Harsco Corporation Reports Second Quarter 2021 Results
- Second Quarter Revenues Totaled $570 Million, an Increase of 27 Percent and 8 Percent, Respectively, From the Prior Year and Sequential Quarters
- Q2 GAAP Operating Income of $36 Million and GAAP Diluted Earnings Per Share of $0.18
- Adjusted Q2 EBITDA Totaled $78 Million; At Upper-End of Previous Guidance Range
- Q2 Adjusted Earnings Per Share of $0.28
- Full Year 2021 Adjusted EBITDA Guidance Range Unchanged At $295 Million To $310 Million
CAMP HILL, Pa. – (August 3, 2021) – Harsco Corporation (NYSE: HSC) today reported second quarter 2021 results. On a U.S. GAAP ("GAAP") basis, second quarter of 2021 diluted earnings per share from continuing operations were $0.18 including certain strategic costs. Adjusted diluted earnings per share from continuing operations in the second quarter of 2021 were $0.28. These figures compare with a second quarter of 2020 GAAP diluted loss per share from continuing operations of $0.14 and adjusted diluted earnings per share from continuing operations of $0.13.
GAAP operating income from continuing operations for the second quarter of 2021 was $36 million. Adjusted EBITDA totaled $78 million in the quarter, compared to the Company's previously provided guidance range of $73 million to $79 million.
“Harsco continued to experience strong growth and operational momentum during the second quarter in each of our businesses," said Chairman and CEO Nick Grasberger. “The underlying business strength has broadened to include certain businesses that had lagged earlier in the economic recovery, and was supported by our ongoing operational improvements and key initiatives. We have also continued to make good progress on our integration with Clean Earth, which remains one of our near term priorities along with the ongoing efforts to strengthening our financial position. I am confident that Harsco is well-positioned to benefit as the global economy strengthens further, and we expect to create additional shareholder value in the future through our ongoing business transformation.”
Harsco Corporation—Selected Second Quarter Results
|($ in millions, except per share amounts)||Q2 2021||Q2 2020||Q1 2021|
|Revenues||$ 570||$ 447||$ 529|
|Operating income from continuing operations - GAAP||$ 36||$ 2||$ 25|
|Diluted EPS from continuing operations - GAAP||$ 0.18||$ (0.14)||$ 0.02|
|Adjusted EBITDA - excluding unusual items||$ 78||$ 59||$ 66|
|Adjusted EBITDA margin - excluding unusual items||13.7%||13.2%||12.4%|
|Adjusted diluted EPS from continuing operations - excluding unusual items||$ 0.28||$ 0.13||$ 0.15|
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 Second Quarter Operating Results
Consolidated total revenues from continuing operations were $570 million, an increase of 27 percent compared with the prior-year quarter. Each business segment realized meaningful revenue growth versus the comparable 2020 quarter. Foreign currency translation positively impacted second quarter 2021 revenues by approximately $16 million compared with the prior-year period, translating to an organic growth rate of 24 percent.
GAAP operating income from continuing operations was $36 million for the second quarter of 2021, compared with $2 million in the same quarter of last year. Meanwhile, adjusted EBITDA totaled $78 million in the second quarter of 2021 versus $59 million in the second quarter of 2020. This adjusted EBITDA increase is attributable to improved performance in each of the Company's business segments as a result of strengthening economic conditions, internal improvement actions and growth initiatives.
Second Quarter Business Review
|($ in millions)||Q2 2021||Q2 2020||Q1 2021|
|Revenues||$ 273||$ 204||$ 258|
|Operating income - GAAP||$ 30||$ 14||$ 26|
|Adjusted EBITDA - excluding unusual items||$ 58||$ 40||$ 54|
|Adjusted EBITDA margins - excluding unusual items||21.2 %||19.7 %||20.8 %|
Environmental revenues totaled $273 million in the second quarter of 2021, an increase of 34 percent compared with the prior-year quarter. This increase is principally 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 $30 million and $58 million, respectively, in the second quarter of 2021. These figures compare with GAAP operating income of $14 million and adjusted EBITDA of $40 million in the prior-year period. The year-on-year improvement in adjusted earnings is attributable to increased services and products demand, as noted above.
|($ in millions)||Q2 2021||Q2 2020||Q1 2021|
|Revenues||$ 196||$ 162||$ 189|
|Operating income - GAAP||$ 7||$ -||$ 3|
|Adjusted EBITDA - excluding unusual items||$ 18||$ 11||$ 15|
|Adjusted EBITDA margin - excluding unusual items||9.4 %||7.0 %||7.7 %|
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 $196 million in the second quarter of 2021, an increase of 21 percent compared with the prior-year quarter. The revenue increase is attributable to increased environmental services demand within both the hazardous waste and contaminated-dredge materials lines of business. Segment operating income was $7 million and adjusted EBITDA totaled $18 million in the second quarter of 2021. These figures compare with zero operating income and adjusted EBITDA of $11 million, respectively, in the prior-year period. The improvement in adjusted earnings is attributable to the above factors as well as integration improvement benefits. These factors were partially offset by personnel investments to support the Clean Earth platform and certain other expenditures, including IT and rebranding related expenses, which will not occur beyond 2021. Lastly, Clean Earth's adjusted EBITDA margin increased to 9.4 percent in the second quarter of 2021 versus 7.0 percent in the comparable-quarter of 2020.
|($ in millions)||Q2 2021||Q2 2020||Q1 2021|
|Revenues||$ 101||$ 82||$ 82|
|Operating income (loss) - GAAP||$ 9||$ 9||$ 5|
|Adjusted EBITDA - excluding unusual items||$ 10||$ 10||$ 6|
|Adjusted EBITDA margin - excluding unusual items||10.1 %||12.2 %||7.3 %|
Rail revenues increased 24 percent compared with the prior-year quarter to $101 million. This increase principally reflects higher global equipment revenues, including those under various long-term supply contracts. The segment's operating income and adjusted EBITDA totaled $9 million and $10 million, respectively, in the second quarter of 2021, and these figures are similar to results realized in the prior-year quarter. EBITDA performance year-on-year reflects higher equipment contributions, offset by a less favorable sales mix across other business-lines and higher SG&A costs.
Net cash provided by operating activities totaled $37 million in the second quarter of 2021, compared with net cash provided by operating activities of $33 million in the prior-year period. Free cash flow was $6 million in the second quarter of 2021, compared with $18 million in the prior-year period. The change in free cash flow compared with the prior-year quarter is principally related to higher capital expenditures, some of which were deferred from 2020, as well as the timing of working capital items.
The Company's 2021 guidance is unchanged relative to the outlook provided with the Company's first quarter 2021 results. Comments by business segments are as follows:
Environmental. 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. 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 non-recurring expenditures.
Rail. 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, adjusted Corporate spending is still 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||$118 - $133 million|
|Adjusted EBITDA||$295 - $310 million|
|GAAP Diluted Earnings Per Share||$0.42 - 0.57|
|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%|
Q3 2021 Outlook
|GAAP Operating Income||$31 - $37 million|
|Adjusted EBITDA||$75 - $81 million|
|GAAP Diluted Earnings Per Share||$0.15 - 0.21|
|Adjusted Diluted Earnings Per Share||$0.23 - 0.29|
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 (833) 651-7826 or (414) 238-0989.
Enter Conference ID number 2147976.
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 12,000-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.
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.