CAMP HILL, Pa., May 08, 2020 (GLOBE NEWSWIRE) -- Harsco Corporation (NYSE: HSC) today reported first quarter 2020 results. On a U.S. GAAP basis, first quarter of 2020 diluted loss per share from continuing operations was $0.11, which included strategic and acquisition integration costs as well as severance expenses incurred within Harsco Environmental to achieve improvement objectives. Adjusted diluted earnings per share from continuing operations in the first quarter of 2020 were $0.16. These figures compare with first quarter of 2019 GAAP diluted earnings per share from continuing operations of $0.13 and adjusted diluted earnings per share from continuing operations of $0.18.
GAAP operating income from continuing operations for the first quarter of 2020 was $3 million. Excluding unusual items, adjusted EBITDA was $57 million, compared to the Company's previously provided guidance range of $43 million to $48 million.
“While Harsco had a positive start to the year, with better than anticipated results in Clean Earth and Rail and the completion of our ESOL acquisition, we have had to shift our immediate priorities to include addressing the impact of the COVID-19 pandemic,” said Chairman and CEO Nick Grasberger. “During these unprecedented times, our focus is on ensuring the health and well-being of our employees and the communities in which we operate, as well as providing the services and products demanded by the critical industries that we support. To that end, our employees have risen to the challenge, and I would like to personally thank all Harsco employees for their outstanding efforts to sustain our operations, serve our customers and ensure our business continuity.
"Our team has managed through market challenges in the past, and while the severity and duration of this downturn is unknown, we are well-prepared to handle this uncertain period. Harsco has significant financial flexibility through a strong liquidity position and favorable debt maturity profile. We are also implementing the lessons learned from past cycles to shape our quick and proactive decisions in response to the pandemic, such as recently implementing actions to align our cost structure and reduce capital spending, to support positive free cash flow generation.
"In total, I am confident that the steps we have taken to build a strong and durable business model focused on environmental services and products will allow us to continue to navigate through the year. In addition, we believe our efforts will position Harsco to be able to exit this period a stronger, more resilient company, poised to capitalize on growth opportunities when the global economy eventually recovers."
Consolidated First Quarter Operating Results
Consolidated total revenues from continuing operations were $399 million, an increase of 21 percent compared with the prior-year quarter due to higher revenues in the Company's Rail segment and the acquisition of Clean Earth in mid-2019. Foreign currency translation negatively impacted first quarter 2020 revenues by approximately $11 million compared with the prior-year period.
GAAP operating income from continuing operations was $3 million for the first quarter of 2020, compared with $20 million in the same quarter of last year. Meanwhile, adjusted EBITDA totaled $57 million in the first quarter of 2020 versus $54 million in the first quarter of 2019. This increase is attributable to the Clean Earth acquisition and lower adjusted Corporate spending.
Environmental revenues totaled $242 million in the first quarter of 2020, compared with $261 million in the prior-year quarter. This change is attributable to foreign currency translation impacts, lower services demand from steel customers and exited contracts. The segment's GAAP operating income and adjusted EBITDA totaled $11 million and $43 million, respectively, in the first quarter of 2020. These figures compare with GAAP operating income of $24 million and adjusted EBITDA of $51 million in the prior-year period. During the quarter, Environmental initiated actions contemplated at the beginning of the year to strengthen its financial performance and competitive position. The costs to complete this program totaled approximately $5 million in the first quarter, with annualized cost benefits anticipated to be in excess of $7 million. Meanwhile, the change in the segment's adjusted EBITDA relative to the prior-year quarter is attributable to the above factors and lower commodity prices, partially offset by a reduction in selling and administrative expenses. Environmental's adjusted EBITDA margin was 17.8 percent in the first quarter of 2020.
Clean Earth
Clean Earth revenues totaled $79 million, representing an increase of 24 percent compared with the prior-year quarter. Segment operating income and adjusted EBITDA in the first quarter of 2020 totaled $4 million, and $11 million, respectively. These figures compare favorably with $1 million and $8 million, respectively, in the prior-year period (2019 figures do not include corporate cost allocation). The increase in revenues and earnings is attributable to higher hazardous and non-hazardous volumes, with growth most pronounced for dredged material processing. Clean Earth's adjusted EBITDA margin was 13.7 percent in the first quarter of 2020.
Rail
Rail revenues increased 14 percent to $78 million, primarily due to higher global demand for maintenance equipment. The segment's operating income and adjusted EBITDA totaled $6 million and $8 million, respectively, in the first quarter of 2020. These figures compare with operating income of $5 million and adjusted EBITDA of $9 million in the prior-year quarter. The EBITDA change year-on-year is attributable to a less favorable mix of equipment, partially offset by lower administrative expense and a more favorable mix of contract services in the most-recent quarter. Rail's adjusted EBITDA margin was 9.9 percent in the first quarter of 2020.
Cash Flow
Net cash used by operating activities totaled $12 million in the first quarter of 2020, compared with net cash provided by operating activities of $15 million in the prior-year period. Free cash flow was $(26) million (before transaction expenses) in the first quarter of 2020, compared with $(20) 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 cash interest payments, partially offset by lower capital expenditures.
Business Continuity / 2020 Outlook
Harsco is operating as an essential business in each of its segments in the United States and almost entirely around the world. The Company has taken significant actions, as previously disclosed, to protect its stakeholders and minimize the operational and financial impacts of the pandemic on the business, while continuing to provide customers with essential products and services. As part of these efforts, Harsco has implemented work safety and flexibility measures to keep employees and customers healthy, as facilities remain operational.
Harsco has also taken measures to adjust its cost structure and reduce capital expenditures, with the goal of improving free cash flow for the year and preserving its financial flexibility and strong liquidity position. To that end, the Company intends to lower 2020 capital spending by approximately $75 million. In addition, Harsco recently executed actions to reduce operating costs by approximately $15 million over the next two quarters ($30 million annualized), while maintaining the ability to take further cost actions if necessary. The Company has also chosen to defer pension and certain tax cash payments and to pursue governmental benefit reimbursements within the scope of various pandemic-related legislation for countries within which it operates.
Lastly, as also previously announced, Harsco will not be providing detailed guidance for the time being given the uncertainty around the pandemic and its evolving impact on relevant markets. While underlying business conditions currently vary across markets, the Company expects that sluggish customer demand and business disruptions will persist for some time. The extent and duration of these impacts cannot be quantified at this time. As a result, Harsco will provide formal guidance when visibility improves, and it deems appropriate
About Harsco
Harsco Corporation is a global market leader providing environmental solutions for industrial and specialty waste streams and innovative technologies for the rail sector. Based in Camp Hill, PA, the 13,000-employee company operates in more than 30 countries. 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.
