Harsco Corporation Reports Fourth Quarter and Full Year 2020 Results

2/25/21

CAMP HILL, Pa., Feb. 25, 2021 (GLOBE NEWSWIRE) -- Harsco Corporation (NYSE: HSC) today reported fourth quarter and full year 2020 results. On a U.S. GAAP basis, fourth quarter of 2020 diluted loss per share from continuing operations was $0.07 including acquisition integration and severance costs. Adjusted diluted earnings per share from continuing operations in the fourth quarter of 2020 were $0.12. These figures compare with fourth quarter of 2019 GAAP diluted earnings per share from continuing operations of $0.03 and adjusted diluted earnings per share from continuing operations of $0.12.

GAAP operating income from continuing operations for the fourth quarter of 2020 was $11 million. Excluding unusual items, adjusted EBITDA totaled $62 million in the quarter, compared to the Company's previously provided guidance range of $58 million to $63 million.

“Against a challenging market backdrop in 2020, Harsco made significant progress on its strategic, operational and financial objectives,” said Chairman and CEO Nick Grasberger. “While the disruption caused by the global pandemic could not have been predicted, our teams executed well, with a consistent focus on our key priorities – operating safely, serving customers, preserving financial flexibility and executing our ESOL integration and operational recovery plan in Rail. The acquisition of ESOL has solidified our transformation to becoming a global, market-leading environmental solutions company, and our integration efforts to date have been on schedule and successful, thanks to the effort and professionalism of our team.”

“Looking to 2021, the ongoing integration of ESOL is anticipated to deliver significant value to our stakeholders, and we are optimistic that our key end-markets will show improvement during the year. Additionally, we plan to maintain our cost and capital discipline, while strengthening our financial flexibility. As a result, each of our business segments is projected to deliver improved operating results and we anticipate healthier cash generation in the year ahead. We look forward to completing the ESOL integration and delivering against our strategic goals, which will position us to continue our journey to a single-thesis environmental solutions company and to further benefit as the global economy recovers.”

Harsco Corporation—Selected Fourth Quarter Results
($ in millions, except per share amounts) Q4 2020 Q4 2019 Q3 2020
Revenues $ 508 $ 400 $ 509
Operating income from continuing operations - GAAP $ 11 $ 20 $ 5
Diluted EPS from continuing operations - GAAP $ (0.07 ) $ 0.03 $ (0.10 )
Adjusted EBITDA - excluding unusual items $ 62 $ 61 $ 59
Adjusted EBITDA margin - excluding unusual items 12.3  % 15.2 % 11.6  %
Adjusted diluted EPS from continuing operations - excluding unusual items $ 0.12 $ 0.12 $ 0.08

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 Fourth Quarter Operating Results

Consolidated total revenues from continuing operations were $508 million, an increase of 27 percent compared with the prior-year quarter due to the acquisition of ESOL in April 2020. Foreign currency translation impacts on fourth quarter 2020 revenues were nominal compared with the prior-year period.

GAAP operating income from continuing operations was $11 million for the fourth quarter of 2020, compared with $20 million in the same quarter of last year. Meanwhile, adjusted EBITDA totaled $62 million in the fourth quarter of 2020 versus $61 million in the fourth quarter of 2019. This EBITDA change is attributable to improved results in the Environmental and Rail segments as well as ESOL contributions following its acquisition earlier in 2020, partially offset by the timing of Corporate spending and lower contributions from the legacy Clean Earth business as a result of the global COVID-19 pandemic.

Harsco Corporation—Selected 2020 Results
($ in millions, except per share amounts) 2020 2019
Revenues $ 1,864 $ 1,504
Operating income from continuing operations - GAAP $ 21 $ 104
Diluted EPS from continuing operations - GAAP $ (0.41 ) $ 0.35
Adjusted EBITDA - excluding unusual items $ 238 $ 265
Adjusted EBITDA margin - excluding unusual items 12.8  % 17.6 %
Adjusted diluted EPS from continuing operations - excluding unusual items $ 0.49 $ 0.90

Note: The financial information provided above and discussed below reflect that Industrial was reclassified as Discontinued Operations in 2019.

Consolidated 2020 Operating Results

Consolidated total revenues were $1.9 billion in 2020, compared to $1.5 billion in 2019, with the increase attributable to the acquisitions of Clean Earth (2019) and ESOL (2020) and revenue growth in Rail during the year. Rail revenues benefited from higher equipment revenues under multi-year contracts with domestic and international customers. Revenues in Environmental decreased compared with 2019 as services and product demand slowed in 2020 as a result of the pandemic. Foreign currency translation negatively impacted 2020 revenues by approximately $24 million compared with 2019.

GAAP operating income from continuing operations was $21 million in 2020, while GAAP operating income from continuing operations in 2019 was $104 million. Adjusted EBITDA was $238 million and $265 million for these years, respectively, with the change in adjusted results reflecting the demand impact from the pandemic, partially offset by additional contribution from acquisitions.

On a GAAP basis, the diluted loss per share from continuing operations in 2020 was $0.41, and this figure compares with diluted earnings per share in 2019 of $0.35. GAAP results included various unusual items including strategic and acquisition integration costs, in each year. Adjusted diluted earnings per share from continuing operations was $0.49 in 2020 compared with $0.90 in 2019.

Fourth Quarter Business Review

Environmental
($ in millions) Q4 2020 Q4 2019 Q3 2020
Revenues $ 246 $ 243 $ 223
Operating income - GAAP $ 23 $ 27 $ 12
Adjusted EBITDA - excluding unusual items $ 52 $ 51 $ 40
Adjusted EBITDA margin - excluding unusual items 21.2 % 20.9 % 17.9 %

Environmental revenues totaled $246 million in the fourth quarter of 2020, a slight increase compared with $243 million in the prior-year quarter. The segment's GAAP operating income and adjusted EBITDA totaled $23 million and $52 million, respectively, in the fourth quarter of 2020. These figures compare with GAAP operating income of $27 million and adjusted EBITDA of $51 million in the prior-year period. The change in the segment's adjusted EBITDA relative to the prior-year quarter is principally attributable to higher demand for applied products and lower general and administrative spending, partially offset by a less favorable services mix and contract changes. Environmental's adjusted EBITDA margin was 21.2 percent in the fourth quarter of 2020.

Clean Earth
($ in millions) Q4 2020 Q4 2019 Q3 2020
Revenues $ 185 $ 82 $ 194
Operating income - GAAP $ 3 $ 9 $ 9
Adjusted EBITDA - excluding unusual items $ 16 $ 17 $ 20
Adjusted EBITDA margin - excluding unusual items 8.6 % 20.5 % 10.4 %

Note: The 2019 financial information provided above and discussed below for Clean Earth does not include a corporate cost allocation and does not include ESOL.

Clean Earth revenues totaled $185 million in the fourth quarter of 2020, compared with $82 million in the prior-year quarter, with the increase attributable to the ESOL acquisition in the second quarter of 2020. Segment operating income was $3 million and adjusted EBITDA totaled $16 million in the fourth quarter of 2020. These figures compare with $9 million and $17 million, respectively, in the prior-year period. The year-on-year change in adjusted EBITDA reflects lower services demand and a less favorable business mix at legacy Clean Earth as a result of the pandemic and higher administrative costs (including a Corporate cost allocation) offset by the contributions from ESOL.

Rail
($ in millions) Q4 2020 Q4 2019 Q3 2020
Revenues $ 77 $ 75 $ 93
Operating income (loss) - GAAP $ 1 $ (3 ) $ 4
Adjusted EBITDA - excluding unusual items $ 3 $ (2 ) $ 5
Adjusted EBITDA margin - excluding unusual items 3.3 % (2.5 )% 5.8 %

Rail revenues increased 3 percent compared with the prior-year quarter to $77 million. This change reflects higher equipment revenues from multi-year supply contracts and higher contract services revenues, partially offset by lower aftermarket parts sales. The segment's operating income and adjusted EBITDA totaled $1 million and $3 million, respectively, in the fourth quarter of 2020. These figures compare with an operating loss of $3 million and adjusted EBITDA of $(2) million in the prior-year quarter. The EBITDA change year-on-year is attributable to lower manufacturing costs along with the above mentioned factors and a less favorable mix of equipment and parts sales.

Cash Flow

Net cash provided by operating activities totaled $12 million in the fourth quarter of 2020, compared with net cash used by operating activities of $50 million in the prior-year period. Free cash flow was $(8) million in the fourth quarter of 2020, compared with $28 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 after excluding transactional expenses and taxes in both periods and higher net capital expenditures. Further, free cash flow in the fourth quarter of 2020 was impacted by the timing of certain working capital items that were anticipated but were deferred into 2021.

For the full-year 2020, net cash provided by operating activities totaled $54 million and free cash flow was $2 million. In 2019, net cash provided by operating activities was nominal and free cash flow was $(32) million. The change in full-year free cash flow can be mainly attributed to lower capital spending in Environmental.

2021 Outlook

The Company's 2021 guidance anticipates that each of its three business segments will realize earnings improvement during the year. This outlook is supported by strong backlog positions that provide forward visibility, anticipated benefits from the Company's key business initiatives including the ESOL integration, and improving fundamentals in relevant end markets.

Environmental adjusted EBITDA is expected to increase due to higher services and applied products demand and benefits of growth initiatives, partially offset by higher SG&A spending.

Clean Earth 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 (such as rebranding and IT integration).

Rail adjusted EBITDA is anticipated to increase as a result of higher demand for equipment and technology products as well as higher contract services contributions, partially offset by R&D and SG&A investments and lower aftermarket parts contributions.

Lastly, Corporate spending is expected to range from $33 million to $34 million for the year.

Summary Outlook highlights are as follows:

2021 Full Year Outlook
GAAP Operating Income $93 - $113 million
Adjusted EBITDA $275 - $295 million
GAAP Diluted Earnings Per Share $0.26 - 0.42
Adjusted Diluted Earnings Per Share $0.59 - 0.76
Free Cash Flow Before Growth Capital $90 - $110 million
Free Cash Flow $30 - $50 million
Net Interest Expense $63 - $66 million
Net Capital Expenditures $155 - $175 million
Effective Tax Rate, Excluding Any Unusual Items 36 - 38%
Q1 2021 Outlook
GAAP Operating Income $8 - $14 million
Adjusted EBITDA $52 - $58 million
GAAP Diluted Earnings Per Share $(0.08) - 0.02
Adjusted Diluted Earnings Per Share $0.01 - 0.10


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.

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