000 of unbilled receivables representing the Company's claim against the U.S. Government for Federal Excise Taxes and related claims on the five-ton truck contract. See "Commitments and Contingencies" for additional disclosure on this claim. Commitments and Contingencies: Federal Excise Tax and Other Matters Related to the Five-ton Truck Contract: Subsequent to the award of the five-ton truck contract in 1986, the Federal Excise Tax (FET) law, which was due to expire on October 1, 1988, was extended. The Company and its legal counsel consider that the excise tax required to be paid by the extension of the law constitutes an after-imposed tax and therefore is subject to recovery by a price adjustment. In January 1993, the Armed Services Board of Contract Appeals decided in favor of the Company's position, ruling that Harsco is entitled to a price adjustment to the contract to reimburse FET paid on vehicles that were to be delivered after October 1, 1988. The Government filed a motion requesting the Armed Services Board of Contract Appeals to reopen the proceedings to admit additional evidence or alternatively to reconsider its decision. On February 25, 1994, the Armed Services Board of Contract Appeals denied the Government's motions. In June 1994, the Government appealed these decisions to the Court of Appeals for the Federal Circuit, but voluntarily withdrew its appeal effective August 16, 1994. On February 23, 1995, the Government filed another motion to reopen the proceedings at the Armed Services Board of Contract Appeals to allow additional discovery or alternatively, to reconsider its decision. The Company will oppose this motion. The Government might also seek to overturn the decision in a separate legal action based upon the results of the continuing investigation described below. As previously reported, the Company had already anticipated prevailing on its claims and recorded as an account receivable the amount of the FET it has paid on these vehicles of approximately $47 million, and the related claim arising from changes in shipment destinations of approximately $15 million. The January 1993 decision only rules upon the Company's claim for reimbursement of the taxes paid without establishing the specific amount of the reimbursement. Subject to the Company prevailing against the Government motions and any other legal challenges to the judgment, the government contracting officer will be required to determine the proper amount of the price adjustment consistent with the ruling. Under applicable law, interest also accrues on the amount owed. Although the January 1993 decision does not directly deal with the claim for $15 million on the related destination change issue, the Company believes that the ruling resolves the key factual issues in that claim in favor of Harsco as well. The Company continues to anticipate favorable resolution with respect to both claims and continues to negotiate with the Government. Final resolution of the issues in favor of the Company would not result in the recording of additional income other than any interest received, but would have a positive cash flow effect. To the extent that any portion of the FET and related claims is not recovered, additional losses on the contract will have to be recognized which could have a material effect on quarterly or annual operating results. The Commercial Litigation Branch of the Department of Justice is continuing an investigation with respect to the facts underlying the Company's claim for reimbursement of Federal Excise Tax payments and its related claim regarding destination changes. In addition, the investigation is examining the way the Company charged the Army for sales of certain cargo truck models for which the Company did not pay Federal Excise Tax based upon an exemption in the law. If the Government files a civil action against the Company as a result of the civil investigation, it may seek various remedies including forfeiture by the Company of its claims for reimbursement of FET and related claims, treble damages, and civil penalties. In a related matter, the Internal Revenue Service is reviewing Harsco's position that certain cargo truck models are not taxable due to a provision in the tax law that exempts trucks having a gross vehicle weight of 33,000 pounds or less, and has tentatively concluded that they appear to be taxable. If the Internal Revenue Service asserts that tax is due on these vehicles, the total claim could be $39 million plus interest and penalty, if any. The Company plans to vigorously contest any such tax deficiency. Although there is risk of an adverse outcome, the Company and its counsel believe that these trucks are not taxable. Even if they are held to be taxable, the Company and its counsel believe the Government would be obligated to reimburse the Company for the majority of the tax, because it would constitute an after-imposed tax that would be subject to the ruling of the Armed Services Board of Contract Appeals discussed above, resulting in a net maximum liability for Harsco of $16 million plus interest and penalty, if any. M9 Armored Combat Earthmover Claim: The Company and its legal counsel are of the opinion that the U.S. Government did not exercise option three under the M9 Armored Combat Earthmover (ACE) contract in a timely manner, with the result that the unit price for options three, four and five are subject to renegotiation. Claims reflecting the Company's position have been filed with respect to all options purported to be exercised, totalling in excess of $60 million plus interest. No recognition has been given in the accompanying financial statements for any recovery on these claims. The Company is awaiting a decision on its Motion for Summary Judgment relating to the late option exercise that is now pending before the Armed Services Board of Contract Appeals. In addition, the Company negotiated a settlement with the U.S. Government of a smaller outstanding claim concerning this contract which provided for payment of $3.8 million by the U.S. Government to Harsco. The Company recognized such amount as other revenue in the Consolidated Statements of Income in the first quarter of 1994 and payment has been received. Other Litigation: On March 13, 1992, the U.S. Government filed a counterclaim against the Company in a civil suit alleging violations of the False Claims Act and breach of a contract to supply M109A2 Self-Propelled Howitzers. The counterclaim was filed in the United States Claims Court along with the Government's answer to the Company's claim of approximately $5 million against the Government for costs incurred on this contract relating to the same issue. The Government claims breach of contract damages of $7.3 million and in addition seeks treble that amount under the False Claims Act plus unquantified civil penalties which the Company estimates to be approximately $3.3 million. The Company and its counsel believe it is unlikely that resolution of these claims will have a material adverse effect on the Company's financial position, however, it could have a material effect on quarterly or annual results of operations. Iran's Ministry of Defense initiated arbitration procedures against the Company in 1991 under the rules of the International Chamber of Commerce for damages allegedly resulting from breach of various contracts executed by the Company and the Ministry of Defense between 1970 and 1978. The contracts were terminated in 1978 and 1979 during the period of civil unrest in Iran that preceded the Iranian revolution. Iran has asserted a claim under one contract for repayment of a $7.5 million advance payment it made to the Company, plus interest at 12% through June 27, 1991 in the amount of $25.3 million. Iran has also asserted a claim for damages under other contracts for $76.3 million. The Company has asserted various defenses and also has filed counterclaims against Iran for damages in excess of $7.5 million which it sustained as a result of Iran's breach of contract, plus interest. The Company's management and its counsel believe it is unlikely that resolution of these claims will have a material adverse effect on the Company's financial position or results of operations. In 1992, the United States Government through its Defense Contract Audit Agency commenced an audit of certain contracts for sale of tracked vehicles by the Company to foreign governments, which were financed by the United States Government through the Defense Security Assistance Agency. The Company cooperated with the audit and responded to a number of issues raised by the audit. In September 1994, the Company received a subpoena issued by the Department of Defense Inspector General seeking various documents relating to sale contracts between the Company and foreign governments which were funded by the Defense Security Assistance Agency. The Company is continuing to cooperate and is responding to the subpoena. Although the Government has not clearly identified to the Company the focus of its investigation, based on discussions with the agent in charge, it appears that it focuses on whether the Company received progress payments in advance of the schedule permitted by the Defense Security Assistance Agency regulations and Company certifications. The Company's management and its counsel believe it is unlikely that this issue will have a material adverse effect on the Company's financial position or results of operations. In June 1994, the shareholder of the Ferrari Group, a Belgium holding company involved in steel mill services and other activities, filed a legal action in Belgium against Heckett MultiServ, S.A. and S.E.A.E., subsidiaries of MultiServ International N.V. (a subsidiary of Harsco Corporation). The action alleges that these two subsidiaries breached contracts arising from letters of intent signed in 1992 and 1993 concerning the possible acquisition of the Ferrari Group, claiming that the subsidiaries were obligated to proceed with the acquisition and failed to do so. The action seeks damages of 504 million Belgian Francs (approximately U.S. $17 million). The Company intends to vigorously defend against the action and believes that based on conditions contained in the letters of intent and other defenses it will prevail. The Company and its counsel believe that is unlikely that these claims will have a material adverse effect on the Company's financial position or results of operations. On August 29, 1994, the Company filed a legal action in the United States District Court for the Southern District of New York against certain former shareholders of MultiServ International N.V. seeking recovery of damages arising from misrepresentations which the Company claims were made to it in connection with its purchase of the MultiServ International N.V. stock on August 31, 1993. The Complaint seeks damages in an amount to be determined. On April 4, 1995, the court dismissed various elements of the Company's claims and allowed the Company to amend its complaint with respect to other elements. The Company intends to appeal this decision and to continue pursuing its claims. Environmental: The Company is involved in a number of environmental remediation investigations and clean-ups and, along with other companies, has been identified as a "potentially responsible party" for certain waste disposal sites. While each of these matters is subject to various uncertainties, it is probable that the Company will agree to make payments toward funding certain of these activities and it is possible that some of these matters will be decided unfavorably to the Company. The Company has evaluated its potential liability, and its financial exposure is dependent upon such factors as the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the allocation of cost among potentially responsible parties, the years of remedial activity required and the remediation methods selected. The Consolidated Balance Sheets at March 31, 1995 and December 31, 1994, include an accrual of $6.2 million for environmental matters. No additional charges were made to earnings for environmental matters during the first quarter of 1995. The first quarter of 1994 included charges to earnings amounting to $.1 million. The liability for future remediation costs is evaluated on a quarterly basis. Actual costs to be incurred at identified sites in future periods may vary from the estimates, given inherent uncertainties in evaluating environmental exposures. Subject to the imprecision in estimating future environmental costs, the Company does not expect that any sum it may have to pay in connection with environmental matters in excess of the amounts recorded or disclosed above would have a material adverse effect on its financial position or results of operations. Other: The Company is subject to various other claims, legal proceedings and investigations covering a wide range of matters that arose in the ordinary course of business. In the opinion of management, all such matters are adequately covered by insurance or by accruals, and if not so covered, are without merit or are of such kind, or involve such amounts, as would not have a material adverse effect on the financial position or results of operations of the Company. Opinion of Management: Financial information furnished herein, which is unaudited, reflects in the opinion of management all adjustments (all of which are of a recurring nature) that are necessary to present a fair statement of the interim period. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition Cash provided by operating activities was $46.6 million in the first quarter of 1995, reflecting, among other things, a $25.7 million decrease in accounts receivable which include the claim settlement of $20.4 million received from the U.S. Government and a $13.8 million increase in income taxes payable. During the first quarter, distributions of $3.3 million were received from unconsolidated entities. As previously reported, included in receivables is $62.4 million for amounts expended, or income not received, related to the Federal Excise Tax (FET) and related claims for the completed five-ton truck contract. Final resolution of the FET and related claims in favor of the Company would not result in the recording of additional income other than any interest received, but would have a positive cash flow effect. To the extent that any portion of the FET and related claims is not recovered, additional losses on the contract will have to be recognized, but there would be little impact on cash outflows. Cash used by investing activities included capital expenditures of $24.9 million and $3.2 million for the acquisition of Fabsco. Total consideration for Fabsco was $14.6 million with the assumption of debt and other liabilities. Cash flow used for financing activities included a net decrease in long-term debt of $20.4 million, which included the purchase at market of $10 million of the Company's outstanding 8-3/4% 10 year notes due May 1996, a $3.3 million reduction of short-term debt, and $9.3 million of cash dividends paid on common stock. Cash and cash equivalents decreased $9.8 million to $33.7 million at March 31, 1995. Other matters which could significantly affect cash flows in the future are discussed in the 1994 Annual Report to Shareholders under Note 10, "Commitments and Contingencies" and the updated "Notes to the Consolidated Financial Statements" include herein under Item 1. Harsco continues to maintain a good financial position, with net working capital of $230.6 million, down from the $254.3 million at December 31, 1994, principally due to the increase in income taxes payable related to higher earnings. Current assets amounted to $538.0 million, and current liabilities were $307.4 million, resulting in a current ratio of 1.8 to 1, slightly below the 1.9 to 1 at year-end 1994. With total debt at $355.2 million and equity at $596.3 million at March 31, 1995, the total debt as a percent of capital was 37.3%, which is lower than the 38.6% at December 31, 1994. The stock price range during the first quarter was $45 - 39 5/8. Harsco's book value per share at March 31, 1995, was $23.62, compared with $23.08 at year-end 1994. The Company's annualized return on equity for the first quarter of 1995 was 17.3%, compared with 15.7% for the year 1994. The return on assets was 15.4%, compared with the 13.5% for the year 1994. The annualized return on capital for the first quarter was 12.6%, compared with 11.0% for year 1994. The Company has available through a syndicate of banks a $150 million 364-day revolving line of credit and a $150 million, multi-currency five-year term line of credit. As of March 31, 1995, there were no borrowings outstanding under these facilities. The Company also has a commercial paper borrowing program under which it can issue up to $150 million of short-term notes in the U.S. commercial paper market. The Company limits the aggregate commercial paper and credit facility borrowings at any one time to a maximum $300 million. At March 31, 1995, the Company had outstanding $45.8 million in commercial paper. Harsco's outstanding notes are rated A by Standard & Poor's and Baa1 by Moody's. Harsco's commercial paper is rated A-1 by Standard & Poor's, F-1 by Fitch Investors Service and P-2 by Moody's. The Company also has on file, with the Securities and Exchange Commission, a Form S-3 shelf registration for the possible issuance of up to an additional $200 million of new debt securities, preferred stock or common stock. As indicated by the above, the Company's financial position and debt capacity should enable it to meet its current and future requirements. As additional resources are needed, the Company should be able to obtain funds at competitive costs. RESULTS OF OPERATIONS FIRST QUARTER OF 1995 COMPARED WITH FIRST QUARTER OF 1994 First quarter revenues of $375.9 million were 9% above last year's comparable period. The increase was primarily due to higher sales for metal reclamation and mill services, gas control and containment equipment, scaffolding, shoring and forming equipment, and to a lesser extent roofing granules and abrasives. Additionally, higher revenues included sales from an acquisition made in the first quarter of 1995, and increased income from the Company's equity investment in United Defense, L.P. These increases were partially offset by lower sales of railway maintenance equipment and process equipment. On a comparative basis, the Company recorded in 1994 a $5.9 million pre-tax gain on the sale of the remaining holdings of an investment in a marketable equity security and $3.8 million of revenues due to the negotiated settlement of a claim with the U.S. Government. Cost of sales increased, principally due to higher volume. Selling and administrative expenses increased, as a result of higher compensation costs, legal and business development costs, and, to a lesser extent, the inclusion of an acquired company. Income before taxes and minority interest was up 27% from the comparable period last year due to higher earnings. The effective income tax rate for 1995 is 40.0%, versus 43.7% in 1994. The lower income tax rate is primarily due to a reduction in losses sustained in certain foreign operations for which there is no tax benefit and increased tax benefits relating to export sales. Higher earnings in the first quarter of 1995 were due principally to improved results for metal reclamation and mill services, gas control and containment equipment, roofing granules and abrasives, as well as the Company's share of income in its equity investment in United Defense, L.P. Lower earnings were recorded for railway maintenance equipment and pipe fittings. Income benefited in 1995 from the impact of a pre-tax $5.1 million net foreign currency translation exchange gain arising from the decline in the U.S. Dollar against certain European currencies which more than offset a pre-tax $3.4 million foreign currency translation exchange loss due to the continued devaluation of the Mexican peso. On a comparative basis, favorably affecting 1994's first quarter's results were a gain on the sale of the remaining holdings of an investment in a marketable equity security and income resulting from the negotiated settlement of a claim with the U.S. Government. Finally, continuing losses during the planned shutdown of the school bus operation, approximated losses incurred in the first quarter of 1994. Net income of $25.5 million, was up 37% from the comparable period in 1994. This net income was the highest first quarter performance excluding accounting changes in prior first quarters. Sales of the Metal Reclamation and Mill Services Group, at $141.7 million, were significantly above 1994's first quarter, due to improved business conditions, particularly in Europe, as well as North America which was unfavorably affected in 1994 by severe winter weather. The favorable impact of the decline in the U.S. Dollar against certain European currencies also contributed to increased revenues for the Group. Sales for Infrastructure and Construction Group at $93.0 million, were slightly ahead of last year's similar period. Scaffolding equipment sales increased significantly from 1994. Sales for the Process Industry Products Group, at $122.2 million, were well ahead of the prior year's first quarter. The improvement included increased sales for most product classes, as well as sales from an acquisition made in the first quarter of 1995. Operating profit for the Metal Reclamation and Mill Services Group was significantly ahead of 1994's first quarter, despite $4.2 million of net foreign currency translation exchange losses due principally to the continued devaluation of the Mexican peso. The increase reflects improved business conditions, the favorable effects of cost reduction efforts, and the favorable impact of the decline in the U.S. Dollar against certain European currencies. The Infrastructure and Construction Group posted an operating profit of $3.6 million, which exceeded 1994's first quarter, as all product classes posted improved results, except railway maintenance equipment which benefited in 1994 from two large shipments to two international customers. On a comparative basis, continuing losses from the planned shutdown of the school bus operation, approximated losses incurred in the first quarter of 1994. Operating profit for the Process Industry Products Group, at $12.5 million, was up 14% from the prior year's first quarter and reflected significantly improved results for gas control and containment equipment which more than offset lower earnings for pipe fittings. HARSCO CORPORATION AND SUBSIDIARY COMPANIES PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Information on legal proceedings is included under Part I, Item 1., the section labeled "Commitments and Contingencies." ITEM 4. SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS a.) At the Annual Meeting of shareholders held on April 25, 1995 in Camp Hill, Pennsylvania, three members of the Board of Directors were reelected to terms expiring in 1998 under the classified Board structure enacted at the 1986 Annual Meeting. They include R. L. Kirk, Chairman, British Aerospace, Inc.; J. E. Marley, Chairman of AMP Inc.; and J. I. Scheiner, P.E., President of Benatec Associates Inc. The Board of Directors voting tabulation is as follows: For Withheld Name No. of Shares No. of Shares R. L. Kirk 21,270,462 102,240 J. E. Marley 21,263,313 109,389 J. I. Scheiner 21,234,831 137,871 Shareholders approved the 1995 Executive Incentive Compensation Plan by the following vote: 17,072,531 For, 2,643,655 Against, and 279,258 Abstain. Shareholders approved the 1995 Non-employee Directors' Stock Plan by the following vote: 17,613,644 For, 2,011,563 Against, and 370,237 Abstain. Shareholders also approved the appointment of Coopers & Lybrand as independent accountants to audit the accounts of the Company for the fiscal year ending December 31, 1995 by the following vote: 21,196,146 For, 80,845 Against, and 95,711 Abstain. ITEM 5. OTHER INFORMATION ACQUISITION: * On February 6, 1995, Harsco Corporation announced that it had completed the acquisition of substantially all of the assets of Fabsco, Inc. for a total consideration of $14.6 million in cash and assumed liabilities. Fabsco, Inc., with its main offices in Sapulpa, Oklahoma, manufactures heat exchange products and generates annual sales of approximately $22 million to the process industry cooler market. The operations of Fabsco will be integrated into the Patterson-Kelley Division of Harsco, and operated as a new business unit of that Division under the Fabsco name. DIVESTITURE: * In November 1994, the Board of Directors authorized the Company to exit from the school bus business and in January 1995, Harsco Corporation announced that it would close its school bus manufacturing division in Marysville, Ohio. * On January 31, 1995, Harsco Corporation announced that it had signed a letter of intent to sell the assets of its school bus manufacturing business in Marysville, Ohio, to Warrick Industries for an undisclosed price. The transaction was contingent upon the early finalization of a definitive agreement and completion of statutory filing requirements. * On February 15, 1995, Harsco Corporation announced that discussions regarding the proposed sale of its school bus business to Warrick Industries, Inc. have terminated due to Warrick's inability to complete its required purchase commitment contingencies. DIVIDEND ACTION: * On March 16, 1995, Harsco Corporation announced that the Board of Directors declared a quarterly cash dividend of 37 cents per share, payable May 15, 1995, to shareholders of record on April 14, 1995. DIRECTOR RETIREMENTS: * On April 25, 1995, DeWitt C. Smith, Jr. and Frank E. Masland III retired from the Company's Board of Directors bringing the total number of directors to 10. ITEM 6(a). EXHIBITS The following exhibits are attached: a.) Exhibit No. 11 Computation of Fully Diluted Net Income Per Common Share. b.) Exhibit No. 12 Computation of Ratios of Earnings to Fixed Charges. c.) An 8-K was filed on January 11 reporting that the Government and the Company agreed to settle various claims on completed contracts for $20,400,000. The related income was recognized in 1994. d.) An 8-K was filed on January 20, announcing that the Company plans to close its school bus manufacturing division in Marysville, Ohio. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HARSCO CORPORATION ________________________ (Registrant) DATE_______________________ /S/ Leonard A. Campanaro ________________________ Leonard A. Campanaro Senior Vice President and Chief Financial Officer DATE_______________________ /S/ Salvatore D. Fazzolari __________________________ Salvatore D. Fazzolari Vice President and Controller HARSCO CORPORATION COMPUTATION OF FULLY DILUTED NET INCOME PER COMMON SHARE (dollars in thousands except per share) _______________________________________
3 MONTHS ENDED MARCH 31 1995 1994 ___________ ___________ Net income $ 25,460 $ 18,628 __________ __________ __________ __________ Average shares of common stock outstanding used to compute primary earnings per common share 25,202,429 25,012,305 Additional common shares to be issued assuming exercise of stock options, net of shares assumed reacquired 107,161 179,820 __________ __________ Shares used to compute dilutive effect of stock options 25,309,590 25,192,125 __________ __________ __________ __________ Fully diluted net income per common share $ 1.01 $ .74 _____ _____ _____ _____ Net income per common share as reported in report to shareholders $ 1.01 $ .74 _____ _____ _____ _____
HARSCO CORPORATION Computation of Ratios of Earnings to Fixed Charges (In Thousands of Dollars)
Three YEARS ENDED DECEMBER 31 Months ________________________________________________________________ Ended 1990 1991 1992 1993 1994 3/31/95 ________ ________ ________ ________ ________ ________ Consolidated Earnings: Pre-tax income from continuing operations $ 115,587 $ 119,647 $ 140,576 $ 137,151 $ 146,089 $ 42,874 Add fixed charges computed below 21,864 23,544 22,425 23,879 37,982 8,380 Net adjustments for equity companies (532) (439) (454) (363) (134) (3,690) Net adjustments for capitalized interest (255) (469) (134) (172) (274) - ________ ________ ________ ________ ________ ________ Consolidated Earnings Available for Fixed Charges $ 136,664 $ 142,283 $ 162,413 $ 160,495 $ 183,663 $ 47,564 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ Consolidated Fixed Charges: Interest expense per financial statements $ 17,506 $ 18,925 $ 18,882 $ 19,974 $ 34,048 $ 7,510 Interest expense capitalized 345 574 355 332 338 50 Portion of rentals (1/3) representing an interest factor 4,013 4,045 3,188 3,573 3,576 820 Interest expense for equity companies whose debt is guaranteed - - - - - - ________ ________ ________ ________ ________ ________ Consolidated Fixed Charges $ 21,864 $ 23,544 $ 22,425 $ 23,879 $ 37,982 $ 8,380 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ Consolidated Ratio of Earnings to Fixed Charges 6.25 6.04 7.24 6.72 4.84 5.68 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 1992 excludes the cumulative effect of change in accounting method for postretirement benefits other than pensions. Includes amortization of debt discount and expense. No fixed charges were associated with debt of less than fifty percent owned companies guaranteed by Harsco during the five year period 1990 through 1994, and the three months ended March 31, 1995.
EX-27 2
5 1000 3-MOS DEC-31-1995 MAR-31-1995 33,708 0 350,126 (7,964) 136,807 537,995 1,023,529 (575,488) 1,331,523 307,385 326,430 40,522 0 0 555,735 1,331,523 356,879 375,942 276,897 326,394 0 733 7,510 43,535 17,414 25,460 0 0 0 25,460 1.01 1.01
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