<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1995
------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-3970
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HARSCO CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 23-1483991
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(State of incorporation) (I.R.S. Employer Identification No.)
Camp Hill, Pennsylvania 17001-8888
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number (717) 763-7064
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ NO / /
<TABLE>
<CAPTION>
Title of Each Class Outstanding Shares at September 30, 1995
- ------------------- ----------------------------------------
<S> <C>
Common Stock Par Value $1.25 25,324,798
Preferred Stock Purchase Rights 25,324,798
</TABLE>
-1-
<PAGE> 2
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(In thousands, except per share amounts) 1995 1994 1995 1994
================================================================================================================================
<S> <C> <C> <C> <C>
REVENUES:
Net sales . . . . . . . . . . . . . . . . . . . . . . $ 374,147 $ 348,073 $1,108,308 $1,004,801
Equity in income of unconsolidated entities . . . . . 10,939 16,904 38,682 52,728
Gain on sale of investments . . . . . . . . . . . . . - 99 - 5,966
Other revenues . . . . . . . . . . . . . . . . . . . . 411 12,267 1,162 16,615
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES . . . . . . . . . . . . . . . . . . 385,497 377,343 1,148,152 1,080,110
- --------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales . . . . . . . . . . . . . . . . . . . . 284,326 270,228 852,504 788,758
Selling, general and administrative expenses . . . . . 47,147 49,552 145,555 147,547
Research and development . . . . . . . . . . . . . . . 1,088 1,213 3,431 3,936
Facilities discontinuance and reorganization costs . . 16,827 8,276 19,322 11,095
Other . . . . . . . . . . . . . . . . . . . . . . . (451) 548 (4,831) 672
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES . . . . . . . . . . . . . 348,937 329,817 1,015,981 952,008
- --------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INTEREST, TAXES,
AND MINORITY INTEREST . . . . . . . . . . . . 36,560 47,526 132,171 128,102
Interest income . . . . . . . . . . . . . . . . . . . . . . 1,647 1,854 5,020 4,710
Interest expense . . . . . . . . . . . . . . . . . . . . . (7,356) (8,826) (22,376) (25,961)
- --------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE TAXES AND MINORITY INTEREST . . . . 30,851 40,554 114,815 106,851
Provision for income taxes . . . . . . . . . . . . . . . . 12,032 17,722 44,778 46,694
- --------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE MINORITY INTEREST . . . . . . . . . 18,819 22,832 70,037 60,157
Minority interest . . . . . . . . . . . . . . . . . . . . . 419 494 1,618 1,644
- --------------------------------------------------------------------------------------------------------------------------------
NET INCOME . . . . . . . . . . . . . . . . . . . . $ 18,400 $ 22,338 $ 68,419 $ 58,513
================================================================================================================================
Average shares of common stock outstanding . . . . . . . . 25,313 25,150 25,262 25,094
================================================================================================================================
NET INCOME PER SHARE . . . . . . . . . . . . . . . $ .73 $ .89 $ 2.71 $ 2.33
================================================================================================================================
Cash dividends declared per share . . . . . . . . $ .37 $ .35 $ 1.11 $ 1.05
================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE> 3
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
(In thousands) 1995 1994
================================================================================================================================
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 58,273 $ 43,550
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,096 350,578
Inventories:
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . 30,457 25,641
Work in process . . . . . . . . . . . . . . . . . . . . . . . . 30,127 28,625
Raw material and purchased parts . . . . . . . . . . . . . . . . 55,438 53,338
Stores and supplies . . . . . . . . . . . . . . . . . . . . . . 15,999 13,595
- -------------------------------------------------------------------------------------------------------------------------
Total inventories . . . . . . . . . . . . . . . . . . . . . 132,021 121,199
Other current assets . . . . . . . . . . . . . . . . . . . . . . . 35,724 21,432
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . 515,114 536,759
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Property, plant and equipment, at cost . . . . . . . . . . . . . . . . 1,059,608 984,930
Allowance for depreciation . . . . . . . . . . . . . . . . . . . . . . (605,474) (549,962)
- -------------------------------------------------------------------------------------------------------------------------
454,134 434,968
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Cost in excess of net assets of companies acquired, net . . . . . . . 213,617 213,480
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,187 43,711
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,923 85,731
- -------------------------------------------------------------------------------------------------------------------------
$ 1,320,975 $ 1,314,649
=========================================================================================================================
LIABILITIES
CURRENT LIABILITIES:
Notes payable and current maturities . . . . . . . . . . . . . . . $ 116,967 $ 25,738
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . 94,754 92,166
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . 39,473 37,837
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,929 10,971
Other current liabilities . . . . . . . . . . . . . . . . . . . . . 117,342 115,709
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . 406,465 282,421
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Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,652 340,246
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 26,546 29,217
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,475 81,543
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692,138 733,427
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SHAREHOLDERS' EQUITY
Common stock and additional paid-in capital . . . . . . . . . . . . . . 140,933 134,499
Cumulative adjustments for translation and pension liability . . . . . (13,663) (16,119)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 694,338 653,996
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . (192,771) (191,154)
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628,837 581,222
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$ 1,320,975 $ 1,314,649
=========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE> 4
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(In thousands) 1995 1994 1995 1994
===============================================================================================================================
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 18,400 $ 22,338 $ 68,419 $ 58,513
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . 23,492 22,913 70,721 67,227
Amortization . . . . . . . . . . . . . . . . . . . . 2,483 2,298 7,456 6,796
Gain on sale of investments . . . . . . . . . . . . - (99) - (5,966)
Equity in earnings of unconsolidated entities . . . (10,939) (17,402) (38,682) (52,702)
Dividends or distributions from unconsolidated entities 4,696 10,654 27,245 42,932
Other, net . . . . . . . . . . . . . . . . . . . . . 6,705 571 3,523 2,140
Changes in assets and liabilities, net of acquisition
of businesses and formation of a partnership:
Notes and accounts receivables . . . . . . . . . 43,052 (10,371) 68,697 (25,269)
Inventories . . . . . . . . . . . . . . . . . . (43) (1,464) (14,004) (12,680)
Accounts payable . . . . . . . . . . . . . . . . 114 2,723 (9,851) 3,669
Other assets and liabilities . . . . . . . . . . 24,498 14,199 15,307 (10,177)
- -------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . 112,458 46,360 198,831 74,483
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment,
net of disposals . . . . . . . . . . . . . . . . . . . (25,329) (25,884) (79,405) (56,949)
Purchase of businesses, net of cash acquired . . . . . . (781) - (4,143) -
Net proceeds (purchases) from sale/maturity of
investments . . . . . . . . . . . . . . . . . . . . . 2,639 - 572 7,617
Other investing activities . . . . . . . . . . . . . . . 128 (199) 2,302 (7,142)
- -------------------------------------------------------------------------------------------------------------------------------
NET CASH (USED) BY INVESTING ACTIVITIES . . . . . . (23,343) (26,083) (80,674) (56,474)
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net . . . . . . . . . . . . . . . (6,289) (8,970) (9,718) (29,515)
Current maturities and long-term debt
Additions . . . . . . . . . . . . . . . . . . . . . . 4,440 7,189 47,135 94,954
Reductions . . . . . . . . . . . . . . . . . . . . . . (49,890) (29,607) (119,113) (83,767)
Cash dividends paid on common stock . . . . . . . . . . (9,365) (8,797) (28,024) (26,328)
Common stock issued-options . . . . . . . . . . . . . . 1,085 946 5,015 6,624
Other financing activities . . . . . . . . . . . . . . . 1,347 2,378 1,107 2,593
- -------------------------------------------------------------------------------------------------------------------------------
NET CASH (USED) BY FINANCING ACTIVITIES . . . . . . (58,672) (36,861) (103,598) (35,439)
- -------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash . . . . . . . . . . 61 171 164 400
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents . . . 30,504 (16,413) 14,723 (17,030)
Cash and cash equivalents at beginning of period . . . . . 27,769 58,123 43,550 58,740
- -------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . $ 58,273 $ 41,710 $ 58,273 $ 41,710
===============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 5
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
REVIEW OF OPERATIONS BY GROUP
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(In millions) 1995 1994 1995 1994
=============================================================================================================================
<S> <C> <C> <C> <C>
SALES:
Metal Reclamation and Mill Services . . . . . . . . . . . . $ 153.1 $ 135.9 $ 446.0 $ 383.4
Infrastructure and Construction (a) . . . . . . . . . . . . 100.6 102.5 302.7 297.4
Process Industry Products . . . . . . . . . . . . . . . . . 120.4 109.7 359.6 324.0
- -----------------------------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 374.1 $ 348.1 $1,108.3 $1,004.8
=============================================================================================================================
INCOME BEFORE TAX AND MINORITY INTEREST:
Group Operating Profit:
Metal Reclamation and Mill Services . . . . . . . . $ 22.9 $ 16.6 $ 60.2 $ 33.5
Infrastructure and Construction (b) . . . . . . . . 12.3 4.3 25.5 11.0
Process Industry Products . . . . . . . . . . . . . 10.9 7.9 32.0 27.8
- -----------------------------------------------------------------------------------------------------------------------------
46.1 28.8 117.7 72.3
Facilities discontinuance and
reorganization costs (c) . . . . . . . . . . . . . . (16.7) (8.3) (18.4) (11.1)
- -----------------------------------------------------------------------------------------------------------------------------
Total group operating profit . . . . . . . . . 29.4 20.5 99.3 61.2
Equity in income of unconsolidated entities . . . . . . . . 11.0 16.9 38.7 52.7
Gain on sale of investments . . . . . . . . . . . . . . . . - .1 - 6.0
Claim settlements . . . . . . . . . . . . . . . . . . . . . - 12.0 - 15.8
Interest expense . . . . . . . . . . . . . . . . . . . . . (7.4) (8.8) (22.4) (26.0)
Unallocated income (expense) . . . . . . . . . . . . . . . (2.2) (.1) (.8) (2.8)
- -----------------------------------------------------------------------------------------------------------------------------
Total pre-tax income . . . . . . . . . . . . . $ 30.8 $ 40.6 $ 114.8 $ 106.9
=============================================================================================================================
</TABLE>
(a) Effective January 1, 1995, the Infrastructure, Construction and
Transportation Group was renamed the Infrastructure and Construction
Group due to the Company's announced exit from the school bus business.
The Company ceased all bus operations in June 1995. School bus sales
included under this Group were $11.3 million for the third quarter of
1994 and zero for the third quarter of 1995. For the nine months of 1995
and 1994, school bus sales were $15.7 million and $22.1 million,
respectively. Additionally, 1994 includes truck sales of $3.5 million
for the nine months. Truck operations were ended in June 1994.
(b) The Infrastructure and Construction Group includes operating losses
related to the school bus business for the third quarter of 1994 of $4.9
million and zero for the third quarter of 1995. For the nine months of
1995 and 1994, operating losses were $6.2 million and $11.5 million,
respectively. Additionally, 1994 includes truck operating losses of $1.9
million for the nine months.
(c) The third quarter and nine months ended September 30, 1995 includes a
non-cash charge of $13.5 million relating to the settlement of the
Federal Excise Tax reimbursement on the completed five-ton truck
contract, and a $2.1 million provision for asset impairment relating to
the remaining fixed assets of the school bus business. The nine months
of 1995 also includes $2.6 million relating to the discontinuance of
certain international facilities related to the Metal Reclamation and
Mill Services Group. The third quarter and nine months ended September
30, 1994 includes $3.7 million and $6.3 million, respectively, for
discontinuance and rationalization of administrative facilities costs
related to the Metal Reclamation and Mill Services Group, and a provision
for the third quarter and nine months of 1994 of $4.7 million relating to
the net realizable value of the investment in the five-ton truck
business.
-5-
<PAGE> 6
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Cont'd.)
Cash payments for interest on all debt, net of amounts capitalized, were
$21,963,000 for the first nine months of 1995 and $27,322,000 for the first
nine months of 1994. Cash payments for income taxes were $36,915,000 for the
first nine months of 1995 and $40,659,000 for the first nine months of 1994.
Notes to Consolidated Financial Statements
Commitments and Contingencies
Federal Excise Tax and Other Matters Related to the Five-ton Truck Contract
In the third quarter, the Company, the United States Army, and the United
States Department of Justice concluded a settlement of Harsco's previously
reported claims against the Army relating to Federal Excise Tax arising under a
completed 1986 contract for the sale of five-ton trucks to the Army. On
September 27, 1995, the Army paid Harsco $49 million in accordance with the
settlement terms. Harsco released the Army from any further liability for
those claims, and the Department of Justice released Harsco from a threatened
action for damages and civil penalties based on an investigation conducted by
the Department's Commercial Litigation Branch that has been pending for several
years. During the performance of the five-ton truck contract, the Company
recorded an account receivable of $62.5 million for its claims against the Army
relating to Federal Excise Tax. As a result of accepting the $49 million in
settlement, Harsco recorded a non-recurring, pre-tax, non-cash charge of $13.5
million (after-tax charge of $8.2 million, $.32 per share), in the third
quarter. The $13.5 million pre-tax charge is included in the Consolidated
Statements of Income under Facilities discontinuance and reorganization costs.
The settlement preserves the rights of the parties to assert claims and
defenses under the Internal Revenue Code, and rights of the Army and Harsco to
claim certain amounts that may be owed by either party to reconcile possible
underpayments or overpayments on the truck contract as part of the formal
contract close out process.
The settlement does not resolve the potential for a claim from the Internal
Revenue Service that, contrary to the Company's position, certain cargo truck
models have gross vehicle weights in excess of the 33,000 pound threshold under
the Federal Excise Tax law, and therefore are taxable. As previously reported,
the Internal Revenue Service has tentatively concluded that those cargo truck
models appear to be taxable. If the Internal Revenue Service asserts that the
tax is due on these vehicles, the total claim could be $42 million plus
interest and penalty, if any. The Company plans to vigorously contest any such
tax deficiency. Although there is risk of an adverse outcome, the Company and
its counsel believe that these trucks are not taxable. The settlement
agreement preserves the Company's right to seek reimbursement of after-imposed
tax from the Army in the event that the Internal Revenue Service finds the
cargo trucks to be taxable, but the agreement limits the reimbursement to a
maximum of $21 million. Additionally, in an earlier contract modification, the
Army accepted responsibility for $3.6 million of the potential tax, bringing
its total potential responsibility up to $24.6 million.
-6-
<PAGE> 7
Under the settlement, the Army agrees that if the cargo trucks are found to be
taxable, the 1993 decision of the Armed Services Board of Contract Appeals will
apply to the question of Harsco's right to reimbursement from the Army for
after-imposed taxes on the cargo trucks, thus in Harsco's view, favorably
resolving the principal issues regarding any such future claim by Harsco.
Therefore, the Company believes that even if Harsco is unsuccessful in
defending against the imposition of the tax on the cargo trucks, the Army would
be obligated to reimburse the Company for a majority of the tax, (but not
interest or any penalty if any), resulting in a net maximum liability for
Harsco of $18 million plus interest and penalty, if any.
In August 1994, the Company and the Government signed a modification to the
five-ton truck contract resolving all outstanding contractual matters
concerning that agreement with certain limited exceptions including FET related
matters. The contract modification included resolution of the Company's claims
described in earlier Company filings for contract changes, inadequate technical
data package, and delays and disruptions. The modification provided for an
increase of $12.5 million in the contract price and payment was received. The
price increase yielded net revenue to the Company of approximately $12.0
million after related excise tax and other associated costs. The Company
recognized such amount as Other revenue in the Consolidated Statements of
Income in the third quarter of 1994.
M9 Armored Combat Earthmover Claim
The Company and its legal counsel are of the opinion that the U.S. Government
did not exercise option three under the M9 Armored Combat Earthmover (ACE)
contract in a timely manner, with the result that the unit prices for options
three, four and five are subject to renegotiation. Claims reflecting the
Company's position have been filed with respect to all options purported to be
exercised, totaling in excess of $60 million plus interest. No recognition
has been given in the accompanying financial statements for any recovery on
these claims. In July 1995, the Armed Services Board of Contract Appeals
denied the motions for summary judgment which had been filed by both the
Company and the Government. The Company intends to continue to pursue its
claim before the Armed Services Board of Contract Appeals.
In addition, in 1994 the Company negotiated a settlement with the U.S.
Government of a smaller outstanding claim concerning this contract which
provided for payment of $3.8 million by the U.S. Government to Harsco. The
Company recognized such amount as other revenue in the Consolidated Statements
of Income in the first quarter of 1994 and payment has been received.
Other Litigation
On March 13, 1992, the U.S. Government filed a counterclaim against the Company
in a civil suit alleging violations of the False Claims Act and breach of a
contract to supply M109A2 Self-Propelled Howitzers. The counterclaim was filed
in the United States Claims Court in response to the Company's claim of
approximately $5 million against the Government for costs incurred on this
contract relating to the same issue. In October 1995, Government counsel
informed the Company's counsel that at trial it would claim breach of contract
damages of $4.8 million plus damages and civil penalties under the False Claims
Act totaling $6.8 million. This is a reduction from the previously asserted
Government claim of $7.3 million in damages, trebled plus False Claims Act
penalties. The Company and its counsel believe it is unlikely that resolution
of these claims will have a material adverse effect on the Company's financial
position, however, it could have a material effect on quarterly or annual
results of operations.
-7-
<PAGE> 8
Iran's Ministry of Defense initiated arbitration procedures against the Company
in 1991 under the rules of the International Chamber of Commerce for damages
allegedly resulting from breach of various contracts executed by the Company
and the Ministry of Defense between 1970 and 1978. The contracts were
terminated in 1978 and 1979 during the period of civil unrest in Iran that
preceded the Iranian revolution. Iran has asserted a claim under one contract
for repayment of a $7.5 million advance payment it made to the Company, plus
interest at 12% through June 27, 1991 in the amount of $25.3 million. Iran has
also asserted a claim for damages under other contracts for $76.3 million. The
Company has asserted various defenses and also has filed counterclaims against
Iran for damages in excess of $7.5 million which it sustained as a result of
Iran's breach of contract, plus interest. The arbitration hearing is scheduled
for January, 1996. The Company's management and its counsel believe it is
unlikely that resolution of these claims will have a material adverse effect on
the Company's financial position or results of operations.
In 1992, the United States Government through its Defense Contract Audit Agency
commenced an audit of certain contracts for sale of tracked vehicles by the
Company to foreign governments, which were financed by the United States
Government through the Defense Security Assistance Agency. The Company
cooperated with the audit and responded to a number of issues raised by the
audit. In September 1994, the Company received a subpoena issued by the
Department of Defense Inspector General seeking various documents relating to
sale contracts between the Company and foreign governments which were funded by
the Defense Security Assistance Agency. The Company is continuing to cooperate
and is responding to the subpoena. Based on discussions with the agent in
charge and the government auditors, it appears that the investigation focuses
on whether the Company improperly certified requests for and received progress
payments in advance of the schedule permitted by the Defense Security
Assistance Agency regulations and Company certifications. The Company's
management and its counsel believe it is unlikely that this issue will have a
material adverse effect on the Company's financial position or results of
operations.
In June 1994, the shareholder of the Ferrari Group, a Belgium holding company
involved in steel mill services and other activities, filed a legal action in
Belgium against Heckett MultiServ, S.A. and S.E.A.E., subsidiaries of MultiServ
International N.V. (a subsidiary of Harsco Corporation). The action alleges
that these two subsidiaries breached contracts arising from letters of intent
signed in 1992 and 1993 concerning the possible acquisition of the Ferrari
Group, claiming that the subsidiaries were obligated to proceed with the
acquisition and failed to do so. The action seeks damages of 504 million
Belgian Francs (approximately U.S. $17 million). The Company intends to
vigorously defend against the action and believes that based on conditions
contained in the letters of intent and other defenses it will prevail. The
Company and its counsel believe that is unlikely that these claims will have a
material adverse effect on the Company's financial position or results of
operations.
On August 29, 1994, the Company filed a legal action in the United States
District Court for the Southern District of New York against certain former
shareholders of MultiServ International N.V. seeking recovery of damages
arising from misrepresentations which the Company claims were made to it in
connection with its purchase of the MultiServ International N.V. stock on
August 31, 1993. The Complaint seeks damages in an amount to be determined.
On April 4, 1995, the court dismissed various elements of the Company's claims
and allowed the Company to amend its complaint with respect to other elements.
At the Company's request, the Court dismissed the remaining claims which then
allowed the Company to file an appeal in the United States Court of Appeals for
the Second Circuit. The Company has settled its claims with A. H. H. Bowden,
but continues to pursue its appeal with respect to claims against the other
defendants.
-8-
<PAGE> 9
Environmental
The Company is involved in a number of environmental remediation investigations
and clean-ups and, along with other companies, has been identified as a
"potentially responsible party" for certain waste disposal sites. While each
of these matters is subject to various uncertainties, it is probable that the
Company will agree to make payments toward funding certain of these activities
and it is possible that some of these matters will be decided unfavorably to
the Company. The Company has evaluated its potential liability, and its
financial exposure is dependent upon such factors as the continuing evolution
of environmental laws and regulatory requirements, the availability and
application of technology, the allocation of cost among potentially responsible
parties, the years of remedial activity required and the remediation methods
selected. The Consolidated Balance Sheets at September 30, 1995 and December
31, 1994, include an accrual of $5.6 and $6.2 million respectively for
environmental matters. The first nine months of 1995 and 1994 include charges
to earnings amounting to $.2 and $.6 million, respectively.
The liability for future remediation costs is evaluated on a quarterly basis.
Actual costs to be incurred at identified sites in future periods may vary from
the estimates, given inherent uncertainties in evaluating environmental
exposures. Subject to the imprecision in estimating future environmental
costs, the Company does not expect that any sum it may have to pay in
connection with environmental matters in excess of the amounts recorded or
disclosed above would have a material adverse effect on its financial position
or results of operations.
Other
The Company is subject to various other claims, legal proceedings and
investigations covering a wide range of matters that arose in the ordinary
course of business. In the opinion of management, all such matters are
adequately covered by insurance or by accruals, and if not so covered, are
without merit or are of such kind, or involve such amounts, as would not have a
material adverse effect on the financial position or results of operations of
the Company.
Opinion of Management
Financial information furnished herein, which is unaudited, reflects in the
opinion of management all adjustments (all of which are of a recurring nature)
that are necessary to present a fair statement of the interim period.
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<PAGE> 10
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
Cash provided by operating activities was $198.8 million in the first nine
months of 1995, reflecting, among other things, a $68.7 million decrease in
accounts receivable which include the claim settlement of $20.4 million
recognized in December 1994 and received from the U.S. Government in February
1995 and the $49 million Federal Excise Tax reimbursement on the completed
five-ton truck contract received in September. As previously reported, to the
extent that any portion of the Federal Excise Tax is not recovered, additional
losses on the contract will have to be recognized, but there would be little
impact on cash flows. By accepting the $49 million settlement, as payment for
the $62.5 million receivable recorded during the performance of the contract,
the Company recorded a pre-tax, non-cash charge of $13.5 million (after tax
charge of $8.2 million). Cash provided by operating activities during the
first nine months of 1995 also includes distributions of $27.2 million from
unconsolidated entities.
Cash used by investing activities included capital expenditures of $85.8
million and $3.4 million for the acquisition of Fabsco and $0.7 million for an
aluminum cylinder shell producer business. Total consideration for Fabsco was
$14.8 million with the assumption of debt and other liabilities. Cash flow
used for financing activities included a net decrease in long-term debt of
$72.0 million, which included the purchase at market of $10.5 million of the
Company's outstanding 8-3/4% 10 year notes due May 1996, a $9.7 million
reduction of short-term debt, and $28.0 million of cash dividends paid on
common stock. Cash and cash equivalents increased $14.7 million to $58.3
million at September 30, 1995.
Other matters which could affect cash flows in the future are discussed under
Part I, Item 1 and in the 1994 Annual Report to Shareholders under Note 10,
"Commitments and Contingencies."
Harsco continues to maintain a good financial position, with net working
capital of $108.6 million, down from the $254.3 million at December 31, 1994,
principally due to the increase in current maturities of debt related to 8 3/4%
10 year notes due May 1996 and the result of the settlement of the Federal
Excise Tax reimbursement from the U.S. Government. Current assets amounted to
$515.1 million, and current liabilities were $406.5 million, resulting in a
current ratio of 1.3 to 1, below the 1.9 to 1 at year-end 1994. With total
debt at $298.6 million and equity at $628.8 million at September 30, 1995, the
total debt as a percent of capital was 32.2%, which is lower than the 38.6% at
December 31, 1994.
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<PAGE> 11
The stock price range during the first nine months was 59 3/8 - 39 5/8.
Harsco's book value per share at September 30, 1995, was $24.83, compared with
$23.08 at year-end 1994. The Company's annualized return on average equity for
the first nine months of 1995 was 15.0%, compared with 15.7% for the year 1994.
The annualized return on average assets was 13.8%, compared with the 13.5% for
the year 1994. The annualized return on capital for the first nine months was
11.5%, compared with 11.0% for the year 1994.
In June, the Company amended its $300 million, October 1993 credit facility
with a syndicate of nineteen banks. The amended and restated five-year
facility consolidates two prior agreements and, as amended, extends maturity to
June 2000, provides for greater financial flexibility and reduced fees and
interest margins. The new agreement is a $300 million unsecured revolving
five-year facility available in U.S. dollars or Eurocurrencies and serves as
back-up to the Company's commercial paper program. As of September 30, 1995,
there were no borrowings outstanding under this syndicated credit facility.
The Company also has a commercial paper borrowing program under which it can
issue up to $150 million of short-term notes in the U.S. commercial paper
market. The Company limits the aggregate commercial paper and syndicated
credit facility borrowings at any one time to a maximum of $300 million. At
September 30, 1995, the Company had no outstanding commercial paper debt.
Harsco's outstanding long-term notes are rated A by Standard & Poor's and Baa1
by Moody's. Harsco's commercial paper is rated A-1 by Standard & Poor's, F-1
by Fitch Investors Service and P-2 by Moody's. The Company also has on file,
with the Securities and Exchange Commission, a Form S-3 shelf registration for
the possible issuance of up to an additional $200 million of new debt
securities, preferred stock or common stock.
As indicated by the above, the Company's financial position and debt capacity
should enable it to meet its current and future requirements. As additional
resources are needed, the Company should be able to obtain funds readily and at
competitive costs.
RESULTS OF OPERATIONS
THIRD QUARTER OF 1995 COMPARED
WITH THIRD QUARTER OF 1994
Third quarter revenues of $385.5 million were 2% higher than last year's
comparable period. Higher sales were reported for two of the three operating
groups and for most product classes, particularly for metal reclamation and
mill services, gas control and containment, process equipment and railway
maintenance equipment. These increases were partially offset by the absence of
school bus sales, as the Company ceased this operation in June 1995, which was
responsible for the third operating group not reporting higher sales. Equity
in income of unconsolidated entities of $10.9 million decreased, due to
expected lower earnings from Harsco's share of the income from its investment
in United Defense, L.P., as compared to $16.9 million for third quarter of
1994. Other revenues also decreased, due to the nonrecurring $12.0 million
third quarter of 1994 negotiated claim settlement with the U.S. Government
concerning the completed five-ton truck contract.
Cost of sales increased, principally due to higher volume. Selling, general
and administrative expenses decreased, principally as a result of exiting the
school bus business. On a comparative basis, facilities discontinuance and
reorganization costs increased due to the non-cash charge of $13.5 million
relating to the settlement of the Federal Excise Tax reimbursement on the
completed
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<PAGE> 12
five-ton truck contract (in which the Company accepted $49 million for the
related $62.5 million receivable), and a $2.1 million provision for asset
impairment relating to the remaining fixed assets of the school bus operation.
The third quarter of 1994 includes facilities discontinuance and reorganization
costs of $4.7 million relating to the net realizable value of the investment in
the five-ton truck business, and the $3.7 million provision for the
discontinuance and rationalization of administrative facilities at several
foreign metal reclamation and mill services locations.
Income before taxes and minority interest decreased 24% from the comparable
period last year, due to the non-cash charge of $13.5 million relating to the
settlement of the Federal Excise Tax reimbursement with the U.S. Government
discussed earlier. This was partially offset by higher earnings for metal
reclamation and mill services, gas control and containment products, grating,
railway maintenance equipment and scaffolding, shoring and forming equipment.
Net income of $18.4 million was down 18% from the comparable period in 1994 due
to the previously discussed non-cash charge of $13.5 million ($8.2 million
after tax). The effective income tax rate for the third quarter of 1995 was
39%, versus 43.7% in 1994. The lower income tax rate is primarily due to lower
effective tax rates on international earnings as well as a reduction in losses
sustained in certain international operations for which there is no tax
benefit. The lower income tax rate is also due to reduced state income taxes
related to the change in the mix of U.S. and international income.
Sales of the Metal Reclamation and Mill Services Group, at $153.1 million, were
12.7% above 1994's third quarter, due to higher volumes in certain European
countries, favorable foreign exchange rates, and higher volumes in North
America. Sales for the Infrastructure and Construction Group, at $100.6
million, were down from last year's similar period, reflecting the closure of
the school bus operation in June 1995. All other operations posted increases,
lead principally by railway maintenance equipment and grating. Sales for the
Process Industry Products Group, at $120.4 million, were well ahead of the
prior year's third quarter, as most product lines within this group posted
higher sales, particularly for gas control and containment products.
Third quarter 1995, operating profit for the Metal Reclamation and Mill
Services Group, excluding the impact of expense items relating to facilities
discontinuance and reorganization costs, was $22.9 million, up 38% from the
comparable period last year, reflecting the improved operating performance, as
well as business conditions and the favorable impact of the decline of the U.S.
dollar against certain European currencies. After including the impact of
facilities discontinuance and reorganization costs, operating profit of $21.8
million for the Group was 68% more than in the prior year. The Infrastructure
and Construction Group posted an operating profit of $12.3 million, excluding
the impact of expense items relating to facilities discontinuance and
reorganization costs, which was significantly ahead of the 1994 third quarter
due to the improved performance of the grating, railway maintenance equipment,
and scaffolding, shoring and forming equipment product lines and the reduction
of losses related to the school bus business which ceased operations in June
1995. After including the impact of facilities discontinuance and
reorganization costs (which included the $13.5 million pre-tax charge for the
Federal Excise Tax settlement and the $2.1 million pre-tax charge for the
school bus operation) the Group incurred a $3.2 million loss. Operating profit
for the Process Industry Products Group, at $10.9 million, was up 39% over the
prior year reflecting improved performance, principally for the gas control and
containment product line.
-12-
<PAGE> 13
FIRST NINE MONTHS OF 1995 COMPARED WITH
FIRST NINE MONTHS OF 1994
Revenues for the first nine months were $1.148 billion, 6% above last year's
comparable period. The increase was primarily due to higher sales for metal
reclamation and mill services, gas control and containment equipment, grating,
scaffolding, shoring and forming equipment, and to a lesser extent roofing
granules and abrasives. Additionally, higher revenues included sales from an
acquisition made in the first quarter of 1995. These increases were partially
offset by the expected decrease in income from the Company's equity investment
in United Defense, L.P., as well as the impact of exiting the school bus
operation and divesting an operation in the fourth quarter of 1994. On a
comparative basis, revenues for the first nine months of 1994 include a $5.9
million pre-tax gain on the sale of the remaining holdings of an investment in
a marketable equity security and $15.8 million due to the negotiated settlement
of two claims with the U.S. Government.
Cost of sales increased, principally due to higher volume. Selling, general
and administrative expenses decreased as a result of exiting the school bus
operation and the impact of divesting a company in the fourth quarter of 1994,
which more than offset higher compensation costs and the inclusion of an
acquired company, in the first quarter of 1995.
Income before taxes and minority interest was up 7% from the comparable period
last year due to improved performance for all three operating groups. The
effective income tax rate for 1995 is 39.0%, versus 43.7% in 1994. The lower
income tax rate is primarily due to lower effective tax rates on international
earnings as well as a reduction in losses sustained in certain international
operations for which there is no tax benefit. The lower income tax rate is
also due to reduced state income taxes related to the change in the mix of U.S.
and international income.
Higher earnings in the first nine months of 1995 were due principally to
improved results for metal reclamation and mill services, grating, gas control
and containment equipment, structural composites, as well as roofing granules
and abrasives. Income benefited in 1995 from the impact of a pre-tax $5.9
million net foreign currency translation exchange gain arising from the decline
in the U.S. Dollar against certain European currencies which more than offset a
pre-tax $3.5 million foreign currency translation exchange loss due to the
devaluation of the Mexican peso. Lower earnings were recorded for the
Company's share of income in its equity investment in United Defense, L.P., as
well as pipe fittings and railway maintenance equipment. Continuing operating
losses during the planned shutdown of the school bus operation, were lower than
operating losses incurred in the first nine months of 1994. The Company ceased
all school bus operations in June 1995. In September 1995, the Company
recorded a non-cash, pre-tax charge of $13.5 million ($.32 earnings per share)
arising from the settlement of the Federal Excise Tax reimbursement claim with
the U.S. Government. As a result of the settlement, the Company received a
$49.0 million payment which was offset against a $62.5 million receivable
recorded during the performance of the contract. Additionally, the Company
recorded a pre-tax provision $2.1 million ($.05 earnings per share) for the
valuation of the remaining school bus operation plant and equipment in
Marysville, Ohio. On a comparative basis, favorably affecting 1994's first
nine months results were a pre-tax $5.9 million ($.14 earnings per share) gain
on the sale of the remaining holdings of an investment in a marketable equity
security and $15.8 million ($.35 earnings per share) of pre-tax income
resulting from the negotiated settlement of two
-13-
<PAGE> 14
claims with the U.S. Government. These favorable items in 1994 were partially
offset by $11.0 million ($.25 earnings per share) of expense for facilities
discontinuance and reorganization costs related to the Metal Reclamation and
Mill Services and Infrastructure and Construction Groups. Interest expense
decreased as a result of the continued liquidation of the Company's outstanding
debt. Net income of $68.4 million, was up 17% from the comparable period in
1994. This income was the highest first nine months performance in the history
of the Company, excluding an accounting change in the first nine months of
1993.
Sales of the Metal Reclamation and Mill Services Group, at $446.0 million, were
well above 1994's first nine months, due to improved business conditions,
particularly in Europe, as well as North America. The favorable impact of the
decline in the U.S. Dollar against certain European currencies, particularly
the French franc, Belgian franc and German mark also contributed to increased
revenues for the Group. Sales for the Infrastructure and Construction Group at
$302.7 million, were slightly ahead of last year's similar period. Grating and
scaffolding equipment sales increased modestly from 1994. Sales for the
Process Industry Products Group, at $359.6 million, were ahead of the prior
year's first nine months. The improvement included increased sales for most
product classes, as well as sales from an acquisition made in the first quarter
of 1995.
Operating profit of $60.2 million for the Metal Reclamation and Mill Services
Group, excluding the impact of expense items relating to facilities
discontinuance and reorganization costs, was up 80% from 1994 principally due
to improved operating performance as well as business conditions, the favorable
effects of cost reduction efforts, and the favorable impact of the decline in
the U.S. Dollar against certain European currencies as previously discussed.
After including the impact of facilities discontinuance and reorganization
costs, operating profit of $57.6 million for the Group was more than twice the
amount recorded in the prior year. The Infrastructure and Construction Group
posted an operating profit of $25.5 million, excluding the impact of expense
items relating to facilities discontinuance and reorganization costs, which
significantly exceeded 1994's first nine months. All continuing product
classes posted improved results, except railway maintenance equipment which
benefited in 1994 from two large shipments to international customers. On a
comparative basis, operating losses during the planned shutdown of the school
bus operation, were lower than operating losses incurred in the first nine
months of 1994. After including the impact of facilities discontinuance and
reorganization costs (which included the $13.5 million pre-tax charge for the
Federal Excise Tax settlement and the $2.1 million pre-tax charge for the
school bus operation as previously discussed) operating profit of $9.6 million
for the Group was up 52% from 1994. Operating profit for the Process Industry
Products Group, at $32.0 million, was up 15% from the prior year's first nine
months and reflected significantly improved results for gas control and
containment equipment which more than offset slightly lower earnings for pipe
fittings.
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<PAGE> 15
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information on legal proceedings is included above under Part I, Item 1., the
section labeled "Commitments and Contingencies."
-15-
<PAGE> 16
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
a.) On September 26, 1995, Harsco Corporation announced that the Board of
Directors declared a quarterly cash dividend of 37 cents per share,
payable November 16, to shareholders of record on October 16, 1995.
b.) On August 23, Harsco Corporation announced that, William D. Etzweiler,
Senior Vice President and Chief Operating Officer, will assume
responsibility for all three operating groups; adding Infrastructure
and Construction to his current assignments of Metal Reclamation and
Mill Services and Process Industry Products. Barrett W. Taussig,
Senior Vice President and Chief Operating Officer, of its
Infrastructure and Construction Group stepped down as part of Harsco's
continued de-emphasis of the defense sector.
c.) On September 25, Harsco announced that the U.S. Army has paid the
Company $49 million in cash to settle a disputed federal excise tax
reimbursement claim on a completed 1986 contract for five-ton trucks
manufactured for the U.S. Army Tank- Automotive Command. The
agreement also releases Harsco from other potential government and
Army legal actions related to the contract.
As a result of the settlement, Harsco offset the $49 million payment
against a $62.5 million receivable recorded during the performance of
the contract. Consequently, the company recorded a non-cash, pre-tax
charge of $13.5 million (after-tax charge of $8.2 million or 32 cents
per share), in the third quarter.
d.) The Company announced on November 7, 1995 that it has signed a letter
of intent to acquire Symons Corporation, a supplier of prefabricated
concrete forming equipment, in exchange for 500,000 shares of Harsco
common stock.
Symons, a privately owned company, has eight manufacturing facilities
and 28 branch sales locations throughout the United States. Annual
revenues are approximately $90 million. Harsco intends to combine
Symons' operations with those of Harsco Corporation's existing Patent
Construction Systems Division.
The transaction is conditioned upon negotiation of a definitive
agreement and final approval of the parties.
ITEM 6(a.) EXHIBITS
The following exhibits are attached:
a.) Exhibit No. 10a. Material Contracts - Agreement with Barrett W. Taussig
dated August 22, 1995.
b.) Exhibit No. 10b. Material Contracts - Settlement Agreement dated
September 19, 1995, among the Company, the United States Army and the
United States Department of Justice.
c.) Exhibit No. 11 Computation of Net Income Per Common Share.
d.) Exhibit No. 12 Computation of Ratios of Earnings to Fixed Charges.
e) Exhibit No. 27 Financial Data Schedule
ITEM 6(b.) Reports on Form 8-K
a.) An 8-K was filed September 27, 1995 dealing with the settlement of the
Federal Excise Tax Reimbursement Claim with the United States Army and
Department of Justice.
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<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARSCO CORPORATION
------------------------------
(Registrant)
DATE 11/7/95 /S/ Leonard A. Campanaro
------------------------ ------------------------------
Leonard A. Campanaro
Senior Vice President and
Chief Financial Officer
DATE 11/7/95 /S/ Salvatore D. Fazzolari
------------------------ ------------------------------
Salvatore D. Fazzolari
Vice President and Controller
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<PAGE> 18
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
Exhibit 10a Material Contracts - Agreement with Barrett W. Taussig
dated August 22, 1995.
Exhibit 10b Material Contracts - Settlement Agreement dated
September 19, 1995, among the Company, the United States
Army and the United States Department of Justice.
Exhibit 11 Computation of Net Income Per Common Share.
Exhibit 12 Computation of Ratios of Earnings to Fixed Charges.
Exhibit 27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10a
[HARSCO CORPORATION LETTERHEAD]
22 August 1995
Mr. Barrett W. Taussig
2006 Mountain Pine Drive
Mechanicsburg, PA 17055
Dear Barrett,
This letter will acknowledge that you have resigned from Harsco as of
30 September 1995 and that the Company has accepted your resignation. It will
further serve to confirm the agreement that we have entered into to satisfy
Harsco's financial obligations to you under the agreement dated 20 January 1994
(the "Premerger Agreement"), and to meet the Company's anticipated need for
your future services from time to time, particularly with regard to defense
business matters.
The Company will continue your current salary and benefits until the
date of your resignation, 30 September 1995. It is mutually agreed that in
consideration of the provisions of this letter agreement, the Premerger
Agreement and the related Special Supplemental Retirement Benefit Agreement
dated 28 January 1994 between the Company and you are canceled and Harsco will
not have any obligations under those Agreements. Thus, your service credit
under the Harsco pension plans will be calculated from your actual date of
employment at the Company's BMY Division.
On or before 28 February 1996, Harsco will pay you three-fourths (3/4)
of the amount that you would have received under the 1995 Executive Incentive
Compensation Plan (the "Plan") had you been employed for the full year. This
amount will be paid entirely in cash, notwithstanding the provisions of the
Plan that require payment partly in common stock.
<PAGE> 2
Mr. Barrett W. Taussig
22 August 1995
Page 2
Harsco will retain you as a consultant to the Corporation for the
period 1 October 1995 through 30 September 1998. You will provide Harsco such
services as the Chairman and Chief Executive Officer may request relating to
the defense business, United Defense, L.P., and such other matters as may be
relevant to your knowledge and expertise. You will cooperate with Harsco with
regard to legal issues and testify when requested. You will be available to
provide occasional consultation from your home or at the Corporate Office upon
request by Harsco.
In consideration of the consulting services described above, Harsco
will pay you a monthly fee of $18,333.33 on the last day of each month during
the term of this consulting agreement. For each day of substantial service
that you perform at Harsco's request under this agreement (but not including
the brief periodic discussions which would be provided without additional
compensation) Harsco will pay you an additional $800 per day of service. The
Company will also reimburse you for your actual and reasonable travel expenses
incurred at the specific request of the Chairman and Chief Executive Officer
when submitted with proper supporting documentation in compliance with Harsco
expense reimbursement policies. Harsco will not provide any insurance, pension
or other benefits to you beyond those accrued as of the date of your
resignation. Your stock options will be exercisable for a period of time in
accordance with their terms.
Nothing in this Agreement will be deemed to constitute you as an
employee of Harsco. If the obligations of this Agreement are satisfactorily
performed, Harsco by policy does not limit your ability to render services for
other noncompeting entities.
It is understood that, as a consultant, you will be an independent
contractor to Harsco, and Harsco will not be responsible for withholding any
federal, state, or local taxes. Harsco will issue an IRS Form 1099 at the
Company's year-end accounting for taxable remuneration paid under the
consulting agreement.
<PAGE> 3
Mr. Barrett W. Taussig
22 August 1995
Page 3
A copy of Harsco's Code of Conduct is attached and is incorporated
herein. You expressly agree to conform to the requirements of this Code. You
will not make any effort to acquire information for the Company to which Harsco
is not legally entitled.
In consideration of Harsco's undertakings in this agreement, you are
signing simultaneously with the execution of this agreement, the enclosed
confidentiality agreement.
This agreement is for your unique personal services and will not be
assignable or delegable by you. In the event of your death, Harsco will make
the remaining payments under the consulting agreement to your estate.
In the event that you breach this agreement or the attached
confidentiality agreement, Harsco will have the right to terminate all further
consideration under this agreement.
If this letter accurately states our agreement, please indicate your
acceptance by signing and returning to me the enclosed copy of this letter.
Sincerely,
/s/ DEREK C. HATHAWAY
---------------------
Derek C. Hathaway
Chairman, President & CEO
cab
Attachment
Accepted and agreed to this 23 day of August 1995.
/s/ BARRETT W. TAUSSIG
- ----------------------
Barrett W. Taussig
<PAGE> 4
CONFIDENTIALITY AGREEMENT
I, Barrett W. Taussig, in consideration of my engagement as a consultant to
Harsco Corporation ("Harsco") hereby agree that:
1. Unless authorized in writing or instructed by Harsco, I will not during my
consulting period or after such consulting period, disclose to anyone
outside of Harsco or use any of Harsco's confidential, secret or
proprietary information known to or acquired by me during my employment or
consulting period relating to human resources, administration, strategic
business plans, products, pricing, costs, bids, processes, know-how,
customer relations, marketing proposals, profit and loss information,
design proposals and specifications, strategic marketing proposals, trade
secrets, research, developments, equipment, computer software, computer
processed data, suppliers or supplies and services or other information
concerning Harsco. This Agreement shall not restrict the disclosure or use
of information which is publicly available or the disclosure or use of
information which I am required to disclose by order of a court of
competent jurisdiction.
2. This Agreement shall be binding on my heirs, legal representatives and
assigns, and shall inure to the benefit of any successors and assigns of
Harsco.
3. If any provision of this Agreement is found to be invalid by a court of
competent jurisdiction, such invalidity will not invalidate the rest of
this Agreement but it will be construed as not containing said provision
and the rights and obligations of the parties will be interpreted,
construed and enforced accordingly.
4. The parties hereto agree that this Agreement is made under the laws of the
Commonwealth of Pennsylvania and for all purposes shall be construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania,
in which jurisdiction Harsco maintains its principal offices and place of
business.
8/23/95 /s/ BARRETT W. TAUSSIG
- ------------------ ------------------------
Date Barrett W. Taussig
HARSCO CORPORATION
8/23/95 /s/ DEREK C. HATHAWAY
- ------------------ ------------------------
Date Derek C. Hathaway
Chairman, President & CEO
cab
<PAGE> 1
EXHIBIT 10b
SETTLEMENT AGREEMENT
I. PARTIES
This Settlement Agreement is made and entered into by and between the
United States of America, acting by and through both the Civil Division of the
Department of Justice ("DOJ") and the United States Department of the Army,
Army Tank-automotive and Armaments Command ("Army"), and Harsco Corporation and
its BMY Wheeled Vehicles Division ("Harsco") (collectively referred to as the
"Parties").
II. RECITALS
The Parties agree to the following recital of facts:
1. Harsco Corporation is a corporation organized under the laws
of the State of Delaware, with its principal place of business located in
Wormleysburg (Camp Hill), Pennsylvania.
2. BMY Wheeled Vehicles Division is a division of Harsco
Corporation.
3. On May 1, 1985, the Army Tank-Automotive Command ("TACOM")
issued a solicitation for bids for the acquisition of M939A2 Series 5-ton
trucks. On April 14, 1986, three offerors, including Arveco, Inc., a wholly
owned subsidiary of Harsco, submitted sealed bids. On May 14, 1986, TACOM
awarded to Arveco Contract No. DAAEO7-86-C-J111 ("J111 Contract") for the
production and delivery of the trucks. The J111 Contract subsequently was
novated to the BMY Wheeled Vehicles operation of Harsco.
4. On October 19, 1987, Harsco requested the contracting officer
to modify the J111 Contract to reflect an after-imposed Federal Excise Tax
("FET") under the contract for models, identified in the attachments to the
request, which did not include Models 923A2 and 925A2. Models 923A2 and 925A2
are referred to herein as Light Weight Trucks ("LWTs"); all other models are
referred to herein as Heavy Weight Trucks ("HWTs"). The Parties do not intend
the designations of LWT or HWT to constitute any type of admission; rather, the
designations are used only for convenience in this Settlement Agreement.
<PAGE> 2
5. On January 5, 1988, the contracting officer denied Harsco's
request, primarily on the basis that TACOM contended that the bid price
contained costs for FET for the HWTs in question. On February 9, 1988, Harsco
submitted a certified claim requesting a contract price adjustment for the
after-imposed FET (the "FET Claim"), which subsequently also was denied in a
final decision of the contracting officer. Harsco then timely appealed this
denial to the Armed Services Board of Contract Appeals ("ASBCA"). See BMY,
Division of Harsco Corp., ASBCA No. 36805.
6. On October 5, 1990, Harsco submitted a certified claim
requesting the contracting officer to make a contract price adjustment to
reflect unilateral changes in shipping destinations under the J111 Contract.
This claim was amended five times by claim amendments dated December 18, 1990;
January 24, 1991; January 30, 1991; February 8, 1991; and February 18, 1991
(The original claim and its five amendments are collectively referred to
hereinafter as the "CLIN Switching Claim"). The CLIN Switching Claim involved
some of the same basic questions of fact as the FET Claim.
7. On March 18, 1991, Harsco received a final decision of the
contracting officer denying the CLIN Switching Claim. On June 11, 1991, while
the FET Claim was still pending before the ASBCA, Harsco timely appealed to the
ASBCA the denial of its certified claim for a price adjustment arising from the
changes in shipping destinations. See BMY, Division of Harsco Corp., ASBCA No.
43042. Subsequently, because the Army and Harsco believed that a decision in
ASBCA No. 36805 could help resolve the issues associated with ASBCA No. 43042,
the Army and Harsco jointly moved that the appeal be dismissed without
prejudice, which was granted.
8. On January 4, 1993, the ASBCA issued a decision with respect
to the FET Claim. See BMY, Division of Harsco Corp., ASBCA No. 36805, 93-2 BCA
Paragraph 25,684.
9. On February 3, 1993, in response to ASBCA No. 36805, the Army
filed its Motion to Reopen and, in the Alternative, Request for
Reconsideration. On February 24, 1994, the ASBCA issued a decision denying
this motion. On June 22, 1994, the United States
- 2 -
<PAGE> 3
appealed to the U.S. Court of Appeals for the Federal Circuit the ASBCA's
decision denying the motion. On August 16, 1994, in response to the Army's
motion, the Federal Circuit ordered the proceeding dismissed under Federal Rule
of Appellate Procedure 42(b).
10. By bilateral modification P00311 to the Contract, dated August
26, 1994, the Army and Harsco settled non-FET related issues pertaining to the
J111 Contract. This settlement excluded FET-related disputes and other matters
enumerated in modification P00311. The Parties are not in agreement whether or
not the releases contained in modification P00311 encompass the reconciliation
of payments under the J111 Contract. In May 1995, the Defense Finance and
Accounting Service, Columbus Center, Ohio ("DFAS") advised the contracting
officer of potential overpayments made to Harsco relating to alleged
under-recouped progress payments. Harsco believes that it may have been
underpaid. This reconciliation is currently under review by DFAS, the Army,
and BMY.
11. On February 13, 1995, Harsco petitioned the ASBCA to reinstate
ASBCA No. 43042; such request was subsequently approved by the ASBCA.
12. On February 23, 1995, the Army filed a renewed Motion to
Reopen and, in the Alternative, Request for Reconsideration in ASBCA No. 36805.
This motion currently is pending.
13. On March 13, 1995, following the reinstatement of the appeal
in ASBCA No. 43042, Harsco filed its Complaint. This appeal is currently
pending.
14. DOJ has conducted an investigation to determine whether to
file a lawsuit against Harsco under the civil False Claims Act, the Contract
Disputes Act, or at common law (i.e., breach of contract, mistake, fraud, and
unjust enrichment) relating to FET and the J111 Contract. The United States
believes that there is evidence to suggest that it may have civil causes of
action against Harsco relating to FET and the J111 Contract under the False
Claims Act, Contract Disputes Act, and at common law (i.e., breach of contract,
mistake, fraud, and unjust enrichment).
- 3 -
<PAGE> 4
15. Harsco has denied wrongdoing of any kind whatsoever and
specifically, with respect to the J111 Contract, has denied that it acted in
violation of any statutes or common law, or that it is liable contractually or
otherwise to any party. During settlement discussions conducted in connection
with the DOJ investigation noted above, Harsco initially presented a quantum
analysis for the FET Claim and the CLIN Switching Claim, dated December 7,
1994, asserting that it was entitled to $86,273,729.17 under these claims.
Under a different methodology suggested by DCAA, Harsco submitted an alternate
quantum analysis for these claims dated December 21, 1994, asserting that it
was entitled to $83,614,237.87.
16. It is recognized by the Parties that the IRS has been
reviewing whether LWTs are subject to FET. Harsco maintains that LWTs are not
subject to FET and to date has paid no tax on LWTs. Harsco also maintains
that, in the event the IRS determines that some or all of the LWTs are taxable
in whole or in part, it may elect to file an after-imposed tax claim for FET
based on actual shipping destinations for those LWTs originally scheduled, by
the J111 Contract at the time of contract award or by an option under the J111
Contract on the date that option was exercised, to be delivered on or after
October 1, 1988 (the "Potential LWT FET Claim"). During the settlement
discussions noted in paragraph 15, above, Harsco presented a pro forma quantum
analysis for a Potential LWT FET Claim, dated January 12, 1995, asserting that
it would be entitled to approximately $24,739,253, exclusive of interest, from
the Army in the event that all LWTs are determined to be taxable. Harsco's
January 12, 1995 pro forma represented that this amount did not include any
amounts or adjustments for unilateral price changes which were made by TACOM
due to unilateral changes in shipping destinations, i.e., the Pro Forma CLIN
Switching Claim amounting to approximately $12,893,375.
17. The Parties are entering into this Settlement Agreement to
avoid the expense, delay, and inconvenience of protracted litigation relating
to the matters referenced above.
18. Accordingly, in reliance upon the representations contained
herein and in consideration of the mutual promises, covenants, and obligations
in this Settlement Agreement,
- 4 -
<PAGE> 5
and for good and valuable consideration, the Parties mutually agree to the
terms and conditions set forth below.
III. TERMS AND CONDITIONS
19. The Army agrees to pay to Harsco the Settlement Amount of
$49,000,000.00 on or before September 30, 1995, in full satisfaction of
Harsco's FET Claim and the CLIN Switching Claim (inclusive of attorneys' fees,
costs, and/or any interest that may be due under the Contract Disputes Act, or
otherwise) as described herein. The Parties recognize that the funds available
to the Army with which to consummate this Settlement Agreement are in part
subject to expiration and cancellation on September 30, 1995. Accordingly, and
notwithstanding any other provision of this Settlement Agreement, it is
expressly agreed that a condition precedent to any obligation of any party to
be bound by the terms of this Settlement Agreement is the requirement that full
payment recited in this paragraph be obligated to the J111 Contract and
disbursed to Harsco on or before September 30, 1995. If this September 30,
1995 milestone is not met, the Parties agree that this Settlement Agreement
shall be completely unenforceable and null and void.
20. Harsco, except as otherwise expressly noted in this Settlement
Agreement, hereby releases and discharges DOJ and the Army, and any present or
former agents, employees, or officers of DOJ or the Army, from any and all
civil claims or administrative claims, that it has or may have based upon
Harsco's entitlement to FET under the J111 Contract, or arising under or
related to the J111 Contract (to include, but not limited to, the FET Claim and
CLIN Switching Claim and all other claims, disputes, or issues not previously
released by modification P00311, described in paragraph 10, above); provided,
however:
a. that with respect to the issue of FET and LWTs, in
the event that some or all of the LWTs are determined to be taxable in whole or
in part, this release and discharge does not prevent Harsco from attempting to
reverse such a determination, or from filing a Potential LWT FET Claim or from
obtaining payment on such a claim (except as such payment may be limited by
paragraph 24 or the Payment Ceiling referenced in subparagraph 25.b, below), or
from
- 5 -
<PAGE> 6
submitting invoices to recover amounts for FET on LWTs specifically withheld by
TACOM pursuant to Modifications to the J111 Contract (including Modifications
P00266, P00292, P00297, and A00034); and
b. that it is recognized by the Parties that trucks
shipped to foreign destinations under the J111 Contract were exempt from FET.
It is also recognized by the Parties that in certain cases, even though trucks
were shipped to foreign destinations, proof of exportation was not available
from TACOM for such trucks within six months of the date of sale, thereby
requiring Harsco to pay FET to the IRS in accordance with Section 4221(b)(2) of
the Internal Revenue Code. All necessary proofs of exportation have now been
received from TACOM and Harsco is in the process of seeking refunds from the
IRS. This release does not prevent Harsco from seeking and obtaining all of
such refunds.
21. It is agreed that all costs (as defined in the Federal
Acquisition Regulations ("FAR") 31.205-47) incurred by or on behalf of (or
allocated to) Harsco and its officers, directors, and employees in connection
with the following activities shall be unallowable costs for government
contract accounting purposes: 1) the matters released by DOJ in this
Settlement Agreement other than routine contract administration, 2) the United
States' civil or criminal investigation of the matters covered by this
Settlement Agreement, 3) the investigation, defense or corrective action, if
any, undertaken by Harsco in connection with the civil or criminal inquiries
based upon matters described in paragraph 14, above, 4) the negotiation of this
Settlement Agreement, 5) any CID's issued by DOJ relating to its investigation
described in paragraph 14, above, and 6) the prosecution of its FET Claim
and/or CLIN Switching Claim before the ASBCA. For accounting purposes these
amounts, with the exception of Harsco's Pennsylvania corporate office costs
which are viewed as de minimus, shall be kept separate from Harsco overhead
accounts and Harsco agrees not to charge these costs directly or indirectly to
any of its contracts with the United States. Harsco further agrees to
separately account for any costs incurred on or after the Effective Date of
this Settlement Agreement by Harsco with regard to any tax litigation with the
IRS relating to FET and trucks delivered under the J111 Contract.
- 6 -
<PAGE> 7
22. Harsco agrees to withdraw the following Freedom of Information
Act ("FOIA") Requests that it has filed in connection with or relating to DOJ's
investigation referenced in paragraph 14, above. The identity of these FOIA
Requests is as follows: 1) 9/7/94 FOIA Request to Army Judge Advocate General
from McKenna & Cuneo (J. Merrifield); 2) 9/7/94 FOIA Request to Defense
Contract Management Area Operations - Cleveland from McKenna & Cuneo (J.
Merrifield); and 3) 8/11/94 FOIA Request to DCAA from BMY (J. Dodd).
23. The Parties agree that currently pending litigation concerning
the FET Claim (ASBCA No. 36805) and the CLIN Switching Claim (ASBCA No. 43042)
will be concluded as follows:
a. Harsco, upon payment of the full Settlement Amount by
the Army, will file a motion for voluntary dismissal
of its appeal of the CLIN Switching Claim (ASBCA No.
43042), with prejudice and without costs or
attorneys' fees to any party; the Army will not
oppose voluntary dismissal of that appeal on these
terms;
b. The Army, upon payment of the full Settlement Amount
by the Army, will request, in writing, withdrawal of
its motion to reopen the appeal of the FET Claim
(ASBCA No. 36805), with prejudice and without costs
or attorneys' fees to any party; Harsco will not
oppose voluntary withdrawal of that motion on these
terms;
c. Harsco, upon payment of the full Settlement Amount by
the Army, will file a motion for voluntary dismissal
of its appeal of the FET Claim (ASBCA No. 36805),
with prejudice and without costs or attorneys' fees
to any party; the Army will not oppose voluntary of
that appeal on these terms.
24. Harsco will omit from the quantum portion of any Potential LWT
FET Claim reserved to Harsco by subparagraph 20.a, any amounts or adjustments
relating in any way to:
- 7 -
<PAGE> 8
a. unilateral price changes which were made by TACOM due
to unilateral changes in shipping destinations, i.e., CLIN Switching, it being
expressly understood and agreed by the Parties that all CLIN Switching issues
whether related to liability, entitlement, damages, or quantum are being
completely resolved herein;
b. interest and penalties, if any, that may be paid by
Harsco to the IRS; and
c. trucks (including HWTs and LWTs) originally scheduled
for delivery prior to October 1, 1988. The issue of which LWTs were scheduled
for delivery prior to October 1, 1988 is not affected by this Settlement
Agreement.
25. The Army, except as otherwise expressly noted in this
Settlement Agreement, hereby releases and discharges Harsco, including its
present and former officers, directors, employees, agents, subsidiaries,
affiliates, divisions, successors and assigns, from any and all civil claims or
administrative claims that it has or may have based upon Harsco's entitlement
to FET under the J111 Contract, or arising under or related to the J111
Contract (to include, but not limited to, the FET Claim, the CLIN Switching
Claim and all other claims, disputes or issues not previously released by
modification P00311, described in paragraph 10, above); provided, further:
a. that with respect to the issue of FET and LWTs,
regardless of the outcome of the IRS review, this release and discharge
includes the release and discharge of any claim that the Army is entitled to
any recovery from Harsco relating to costs in the J111 Contract bid price that
Harsco may have included with respect to FET for LWTs originally scheduled for
delivery prior to October 1, 1988; and
b. in the event that some or all of the LWTs are
determined to be taxable in whole or in part, the Army will abide by the result
of the ASBCA decision on the FET Claim (ASBCA No. 36805), cited in paragraph 8,
above, and will apply that decision to a Potential LWT FET Claim. The Parties
agree that the quantum of any Potential LWT FET Claim is excepted from this
Settlement Agreement; provided, however, that the amount of any payment
- 8 -
<PAGE> 9
that the Army may make on a Potential LWT FET Claim will not exceed a Payment
Ceiling of $21,000,000.
26. The Army agrees to make its best reasonable efforts to return
to Harsco all originals and copies of Harsco documents in the Army's possession
(to include both TACOM and the Army Contract Appeals Division) that were
obtained from Harsco in connection with the investigation referenced in
paragraph 14 above (excluding any Harsco documents attached to any filings
before the ASBCA), the FET Claim, or the CLIN Switching Claim. The Army will
make its best reasonable efforts to return such documents within ninety days of
the Effective Date of this Settlement Agreement. The Army reserves the right
to retain copies of such materials that are necessary to document its decision
to enter into this Settlement Agreement.
27. DOJ, except as otherwise expressly noted in this paragraph and
paragraph 34, below, hereby releases and discharges Harsco, including its
present and former officers, directors, employees, agents, subsidiaries,
affiliates, divisions, and successors and assigns, from any and all civil or
administrative monetary claims, that the United States has under the False
Claims Act, 31 U.S.C. Section 3729 et seq.; Contract Disputes Act, 41 U.S.C.
Section 604; or common law (i.e., breach of contract, mistake, fraud, and
unjust enrichment) based upon (i) Harsco's entitlement to FET under the J111
Contract, (ii) the FET Claim (ASBCA No. 36805), (iii) the CLIN Switching Claim
(ASBCA No. 43042), and (iv) any representations Harsco made concerning to what
extent Harsco included in its bid price costs for FET for either HWTs or LWTs,
and any repetition of those representations that may be made in connection with
a Potential LWT FET Claim.
28. DOJ agrees to make its best reasonable efforts to return to
Harsco all originals and copies of Harsco documents in DOJ's possession that
were obtained from Harsco in connection with the investigation referenced in
paragraph 14, above. DOJ will make its best reasonable efforts to return such
documents to Harsco within ninety days of the Effective Date of this Settlement
Agreement. DOJ reserves the right to retain copies of such materials that are
- 9 -
<PAGE> 10
necessary to document its conduct of its investigation and its decision to
enter in this Settlement Agreement or attached to any court filings,
depositions, or records of interviews.
29. Nothing in this Settlement Agreement is intended to constitute
an admission of wrongdoing on the part of DOJ, the Army, or Harsco.
30. The Parties agree that this Settlement Agreement may not be
altered, amended, modified, or otherwise changed except by a writing duly
executed by DOJ, the Army, and Harsco. The Parties further agree that this
Settlement Agreement constitutes the entire agreement with respect to its
subject matter.
31. The Parties to this Settlement Agreement have executed three
identical copies of this Settlement Agreement, each of which shall be deemed an
original.
32. Each signatory below warrants that he has all necessary
authority to execute this Settlement Agreement on behalf of his respective
party.
33. Subject only to the provisos set forth in paragraph 19, above,
this Settlement Agreement shall become effective (the "Effective Date") upon
the last date of its execution by the Parties.
34. Notwithstanding any term of this Settlement Agreement,
specifically excluded and reserved from the scope and terms of this Settlement
Agreement are any and all: 1) claims and defenses to claims that may arise
under Title 26, United States Code, or Internal Revenue Service regulations, 2)
suspension and debarment rights of any federal agency, 3) claims and defenses
to claims personal injury or property damage arising from the delivery of
deficient or defective products or parts under the J111 Contract, or for breach
of any express or implied warranty relating to products or parts delivered
under the J111 Contract, 4) claims and defenses to claims: (a) by Harsco for
underpayment or (b) by the government for over-payment relating to alleged
under-recouped progress payments, of the contract price disclosed by the
reconciliation of payments under the J111 Contract described in paragraph 10,
above, and not otherwise resolved by Modification P00311 to the J111 Contract,
and 5) claims for the enforcement of the terms of this Settlement Agreement.
- 10 -
<PAGE> 11
35. The provisions of this Settlement Agreement shall be binding
upon the United States and Harsco and their heirs, successors, and assigns.
FOR THE UNITED STATES OF AMERICA:
Dated: September 19, 1995 /s/ DENNIS L. PHILLIPS
-------------------- ----------------------
Dennis L. Phillips
Trial Attorney
Commercial Litigation Branch
Civil Division
United States Department of Justice
Washington, D.C.
FOR THE DEPARTMENT OF THE ARMY:
Dated: 19 Sep 95 /s/ MARTIN J. GREEN
-------------------- -------------------
Martin J. Green
Contracting Officer
U.S. Army Tank-automotive and
Armaments Command
Warren, Michigan
FOR HARSCO CORPORATION AND ITS BMY WHEELED VEHICLES DIVISION:
Dated: September 19, 1995 /s/ DEREK C. HATHAWAY
------------------ ---------------------
Derek C. Hathaway
Chairman, President and Chief
Executive Officer
- 11 -
<PAGE> 1
Part I
Exhibit 11
HARSCO CORPORATION
COMPUTATION OF NET INCOME PER COMMON SHARE
(dollars in thousands except per share)
----------------------------------------------------------
<TABLE>
<CAPTION>
3 MONTHS ENDED SEPT. 30 9 MONTHS ENDED SEPT. 30
---------------------------------- ----------------------------------
1995 1994 1995 1994
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net income $ 18,400 $ 22,338 $ 68,419 $ 58,513
============= =========== ============ =============
Average shares of common stock
outstanding used to compute
earnings per common share 25,312,553 25,150,174 25,261,634 25,093,574
Additional common shares to be
issued assuming exercise of
stock options, net of shares
assumed reacquired 169,001 79,399 186,276 93,336
------------- ----------- ------------ -------------
Shares used to compute dilutive
effect of stock options 25,481,554 25,229,573 25,447,910 25,186,910
============= =========== ============ =============
Fully diluted net income per
common share $ 0.72 $ 0.88 $ 2.69 $ 2.32
============= =========== ============ =============
Net income per common share $ 0.73 $ 0.89 $ 2.71 $ 2.33
============= =========== ============ =============
</TABLE>
<PAGE> 1
Part I
Exhibit 12
HARSCO CORPORATION
Computation of Ratios of Earnings to Fixed Charges
(In Thousands of Dollars)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 Nine
---------------------------------------------------------------------- Months
Ended
1990 1991 1992 1993 1994 9/30/95
---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Earnings:
Pre-tax income from continuing
operations (1) $ 115,587 $ 119,647 $ 140,576 $ 137,151 $ 146,089 $ 113,197
Add fixed charges computed below 21,864 23,544 22,425 23,879 37,982 25,268
Net adjustments for equity companies (532) (439) (454) (363) (134) (604)
Net adjustments for capitalized
interest (255) (469) (134) (172) (274) -
--------- ---------- ---------- ---------- ----------- ----------
Consolidated Earnings Available for
Fixed Charges $ 136,664 $ 142,283 $ 162,413 $ 160,495 $ 183,663 $ 137,861
========= ========== ========== ========== =========== ==========
Consolidated Fixed Charges:
Interest expense per financial
statements (2) $ 17,506 $ 18,925 $ 18,882 $ 19,974 $ 34,048 $ 22,376
Interest expense capitalized 345 574 355 332 338 276
Portion of rentals (1/3 ) representing
an interest factor 4,013 4,045 3,188 3,573 3,596 2,616
Interest expense for equity companies
whose debt is guaranteed (3) - - - - - -
--------- ---------- ---------- ---------- ----------- ----------
Consolidated Fixed Charges $ 21,864 $ 23,544 $ 22,425 $ 23,879 $ 37,982 $ 25,268
========= ========== ========== ========== =========== ==========
Consolidated Ratio of Earnings to
Fixed Charges 6.25 6.04 7.24 6.72 4.84 5.46
========= ========== ========== ========== =========== ==========
</TABLE>
(1) 1992 excludes the cumulative effect of change in accounting method for
post-retirement benefits other than pensions.
(2) Includes amortization of debt discount and expense.
(3) No fixed charges were associated with debt of less than fifty percent
owned companies guaranteed by Harsco during the five year period 1990
through 1994, and the nine months ended September 30, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 58,273
<SECURITIES> 0
<RECEIVABLES> 296,668
<ALLOWANCES> (7,572)
<INVENTORY> 132,021
<CURRENT-ASSETS> 515,114
<PP&E> 1,059,608
<DEPRECIATION> (605,474)
<TOTAL-ASSETS> 1,320,975
<CURRENT-LIABILITIES> 406,465
<BONDS> 181,652
<COMMON> 40,648
0
0
<OTHER-SE> 588,189
<TOTAL-LIABILITY-AND-EQUITY> 1,320,975
<SALES> 1,108,308
<TOTAL-REVENUES> 1,148,152
<CGS> 852,504
<TOTAL-COSTS> 1,015,981
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,871
<INTEREST-EXPENSE> 22,376
<INCOME-PRETAX> 114,815
<INCOME-TAX> 44,778
<INCOME-CONTINUING> 68,419
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,419
<EPS-PRIMARY> 2.71
<EPS-DILUTED> 2.69
</TABLE>
