Harsco Corp. (HSC, Financial) filed Quarterly Report for the period ended 2009-09-30.
Harsco Corporation is a services and engineered products company. The principal lines of business are: mill services that are provided to steel and non-ferrous metal producers; gas control and containment products; scaffolding services; railway maintenance of way services and equipment; and several other lines of business including process equipment industrial grating and bridge decking industrial pipe fittings slag abrasives and roofing granules. Harsco Corp. has a market cap of $2.57 billion; its shares were traded at around $31.98 with a P/E ratio of 18.1 and P/S ratio of 0.6. The dividend yield of Harsco Corp. stocks is 2.5%. Harsco Corp. had an annual average earning growth of 8.9% over the past 10 years. GuruFocus rated Harsco Corp. the business predictability rank of 2.5-star.
Revenues for the first nine months of 2009 were $2.2 billion, a decrease of $914.2 million or 29% from the first nine months of 2008. Operating income from continuing operations was $164.0 million compared with $379.1 million in the first nine months of 2008, a 57% decrease. Diluted earnings per share from continuing operations were $1.17, a 57% decrease from the first nine months of 2008. Foreign currency translation decreased revenues and operating income for the first nine months of 2009 by $309.0 million and $32.8 million, respectively, in comparison with the first nine months of 2008. Revenues from emerging markets were approximately 21% of total revenues for the first nine months of both 2009 and 2008.
The Company continues to have significant available liquidity and remains well-positioned from a financial flexibility perspective. Net cash from operations for the third quarter and the first nine months of 2009 is less than comparable periods in 2008, but was offset by decreased capital expenditures compared with prior years. This has allowed the Company to further enhance its balance sheet, maintain its dividend, reduce debt to the extent possible under borrowing agreements and pursue prudent, bolt-on acquisitions that are consistent with the Company s growth strategies. During the third quarter of 2009, the Company generated net cash from operating activities of $120.4 million, compared with $171.6 million achieved in the third quarter of 2008. For the first nine months of 2009, the Company generated net cash from operating activities of $276.7 million compared with $382.0 million for the first nine months of 2008. For the first nine months of 2009, capital expenditures were $123.1 million compared with $380.9 million in the first nine months of 2008. Cash flow from operations for all of 2009 is expected to be approximately $400 million and total capital expenditures are expected to be approximately $150 million. The Company s cash flows are further discussed in the Liquidity and Capital Resources section.
The Harsco Infrastructure Segment recorded lower revenue and operating income in the third quarter and first nine months of 2009 compared to similar periods in 2008. The reductions in 2009 were due principally to reduced end-market demand, particularly in the United Kingdom, North America and several other key European countries, and negative foreign currency translation effects. Lower demand is being driven by the continued lack of available credit that has resulted in cancelled and delayed nonresidential construction projects, as well as a significant decline in export sales of infrastructure-related equipment. This Segment s revenues in the third quarter of 2009 were $279.5 million compared with $393.3 million in the third quarter of 2008, a 29% decrease. Operating income decreased by 63% to $22.5 million, from $60.0 million in the third quarter of 2008. Operating margins for the Segment declined by 720 basis points to 8.1% from 15.3% in the third quarter of 2008. In comparison with the first nine months of 2008, this Segment s revenue decreased by 27% to $872.0 million. Operating income in the first nine months of 2009 declined by 58% to $66.3 million from $156.0 million in the first nine months of 2008, and operating margins declined 540 basis points to 7.6% from 13.0%. Foreign currency translation decreased revenues and operating income for the first nine months of 2009 by $134.4 million and $16.7 million, respectively, in comparison with the first nine months of 2008. Harsco Infrastructure accounted for 38% and 39% of the Company s revenues for the third quarter and the first nine months of 2009, respectively; and 40% of the operating income for both the third quarter and first nine months of 2009.
year-over-year sales; negative foreign currency translation contributed 31% of the decline; and the remainder was attributable to the revenue reversal adjustment. Including this adjustment, this Segment generated operating losses of $4.4 million and $3.0 million during the third quarter and first nine months of 2009, respectively. This is compared with operating income of $33.3 million and $99.6 million in the third quarter and first nine months of 2008, respectively. Foreign currency translation decreased revenues and operating income for the first nine months of 2009 by $156.6 million and $13.9 million, respectively, in comparison with the first nine months of 2008. Harsco Metals accounted for 37% and 35% of the Company s revenues for the third quarter and the first nine months of 2009, respectively.
The All Other Category (“Harsco Minerals & Rail”), revenues in the third quarter of 2009 were $189.6 million compared with $227.7 million in the third quarter of 2008, a decrease of 17%. Operating income decreased by 6% to $39.6 million, from $42.0 million in the third quarter of 2008 due principally to volume and commodity price declines in the minerals business and an overall market decline in the industrial grating products business. Despite the revenue and income decline, operating margins for the All Other Category increased by 250 basis points to 20.9% from 18.4% in the third quarter of 2008. Comparing the first nine months of 2009 to the first nine months of 2008, revenues decreased 11% to $573.0 million from $644.8 million, respectively, and operating income decreased 17% to $105.7 million from $128.0 million, respectively. Operating margins for the first nine months of 2009 decreased 130 basis points to 18.5% from 19.8% in the first nine months of 2008. The Harsco Rail business recorded increased revenues in the third quarter and first nine months of 2009 compared with the prior year periods due to shipments of equipment to China under contracts with the China Ministry of Railways. The minerals business continued to be adversely impacted by a lack of metals production and fluctuating commodity prices and the industrial products business experienced an overall market decline as customers reduced stock levels from high 2008 inventory levels. The All Other Category accounted for 26% of the Company s revenues for both the third quarter and first nine months of 2009; and 70% and 65% of the operating income for the third quarter and first nine months of 2009, respectively.
Read the The complete ReportHSC is in the portfolios of John Keeley of Keeley Fund Management.
Harsco Corporation is a services and engineered products company. The principal lines of business are: mill services that are provided to steel and non-ferrous metal producers; gas control and containment products; scaffolding services; railway maintenance of way services and equipment; and several other lines of business including process equipment industrial grating and bridge decking industrial pipe fittings slag abrasives and roofing granules. Harsco Corp. has a market cap of $2.57 billion; its shares were traded at around $31.98 with a P/E ratio of 18.1 and P/S ratio of 0.6. The dividend yield of Harsco Corp. stocks is 2.5%. Harsco Corp. had an annual average earning growth of 8.9% over the past 10 years. GuruFocus rated Harsco Corp. the business predictability rank of 2.5-star.
Highlight of Business Operations:
The Company s third quarter 2009 revenues from continuing operations totaled $744.2 million, a decrease of $300.7 million or 29% from the third quarter of 2008. The Company experienced lower volume levels resulting from a deterioration of global steel markets and weaker demand for infrastructure services, particularly in the United Kingdom, North America and several other key European countries. Foreign currency translation decreased sales by $53.2 million and accounted for approximately 18% of the decline in sales. Operating income from continuing operations was $56.4 million compared with $133.9 million in 2008, a decrease of 58%. Diluted earnings per share from continuing operations were $0.40, a 60% decrease from 2008. Third quarter 2009 results also included a net non-cash charge of $0.11 per share for adjustments to correct errors generated principally by the improper recognition of certain revenues and delaying the recognition of certain expenses by one subsidiary, in one country, during the past three years. The Company assessed the individual and aggregate impact of these adjustments on the current year and all prior periods and determined that the cumulative effect of the adjustments was not material to the full year 2009 results and it did not result in a material misstatement to any previously issued annual or quarterly financial statements. Consequently, the Company recorded the net adjustment in the current quarter and has not revised any previously issued annual financial statements or interim financial data.Revenues for the first nine months of 2009 were $2.2 billion, a decrease of $914.2 million or 29% from the first nine months of 2008. Operating income from continuing operations was $164.0 million compared with $379.1 million in the first nine months of 2008, a 57% decrease. Diluted earnings per share from continuing operations were $1.17, a 57% decrease from the first nine months of 2008. Foreign currency translation decreased revenues and operating income for the first nine months of 2009 by $309.0 million and $32.8 million, respectively, in comparison with the first nine months of 2008. Revenues from emerging markets were approximately 21% of total revenues for the first nine months of both 2009 and 2008.
The Company continues to have significant available liquidity and remains well-positioned from a financial flexibility perspective. Net cash from operations for the third quarter and the first nine months of 2009 is less than comparable periods in 2008, but was offset by decreased capital expenditures compared with prior years. This has allowed the Company to further enhance its balance sheet, maintain its dividend, reduce debt to the extent possible under borrowing agreements and pursue prudent, bolt-on acquisitions that are consistent with the Company s growth strategies. During the third quarter of 2009, the Company generated net cash from operating activities of $120.4 million, compared with $171.6 million achieved in the third quarter of 2008. For the first nine months of 2009, the Company generated net cash from operating activities of $276.7 million compared with $382.0 million for the first nine months of 2008. For the first nine months of 2009, capital expenditures were $123.1 million compared with $380.9 million in the first nine months of 2008. Cash flow from operations for all of 2009 is expected to be approximately $400 million and total capital expenditures are expected to be approximately $150 million. The Company s cash flows are further discussed in the Liquidity and Capital Resources section.
The Harsco Infrastructure Segment recorded lower revenue and operating income in the third quarter and first nine months of 2009 compared to similar periods in 2008. The reductions in 2009 were due principally to reduced end-market demand, particularly in the United Kingdom, North America and several other key European countries, and negative foreign currency translation effects. Lower demand is being driven by the continued lack of available credit that has resulted in cancelled and delayed nonresidential construction projects, as well as a significant decline in export sales of infrastructure-related equipment. This Segment s revenues in the third quarter of 2009 were $279.5 million compared with $393.3 million in the third quarter of 2008, a 29% decrease. Operating income decreased by 63% to $22.5 million, from $60.0 million in the third quarter of 2008. Operating margins for the Segment declined by 720 basis points to 8.1% from 15.3% in the third quarter of 2008. In comparison with the first nine months of 2008, this Segment s revenue decreased by 27% to $872.0 million. Operating income in the first nine months of 2009 declined by 58% to $66.3 million from $156.0 million in the first nine months of 2008, and operating margins declined 540 basis points to 7.6% from 13.0%. Foreign currency translation decreased revenues and operating income for the first nine months of 2009 by $134.4 million and $16.7 million, respectively, in comparison with the first nine months of 2008. Harsco Infrastructure accounted for 38% and 39% of the Company s revenues for the third quarter and the first nine months of 2009, respectively; and 40% of the operating income for both the third quarter and first nine months of 2009.
year-over-year sales; negative foreign currency translation contributed 31% of the decline; and the remainder was attributable to the revenue reversal adjustment. Including this adjustment, this Segment generated operating losses of $4.4 million and $3.0 million during the third quarter and first nine months of 2009, respectively. This is compared with operating income of $33.3 million and $99.6 million in the third quarter and first nine months of 2008, respectively. Foreign currency translation decreased revenues and operating income for the first nine months of 2009 by $156.6 million and $13.9 million, respectively, in comparison with the first nine months of 2008. Harsco Metals accounted for 37% and 35% of the Company s revenues for the third quarter and the first nine months of 2009, respectively.
The All Other Category (“Harsco Minerals & Rail”), revenues in the third quarter of 2009 were $189.6 million compared with $227.7 million in the third quarter of 2008, a decrease of 17%. Operating income decreased by 6% to $39.6 million, from $42.0 million in the third quarter of 2008 due principally to volume and commodity price declines in the minerals business and an overall market decline in the industrial grating products business. Despite the revenue and income decline, operating margins for the All Other Category increased by 250 basis points to 20.9% from 18.4% in the third quarter of 2008. Comparing the first nine months of 2009 to the first nine months of 2008, revenues decreased 11% to $573.0 million from $644.8 million, respectively, and operating income decreased 17% to $105.7 million from $128.0 million, respectively. Operating margins for the first nine months of 2009 decreased 130 basis points to 18.5% from 19.8% in the first nine months of 2008. The Harsco Rail business recorded increased revenues in the third quarter and first nine months of 2009 compared with the prior year periods due to shipments of equipment to China under contracts with the China Ministry of Railways. The minerals business continued to be adversely impacted by a lack of metals production and fluctuating commodity prices and the industrial products business experienced an overall market decline as customers reduced stock levels from high 2008 inventory levels. The All Other Category accounted for 26% of the Company s revenues for both the third quarter and first nine months of 2009; and 70% and 65% of the operating income for the third quarter and first nine months of 2009, respectively.
Read the The complete ReportHSC is in the portfolios of John Keeley of Keeley Fund Management.
