- First Quarter Revenues Totaled $529 Million, An Increase Compared with Both the Sequential and Prior Year Quarters
- Q1 GAAP Operating Income Of $25 Million And GAAP Diluted Earnings Per Share Of $0.02
- Q1 Adjusted Earnings Per Share Of $0.15
- Adjusted Q1 EBITDA Totaled $66 Million; Exceeding Previous Guidance Range and Prior-Year Performance
- Completed Successful Debt Refinancing in Quarter; Transaction Provides Interest Savings, Extends Maturities and Strengthens Financial Position
- 2021 Adjusted EBITDA Guidance Increased to Between $295 Million and $310 Million, Versus A Prior Range Of $275 Million To $295 Million; Change Reflects Improving Markets in Each Business Segment
CAMP HILL, Pa. – (May 4, 2021) - Harsco Corporation (NYSE: HSC) today reported first quarter 2021 results. On a U.S. GAAP ("GAAP") basis, first quarter of 2021 diluted earnings per share from continuing operations were $0.02 including a loss on the debt refinancing. Adjusted diluted earnings per share from continuing operations in the first quarter of 2021 were $0.15. These figures compare with first quarter of 2020 GAAP diluted loss per share from continuing operations of $0.11 and adjusted diluted earnings per share from continuing operations of $0.16.
GAAP operating income from continuing operations for the first quarter of 2021 was $25 million. Adjusted EBITDA totaled $66 million in the quarter, compared to the Company's previously provided guidance range of $52 million to $58 million.
“Harsco delivered solid operational and financial performance in the first quarter, exceeding expectations in each of our businesses,” said Chairman and CEO Nick Grasberger. “Our results reflect strong execution by our team together with improving conditions across our end markets, including in Rail. Based on our first quarter performance and improving market visibility, we are raising our full-year 2021 guidance.”
“There is significant momentum currently within the Company and our near-term priorities, including acquisition integration and strengthening our financial position, remain unchanged. I am proud of our progress to advance our strategic goals, and believe that each of our business segments is well positioned to benefit as the economic recovery continues. We look forward to continuing our business transformation and positioning Harsco to pursue growth and to drive enhanced value for shareholders in the future.”
Harsco Corporation—Selected First Quarter Results
|($ in millions, except per share amounts)||Q1 2021||Q1 2020||Q4 2020|
|Revenues||$ 529||$ 399||$ 508|
|Operating income from continuing operations - GAAP||$ 25||$ 3||$ 11|
|Diluted EPS from continuing operations - GAAP||$ 0.02||$ (0.11)||$ (0.07)|
|Adjusted EBITDA - excluding unusual items||$ 66||$ 57||$ 62|
|Adjusted EBITDA margin - excluding unusual items||12.4 %||14.4 %||12.3 %|
|Adjusted diluted EPS from continuing operations - excluding unusual items||$ 0.15||$ 0.16||$ 0.12|
Note: Adjusted earnings per share and adjusted EBITDA details presented throughout this release are adjusted for unusual items; in addition, adjusted earnings per share details are adjusted for acquisition-related amortization expense.
Consolidated First Quarter Operating Results
Consolidated total revenues from continuing operations were $529 million, an increase of 33 percent compared with the prior-year quarter due to the acquisition of ESOL in April 2020 as well as revenue growth in Environmental and Rail. Foreign currency translation positively impacted first quarter 2021 revenues by approximately $9 million compared with the prior-year period.
GAAP operating income from continuing operations was $25 million for the first quarter of 2021, compared with $3 million in the same quarter of last year. Meanwhile, adjusted EBITDA totaled $66 million in the first quarter of 2021 versus $57 million in the first quarter of 2020. This EBITDA increase is attributable to improved results in the Environmental segment as well as ESOL contributions to the Clean Earth segment following its acquisition in Q2 2020.
First Quarter Business Review
|($ in millions)||Q1 2021||Q1 2020||Q4 2020|
|Revenues||$ 258||$ 242||$ 246|
|Operating income - GAAP||$ 26||$ 11||$ 23|
|Adjusted EBITDA - excluding unusual items||$ 54||$ 43||$ 52|
|Adjusted EBITDA margin - excluding unusual items||20.8 %||17.8 %||21.2 %|
Environmental revenues totaled $258 million in the first quarter of 2021, an increase of 7 percent compared with the prior-year quarter. This increase is attributable to improved demand for environmental services and applied products as well as favorable foreign exchange movements. The segment's GAAP operating income and adjusted EBITDA totaled $26 million and $54 million, respectively, in the first quarter of 2021. These figures compare with GAAP operating income of $11 million and adjusted EBITDA of $43 million in the prior-year period. Higher demand, a more favorable mix of services and lower general and administrative spending contributed to the improvement in adjusted earnings. Results also benefited from the recovery of Brazil sales tax expenses, totaling approximately $2 million, which were not anticipated in the quarter. Lastly, Environmental's adjusted EBITDA margin increased to 20.8 percent in the first quarter of 2021 versus 17.8 percent in the comparable-quarter of 2020.
|($ in millions)||Q1 2021||Q1 2020||Q4 2020|
|Revenues||$ 189||$ 79||$ 185|
|Operating income - GAAP||$ 3||$ 4||$ 3|
|Adjusted EBITDA - excluding unusual items||$ 15||$ 11||$ 16|
|Adjusted EBITDA margin - excluding unusual items||7.7 %||13.7 %||8.6 %|
Note: The 2020 financial information provided above and discussed below for Clean Earth does not include a corporate cost allocation for ESOL.
Clean Earth revenues totaled $189 million in the first quarter of 2021, compared with $79 million in the prior-year quarter, with the increase attributable to the ESOL acquisition in Q2 2020. Segment operating income was $3 million and adjusted EBITDA totaled $15 million in the first quarter of 2021. These figures compare with $4 million and $11 million, respectively, in the prior-year period. The improvement in adjusted earnings relative to the prior-year quarter can be attributed to ESOL's contributions in the current year. This benefit was partially offset by personnel investments to support the full integration of the Clean Earth platform and other administrative expenses, some which will not occur beyond 2021, as well as lower services demand and a less favorable business mix principally within the contaminated materials business as a result of the pandemic.
|($ in millions)||Q1 2021||Q1 2020||Q4 2020|
|Revenues||$ 82||$ 78||$ 77|
|Operating income (loss) - GAAP||$ 5||$ 6||$ 1|
|Adjusted EBITDA - excluding unusual items||$ 6||$ 8||$ 3|
|Adjusted EBITDA margin - excluding unusual items||7.3 %||9.9 %||3.3 %|
Rail revenues increased 4 percent compared with the prior-year quarter to $82 million. This change reflects higher equipment and contract services revenues, partially offset by lower aftermarket parts sales. The segment's operating income and adjusted EBITDA totaled $5 million and $6 million, respectively, in the first quarter of 2021. These figures compare with $6 million and $8 million, respectively, in the prior-year quarter. The EBITDA change year-on-year is attributable to lower aftermarket parts contribution as well as a less favorable sales mix.
Net cash used by operating activities totaled $23 million in the first quarter of 2021, compared with net cash used by operating activities of $12 million in the prior-year period. Free cash flow was $(32) million in the first quarter of 2021, compared with $(26) million in the prior-year period.
The change in free cash flow compared with the prior-year quarter is attributable to changes in net cash from operating activities, including the impact of higher interest payments linked to the ESOL acquisition and the timing of working capital items, partially offset by lower net capital spending.
The Company's has increased its 2021 guidance to reflect business momentum and improved visibility in each of its businesses, relative to the outlook provided with the Company's fourth quarter 2020 results. Comments by business segments are as follows:
Environmental outlook is improved to reflect higher services and applied products demand, increased commodity prices and lower administrative spending. For the year, the primary drivers for an increase in adjusted EBITDA compared with 2020 are expected to be favorable demand for underlying services and products as well as higher commodity prices.
Clean Earth outlook is improved to reflect increasing demand for hazardous waste processing services and stronger margin performance. For the year, adjusted EBITDA is projected to increase due to the full-year impact of ESOL ownership, underlying organic growth for hazardous material services and integration benefits, partially offset by an additional allocation of Corporate costs and investments which include various one-time expenditures. Further, performance in the contaminated materials line of business is expected to strengthen in the coming quarters as a result of favorable trends within regional non-residential construction markets.
Rail outlook is improved principally as a result of strengthening demand for rail maintenance equipment as well as aftermarket parts, including in Asia. For the year, the primary drivers for an increase in adjusted EBITDA versus 2020 remain higher anticipated demand for equipment and technology products as well as higher contract services contributions.
Lastly, Corporate spending is expected to range from $36 million to $37 million for the year.
Summary Outlook highlights are as follows:
2021 Full Year Outlook
|GAAP Operating Income||$120 - $135 million|
|Adjusted EBITDA||$295 - $310 million|
|GAAP Diluted Earnings Per Share||$0.45 - 0.59|
|Adjusted Diluted Earnings Per Share||$0.82 - 0.96|
|Free Cash Flow Before Growth Capital||$95 - $115 million|
|Free Cash Flow||$35 - $55 million|
|Net Interest Expense||$62 - $63 million|
|Net Capital Expenditures||$150 - $170 million|
|Effective Tax Rate, Excluding Any Unusual Items||34 - 36%|
Q2 2021 Outlook
|GAAP Operating Income||$29 - $35 million|
|Adjusted EBITDA||$73 - $79 million|
|GAAP Diluted Earnings Per Share||$0.13 - 0.19|
|Adjusted Diluted Earnings Per Share||$0.21 - 0.27|
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 (877) 783-8494 or (614) 999-1829.
Enter Conference ID number 7159057.
The nature of the Company's business, together with the number of countries in which it operates, subject it to changing economic, competitive, regulatory and technological conditions, risks and uncertainties. In accordance with the "safe harbor" provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, the Company provides the following cautionary remarks regarding important factors that, among others, could cause future results to differ materially from the results contemplated by forward-looking statements, including the expectations and assumptions expressed or implied herein. Forward-looking statements contained herein could include, among other things, statements about management's confidence in and strategies for performance; expectations for new and existing products, technologies and opportunities; and expectations regarding growth, sales, cash flows, and earnings. Forward-looking statements can be identified by the use of such terms as "may," "could," "expect," "anticipate," "intend," "believe," "likely," "estimate," "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 changes in general economic conditions or changes due to COVID-19 and governmental and market reactions to COVID-19; (2) changes in currency exchange rates, interest rates, commodity and fuel costs and capital costs; (3) changes in the performance of equity and bond markets that could affect, among other things, the valuation of the assets in the Company's pension plans and the accounting for pension assets, liabilities and expenses; (4) changes in governmental laws and regulations, including environmental, occupational health and safety, tax and import tariff standards and amounts; (5) market and competitive changes, including pricing pressures, market demand and acceptance for new products, services and technologies; (6) the Company's inability or failure to protect its intellectual property rights from infringement in one or more of the many countries in which the Company operates; (7) failure to effectively prevent, detect or recover from breaches in the Company's cybersecurity infrastructure; (8) unforeseen business disruptions in one or more of the many countries in which the Company operates due to political instability, civil disobedience, armed hostilities, public health issues or other calamities; (9) disruptions associated with labor disputes and increased operating costs associated with union organization; (10) the seasonal nature of the Company's business; (11) the Company's ability to successfully enter into new contracts and complete new acquisitions or strategic ventures in the time-frame contemplated, or at all; (12) the integration of the Company's strategic acquisitions; (13) potential severe volatility in the capital markets; (14) failure to retain key management and employees; (15) the outcome of any disputes with customers, contractors and subcontractors; (16) the financial condition of the Company's customers, including the ability of customers (especially those that may be highly leveraged, have inadequate liquidity or whose business is significantly impacted by COVID-19) to maintain their credit availability; (17) implementation of environmental remediation matters; (18) risk and uncertainty associated with intangible assets and (19) other risk factors listed from time to time in the Company's SEC reports. A further discussion of these, along with other potential risk factors, can be found in Part I, Item 1A, "Risk Factors," of the Company's Annual Report on Form 10-K for the year ended December 31, 2020. The Company cautions that these factors may not be exhaustive and that many of these factors are beyond the Company's ability to control or predict. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. The Company undertakes no duty to update forward-looking statements except as may be required by law.
Harsco Corporation is a global market leader providing environmental solutions for industrial and specialty waste streams and innovative technologies for the rail sector. Based in Camp Hill, PA, the 13,000-employee company operates in more than 30 countries. 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.
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