<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 June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-3970
HARSCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-1483991
(State of incorporation) (I.R.S. Employer Identification No.)
Camp Hill, Pennsylvania 17001-8888
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number (717) 763-7064
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
----- -----
Title of Each Class Outstanding Shares at June 30, 1998
- ------------------- -----------------------------------
Common Stock Par Value $1.25 45,917,999
Preferred Stock Purchase Rights 45,917,999
-1-
<PAGE> 2
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
(In thousands, except per share amounts) 1998 1997 1998 1997
- ---------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Product sales $ 220,953 $ 220,768 $ 431,485 $ 429,025
Service sales 235,318 205,501 425,808 387,938
Other 610 410 872 790
--------- --------- --------- ---------
TOTAL REVENUES 456,881 426,679 858,165 817,753
========= ========= ========= =========
COSTS AND EXPENSES:
Cost of products sold 165,746 168,661 327,852 328,054
Cost of services sold 178,652 153,527 322,805 292,908
Selling, general and administrative expenses 54,105 53,951 105,657 106,676
Research and development expenses 1,627 891 2,806 2,133
Facilities discontinuance and reorganization costs 43 600 288 3,055
--------- --------- --------- ---------
TOTAL COSTS AND EXPENSES 400,173 377,630 759,408 732,826
========= ========= ========= =========
INCOME FROM CONTINUING OPERATIONS BEFORE
INTEREST, INCOME TAXES AND MINORITY INTEREST 56,708 49,049 98,757 84,927
Interest income 1,950 1,172 5,425 2,442
Interest expense (4,672) (4,521) (8,554) (8,513)
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTEREST 53,986 45,700 95,628 78,856
Provision for income taxes 19,558 19,236 35,382 32,828
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE
MINORITY INTEREST 34,428 26,464 60,246 46,028
Minority interest in net income 1,354 1,710 2,830 3,146
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 33,074 24,754 57,416 42,882
Income from discontinued defense business (net of
income taxes of $4,131 and $9,866, respectively) -- 11,660 -- 23,630
--------- --------- --------- ---------
NET INCOME $ 33,074 $ 36,414 $ 57,416 $ 66,512
========= ========= ========= =========
Average shares of common stock outstanding 46,322 49,067 46,564 49,297
Basic earnings per common share:
Income from continuing operations $ .71 $ .50 $ 1.23 $ .87
Income from discontinued operations -- .24 -- .48
--------- --------- --------- ---------
BASIC EARNINGS PER COMMON SHARE $ .71 $ .74 $ 1.23 $ 1.35
========= ========= ========= =========
Diluted earnings per common share:
Income from continuing operations $ .71 $ .50 $ 1.22 $ .86
Income from discontinued operations -- .24 -- .48
--------- --------- --------- ---------
DILUTED EARNINGS PER COMMON SHARE $ .71 $ .74 $ 1.22 $ 1.34
========= ========= ========= =========
</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)
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
(In thousands) 1998 1997
- -------------- ----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 46,730 $ 221,565
Investments in debt securities -- 43,867
Receivables 340,570 259,565
Inventories:
Finished goods 42,076 27,639
Work in process 33,909 27,979
Raw material and purchased parts 62,955 60,982
Stores and supplies 22,562 18,554
----------- -----------
Total inventories 161,502 135,154
Other current assets 61,729 53,501
----------- -----------
TOTAL CURRENT ASSETS 610,531 713,652
----------- -----------
Property, plant and equipment, at cost 1,367,368 1,202,783
Allowance for depreciation (776,775) (690,870)
----------- -----------
590,593 511,913
----------- -----------
Cost in excess of net assets of companies acquired, net 255,717 187,666
Other assets 111,989 63,957
----------- -----------
TOTAL ASSETS $ 1,568,830 $ 1,477,188
=========== ===========
LIABILITIES
CURRENT LIABILITIES:
Notes payable and current maturities $ 22,582 $ 26,477
Accounts payable 133,238 120,148
Accrued compensation 45,927 42,652
Income taxes 27,903 30,572
Other current liabilities 169,294 152,643
----------- -----------
TOTAL CURRENT LIABILITIES 398,944 372,492
----------- -----------
Long-term debt 264,262 198,898
Deferred income taxes 55,276 36,954
Other liabilities 85,707 87,142
----------- -----------
TOTAL LIABILITIES 804,189 695,486
=========== ===========
SHAREHOLDERS' EQUITY
Common stock and additional paid-in capital 164,754 161,678
Accumulated other comprehensive income (expense) (57,082) (50,974)
Retained earnings 1,070,862 1,033,770
Treasury stock (413,893) (362,772)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 764,641 781,702
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,568,830 $ 1,477,188
=========== ===========
</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)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
(In thousands) 1998 1997
- -------------- --------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 57,416 $ 66,512
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 56,634 54,312
Amortization 5,299 4,587
Equity in income of unconsolidated entities (569) (33,959)
Dividends or distributions from unconsolidated entities -- 31,636
Deferred income taxes 2,697 (360)
Other, net 4,877 1,293
Changes in assets and liabilities, net of acquisitions
and dispositions of businesses:
Accounts receivable (40,194) (27,792)
Inventories (16,195) (13,580)
Accounts payable 11,238 (3,951)
Other assets and liabilities (22,936) 3,221
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES (1) 58,267 81,919
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (68,087) (71,961)
Purchase of businesses, net of cash acquired (123,584) --
Maturities of investments available-for-sale 40,000 --
Investments held-to-maturity, net of purchases 4,010 10,120
Proceeds from sale of a business -- 1,236
Other investing activities (5,090) 4,967
--------- ---------
NET CASH (USED) BY INVESTING ACTIVITIES (152,751) (55,638)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net (8,735) 16,235
Current maturities and long term debt:
Additions 37,177 29,974
Reductions (25,785) (21,983)
Cash dividends paid on common stock (20,539) (19,747)
Common stock issued-options 2,078 3,174
Common stock acquired for treasury (60,734) (35,323)
Other financing activities (1,341) 5
--------- ---------
NET CASH (USED) BY FINANCING ACTIVITIES (77,879) (27,665)
--------- ---------
Effect of exchange rate changes on cash (2,472) (533)
--------- ---------
Net increase (decrease) in cash and cash equivalents (174,835) (1,917)
Cash and cash equivalents at beginning of period 221,565 45,862
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 46,730 $ 43,945
========= =========
</TABLE>
(1) Cash provided by operating activities for the six months ended June 30,
1998 includes approximately $4 million of income taxes paid related to the
gain on the disposal of the defense business.
See accompanying notes to consolidated financial statements.
-4-
<PAGE> 5
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
(In thousands) 1998 1997 1998 1997
- -------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 33,074 $ 36,414 $ 57,416 $ 66,512
Other comprehensive income (expense):
Foreign currency translation adjustments (5,050) (3,118) (6,136) (12,536)
Unrealized investment gains, net of deferred income taxes -- -- 28 --
-------- -------- -------- --------
Other comprehensive income (expense) (5,050) (3,118) (6,108) (12,536)
-------- -------- -------- --------
TOTAL COMPREHENSIVE INCOME $ 28,024 $ 33,296 $ 51,308 $ 53,976
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE> 6
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Commitments and Contingencies:
Discontinued Defense Business - Contingencies
Federal Excise Tax and Other Matters Related to the Five-ton Truck Contract
In 1995, 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 ("FET") arising under a completed 1986
contract for the sale of five-ton trucks to the Army. On September 27, 1995, the
Army paid the Company $49 million in accordance with the settlement terms. The
Company released the Army from any further liability for those claims, and the
Department of Justice released the Company from a threatened action for damages
and civil penalties based on an investigation conducted by the Department's
Commercial Litigation Branch that had been pending for several years.
The settlement preserves the rights of the parties to assert claims and defenses
under the Internal Revenue Code, and rights of the Army and the Company 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 claim by the Internal Revenue Service that,
contrary to the Company's position, certain cargo truck models sold by the
Company should be considered to have gross vehicle weights in excess of the
33,000 pound threshold under the Federal Excise Tax law, are not entitled to an
exemption from the Federal Excise Tax under any other theory, and therefore are
taxable. On December 19, 1996, the District Director of the Internal Revenue
Service issued a 30-day letter and examination report (the "Report") that
proposed an increase in Federal Excise Tax of $33.7 million plus penalties of
$6.9 million and applicable interest currently estimated by the Company to be
$39.9 million, primarily on the grounds that those cargo truck models are
subject to the Federal Excise Tax. This proposed increase in Federal Excise Tax
takes into account offsetting credits of $9.2 million, based on a partial
allowance of the Company's $22.9 million claim that certain truck components are
exempt from the Federal Excise Tax. The Report disallowed in full the Company's
additional claim that it is entitled to the entire $52 million of Federal Excise
Tax (plus applicable interest currently estimated by the Company to be $34.0
million) the Company has paid on the five-ton trucks, on the grounds that such
trucks qualify for the Federal Excise Tax exemption applicable to certain
vehicles specially designed for the primary function of off-highway
transportation. In the event that the Company ultimately receives from the
Internal Revenue Service a refund of tax (including applicable interest) with
respect to which the Company has already received reimbursement from the Army,
the refund would be allocated between the Company and the Army. The Company
plans to vigorously contest the findings of the District Director. On March 19,
1997, the Company filed its formal written protest to these findings with the
Internal Revenue Service Office of the Regional Director of Appeals. On July 24,
1998, the Company filed a formal request for approval of mediation with the
Internal Revenue Service Director, Dispute Resolution and Specialty Programs,
under the provisions of the Internal Revenue Service Restructuring and Reform
Act of 1998. Although there is risk of an adverse outcome, the Company believes
that the cargo trucks are not taxable. No recognition has been given in the
accompanying financial statements for the Company's claim with the Internal
Revenue Service.
-6-
<PAGE> 7
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
The settlement agreement with the Army preserves the Company's right to seek
reimbursement of after-imposed tax from the Army in the event that the cargo
trucks are determined 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.
Under the settlement, the Army agreed that if the cargo trucks are determined to
be taxable, the 1993 decision of the Armed Services Board of Contract Appeals
(which ruled that the Company is entitled to a price adjustment to the contract
for reimbursement of FET paid on vehicles that were to be delivered after
October 1, 1988) will apply to the question of the Company's right to
reimbursement from the Army for after-imposed taxes on the cargo trucks. In the
Company's view, application of the 1993 decision will favorably resolve the
principal issues regarding any such future claim by the Company. Therefore, the
Company believes that even if the cargo trucks are ultimately held to be
taxable, the Army would be obligated to reimburse the Company for a majority of
the tax, (but not interest or penalty, if any), resulting in a net maximum
liability for the Company of $9.1 million plus penalties of $6.9 million and
applicable interest currently estimated by the Company to be $39.9 million. The
Company believes it is unlikely that resolution of this matter 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.
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 were filed with respect to all options purported to be
exercised, totaling in excess of $60 million plus interest. In February 1998,
the Armed Services Board of Contract Appeals denied the Company's claims. The
Company has appealed the decision to the United States Court of Appeals for the
Federal Circuit. No recognition has been given in the accompanying financial
statements for any recovery on these claims.
Other Defense Business Litigation
In 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 May 1997, the Court issued a decision in the first phase of
the case, denying the Company's claim for reimbursement and granting the
Government's counterclaim for breach of contract and penalties under the False
Claims Act. The Court will consider the amount of damages and penalties in the
next phase of the case, and the decision will then be subject to the right of
appeal. The Government has filed a brief seeking penalties and treble damages
totaling $26 million. The Company intends to vigorously oppose this claim. The
Company and its counsel believe that resolution of these claims will not 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
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
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. The Government subsequently issued a grand
jury subpoena to a former employee of the Company's divested defense business.
Based on discussions with the agent in charge and the Government auditors, it
appears that the investigation focuses on whether the Company made improper
certifications to the Defense Security Assistance Agency and other government
contract accounting matters. The Government has not asserted any claims at this
time and it is too early to know whether a claim will be asserted or what the
nature of any such claim would be, however, 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.
Continuing Operations - Contingencies
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 the Company). 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. $13.5 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 it is
unlikely that these claims will have a material adverse effect on the Company's
financial position or results of operations.
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 Sheet at June 30, 1998 and December 31, 1997, includes an
accrual of $3.2 million and $3.4 million, respectively, for environmental
matters. The amounts charged to earnings on a pre-tax basis related to
environmental matters totaled $0.3 million for the six months of 1998 and $0.2
million for the six months of 1997.
-8-
<PAGE> 9
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
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.
Financial Instruments and Hedging
The Company has subsidiaries principally operating in North America, Latin
America, Europe and Asia-Pacific. These operations are exposed to fluctuations
in related foreign currencies, in the normal course of business. The Company
seeks to reduce exposure to foreign currency fluctuations, primarily the
European currencies, through the use of forward exchange contracts. The Company
does not hold or issue financial instruments for trading purposes, and it is the
Company's policy to prohibit the use of derivatives for speculative purposes.
The Company has a Foreign Currency Risk Management Committee that meets
periodically to monitor foreign currency risks.
The Company enters into forward foreign exchange contracts to hedge transactions
on its non-U.S. subsidiaries, for firm commitments to purchase equipment and for
export sales denominated in foreign currencies. These contracts generally are
for 90 to 180 days or less. For those contracts that hedge an identifiable
transaction, gains or losses are deferred and accounted for as part of the
underlying transactions. The cash flows from these contracts are classified
consistent with the cash flows from the transaction being hedged. The Company
also enters into forward exchange contracts for intercompany foreign currency
commitments. These foreign exchange contracts do not qualify as hedges, and they
are recognized in income based on their fair market value. As of June 30, 1998,
the total of all forward exchange contracts amounted to $2.2 million, with a
favorable mark-to-market fluctuation of $19,000.
-9-
<PAGE> 10
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
New Financial Accounting Standards Issued
In February 1998, the Financial Accounting Standards Board issued SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits" (SFAS
132), which is effective for fiscal years beginning after December 15, 1997.
SFAS 132 revises the required disclosures about pension and other postretirement
benefit plans. The Company plans to adopt SFAS 132 in the fourth quarter of
1998.
In June 1998, the Financial Accounting Standard Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), which
is effective for the fiscal years beginning after June 15, 1999. SFAS 133
requires that an entity recognize all derivative instruments as either assets or
liabilities on its balance sheet at their fair value. Changes in the fair value
of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction, and, if it is, the type of hedge transaction. The Company
will adopt SFAS 133 by the first quarter of 2000. Due to the Company's limited
use of derivative instruments, SFAS 133 is not expected to have a material
effect on the financial position or results of operations of the Company.
Acquisitions
In April 1998, the Company completed the acquisition of Faber Prest Plc for
approximately $98 million. Faber Prest is a UK-based provider of mill services
to worldwide steel producers and of integrated logistics services to the steel
industry and other market sectors. For the year ended September 30, 1997, Faber
Prest recorded sales of approximately $137 million.
In June 1998, the Company completed the acquisition of Chemi-Trol Chemical
Company for approximately $46 million in cash. Chemi-Trol's principal business
is the production and distribution of steel pressure tanks for the storage of
propane gas and anhydrous ammonia. Chemi-Trol had sales of approximately $50
million in 1997.
The Company's planned acquisition of Charter plc's Pandrol Jackson railway track
maintenance business, announced in February 1998, is currently awaiting
favorable completion of pre-merger review by the United States Department of
Justice.
Planned Sale of Non-Core Operations
On July 7, 1998, the Company announced plans to sell certain of its smaller
businesses. The operations to be sold include Nutter Engineering, a designer and
manufacturer of mass transfer equipment for the refining and petrochemical
industries; Astralloy Wear Technology, which produces wear-resistant steel
components for a variety of industrial uses; and France-based HydroServ SAS,
which provides specialized industrial cleaning services, largely for the western
European market. Altogether, these businesses accounted for 1997 sales of
approximately $55 million.
-10-
<PAGE> 11
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
Reconciliation of Basic and Diluted Shares
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
(Dollars in thousands, except per share) 1998 1997 1998 1997
- ---------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income from continuing operations $ 33,074 $ 24,754 $ 57,416 $ 42,882
=========== =========== =========== ===========
Average shares of common stock
outstanding used to compute
basic earnings per common
share 46,322,100 49,066,904 46,564,135 49,297,158
Additional common shares to be
issued assuming exercise of
stock options, net of shares
assumed reacquired 462,679 417,193 445,638 422,308
----------- ----------- ----------- -----------
Shares used to compute dilutive
effect of stock options 46,784,779 49,484,097 47,009,773 49,719,466
=========== =========== =========== ===========
Basic earnings per common share
from continuing operations $ .71 $ .50 $ 1.23 $ .87
=========== =========== =========== ===========
Diluted earnings per common share
from continuing operations $ .71 $ .50 $ 1.22 $ .86
=========== =========== =========== ===========
</TABLE>
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.
-11-
<PAGE> 12
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 AND LIQUIDITY
Net cash provided by operating activities was $58.3 million in the first six
months of 1998 compared with $81.9 million in 1997. After excluding cash
transactions relating to the discontinued defense business, operating cash flows
for the first half of 1998 increased $12 million. Cash flows from operating
activities in 1998 were lowered by $4 million due to the final tax payment
related to the gain on disposal of the defense business. In 1997, cash flows
were significantly assisted by $31.6 million in distributions from the
discontinued defense business.
Capital expenditures for the first half of 1998 were $68.1 million compared with
$72.0 million in 1997. For the year, capital expenditures are expected to exceed
last year's amount. These investments reflect the Company's continuing program
to achieve business growth and to improve productivity and product quality. In
the first six months of 1998, $123.6 million of cash was used to purchase EFI
Corporation, Faber Prest Plc, and Chemi-Trol Chemical Co.
The Company has maintained a policy of reacquiring its common stock in
unsolicited open market or privately-negotiated transactions at prevailing
market prices for several years. In November 1997, the Board of Directors
authorized the purchase, over a one-year period, of up to 2,000,000 shares of
the Company's common stock. In June 1998, the Board of Directors authorized the
purchase of up to 1,000,000 additional shares of common stock through December
31, 1998. The total number of shares purchased under these programs for the six
months ended June 30, 1998 was 1,182,649 for approximately $51.8 million.
Cash and cash equivalents decreased $174.8 million to $46.7 million at June 30,
1998.
Other matters which could affect cash flows in the future are discussed under
Part 1, item 1 "Notes to Consolidated Financial Statements."
The Company continues to maintain a good financial position, with net working
capital of $211.6 million, a decrease from the $341.2 million at December 31,
1997. The decrease of $129.6 million relates principally to cash used for
acquired businesses and stock repurchases. Current assets amounted to $610.5
million, and current liabilities were $398.9 million, resulting in a current
ratio of 1.5 to 1, compared with 1.9 to 1 at December 31, 1997. With total debt
of $286.8 million and equity of $764.6 million at June 30, 1998, the total debt
as a percent of capital was 27.3%, compared with 22.4% at December 31, 1997.
-12-
<PAGE> 13
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
The stock price ranged from $37.50 to $47.00 per share during the first six
months. Harsco's book value per share at June 30, 1998 was $16.65, compared with
$16.64 at December 31, 1997. The Company's annualized return from continuing
operations on average equity for the first half of 1998 was 14.8% compared with
13.7% for the first half of 1997. The annualized return from continuing
operations on average assets was 13.9% compared with 13.8% for the first six
months of 1997. The annualized return from continuing operations on average
capital for the first six months was 12.2% compared with 10.9% for the first six
months of 1997.
The Company has available, through a syndicate of banks, a $400 million
multi-currency five-year revolving credit facility, extending through July 2001.
This facility serves as back-up to the Company's commercial paper program. As of
June 30, 1998, there were no borrowings outstanding under this facility.
The Company has a U.S. commercial paper borrowing program under which it can
issue up to $300 million of short-term notes in the U.S. commercial paper
market. In addition, the Company has a 3 billion Belgian Franc program,
equivalent to approximately US $80 million. The Belgian program will be used to
borrow a variety of European currencies in order to fund the Company's European
operations more efficiently and in appropriate currencies. The Company limits
the aggregate commercial paper and syndicated credit facility borrowings at any
one time to a maximum of $400 million. At June 30, 1998, the Company had $59.6
million of commercial paper debt outstanding under the commercial paper
programs.
The Company's outstanding long-term notes are rated A by Standard & Poor's, A by
Fitch IBCA and A-3 by Moody's. The Company's commercial paper is rated A-1 by
Standard & Poor's, F-1 by Fitch IBCA 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.
-13-
<PAGE> 14
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
RESULTS OF OPERATIONS
SECOND QUARTER OF 1998 COMPARED
WITH SECOND QUARTER OF 1997
Second quarter revenues of $456.9 million were 7% above 1997's comparable
period. The increase was due principally to the inclusion of acquired companies'
revenues in the second quarter of 1998. Additionally, process equipment products
had increased revenues, while railway maintenance of way equipment and pipe
fittings had decreases. Excluding the adverse effect of the strengthening U.S.
dollar, revenues from continuing operations for the second quarter of 1998 were
9% above the second quarter of 1997.
Cost of products and services sold increased principally due to the inclusion of
acquired companies' expenses for 1998. Selling, general and administrative
expenses increased slightly due to the inclusion of acquired companies which was
substantially offset by the results of cost reduction measures.
Income from continuing operations before income taxes and minority interest was
up 18% from 1997, due principally to the inclusion of acquired companies'
results and to improved performance in process equipment products, metal
reclamation and mill services and scaffolding, shoring and forming services.
These increases were partially offset by lower results for railway maintenance
of way equipment and pipe fittings. Interest income was up due to the increased
amount of cash available for investment purposes which resulted from the
disposal of the Company's defense business in October 1997. The effective income
tax rate for continuing operations for 1998's second quarter was 36% versus 42%
in 1997. The reduction in the income tax rate is due principally to lower
international and state effective tax rates.
Income from continuing operations of $33.1 million in the second quarter of 1998
was up 34% from 1997. Basic income per common share from continuing operations
was $.71, up 42% from the $.50 recorded in 1997.
Net income of $33.1 million for the second quarter of 1998 was below 1997 which
included $11.7 million income from the discontinued defense business. Basic
income per common share was $.71, down from 1997. Diluted income per common
share was $.71, down from $.74 in 1997.
Sales of the Metal Reclamation and Mill Services Group, at $203.6 million, were
above 1997's second quarter due to the inclusion of an acquired company. Sales
of the Process Industry Products Group, at $153.2 million, were above 1997 due
principally to the inclusion of sales from acquired companies and increased
sales of process equipment. Sales of the Infrastructure and Construction Group,
at $99.5 million, were below 1997 due principally to lower sales of railway
maintenance of way equipment and of scaffolding, shoring and forming services.
-14-
<PAGE> 15
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
Operating profit of the Metal Reclamation and Mill Services Group, at $31.5
million, exceeded 1997 due to the inclusion of an acquired company and improved
performance of certain operations. Operating profit of the Process Industry
Products Group, at $18.0 million, was above 1997 due to increased income for
process equipment and the inclusion of acquired companies' results. Operating
profit of the Infrastructure and Construction Group, at $10.7 million, was above
1997 due to improved results for scaffolding, shoring and forming services which
was partially offset by lower income for railway maintenance of way equipment.
In addition to the Group reporting noted above, the Company views itself as a
diversified industrial services and engineered products company. Total
industrial service sales, which include the Metal Reclamation and Mill Services
Group and Infrastructure and Construction Group service businesses, principally
scaffolding, forming and shoring services and railway maintenance of way
services, were $235.3 million in 1998 and $205.5 million in 1997, or
approximately 52% and 48% of net sales, respectively. Excluding the adverse
effect of the strengthening U.S. dollar, total industrial service sales were
approximately 18% above 1997. Total engineered products sales for 1998, which
include sales of the Reed Minerals Division of the Metal Reclamation and Mill
Services Group, product sales of the Infrastructure and Construction Group and
the Process Industry Products Group, were $221.0 million in 1998 and $220.8
million in 1997, or approximately 48% and 52% of net sales, respectively.
The operating profit for industrial services for 1998 was $33.2 million compared
with $29.1 million in 1997, or approximately 55% of total Group operating profit
for both years. The operating profit for engineered products for 1998 was $27.0
million compared with $23.8 million in 1997, or approximately 45% of total Group
operating profit for both years.
-15-
<PAGE> 16
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
RESULTS OF OPERATIONS
FIRST SIX MONTHS OF 1998 COMPARED
WITH FIRST SIX MONTHS OF 1997
Revenues from continuing operations for the first six months of 1998 of $858.2
million were 5% above last year's comparable period. The increase was generally
due to the inclusion of acquired companies in the first six months of 1998.
Higher product sales were recorded for process equipment. Sales of scaffolding,
shoring and forming services and railway maintenance contract services also
increased, but to a lesser extent. These increases were partially offset by
lower product sales for gas control and containment equipment, pipe fittings,
grating and railway maintenance of way equipment, as well as lower sales for
metal reclamation and mill services. Excluding the adverse effect of the
strengthening U.S. dollar, revenues from continuing operations for the first six
months of 1998 were 7% above the first six months of 1997.
Costs of products and services sold increased due to the inclusion of acquired
companies. Selling, general and administrative expenses decreased as a result of
continuing efforts to reduce expenses, which more than offset the inclusion of
acquired companies.
Income from continuing operations before income taxes and minority interest was
up 21% from 1997 due principally to improved performance. Interest income was up
due to the increased amount of cash available for investment purposes which
resulted from the disposal of the Company's defense business in the fourth
quarter of 1997. On a comparative basis, results for the first six months of
1997 were unfavorably affected by a $1.4 million provision for an impairment
loss arising from the disposal of the Company's shell and tube business. Higher
earnings from continuing operations in 1998 were due principally to higher
results for scaffolding, shoring and forming services, process equipment, and
metal reclamation and mill services, as well as the inclusion of acquired
companies. These increases were partially offset by lower results for pipe
fittings, railway maintenance of way equipment and services, and gas control and
containment equipment, as well as start-up losses associated with the recently
acquired medical waste disposal services business. The effective income tax rate
for continuing operations for 1998 was 37% versus 42% in 1997. The reduction in
the income tax rate is due principally to lower effective tax rates on
international earnings.
Income from continuing operations of $57.4 million in the first six months of
1998 was up 34% from 1997. Basic income per common share from continuing
operations was $1.23, up 41% from the $.87 recorded in 1997.
Net income of $57.4 million for the first six months of 1998 was below 1997
which included $23.6 million of income from discontinued operations related to
the Company's defense business which was divested in the fourth quarter of 1997.
Basic income per common share was $1.23, down from $1.35 in 1997. Diluted income
per common share was $1.22, down from $1.34 in 1997.
-16-
<PAGE> 17
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
Sales of the Metal Reclamation and Mill Services Group, at $367.5 million, were
above 1997's first six months, despite the strengthening of the U.S. dollar. The
increase was due to the inclusion of an acquired company in the second quarter
of 1998. Sales of the Process Industry Products Group, at $302.5 million, were
higher than the first six months of 1997 due to the inclusion of sales of three
acquired companies and to increased sales for process equipment. Sales of the
Infrastructure and Construction Group, at $187.3 million, were above 1997 due
principally to higher sales of scaffolding, shoring and forming services, as
well as railway maintenance of way equipment and services. Sales of grating
products were down from 1997.
Operating profit of the Metal Reclamation and Mill Services Group, at $56.7
million, exceeded 1997 despite the adverse effects of the strong U.S. dollar.
Operating profit of the Process Industry Products Group, at $32.3 million, was
above last year's comparable period due primarily to higher results for process
equipment, despite the inclusion of start-up costs associated with the medical
waste disposal services business. Operating profit in 1998 of the Infrastructure
and Construction Group, at $17.3 million, was significantly above 1997. The
increase primarily reflected improved results for scaffolding, shoring and
forming services.
In addition to the Group reporting noted above, the Company views itself as a
diversified industrial services and engineered products company. Total
industrial service sales, which include metal reclamation and mill services, as
well as the Infrastructure and Construction Group service businesses of
scaffolding, forming, and shoring services and railway maintenance of way
services, were $425.8 million in 1998 and $387.9 million in 1997, or
approximately 50% and 47% of net sales, respectively. Excluding the adverse
effect of the strengthening U.S. dollar, total industrial service sales were
approximately 14% above last year's comparable period. The total engineered
products sales for 1998 were $431.5 million or approximately 50% of net sales.
Engineered products include sales of the Reed Minerals Division in the Metal
Reclamation and Mill Services Group, product sales of the Infrastructure and
Construction Group and the Process Industry Products Group. The total engineered
products sales for 1997 were $429.0 million or approximately 53% of net sales.
The operating profit for industrial services for 1998 was $59.2 million compared
with $49.5 million in 1997, or approximately 56% and 53%, respectively, of total
Group operating profit. The operating profit from engineered products for 1998
was $47.1 million compared with $44.7 million in 1997, which included a $1.4
million provision for an impairment loss arising from the disposal of the
Company's shell and tube business. These amounts are approximately 44% and 47%,
respectively, of total Group operating profit.
-17-
<PAGE> 18
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
Year 2000
The Company is taking steps to ensure its operations will not be adversely
impacted by potential Year 2000 software failures. The Company has determined
that it will be necessary to modify, upgrade or replace portions of its software
so that its computer applications will properly utilize dates beyond December
31, 1999, and has developed a plan to implement such modifications, upgrades,
and replacements. The majority of the software which is not Year 2000 ready is
currently being updated through normal software upgrades and replacements. Based
on its assessment of presently available information, the Company does not
expect that the cost of addressing its Year 2000 readiness issues will have a
material adverse effect on the future financial results of the Company. However,
there can be no guarantee that all such Year 2000 failures will be avoided, nor
that the costs will be within the range of the Company's current estimates.
The Company also is engaged in communications with its significant business
partners, suppliers and major customers to determine the extent to which the
Company is vulnerable to such third parties' failure to address their own Year
2000 issues. The Company's assessment of the impact of its Year 2000 issues
includes an assessment of the Company's vulnerability to such third parties,
based on information currently available to the Company from such third parties.
The Company is seeking assurances from significant business partners, suppliers
and major customers that their computer applications will not fail due to Year
2000 problems. However, there can be no guarantee that such third parties'
systems, on which the Company's systems rely, will be converted in a timely
manner.
Safe Harbor Statement
The nature of the Company's operations and the many 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 the Private Securities Litigation Reform Act of 1995, the
Company provides the following cautionary remarks regarding important factors
which, among others, could cause future results to differ materially from the
forward-looking statements, expectations and assumptions expressed or implied
herein.
These factors include, but are not limited to: (1) changes in the world-wide
business environment in which the Company operates, including import, licensing
and trade restrictions, currency exchange rates, interest rates, and capital
costs; (2) changes in governmental laws and regulations, including taxes; (3)
market and competitive changes, including market demand and acceptance for new
products, services, and technologies; (4) effects of unstable governments and
business conditions in emerging economies; and (5) other risk factors listed
from time to time in the Company's SEC reports. The Company does not intend to
update this information and disclaims any legal liability to the contrary.
-18-
<PAGE> 19
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The discussion of legal proceedings in Part I under the heading "Commitments and
Contingencies" is incorporated into Part II.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS
At the Annual Meeting of shareholders held on April 29, 1998 in Camp Hill,
Pennsylvania, four members of the Board of Directors were reelected to terms
expiring in 2001 under the classified Board structure enacted at the 1986 Annual
Meeting. They include L. A. Campanaro, President and Chief Operating Officer of
Harsco Corporation, R. L. Kirk, former Chairman of British Aerospace Holdings,
Inc., J. E. Marley, Chairman of AMP Incorporated, and J. I. Scheiner, President
and Chief Operating Officer of Benatec Associates, Inc.
The Board of Directors voting tabulation is as follows:
<TABLE>
<CAPTION>
Broker
For Withheld No-Votes
Name No. of Shares No. of Shares No. of Shares
<S> <C> <C> <C>
L. A. Campanaro 35,784,517 5,210,507 -
R. L. Kirk 35,701,102 5,293,922 -
J. E. Marley 35,414,019 5,581,005 -
J. I. Scheiner 35,805,070 5,189,954 -
</TABLE>
Shareholders approved an amendment to the 1995 Executive Incentive Compensation
Plan which increased the "per person" limitations of the Plan, and reapproved
related Plan terms, by the following vote:
<TABLE>
<CAPTION>
Broker
For Against Abstentions No-Votes
No. of Shares No. of Shares No. of Shares No. of Shares
<S> <C> <C> <C>
38,649,458 1,941,658 403,908 -
</TABLE>
Shareholders also approved the appointment of Coopers & Lybrand L.L.P., who
subsequently merged with Price Waterhouse L.L.P. to form PricewaterhouseCoopers
L.L.P., as independent accountants to audit the financial statements of the
Company for the fiscal year ending December 31, 1998 by the following vote:
<TABLE>
<CAPTION>
Broker
For Against Abstentions No-Votes
No. of Shares No. of Shares No. of Shares No. of Shares
<S> <C> <C> <C>
40,775,154 81,906 137,964 -
</TABLE>
-19-
<PAGE> 20
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
DIVIDEND ACTION:
On June 23, 1998, Harsco Corporation announced that the Board of Directors
declared a quarterly cash dividend of 22 cents per share, payable August 14,
1998, to shareholders of record on July 15, 1998.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING:
Any shareholder proposal submitted with respect to Harsco Corporation's 1999
Annual Meeting of Stockholders, which is submitted outside the processes of
Rule 14a-8 under the Securities Exchange Act of 1934, will be considered
untimely for purposes of Rules 14a-4 and 14a-5 if notice thereof is received by
Harsco Corporation after February 6, 1999, or such earlier date as may apply
under the Company's By-laws.
The Company's By-laws provide that a stockholder proposal with respect to any
Annual Meeting of Stockholders will be considered untimely unless written
notice of the proposal to the Corporate Secretary is received at the corporate
headquarters, "not less than sixty days nor more than ninety days prior to the
meeting, provided, however, that in the event that less than seventy days'
notice or prior public disclosure of the date of the meeting is given or made
to stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth day following the date on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made."
ITEM 6(a). EXHIBITS
The following exhibits are attached:
a.) Exhibit No. 12 Computation of Ratios of Earnings to Fixed Charges.
b.) Exhibit No. 27 Financial Data Schedule
ITEM 6(b) REPORTS ON FORM 8-K
a.) There were no reports filed on Form 8-K during the second quarter ending
June 30, 1998.
-20-
<PAGE> 21
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 July 31, 1998 /S/ Salvatore D. Fazzolari
--------------------------- -----------------------------
Salvatore D. Fazzolari
Senior Vice President and
Chief Financial Officer
DATE July 31, 1998 /S/ Stephen J. Schnoor
--------------------------- -----------------------------
Stephen J. Schnoor
Vice President and Controller
-21-
<PAGE> 1
Exhibit 12
HARSCO CORPORATION
Computation of Ratios of Earnings to Fixed Charges
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Six Months YEARS ENDED DECEMBER 31
Ended -------------------------------------------------------------
6/30/98 1997 1996 1995 1994 1993
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Earnings:
Pre-tax income from continuing
operations $ 92,798 $ 165,613 $ 145,984 $ 107,073 $ 84,197 $ 70,116
Add fixed charges computed below 12,385 24,263 26,181 33,121 37,982 23,879
Net adjustments for equity companies (196) (694) (181) (466) (134) (363)
Net adjustments for capitalized
interest -- -- -- -- (274) (172)
--------- --------- --------- --------- --------- ---------
Consolidated Earnings Available for
Fixed Charges $ 104,987 $ 189,182 $ 171,984 $ 139,728 $ 121,771 $ 93,460
========= ========= ========= ========= ========= =========
Consolidated Fixed Charges:
Interest expense per financial
statements (1) $ 8,554 $ 16,741 $ 21,483 $ 28,921 $ 34,048 $ 19,974
Interest expense capitalized 64 128 131 134 338 332
Portion of rentals (1/3) representing
an interest factor 3,767 7,394 4,567 4,066 3,596 3,573
Interest expense for equity companies
whose debt is guaranteed (2) -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Consolidated Fixed Charges $ 12,385 $ 24,263 $ 26,181 $ 33,121 $ 37,982 $ 23,879
========= ========= ========= ========= ========= =========
Consolidated Ratio of Earnings to
Fixed Charges 8.48 7.80 6.57 4.22 3.21 3.91
========= ========= ========= ========= ========= =========
</TABLE>
(1) Includes amortization of debt discount and expense.
(2) No fixed charges were associated with debt of less than fifty percent
owned companies guaranteed by the Company during the five year period 1993
through 1997, and the six months ended June 30, 1998.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 46,730
<SECURITIES> 0
<RECEIVABLES> 348,479
<ALLOWANCES> (7,909)
<INVENTORY> 161,502
<CURRENT-ASSETS> 610,531
<PP&E> 1,367,368
<DEPRECIATION> (776,775)
<TOTAL-ASSETS> 1,568,830
<CURRENT-LIABILITIES> 398,944
<BONDS> 264,262
0
0
<COMMON> 82,450
<OTHER-SE> 682,191
<TOTAL-LIABILITY-AND-EQUITY> 1,568,830
<SALES> 857,293
<TOTAL-REVENUES> 858,165
<CGS> 650,657
<TOTAL-COSTS> 759,408
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 364
<INTEREST-EXPENSE> 8,554
<INCOME-PRETAX> 95,628
<INCOME-TAX> 35,382
<INCOME-CONTINUING> 57,416
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,416
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.22
</TABLE>
