<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, 2000
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 October 31, 2000
------------------- --------------------------------------
Common Stock Par Value $1.25 39,917,297
Preferred Stock Purchase Rights 39,917,297
-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 Nine Months Ended
September 30 September 30
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999 2000 1999
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Service sales $ 330,957 $ 214,129 $ 817,670 $ 632,126
Product sales 201,854 209,798 621,314 627,110
Other 404 641 843 899
----------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 533,215 424,568 1,439,827 1,260,135
----------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of services sold 241,419 165,718 610,102 488,960
Cost of products sold 156,129 161,318 489,496 490,009
Selling, general, and administrative expenses 84,593 49,814 194,652 153,631
Research and development expenses 1,338 1,885 4,426 5,013
Other expense 1,004 1,305 728 4,026
---------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 484,483 380,040 1,299,404 1,141,639
----------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 48,732 44,528 140,423 118,496
Equity in income (loss) of affiliates, net (1) (582) 1,430 (1,020) 2,390
Interest income 1,611 1,222 4,061 3,458
Interest expense (16,653) (6,117) (32,870) (19,195)
----------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 33,108 41,063 110,594 105,149
Provision for income taxes 9,376 13,731 36,496 36,802
----------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE MINORITY INTEREST 23,732 27,332 74,098 68,347
Minority interest in net income 1,420 1,220 3,353 3,613
----------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 22,312 $ 26,112 $ 70,745 $ 64,734
============================================================================================================================
Average shares of common stock outstanding 39,992 40,740 39,990 41,161
----------------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER COMMON SHARE $ .56 $ .64 $ 1.77 $ 1.57
============================================================================================================================
Diluted average shares of common shares outstanding 40,073 40,854 40,069 41,299
----------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER COMMON SHARE $ .56 $ .64 $ 1.77 $ 1.57
============================================================================================================================
</TABLE>
(1) Equity in income (loss) of affiliates is now separately reported. Previously
these amounts were included in operating income as other revenues. Amounts
previously reported as operating income for the three months and nine months
ended September 30, 1999 were $45,958 and $120,886, respectively.
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>
SEPTEMBER 30 December 31
(IN THOUSANDS) 2000 1999
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 87,907 $ 51,266
Receivables, less allowance for doubtful accounts of
$27,509 in 2000 and $13,339 in 1999 424,059 331,123
Inventories 233,990 172,198
Other current assets 65,126 58,368
------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 811,082 612,955
------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost 1,727,310 1,499,823
Allowance for depreciation 854,100 828,277
------------------------------------------------------------------------------------------------------------------
873,210 671,546
Cost in excess of net assets of businesses acquired, net 353,570 258,698
Other assets 207,789 116,624
------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 2,245,651 $ 1,659,823
==================================================================================================================
LIABILITIES
CURRENT LIABILITIES:
Notes payable and current maturities $ 63,417 $ 36,607
Accounts payable 195,776 132,394
Accrued compensation 50,366 46,615
Income taxes 43,053 44,154
Other current liabilities 211,767 170,746
-------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 564,379 430,516
-------------------------------------------------------------------------------------------------------------------
Long-term debt 824,755 418,504
Deferred income taxes 95,106 52,932
Other liabilities 107,337 107,750
-------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,591,577 1,009,702
-------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock and additional paid-in capital 172,848 170,878
Accumulated other comprehensive income (expense) (116,894) (80,538)
Retained earnings 1,198,148 1,155,586
Treasury stock (600,028) (595,805)
-------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 654,074 650,121
-------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,245,651 $ 1,659,823
===================================================================================================================
</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>
NINE MONTHS ENDED
SEPTEMBER 30
(IN THOUSANDS) 2000 1999
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 70,745 $ 64,734
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 103,443 91,437
Amortization 12,104 9,768
Equity in (income) loss of affiliates, net 1,020 (2,390)
Dividends or distributions from affiliates 702 1,292
Deferred income taxes 13,342 1,347
Other, net 2,654 170
Changes in assets and liabilities, net of acquisitions and
dispositions of businesses:
Accounts receivable 1,072 (29,030)
Inventories (29,121) 7,916
Accounts payable 13,380 (15,526)
Net disbursements related to discontinued defense business (11,862) (13,777)
Other assets and liabilities (16,566) (14,905)
----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 160,913 101,036
----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (132,044) (122,402)
Purchase of businesses, net of cash acquired (301,557) (4,296)
Proceeds from sales of businesses 10,572 12,224
Proceeds from sale of property, plant and equipment 7,020 9,952
Other investing activities 878 (1,650)
----------------------------------------------------------------------------------------------------------------------------------
NET CASH (USED) BY INVESTING ACTIVITIES (415,131) (106,172)
----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net 196,652 (24,910)
Current maturities and long-term debt:
Additions 246,976 168,411
Reductions (112,478) (32,747)
Cash dividends paid on common stock (28,201) (27,997)
Common stock issued-options 1,754 1,490
Common stock acquired for treasury (3,768) (68,644)
Other financing activities (3,807) (1,766)
----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 297,128 13,837
----------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (6,269) (261)
----------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 36,641 8,440
Cash and cash equivalents at beginning of period 51,266 41,562
----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 87,907 $ 50,002
==================================================================================================================================
</TABLE>
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 NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(IN THOUSANDS) 2000 1999 2000 1999
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 22,312 $ 26,112 $ 70,745 $ 64,734
Other comprehensive income (expense):
Foreign currency translation adjustments (17,733) 6,802 (36,356) (22,260)
--------------------------------------------------------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME $ 4,579 $ 32,914 $ 34,389 $ 42,474
================================================================================================================================
</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)
REVIEW OF OPERATIONS BY SEGMENT
(Unaudited)
<TABLE>
<CAPTION>
(IN MILLIONS)
HARSCO HARSCO
MILL GAS AND HARSCO S3NETWORKS GENERAL CONSOLIDATED
THREE MONTHS ENDED SEPTEMBER 30, 2000 SERVICES FLUID CONTROL INFRASTRUCTURE LLC CORPORATE TOTALS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated customers $ 186.0 $ 132.3 $ 214.5 $ - $ - $ 532.8
------------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 22.6 $ 13.3 $ 13.5 $ - $ (0.7) $ 48.7
Equity in income (loss) of affiliates, net 0.2 - 0.5 (1.3) - (0.6)
Interest income 1.1 - 0.4 - 0.1 1.6
Interest expense (3.0) (1.0) (9.2) - (3.4) (16.6)
Income tax (expense) benefit (4.5) (4.3) (1.2) 0.5 0.1 (9.4)
Minority interest in net (income) loss (1.3) - (0.1) - - (1.4)
------------------------------------------------------------------------------------------------------------------------------------
SEGMENT NET INCOME (LOSS) $ 15.1 $ 8.0 $ 3.9 $ (0.8) $ (3.9) $ 22.3
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
HARSCO HARSCO
MILL GAS AND HARSCO S3NETWORKS GENERAL CONSOLIDATED
THREE MONTHS ENDED SEPTEMBER 30, 1999 SERVICES FLUID CONTROL INFRASTRUCTURE LLC CORPORATE TOTALS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated customers $ 184.3 $ 138.2 $ 101.4 $ - $ - $ 423.9
------------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 20.8 $ 13.1 $ 11.3 $ - $ (0.6) $ 44.6
Equity in income of affiliates, net (1) 1.4 - - - - 1.4
Interest income 1.1 - - - - 1.1
Interest expense (2.7) (0.8) (1.5) - (1.1) (6.1)
Income tax (expense) benefit (7.0) (4.7) (3.5) - 1.5 (13.7)
Minority interest in net (income) loss (1.2) - - - - (1.2)
------------------------------------------------------------------------------------------------------------------------------------
SEGMENT NET INCOME (LOSS) $ 12.4 $ 7.6 $ 6.3 $ - $ (0.2) $ 26.1
====================================================================================================================================
</TABLE>
(1) Equity in income (loss) of affiliates is now separately reported.
Previously, these amounts were included in operating income. Amounts
previously reported as operating income for the three months ended
September 30, 1999 were $22.2 million for Harsco Mill Services Segment and
a consolidated total of $46.0 million. Reported operating income amounts
for the other segments are unchanged.
-6-
<PAGE> 7
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
REVIEW OF OPERATIONS BY SEGMENT
(Unaudited)
<TABLE>
<CAPTION>
(IN MILLIONS)
HARSCO HARSCO
MILL GAS AND HARSCO S3NETWORKS GENERAL CONSOLIDATED
NINE MONTHS ENDED SEPTEMBER 30, 2000 SERVICES FLUID CONTROL INFRASTRUCTURE LLC CORPORATE TOTALS
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated customers $ 572.8 $ 393.1 $ 473.1 $ - $ - $ 1,439.0
------------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 69.7 $ 35.1 $ 36.8 $ - $ (1.2) $ 140.4
Equity in income (loss) of affiliates, net 0.7 - 0.5 (2.2) - (1.0)
Interest income 3.2 0.1 0.7 - 0.1 4.1
Interest expense (7.4) (3.0) (13.4) - (9.1) (32.9)
Income tax (expense) benefit (19.9) (11.6) (8.1) 0.8 2.3 (36.5)
Minority interest in net (income) loss (3.2) - (0.2) - - (3.4)
------------------------------------------------------------------------------------------------------------------------------------
SEGMENT NET INCOME (LOSS) $ 43.1 $ 20.6 $ 16.3 $ (1.4) $ (7.9) $ 70.7
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
HARSCO HARSCO
MILL GAS AND HARSCO S3NETWORKS GENERAL CONSOLIDATED
NINE MONTHS ENDED SEPTEMBER 30, 1999 SERVICES FLUID CONTROL INFRASTRUCTURE LLC CORPORATE TOTALS
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated customers $ 539.7 $ 411.4 $ 308.1 $ - $ - $ 1,259.2
------------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 55.9 $ 31.6 $ 31.4 $ - $ (0.4) $ 118.5
Equity in income of affiliates, net (1) 2.4 - - - - 2.4
Interest income 3.1 0.1 0.1 - 0.1 3.4
Interest expense (8.4) (3.5) (4.5) - (2.8) (19.2)
Income tax (expense) benefit (17.3) (10.7) (9.8) - 1.0 (36.8)
Minority interest in net (income) loss (3.7) 0.1 - - - (3.6)
------------------------------------------------------------------------------------------------------------------------------------
SEGMENT NET INCOME (LOSS) $ 32.0 $ 17.6 $ 17.2 $ - $ (2.1) $ 64.7
====================================================================================================================================
</TABLE>
(1) Equity in income (loss) of affiliates is now separately reported.
Previously these amounts were included in operating income. Amounts
previously reported as operating income for the nine months ended September
30, 1999 were $58.3 million for Harsco Mill Services Segment and a
consolidated total of $120.9 million. Reported operating income amounts for
the other segments are unchanged.
-7-
<PAGE> 8
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Inventories
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31
(in thousands) 2000 1999
--------------------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 87,723 $ 37,715
Work-in-process 43,035 37,198
Raw materials and purchased parts 82,701 76,911
Stores and supplies 20,531 20,374
--------------------------------------------------------------------------------------------
$ 233,990 $ 172,198
============================================================================================
</TABLE>
--------------------------------------------------------------------------------
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 ("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
("IRS") 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 FET law, are not entitled to an exemption
from FET under any other theory, and therefore are taxable. In 1999, the IRS
assessed an increase in FET of $30.4 million plus penalties of $10.9 million and
applicable interest currently estimated to be $51.9 million. In October 1999,
the Company posted an $80 million bond required as security by the IRS. This
increase in FET takes into account offsetting credits of $9.2 million, based on
a partial allowance of the Company's $31.9 million claim that certain truck
components are exempt from FET. The IRS
-8-
<PAGE> 9
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
--------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (CONTINUED)
disallowed in full the Company's additional claim that it is entitled to the
entire $52 million of FET (plus applicable interest currently estimated by the
Company to be $46.5 million) the Company has paid on the five-ton trucks, on the
grounds that such trucks qualify for the FET 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 IRS 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. In August 2000, the Company filed legal action
against the Government in the U.S. Court of Federal Claims challenging the
assessment and seeking a refund of all FET that the Company has paid on five-ton
trucks. Although there is risk of an adverse outcome, both the Company and the
Army believe that the cargo trucks are not taxable. No recognition has been
given in the accompanying financial statements for the Company's claims with the
IRS.
The settlement agreement with the Army preserved 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 limited 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. As of September 30,
2000, the Army has paid Harsco this entire amount and Harsco has paid those
funds to the IRS, subject to it's pending refund claim. Thus, the Company has
satisfied a portion of the disputed tax assessment. If the Company succeeds in
its refund claim against the IRS, it will owe the Army the amount recovered that
corresponds to the $24.6 million.
Even if the cargo trucks are ultimately held to be taxable, the Army's
contribution of $24.6 million toward payment of the tax (but not interest or
penalty, if any), would result in a net maximum liability for the Company of
$5.8 million plus penalties and applicable interest currently estimated to be
$10.9 million and $51.9 million, respectively. 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.
OTHER DEFENSE BUSINESS LITIGATION
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. In September 1994,
the Company received a subpoena issued by the Department of Defense Inspector
General seeking various documents relating to issues raised in the audit.
-9-
<PAGE> 10
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
--------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Government subsequently subpoenaed a number of former employees of the
Company's divested defense business to testify before a grand jury and issued
grand jury subpoenas to the Company for additional documents. On December 22,
1999, the Company announced that it reached agreement with the U.S. Government
on behalf of its former BMY Combat Systems Division to settle the matter. Under
the agreement, BMY Combat Systems pled guilty to a one-count misdemeanor
relating to submitting advance payment certifications which resulted in BMY
receiving a portion of the payments for the contract prematurely. In June 2000,
the U.S. District Court gave final approval to the settlement. In accordance
with the settlement, Harsco paid the Government a $200,000 fine in June 2000 and
in July 2000 paid the $10.8 million in damages for a total of $11 million.
The settlement ends the Government's investigation and releases Harsco and BMY
from further liability for the issues under investigation. Harsco charged the
payment against an existing reserve, resulting in no charge to the Company's
earnings.
CONTINUING OPERATIONS - CONTINGENCIES
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 September 30, 2000, and December 31, 1999 includes
an accrual of $5.8 million and $3.0 million, respectively, for environmental
matters. The increase from December 31, 1999 principally relates to
environmental liabilities of acquired companies. The amounts affecting pre-tax
earnings related to environmental matters totaled $1.3 million of expense for
the first nine months of 2000, and $0.2 million of income for the first nine
months of 1999.
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. 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.
-10-
<PAGE> 11
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
--------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (CONTINUED)
In the first quarter of 2000 the U.S. Environmental Protection Agency issued a
Notice of Violation to the Company for violations of the Clean Air Act arising
from slag dust emissions at one of the Company's mill services locations. The
Agency is seeking abatement of dust emissions at the site and has advised that
it is seeking financial penalties which exceed $100,000. The Company is
cooperating with the mill and the Agency to abate the dust emissions and is in
settlement discussions with the Agency.
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
OFF BALANCE SHEET RISK
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 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 foreign currency forward exchange contracts to hedge
transactions of 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 forward exchange contracts do not qualify as hedges,
therefore, gains and losses are recognized in income based on fair market value.
As of September 30, 2000, the total of all forward exchange contracts amounted
to $23.9 million.
-11-
<PAGE> 12
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 Nine Months Ended
September 30 September 30
(In thousands, except amounts per share) 2000 1999 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 22,312 $ 26,112 $ 70,745 $ 64,734
============ ============ ============ ============
Average shares of common stock
outstanding used to compute basic
earnings per common share 39,992 40,740 39,990 41,161
Additional common shares to be
issued assuming exercise of
stock options, net of shares
assumed reacquired 81 114 79 138
------------ ------------ ------------ ------------
Shares used to compute dilutive
effect of stock options 40,073 40,854 40,069 41,299
============ ============ ============ ============
Basic earnings per common share $ .56 $ .64 $ 1.77 $ 1.57
============ ============ ============ ============
Diluted earnings per common share $ .56 $ .64 $ 1.77 $ 1.57
============ ============ ============ ============
</TABLE>
New Financial Accounting Standards Issued
In June 1998, the Financial Accounting Standard Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), with
an amended date effective for fiscal years beginning after June 15, 2000. SFAS
No. 133 was further amended by SFAS No. 138. 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 2001. 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.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS 140),
which replaces SFAS No. 125 with the same title. It revises the standards for
securitizations and other transfers of financial assets and collateral and
requires additional disclosures, but otherwise retains most of SFAS No. 125's
provisions. The Company will adopt SFAS No. 140 in the second quarter of 2001.
The adoption of SFAS No. 140 is not expected to have a material effect on the
Company's financial position and results of operations.
-12-
<PAGE> 13
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
New Staff Accounting Bulletin Issued
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements," which
provides guidance on the recognition, presentation, and disclosure of revenue in
financial statements filed with the Commission. In June 2000, the SEC issued SAB
No. 101B, "Second Amendment: Revenue Recognition in Financial Statements". SAB
101B delays the implementation of SAB 101 until no later than the fourth fiscal
quarter of fiscal years beginning after December 15, 1999. Based on a review of
the Company's policies and practices and current interpretations of SAB 101, the
Company believes it is in general compliance with SAB 101.
New Emerging Issues Task Force (EITF) Consensus
In July and September 2000, the EITF reached a consensus in EITF Issue No.
00-10, "Accounting for Shipping and Handling Fees and Cost," by agreeing that
shipping and handling fees billed to a customer in a sales transaction must be
classified as revenues and that shipping costs should not be netted against
sales. The EITF also requires that all costs incurred for shipping and handling
be classified as expenses, preferably in cost of sales.
It has been determined that certain operations of the Company currently net
shipping and handling costs against revenues. The Company is required to
reclassify these costs to cost of sales. Information is currently being gathered
and it is expected that the reclassification will increase sales and cost of
sales by approximately $30 million per year. There will be no effect on net
income or earnings per share. However, calculated margin percentages may be
reduced.
The EITF consensus is effective for the fourth quarter of 2000 and
reclassification of prior period financial statements is required.
Acquisitions
In May 2000, the Company launched a conditional tender offer for the outstanding
shares of SGB Group PLC (SGB). In June, the Company made its offer unconditional
and by August 31 had acquired 100% of the outstanding shares. SGB, based in the
UK, is one of Europe's largest suppliers of scaffolding, forming and related
access products and services. SGB also has operations in North America, the
Middle East and the Asia Pacific region. SGB had 1999 sales of pound sterling
283 million (approximately $414 million U.S. dollars using a September 30, 2000
exchange rate). Through September 30, 2000 the Company had borrowed $288.6
million to finance the acquisition.
The acquisition of SGB has been accounted for using the purchase method of
accounting and accordingly, the operating results of SGB have been included in
the consolidated results of the Company from June 16, 2000, the date of
acquisition. The purchase price allocation is based upon appraisal values and
management estimates and is subject to reclassifications and adjustments in the
future.
-13-
<PAGE> 14
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
The purchase price of SGB has been allocated as follows:
<TABLE>
<S> <C>
(in millions)
Working capital, other than cash $ 31.9
Property, plant and equipment 208.9
Other assets 71.7
Goodwill 112.9
Non-current liabilities (153.4)
----------
Purchase price, net of cash received $ 272.0
==========
</TABLE>
Harsco's management is in the process of finalizing fair value adjustments,
reorganization actions, and its plan to exit certain activities of SGB.
Estimates of the associated costs have been included in the opening balance
sheet. Management expects to finalize its plans and the associated estimates by
December 31, 2000.
The following unaudited pro forma summary combines the consolidated results of
operations of the Company and SGB as if the acquisition had occurred on January
1, 2000 for the nine months ending September 30, 2000 and January 1, 1999 for
the nine months ending September 30, 1999:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
(thousands except per share data)
PRO FORMA PRO FORMA
2000 1999
<S> <C> <C>
Total Revenues $ 1,640,291 $ 1,588,614
Net Income *64,753 75,799
Diluted Earnings per Share $ 1.62 $ 1.84
--------------------------------------------------------------------------------------
</TABLE>
* Net income is after approximately $4 million of non-tax deductible costs
incurred by SGB in defense of the takeover.
In May 2000, the Company completed the acquisitions of Bergslagen Steelservice
AB and Bergslagen Suomi Oy (collectively Bergslagen). The two companies provide
specialized slag processing and metal recovery services to steel mills in Sweden
and Finland, respectively. The two organizations together recorded 1999 sales of
nearly $10 million.
-14-
<PAGE> 15
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
In April 2000, the company agreed to invest $20 million for a 49 percent
ownership interest in S3Networks, LLC, a start-up company providing internet and
e-business infrastructure consulting services primarily to Fortune 1000
corporations. Cash of $10 million has been invested through September 30, 2000
with an additional $10 million to be paid over a period not to exceed fifteen
months from the initial investment date. The investment is being accounted for
under the equity method. Since the Company is the principal provider of initial
capital for S3Networks, LLC, the Company is recording 100% of net losses to the
extent of its initial $20 million investment. However, the Company will also
record 100% of subsequent net income until the entire initial investment amount
is reinstated. Subsequent to reinstatement of the initial investment amount, the
company will record net income to the extent of its ownership percentage of
S3Networks, LLC.
Pending Divestitures
The Company announced September 27, 2000 that its Board of Directors has
approved plans to divest three non-core operations as part of Harsco's
continuing strategic repositioning as a leading worldwide industrial services
company.
The operations include Capitol Manufacturing, which produces pipe fittings and
related products for the industrial plumbing, electrical, and other markets;
Patterson-Kelley, a manufacturer of industrial and commercial boilers, water
heaters, and blenders; and Faber Prest Distribution, a UK-based materials
transport businesses which Harsco acquired in 1998 as part of mill services
provider Faber Prest Plc.
Opinion of Management
In the opinion of management, financial information furnished herein, which is
unaudited, reflects all adjustments (all of which are of a recurring nature)
that are necessary to present a fair statement of the interim period.
-15-
<PAGE> 16
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
The major changes in the liquidity and capital resources of the Company are as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31 INCREASE/
(DOLLARS ARE IN MILLIONS) 2000 1999 (DECREASE)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets $ 811.1 $ 612.9 $ 198.2
Current liabilities 564.4 430.5 133.9
---------------------------------------------------------------------------------------------
Working capital $ 246.7 $ 182.4 $ 64.3
Current ratio 1.4:1 1.4:1
=============================================================================================
Notes payable and
current maturities $ 63.4 $ 36.6 $ 26.8
Long-term debt 824.8 418.5 406.3
---------------------------------------------------------------------------------------------
Total debt 888.2 455.1 $ 433.1
Total equity 654.1 650.1 4.0
---------------------------------------------------------------------------------------------
Total capital $ 1,542.3 $ 1,105.2 $ 437.1
Total debt to
total capital 57.6% 41.2%
=============================================================================================
</TABLE>
The change in the Company's working capital position during the first nine
months of 2000 is due principally to the acquisition of SGB Group PLC (SGB) in
June 2000. Current assets at September 30 include SGB's current assets of $194.4
million, which consists of $34.6 million in cash, $105.0 million in receivables,
$41.8 million of inventories and $13.0 million of other current assets. The
$133.9 million increase in current liabilities is due principally to the $153.1
million current liabilities of SGB. SGB current liabilities as of September 30,
2000 include short-term borrowings of $22.1 million, accounts payable of $59.1
million, accrued liabilities of $40.5 million and other liabilities of $31.4
million.
The Company is continuing its strategic focus on the reduction of capital
employed including inventory and receivable levels. As a result of this focus,
excluding the recent SGB acquisition, the Company improved its accounts
receivable turnover ratio from 5.3 to 5.6, for the first nine months of 1999
compared to the first nine months of 2000.
Long-term debt increased in the first nine months of 2000 principally as a
result of financing the acquisitions of SGB, Bergslagen Steelservice AB and
Bergslagen Suomi Oy (collectively Bergslagen), and to a lesser extent, capital
investments. SGB was temporarily financed with a 190 million British pounds
(approximately $278.0 million at September 30, 2000) bridge loan. The Bergslagen
acquisition was financed through a temporary bridge loan which was refinanced by
a Swedish private placement bond issued in June, also classified as long-term.
In October, the Company refinanced the acquisition of SGB with a 200 million
British pound bond offering, equivalent to approximately $293 million in cash.
Details of this transaction are discussed later in this section.
16
<PAGE> 17
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Capital investments for the first nine months of 2000 were a record $132.0
million. Capital investments were made for new mill services contracts, SGB and
other business growth initiatives, new processes, and for productivity
improvements.
The capital investments, acquisitions, share repurchases, and cash dividends,
paid at the same or increased rates for the 201st consecutive quarter in August
2000, demonstrate the Company's continued commitment to creating value through
strategic acquisitions and investments and return of capital to shareholders.
<TABLE>
<CAPTION>
Cash Utilization: FOR THE PERIOD FOR THE YEAR ENDED DECEMBER 31
(In millions) ENDED SEPTEMBER 30 ---------------------------------------------------------------
2000 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital investments $ 132.0 $175.2 $159.8 $143.4 $150.3 $113.9
Strategic acquisitions 301.6 48.9 158.3 8.5 21.1 4.1
Share repurchases 3.8 71.9 169.3 113.2 30.7 14.1
Cash dividends 28.2 37.0 40.3 39.1 37.9 37.4
---------------------------------------------------------------------------------------------------------------------------
Total $ 465.6 $333.0 $527.7 $304.2 $240.0 $169.5
===========================================================================================================================
</TABLE>
The Company's debt as a percent of total capital increased as a result of
greater debt. Also contributing to the increase in the debt to total capital is
a $36.4 million decrease in equity from foreign currency translation
adjustments. The foreign currency translation adjustments are principally due to
a 13% decrease in the translated value of the euro, a 9% decrease in the British
pound and a 16% decrease in the South African rand from December 31, 1999 to
September 30, 2000. The Company has initiated a debt reduction program that is
further described later in this section.
<TABLE>
<CAPTION>
Nine Month Financial Statistics FOR THE NINE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
2000 1999
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Harsco stock price high-low $31.63 - $21.25 $34.375 - $23.06
Annualized return on average equity 14.4% 13.4%
Annualized return on average assets 10.0% 10.3%
Annualized return on average capital 9.4% 9.5%
</TABLE>
Higher annualized return on average equity is due principally to increased
income in the first nine months of 2000 compared with the first nine months of
1999. Lower annualized returns on average assets and capital are due to the
effect of the recent SGB acquisition. The company's book value per share
increased to $16.35 per share at September 30, 2000 from $16.22 at December 31,
1999 due principally to an increase in retained earnings partially offset by
foreign currency translation adjustments recorded as part of other comprehensive
income (loss).
-17-
<PAGE> 18
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
(In millions) 2000 1999
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net cash provided by operations: $160.9 $101.0
</TABLE>
Operating cash flows were $59.9 million greater in the first nine months of 2000
than the first nine months of 1999. The increase in cash from operating
activities was due principally to the timing of receipts and payments for
accounts receivable and accounts payable, for $30.1 million and $28.9 million,
respectively. Also affecting cash from operations was an increase in income
before depreciation and amortization of $20.4 million for the nine months ended
September 30, 2000 over the comparable period in 1999, and a $12.0 million
increase in deferred income taxes. Partially offsetting these favorable
variances was a $37.0 million decrease in operating cash flow due to the timing
of payments for inventories.
The Company has a U.S. commercial paper borrowing program under which it can
issue up to $350 million of short-term notes in the U.S. commercial paper
market. In addition, the Company has a three billion Belgian franc commercial
paper program, equivalent to approximately U.S. $65 million at September 30,
2000. The Belgian program provides the capacity for the Company to borrow euros
to fund its European operations more efficiently. The Company limits the
aggregate commercial paper and syndicated credit facility borrowings at any one
time to a maximum $350 million. At September 30, 2000, the Company had $232.7
million of U.S. commercial paper debt outstanding, and $54.1 million of
commercial paper debt outstanding under the Belgian program.
In September 2000, the Company renewed its revolving credit facility in the
amount of $350 million through a syndicate of 13 banks. This facility serves as
back-up to the Company's U.S. commercial paper program. The facility is in two
parts. One part amounts to $131,250,000 and is referred to as a 364-day credit
agreement that extends maturity of any borrowings for up to two years. The
second part is for $218,750,000 and is referred to as a 5-year credit agreement,
that extends the maturity date of the facility for up to five years. As of
September 30, 2000 there were no borrowings outstanding under this facility.
A Form S-3 shelf registration is on file with the Securities and Exchange
Commission for the possible issuance of up to an additional $200 million of new
debt securities, preferred stock or common stock.
The Company financed the purchase of SGB with temporary bridge loan financing
from Chase Manhattan Bank. The bridge loan was 190.0 million British pounds,
equivalent to approximately $278 million as of September 30, 2000. In October
2000 the Company issued 200 million of 7.25% British pound notes due 2010. The
issue pays a coupon of 7.25% and has been priced at 98.463%. The net proceeds of
the issue have been used to refinance the temporary bridge loan used for the SGB
acquisition.
-18-
<PAGE> 19
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Due to the Company's increased debt level resulting from the June 16, 2000 SGB
acquisition, Standard & Poor's and Fitch lowered the Company's credit ratings
slightly. The Company's outstanding long-term notes are now rated A- by Standard
& Poor's, A- by Fitch and A-3 by Moody's. The Company's commercial paper is
rated A-2 by Standard & Poor's, F-2 by Fitch and P-2 by Moody's. The Company has
undertaken a debt reduction program that includes significant working capital
reductions, divestitures of non-core businesses, other asset sales, and a
complete evaluation of its capital expenditure program. These actions are
expected to enable the company to reduce its debt levels in 2001.
The Company's financial position and debt capacity should enable it to meet
current and future requirements. As additional resources are needed, the Company
should be able to obtain funds readily and at competitive costs. The Company is
positioned to continue to invest strategically in high return projects, and to
pay cash dividends as a means to enhance shareholder value. The Company intends
to use future discretionary cash flow principally for debt reduction.
RESULTS OF OPERATIONS
THIRD QUARTER OF 2000 COMPARED WITH THIRD QUARTER OF 1999
<TABLE>
<CAPTION>
AMOUNT PERCENT
(DOLLARS ARE IN MILLIONS, EXCEPT PER SHARE) 2000 1999 INCREASE INCREASE
----------------------------------------- ---- ---- -------- --------
<S> <C> <C> <C> <C>
Revenues $533.2 $424.6 $108.6 26%
Operating income 48.7 44.5 4.2 9%
Net income 22.3 26.1 (3.8) (15)%
Basic earnings per common share .56 .64 (.08) (13)%
Diluted earnings per common share .56 .64 (.08) (13)%
</TABLE>
SUMMARY ANALYSIS OF RESULTS
All three operating segments contributed to the increase in operating income.
Operating income was above last year's comparable period due to two business
acquisitions in the Harsco Infrastructure Segment, as well as improved demand
for mill services resulting from more favorable conditions in the steel
industry. On a comparative basis, increased steel production and capacity
utilization favorably affected results for many mills in the United States and
certain other countries. However, the domestic and certain international steel
industries began experiencing softening demand in the third quarter of 2000.
Income was unfavorably affected by higher fuel costs in 2000 and the unfavorable
effects of foreign currency translation.
Interest expense was significantly greater than last year's comparative period.
The increase more than offset the increase in operating income. The increase in
interest expense was due principally to the strategic acquisition of SGB Group,
PLC (SGB) in the second quarter of 2000.
-19-
<PAGE> 20
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
COMPARATIVE ANALYSIS OF CONSOLIDATED RESULTS
REVENUES
As noted above, revenues for 2000 increased significantly from last year's
comparable period. The improvement results from increased volume for the Harsco
Infrastructure Segment due principally to two business acquisitions, SGB and
Pandrol Jackson. Sales of grating products also increased. Adjusting for the
unfavorable effect of foreign exchange translation, sales would have increased
29%.
COST OF SALES AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Cost of services and products sold increased but at a lower rate than the
increase in total revenues despite the increase in fuel costs. Selling, general
and administrative expenses increased due to the costs related to acquired
companies. The Company's continuing cost reduction, process improvement and
reorganization efforts contributed towards slowing the rate of growth of these
costs. Excluding the effects of business acquisitions less divestitures of
non-core businesses, selling, general and administrative expenses decreased
slightly.
EQUITY IN INCOME (LOSS) OF AFFILIATES
Equity in income of affiliates decreased from $1.4 million in income in the
third quarter of 1999 to a loss of $0.6 million in the comparable period of
2000. This is due principally to the losses incurred by S3 Networks LLC, a 49%
owned information technology infrastructure services company in which Harsco
plans to invest a total of $20 million in start-up capital. The Company has
invested $10.0 million in S3 Networks as of September 30, 2000.
INTEREST EXPENSE
Interest expense was higher than last year's comparable period due to additional
borrowings principally as a result of the SGB acquisition, and increased capital
expenditures. Increased interest rates also affected interest expense.
PROVISION FOR INCOME TAXES
The effective income tax rate for the third quarter of 2000 was 28.3% versus
33.4% for the comparable period in 1999. The reduction in the income tax rate is
due principally to lower effective income tax rates on international earnings as
well as a year-to-date adjustment to reduce the effective income tax rate to
33%.
NET INCOME
Net income of $22.3 million was 15% below 1999 due to the factors previously
disclosed.
-20-
<PAGE> 21
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
SEGMENT ANALYSIS
HARSCO MILL SERVICES SEGMENT
<TABLE>
<CAPTION>
THREE MONTHS AMOUNT PERCENT
(DOLLARS ARE IN MILLIONS) ENDING SEPTEMBER 30 INCREASE INCREASE
----------------------- ------------------- -------- --------
2000 1999
---- ----
<S> <C> <C> <C> <C>
Sales $ 186.0 $ 184.3 $ 1.7 1%
Operating income 22.6 20.8 1.8 9%
Segment net income 15.1 12.4 2.7 22%
</TABLE>
Third quarter sales of the Harsco Mill Services Segment were slightly above last
year's comparable period. Sales increases resulted from new contracts and
additional services on existing contracts particularly for certain operations in
North and South America. Sales increases were partially offset by divestitures
of non-core businesses in September 1999 and June 2000. Excluding the
unfavorable effect of foreign currency translation, sales would have increased
8% on a comparable basis.
Operating income of the Harsco Mill Services Segment was 9% above 1999.
Increased demand for mill services, as well as the favorable effects of
continuous process improvement programs and reorganization actions, more than
offset the unfavorable effects of higher fuel costs in 2000 and foreign currency
translation. During the third quarter of 2000 demand for mill services in
certain markets began to soften in comparison to the strong demand experienced
earlier in 2000.
Net income of the Harsco Mill Services Segment was significantly above 1999 due
in part to a lower effective income tax rate.
HARSCO GAS AND FLUID CONTROL SEGMENT
<TABLE>
<CAPTION>
AMOUNT PERCENT
THREE MONTHS INCREASE INCREASE
(DOLLARS ARE IN MILLIONS) ENDING SEPTEMBER 30 (DECREASE) (DECREASE)
----------------------- ------------------- -------- --------
2000 1999
---- ----
<S> <C> <C> <C> <C>
Sales $132.3 $138.2 $ (5.9) (4)%
Operating income 13.3 13.1 0.2 2%
Segment net income 8.0 7.6 0.4 5%
</TABLE>
Sales of the Harsco Gas and Fluid Control Segment were below last year's
comparable period due to the divestitures of two non-core businesses and soft
market conditions affecting gas control and containment equipment.
-21-
<PAGE> 22
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Operating income of the Harsco Gas and Fluid Control Segment was slightly above
1999 due principally to one-time benefits totaling $2.2 million as a result of
cost containment actions and a gain due to the sale of a non-core business.
HARSCO INFRASTRUCTURE SEGMENT
<TABLE>
<CAPTION>
THREE MONTHS
(DOLLARS ARE IN MILLIONS) ENDING SEPTEMBER 30
----------------------- ------------------- AMOUNT PERCENT
2000 1999 INCREASE INCREASE
---- ---- -------- --------
<S> <C> <C> <C> <C>
Sales $ 214.5 $ 101.4 $ 113.1 112%
Operating income 13.5 11.3 2.2 19%
Segment net income 3.9 6.3 (2.4) (38)%
</TABLE>
The significant sales increase is due principally to the June 2000 acquisition
of SGB. Sales of railway maintenance-of-way services and equipment, resulting
principally from the fourth quarter 1999 acquisition of Pandrol Jackson also
contributed to the increase.
Operating income of the Harsco Infrastructure Segment increased 19% due to the
acquisitions of SGB and Pandrol Jackson. The operating income improvement was
partially offset by lower income for railway maintenance-of-way services and
equipment due to reduced demand of certain products and a pre-tax non-recurring
asset writedown of $3.0 million. Lower income for the grating product line
reflected higher material costs.
Segment net income decreased from the third quarter of 1999 due principally to
higher interest expense resulting from financing the SGB acquisition. Operating
income from the SGB acquisition, which was slightly accretive to net income in
the third quarter of 2000, was more than offset by the other factors previously
discussed.
SERVICES AND ENGINEERED PRODUCTS ANALYSIS
The Company is a diversified services and engineered products company. The
Company is committed to increasing its presence and strategic growth in
services-related businesses. This is evidenced by the June 2000 acquisition of
SGB, which is principally a service business. The acquisitions of Bergslagen and
Pandrol Jackson have also increased the Company's service revenue base. The
Company has committed substantial capital investments in service businesses.
These investments, principally in scaffolding, forming and shoring services;
mill services; and railway maintenance-of-way services have contributed to
higher levels of sales and income. Approximately 90% of the Company's capital
expenditures in the third quarter of 2000 were investments in services.
-22-
<PAGE> 23
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
(DOLLARS ARE IN MILLIONS) SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
-------------------------------------------------------------------------------------------------------------------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
SALES
<S> <C> <C> <C> <C>
Services $ 331.0 62% $ 214.1 51%
Engineered products 201.8 38 209.8 49
------- --- ------- ----
Total sales $ 532.8 100% $ 423.9 100%
======== === ======== ====
OPERATING INCOME
Services $ 28.9 59% $ 22.2 49%
Engineered products 20.5 41 22.9 51
------- --- ------- ----
Total segment operating income $ 49.4 100% $ 45.1 100%
======== === ======== ====
EBITDA*
Services $ 63.5 69% $ 50.2 63%
Engineered products 27.9 31 29.8 37
------- ----- ------- ----
Total segment EBITDA $ 91.4 100% $ 80.0 100%
======== ===== ======== ====
</TABLE>
* Earnings before interest, income taxes, minority interest, depreciation and
amortization (EBITDA) is not a measure of performance under generally
accepted accounting principles, however, the Company and the investment
community consider it an important calculation.
Third quarter 2000 sales, operating income and EBITDA for services increased
substantially from the comparable period in 1999. The increases reflect business
acquisitions, principally SGB, as well as, improved economic conditions in
certain markets served by the company and the favorable effects of cost
reductions, process improvements and reorganization efforts.
Results for engineered products were down from the third quarter of 1999 due to
higher material costs associated with the grating product line and reduced
demand for railway maintenance-of-way equipment.
Third quarter 1999 operating income and EBITDA have been restated to exclude
equity in income (loss) of affiliates, which is consistent with the third
quarter of 2000.
-23-
<PAGE> 24
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS
NINE MONTHS OF 2000 COMPARED WITH NINE MONTHS OF 1999
<TABLE>
<CAPTION>
AMOUNT PERCENT
(DOLLARS ARE IN MILLIONS, EXCEPT PER SHARE) 2000 1999 INCREASE INCREASE
----------------------------------------- ---- ---- -------- --------
<S> <C> <C> <C> <C>
Revenues $1,439.8 $1,260.1 $179.7 14%
Operating income 140.4 118.5 21.9 18%
Net income 70.7 64.7 6.0 9%
Basic earnings per common share 1.77 1.57 .20 13%
Diluted earnings per common share 1.77 1.57 .20 13%
</TABLE>
SUMMARY ANALYSIS OF RESULTS
The Company's revenues, operating income, net income and operating income
margins improved for the first nine months of 2000 compared with the first nine
months of 1999. These results improved despite the negative impact on sales and
earnings of the foreign currency translation effect of the strong U.S. dollar,
the sale of five non-core businesses in 1999 and 2000, and the unfavorable
effect of higher fuel costs.
Increased sales and income were due in part to increased demand for mill
services resulting from improved conditions in the steel industry. The
improvement reflected increased steel production and capacity utilization for
many mills in the United States. Steel production also increased in several
other countries where the Company conducts business. However, the domestic and
certain international steel industries began experiencing softening demand in
the third quarter of 2000. Results for mill services also include the Bergslagen
acquisition in May of 2000.
Sales and operating income for the first nine months of 2000 benefited
significantly from the results of the Pandrol Jackson acquisition in the fourth
quarter of 1999 and the SGB Group PLC (SGB) acquisition in the second quarter of
2000. Additionally, increased demand for services and products in the domestic
non-residential construction market favorably affected sales and income.
Interest expense was significantly greater than last year's comparative period.
The increase offset a significant portion of the increase in operating income.
Most of the increase in interest expense resulted from financing the SGB and
Pandrol Jackson acquisitions.
-24-
<PAGE> 25
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
COMPARATIVE ANALYSIS OF CONSOLIDATED RESULTS
REVENUES
Revenues for the first nine months of 2000 were significantly above the
comparable period in 1999. The principal reason for increased sales is the
addition of sales of acquired companies, net of disposition of non-core
businesses. The improvement also resulted from increased demand for services and
products in principally the steel and the domestic non-residential construction
markets. Excluding the unfavorable foreign currency translation effect of the
strengthening U.S. dollar, particularly relative to the euro, revenues increased
by more than 16%.
COST OF SALES AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Cost of services and products sold increased but at a lower rate than the
increase in total revenues despite a significant increase in fuel costs.
Selling, general and administrative expenses increased due to the costs related
to acquired companies. The company's continuing cost reduction, process
improvement and reorganization efforts contributed towards slowing the rate of
growth of these costs. Excluding the effects of business acquisitions less
divestitures of non-core businesses, selling, general and administrative
expenses decreased slightly.
INTEREST EXPENSE
Interest expense was higher than last year's comparable period due to additional
borrowings as a result of acquisitions, principally SGB and Pandrol Jackson, as
well as increased capital expenditures. Higher interest rates also contributed
to the rise in interest expense.
PROVISION FOR INCOME TAXES
The effective income tax rate for the first nine months of 2000 was 33% versus
35% for the comparable period in 1999. The reduction in the income tax rate is
due principally to lower effective income tax rates on international earnings.
NET INCOME AND EARNINGS PER SHARE
Net income of $70.7 million and earnings per share of $1.77 were significantly
above 1999 due to the factors previously disclosed.
SEGMENT ANALYSIS
HARSCO MILL SERVICES SEGMENT
<TABLE>
<CAPTION>
NINE MONTHS AMOUNT PERCENT
(DOLLARS ARE IN MILLIONS) ENDED SEPTEMBER 30 INCREASE INCREASE
----------------------- ------------------ -------- --------
2000 1999
---- ----
<S> <C> <C> <C> <C>
Sales $ 572.8 $ 539.7 $33.1 6%
Operating income 69.7 55.9 13.8 25%
Segment net income 43.1 32.0 11.1 35%
</TABLE>
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<PAGE> 26
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Sales of the Harsco Mill Services Segment were above 1999's first nine months
despite the unfavorable effect of foreign exchange translation and the
disposition of two non-core businesses. Increased demand for services resulted
from improved United States steel industry production levels and capacity
utilization. Additionally, steel production levels and the demand for mill
services increased at certain international locations. In the third quarter of
2000 the domestic and certain international steel industries began experiencing
softening demand. Excluding the unfavorable foreign currency translation effect
of the strengthening U.S. dollar and the disposition of two non-core businesses,
sales increased by 13%.
Operating income of the Harsco Mill Services Segment was significantly above
1999. The increase reflected the improved operating and economic environment for
mill services and the favorable effects of continuous process improvement
programs and reorganization efforts which more than offset significantly higher
fuel costs. On a comparative basis, 1999 included a foreign currency translation
pre-tax gain in Brazil of $1.6 million.
Net income of the Harsco Mill Services Segment was also significantly above
1999. The increase reflects the conditions previously discussed. Additionally, a
lower effective income tax rate was experienced on international earnings.
HARSCO GAS AND FLUID CONTROL SEGMENT
<TABLE>
<CAPTION>
NINE MONTHS
(DOLLARS ARE IN MILLIONS) ENDED SEPTEMBER 30 AMOUNT PERCENT
----------------------- ------------------ INCREASE INCREASE
2000 1999 (DECREASE) (DECREASE)
---- ---- -------- --------
<S> <C> <C> <C> <C>
Sales $393.1 $411.4 $(18.3) (4)%
Operating income 35.1 31.6 3.5 11%
Segment net income 20.6 17.6 3.0 17%
</TABLE>
The decrease in sales was due principally to the unfavorable effect of lower
sales due to the disposition of three non-core businesses. Increased sales for
industrial fittings reflected improved demand in the industrial gas and oil
markets. Excluding the unfavorable effect of dispositions of three non-core
businesses, sales decreased by only 1%.
Operating income of the Harsco Gas and Fluid Control Segment was significantly
above 1999 due in part to the inclusion of $1.8 million of pre-tax gains on the
sale of two non-core businesses, as well as cost reductions and improved
efficiencies.
The increase in net income of the Harsco Gas and Fluid Control Segment reflects
the conditions previously discussed.
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<PAGE> 27
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
HARSCO INFRASTRUCTURE SEGMENT
<TABLE>
<CAPTION>
NINE MONTHS
(DOLLARS ARE IN MILLIONS) ENDED SEPTEMBER 30
----------------------- ------------------ AMOUNT PERCENT
2000 1999 INCREASE INCREASE
---- ---- -------- --------
<S> <C> <C> <C> <C>
Sales $473.1 $308.1 $165.0 54%
Operating income 36.8 31.4 5.4 17%
Segment net income 16.3 17.2 (0.9) (5)%
</TABLE>
The significant increase in sales of the Harsco Infrastructure Segment is due to
the inclusion of the SGB acquisition late in the second quarter of 2000 and the
inclusion of the Pandrol Jackson acquisition in the fourth quarter of 1999. The
acquisitions resulted in increased sales of scaffolding, shoring, and forming
services and railway maintenance-of-way contract services and equipment. Sales
of grating products also increased.
Operating income of the Harsco Infrastructure Segment increased significantly.
The improvement reflects the inclusion of two acquisitions as discussed above
and the favorable effects of reorganization efforts. Income for the railway
track maintenance business was unfavorably affected by a pre-tax non-recurring
asset write-down of $3.0 million and the deferral of service and parts purchases
by certain major domestic railroads.
Net income of the Harsco Infrastructure Segment decreased due to increased
interest expense as a result of additional borrowings associated with the SGB
Group PLC and Pandrol Jackson acquisitions.
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<PAGE> 28
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
SERVICES AND ENGINEERED PRODUCTS ANALYSIS
The Company is a diversified services and engineered products company. Sales and
operating income for the nine months of 2000 and 1999 are presented in the
following table:
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
(DOLLARS ARE IN MILLIONS) SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
----------------------------------------------------------------------------------------------------------------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C>
SALES
Services $ 817.7 57% $ 632.1 50%
Engineered products 621.3 43 627.1 50
---------- ---- ---------- ----
Total sales $ 1,439.0 100% $ 1,259.2 100%
=========== ==== =========== ====
OPERATING INCOME
Services $ 85.4 60% $ 61.2 51%
Engineered products 56.2 40 57.7 49
---------- -- ---------- --
Total segment operating income $ 141.6 100% $ 118.9 100%
=========== ==== =========== ====
EBITDA*
Services $ 175.4 69% $ 140.5 64%
Engineered products 78.9 31 78.6 36
---------- -- ---------- ----
Total segment EBITDA $ 254.3 100% $ 219.1 100%
=========== ==== =========== ====
</TABLE>
* Earnings before interest, income taxes, minority interest, depreciation and
amortization (EBITDA) is not a measure of performance under generally
accepted accounting principles, however, the Company and the investment
community consider it an important calculation
Sales, operating income and EBITDA for services increased significantly from the
first nine months of 1999. The increases reflect the effects of acquisitions as
well as improved economic conditions in certain markets served by the company.
Additionally, results benefited from the favorable effects of cost reductions,
process improvements and reorganization efforts.
Results for engineered products were down from the first nine months of 1999 due
to reduced demand for certain products principally rail equipment as well as
certain product lines in the Harsco Gas and Fluid Control segment.
The first nine months of 1999's operating income and EBITDA have been restated
to exclude equity in income (loss) of affiliates on a basis consistent with
2000.
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<PAGE> 29
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
FORWARD LOOKING STATEMENTS
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 include statements about our management confidence and strategies
for performance; expectations for new and existing products, technologies, and
opportunities; and expectations for market segment and industry growth, sales,
and earnings.
These factors include, but are not limited to: (1) changes in the worldwide
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.
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<PAGE> 30
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to foreign currency risk in its international operations.
The Company conducts business in over thirty foreign countries and approximately
36%, 37% and 36% of the Company's net revenues for the years ended December 31,
1999, 1998 and 1997, respectively, were derived from the Company's operations
outside the United States. The June 2000 SGB acquisition has increased the
Company's foreign currency exposure. As an example of the effect of foreign
currency risk, in the first nine months of 2000 the British pound has decreased
9% and the euro has declined 13% in relation to the U.S. dollar. These and other
foreign currency exposures increase the risk of income statement, balance sheet
and cash flow volatility.
To illustrate the recent effect of foreign currency exchange rate changes due to
the strengthening of the U.S. dollar, in the first nine months of 2000 sales
would have been 2.0 percent greater using the average exchange rates for the
first nine months of 1999. A similar comparison for the year 1999, shows that
sales would have increased an additional 2.0 percent, if the average exchange
rates for 1999 would have been the same as in 1998.
The Company seeks to reduce exposures to foreign currency fluctuations through
the use of forward exchange contracts. At September 30, 2000, these contracts
amounted to $23.9 million and 93% of the amount will mature in 2000. 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.
Also, the Company's cash flows and earnings are subject to changes in interest
rates. Total debt was $888.2 million as of September 30, 2000. The weighted
average interest rate of total debt was approximately 6.6%. At current debt
levels, a one percentage increase in interest rates would increase interest
expense by approximately $7.2 million per year on variable interest rate debt.
Harsco Mill Services Segment provides services at steel mills worldwide, with
approximately 75% of its revenues generated outside the U.S. The Company is
exposed to risks related to changing economic conditions and their effect on the
markets it serves and on the Company's supply chain, and related costs. As an
example, in 1998 and early 1999 the worldwide steel industry experienced selling
price reductions and production curtailments at many steel producers,
particularly in the United States. The United States steel industry was
unfavorably affected by imports of low-priced foreign steel. Additionally,
certain steel producers in the U.S. were forced to file for bankruptcy
protection. The situation improved in the second half of 1999. However, as of
September 30, 2000, there appears to be a moderation in domestic and certain
international steel mill activity. There is a risk that the Company's future
results of operations or financial condition could be adversely affected if the
steel industry's problems recur. The future financial impact on the Company
associated with the risks cannot be estimated.
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<PAGE> 31
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
On April 6, 2000, the Company agreed to invest $20 million for a 49% interest in
S3Networks, LLC, a start-up company providing internet and e-business
infrastructure consulting services primarily to Fortune 1000 companies. This
investment is subject to market risks inherent in any start-up company. Such
risks include the ability to develop a revenue base sufficient to offset fixed
expenses; the ability to hire and retain qualified employees; the ability to
secure market share from established companies, etc. Since the Company is
principal provider of initial capital for S3 Network, LLC, the Company records
100% of the net losses to the extent of its initial $20 million investment.
There is no obligation for the Company to fund the venture beyond its $20
million investment.
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<PAGE> 32
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information on legal proceedings is included under Part I, Item 1., the section
labeled "Commitments and Contingencies."
ITEM 5. OTHER INFORMATION
DIVIDEND INFORMATION
On September 26, 2000, the Board of Directors declared a quarterly cash dividend
of 23.5 cents per share, payable November 15, 2000, to shareholders of record on
October 16, 2000.
ITEM 6(a). EXHIBITS
The following exhibits are attached:
Exhibit No. 4 Harsco Finance B.V. pound sterling200,000,000, 7.25% Guaranteed
Notes due 2010
Exhibit No. 10(a) 364-Day Credit Agreement
Exhibit No. 10(b) Five Year Credit Agreement
Exhibit No. 12 Computation of Ratios of Earnings to Fixed Charges
Exhibit No. 27 Financial Data Schedule
ITEM 6(b). REPORTS ON FORM 8-K
A report on Form 8-K/A dated June 16, 2000 was filed on August 29, 2000. The
report presents financial statements of SGB Group PLC, and pro forma information
incorporating SGB Group PLC results.
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<PAGE> 33
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART II - OTHER INFORMATION
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.
<TABLE>
<S> <C>
HARSCO CORPORATION
-----------------------------
(Registrant)
DATE November 13, 2000 /S/ Salvatore D. Fazzolari
------------------------------------------ ------------------------------------------
Salvatore D. Fazzolari
Senior Vice President, Chief
Financial Officer and Treasurer
DATE November 13, 2000 /S/ Stephen J. Schnoor
------------------------------------------ ------------------------------------------
Stephen J. Schnoor
Vice President and Controller
</TABLE>
-33-
