<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 March 31, 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)
<TABLE>
<S> <C>
Delaware 23-1483991
- ------------------------------------------------------------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
Camp Hill, Pennsylvania 17001-8888
- ------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
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 March 31, 2000
- ------------------- ------------------------------------
Common Stock Par Value $1.25 39,942,800
Preferred Stock Purchase Rights 39,942,800
-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
MARCH 31
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Service sales $ 230,859 $ 200,221
Product sales 218,276 204,410
Other 353 461
- -----------------------------------------------------------------------------------------
TOTAL REVENUES 449,488 405,092
=========================================================================================
COSTS AND EXPENSES:
Cost of services sold 178,704 155,295
Cost of products sold 175,796 163,465
Selling, general, and administrative expenses 53,794 52,795
Research and development expenses 1,647 1,650
Other expense 374 1,412
- -----------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 410,315 374,617
=========================================================================================
OPERATING INCOME 39,173 30,475
Interest income 1,188 1,089
Interest expense (7,490) (6,213)
- -----------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 32,871 25,351
Provision for income taxes 11,505 9,253
- -----------------------------------------------------------------------------------------
INCOME BEFORE MINORITY INTEREST 21,366 16,098
Minority interest in net income 1,164 1,299
- -----------------------------------------------------------------------------------------
NET INCOME $ 20,202 $ 14,799
=========================================================================================
Average shares of common stock outstanding 40,015 41,629
=========================================================================================
BASIC EARNINGS PER COMMON SHARE $ .50 $ .36
=========================================================================================
Diluted average shares of common stock outstanding 40,085 41,745
- -----------------------------------------------------------------------------------------
DILUTED EARNINGS PER COMMON SHARE $ .50 $ .35
=========================================================================================
CASH DIVIDENDS DECLARED PER COMMON SHARE $ .235 $ .225
</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>
MARCH 31 DECEMBER 31
(IN THOUSANDS) 2000 1999
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 45,848 $ 51,266
Receivables, less allowance for doubtful accounts of
$12,035 in 2000 and $13,339 in 1999 335,221 331,123
Inventories 175,998 172,198
Other current assets 58,525 58,368
- ---------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 615,592 612,955
- ---------------------------------------------------------------------------------------------
Property, plant and equipment, at cost 1,509,560 1,499,823
Allowance for depreciation 839,747 828,277
- ---------------------------------------------------------------------------------------------
669,813 671,546
Cost in excess of net assets of businesses acquired, net 252,063 258,698
Other assets 118,373 116,624
- ---------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,655,841 $ 1,659,823
=============================================================================================
LIABILITIES
CURRENT LIABILITIES:
Notes payable and current maturities $ 39,520 $ 36,607
Accounts payable 120,033 132,394
Accrued compensation 40,429 46,615
Income taxes 46,527 44,154
Other current liabilities 155,873 170,746
- ---------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 402,382 430,516
- ---------------------------------------------------------------------------------------------
Long-term debt 449,500 418,504
Deferred income taxes 55,255 52,932
Other liabilities 98,901 107,750
- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,006,038 1,009,702
- ---------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common stock and additional paid-in capital 171,286 170,878
Accumulated other comprehensive income (expense) (88,165) (80,538)
Retained earnings 1,166,397 1,155,586
Treasury stock (599,715) (595,805)
- ---------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 649,803 650,121
- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,655,841 $ 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>
THREE MONTHS ENDED
MARCH 31
(IN THOUSANDS) 2000 1999
================================================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,202 $ 14,799
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 31,883 29,219
Amortization 3,350 3,163
Equity in income of unconsolidated entities (150) (350)
Dividends or distributions from unconsolidated entities - 377
Deferred income taxes 1,859 (1,032)
Other, net 864 1,068
Changes in assets and liabilities, net of acquisitions and dispositions
of businesses:
Accounts receivable (6,901) (2,398)
Inventories (6,117) (2,565)
Accounts payable (7,887) (18,683)
Disbursements related to discontinued defense business (227) (982)
Other assets and liabilities (19,393) (11,273)
- ---------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 17,483 11,343
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (39,207) (34,195)
Purchase of business, net of cash acquired (9,502) (2,903)
Proceeds from sale of business 3,743 8,502
Other investing activities 915 519
- ---------------------------------------------------------------------------------------------------------------
NET CASH (USED) BY INVESTING ACTIVITIES (44,051) (28,077)
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net 3,661 (7,148)
Current maturities and long-term debt:
Additions 34,208 84,249
Reductions (1,992) (3,083)
Cash dividends paid on common stock (9,421) (9,479)
Common stock issued-options 265 870
Common stock acquired for treasury (3,768) (38,047)
Other financing activities (748) (1,767)
- ---------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 22,205 25,595
- ---------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (1,055) (1,045)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (5,418) 7,816
Cash and cash equivalents at beginning of period 51,266 41,562
===============================================================================================================
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45,848 $ 49,378
===============================================================================================================
</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
MARCH 31
(IN THOUSANDS) 2000 1999
================================================================================
<S> <C> <C>
Net income $ 20,202 $ 14,799
Other comprehensive income (expense):
Foreign currency translation adjustments (7,627) (23,545)
- --------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME (EXPENSE) $ 12,575 $ (8,746)
- --------------------------------------------------------------------------------
</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)
(In millions)
<TABLE>
<CAPTION>
HARSCO GAS
HARSCO MILL AND FLUID HARSCO GENERAL CONSOLIDATED
THREE MONTHS ENDED MARCH 31, 2000 SERVICES CONTROL INFRASTRUCTURE CORPORATE TOTALS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES TO UNAFFILIATED CUSTOMERS $ 191.6 $ 135.3 $ 122.2 $ - $ 449.1
- ---------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) $ 20.1 $ 11.1 $ 8.8 $ (0.8) $ 39.2
INTEREST INCOME 1.1 0.1 - - 1.2
INTEREST EXPENSE (2.1) (1.0) (1.8) (2.6) (7.5)
INCOME TAX (EXPENSE) BENEFIT (6.7) (3.8) (2.4) 1.4 (11.5)
MINORITY INTEREST IN NET (INCOME) (1.2) - - - (1.2)
- ---------------------------------------------------------------------------------------------------------------------------------
SEGMENT NET INCOME (LOSS) $ 11.2 $ 6.4 $ 4.6 $ (2.0) $ 20.2
=================================================================================================================================
HARSCO GAS
HARSCO MILL AND FLUID HARSCO GENERAL CONSOLIDATED
THREE MONTHS ENDED MARCH 31, 1999 SERVICES CONTROL INFRASTRUCTURE CORPORATE TOTALS
- ---------------------------------------------------------------------------------------------------------------------------------
Net sales to unaffiliated customers $ 173.1 $ 134.1 $ 97.4 $ - $ 404.6
- ---------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 16.5 $ 8.0 $ 6.3 $ (0.3) $ 30.5
Interest income 0.9 - 0.1 0.1 1.1
Interest expense (2.8) (1.4) (1.4) (0.6) (6.2)
Income tax expense (4.7) (2.2) (1.8) (0.6) (9.3)
Minority interest in net (income) loss (1.4) 0.1 - - (1.3)
- ---------------------------------------------------------------------------------------------------------------------------------
Segment net income (loss) $ 8.5 $ 4.5 $ 3.2 $ (1.4) $ 14.8
=================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-6-
<PAGE> 7
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Inventories
Inventories consist of:
<TABLE>
<CAPTION>
MARCH 31 December 31
(in thousands) 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 44,148 $ 37,715
Work-in-process 36,983 37,198
Raw materials and purchased parts 74,417 76,911
Stores and supplies 20,450 20,374
- ------------------------------------------------------------------------------------------------------------------------------
$175,998 $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 $9.9 million and
applicable interest currently estimated to be $47.3 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
-7-
<PAGE> 8
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 $43.1 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. The Company plans to vigorously contest the
IRS assessment in the U.S. Court of Federal Claims. 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 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 $5.8 million plus penalties and applicable interest
currently estimated to be $9.9 million and $47.3 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.
-8-
<PAGE> 9
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. Harsco will
pay the Government a $200,000 fine plus $10.8 million in damages for a total of
$11 million.
The settlement, which is subject to acceptance by the U.S. District Court, ends
the Government's investigation and releases Harsco and BMY from further
liability for the issues under investigation. Harsco will charge the payment
against an existing reserve, resulting in no charge to the Company's earnings.
Based on the terms of the settlement, the Company expects to pay the $11 million
by the third quarter of 2000, following the Court's entry of judgment.
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 March 31, 2000, and December 31, 1999 includes an
accrual of $3.5 million and $3.0 million, respectively, for environmental
matters. The amounts charged against pre-tax earnings related to environmental
matters totaled $0.8 million for the first three months of 2000, and $0.1
million for the first three 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.
-9-
<PAGE> 10
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 forward foreign 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 foreign exchange contracts do not qualify as hedges,
therefore, gains and losses are recognized in income based on fair market value.
As of March 31, 2000, the total of all forward exchange contracts amounted to
$3.1 million with a favorable mark-to-market fluctuation of twelve thousand
dollars.
-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 MARCH 31
(Dollars in thousands except per share) 2000 1999
- -------------------------------------------------------------------------
<S> <C> <C>
Net income $ 20,202 $ 14,799
=========== ===========
Average shares of common stock
outstanding used to compute
basic earnings per common
share 40,014,882 41,629,301
Additional common shares to be
issued assuming exercise of
stock options, net of shares
assumed reacquired 70,213 115,366
----------- -----------
Shares used to compute dilutive
effect of stock options 40,085,095 41,744,667
=========== ===========
Basic earnings per common share $ .50 $ .36
=========== ===========
Diluted earnings per common share $ .50 $ .35
=========== ===========
</TABLE>
NEW FINANCIAL ACCOUNTING STANDARD 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 effective date for fiscal years beginning after June 15, 2000. 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 as of January 1, 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.
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
FINANCIAL CONDITION AND LIQUIDITY
The change in the Company's financial position and liquidity is summarized as
follows:
MARCH 31 DECEMBER 31 INCREASE/
(DOLLARS ARE IN MILLIONS) 2000 1999 (DECREASE)
- ---------------------------------------------------------------------------
Current assets 615.6 $ 612.9 $ 2.7
Current liabilities 402.4 430.5 (28.1)
- ---------------------------------------------------------------------------
Working capital 213.2 $ 182.4 $ 30.8
Current ratio 1.5:1 1.4:1
===========================================================================
Notes payable and
current maturities $ 39.5 $ 36.6 $ 2.9
Long-term debt 449.5 418.5 31.0
- ---------------------------------------------------------------------------
Total debt 489.0 455.1 $ 33.9
Total equity 649.8 650.1 (0.3)
- ---------------------------------------------------------------------------
Total capital $ 1,138.8 $ 1,105.2 $ 33.6
Total debt to
total capital 42.9% 41.2%
===========================================================================
The improvement in the Company's working capital position and current ratio
during the first three months of 2000 was due principally to a reduction in
current liabilities of $28.1 million. The largest reduction within current
liabilities was a $12.4 million decrease in accounts payable. Other current
liabilities also decreased by $14.9 million which included a $7.2 million
reduction in accrued liabilities and a $2.8 million reduction in advances on
contracts.
The Company is continuing its strategic focus on the reduction of capital
employed including inventory and receivable levels. As a result of this focus,
the Company showed improvements in its inventory and accounts receivable
turnover ratios from 9.1 to 10.1 and 5.4 to 5.6, respectively, from the first
quarter of 1999 to the first quarter of 2000.
Long-term debt increased in the first quarter of 2000 principally as a result of
capital expenditures (investments), and to a lesser extent, an acquisition and
share repurchases. Capital investments for the first quarter of 2000 were $39.2
million. Investments were made for new mill services contracts and other
business growth initiatives, new processes, and for productivity improvements.
The capital investments, acquisition, share repurchases and cash dividends, paid
at the same or increased rates for the 199th consecutive quarter in February
2000, demonstrate the Company's continued commitment to creating value through
strategic investments and return of capital to shareholders.
-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.)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE YEAR ENDED DECEMBER 31
Cash Utilization: ENDED MARCH 31 --------------------------------------------------------------
(In millions) 2000 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital investments $ 39.2 $175.2 $159.8 $143.4 $150.3 $113.9
Strategic acquisitions 9.5 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 9.4 37.0 40.3 39.1 37.9 37.4
- --------------------------------------------------------------------------------------------------------------
Total $ 61.9 $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 and a decrease in equity capital principally due to $7.6 million of
foreign currency translation adjustments. The foreign currency translation
adjustments are principally due to a 5% decrease in the translated value of the
euro and a 7% decrease in the South African rand from December 31, 1999 to March
31, 2000.
<TABLE>
<CAPTION>
First Quarter Financial Statistics FOR THE PERIOD FOR THE PERIOD
ENDED MARCH 31 ENDED MARCH 31
2000 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
Harsco stock price high-low $31.63 - $24.00 $33 - $25
Annualized return on average equity 12.4% 9.2%
Annualized return on average assets 9.8% 7.9%
Annualized return on average capital 8.9% 7.1%
</TABLE>
Higher annualized returns on average equity, assets, and capital are due
principally to increased income in the first three months of 2000 compared with
the first three months of 1999. The Company's book value per share increased to
$16.27 per share at March 31, 2000 from $16.22 at December 31, 1999 due to share
repurchases which reduced the amount of outstanding shares.
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
ENDED MARCH 31 ENDED MARCH 31
(In millions) 2000 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net cash provided by operations: $17.5 $11.3
</TABLE>
Operating cash flows were $17.5 million in the first quarter of 2000 compared
with $11.3 million in the first quarter of 1999. The increase in cash from
operating activities was due principally to greater income in the first three
months of 2000 compared with the first three months of 1999.
The Company has a U.S. commercial paper borrowing program under which it can
issue up to $400 million of short-term notes in the U.S. commercial paper
market. In addition, the
-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.)
Company has a three billion Belgian franc commercial paper program, equivalent
to approximately U.S. $71 million at March 31, 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 $400
million. At March 31, 2000, the Company had $234.4 million of U.S. commercial
paper debt outstanding, and $30.6 million of commercial paper debt outstanding
under the Belgian program.
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 U.S. commercial paper program.
As of March 31, 2000 there were no borrowings outstanding under this facility.
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. 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.
As supported 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. The Company is positioned to continue to invest in strategic
acquisitions, selective high return capital investments, and to issue cash
dividends as means to enhance shareholder value. The Company intends to use
future discretionary cash flow principally for debt reduction and strategic
acquisitions, with additional shares being acquired from time to time.
-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.)
RESULTS OF OPERATIONS
FIRST QUARTER OF 2000 COMPARED WITH FIRST QUARTER OF 1999
<TABLE>
<CAPTION>
AMOUNT PERCENT
(DOLLARS ARE IN MILLIONS, EXCEPT PER SHARE) 2000 1999 INCREASE INCREASE
- ------------------------------------------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 449.5 $ 405.1 $ 44.4 11%
Operating income 39.2 30.5 8.7 29%
Net income 20.2 14.8 5.4 36%
Basic earnings per common share .50 .36 .14 39%
Diluted earnings per common share .50 .35 .15 43%
</TABLE>
SUMMARY ANALYSIS OF RESULTS
All three operating segments contributed to significant improvements in sales,
operating income and operating profit margins. Results improved despite the
negative impact on sales and earnings of the foreign currency translation effect
of the strong U.S. dollar.
Increased sales and income were due in part to increased demand for mill
services resulting from improved conditions in the steel industry. This is
evidenced by 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. In addition, increased demand for services
and products in the non-residential construction market as well as the
industrial gas and oil markets favorably affected sales and income.
Sales and income for the first quarter of 2000 also benefited from the results
of the Pandrol Jackson acquisition in the Infrastructure Segment in the fourth
quarter of 1999.
COMPARATIVE ANALYSIS OF CONSOLIDATED RESULTS
REVENUES
Revenues for the first quarter of 2000 were significantly above the comparable
period in 1999. The improvement results from increased demand for services and
products in principally the steel, oil and gas and non-residential construction
markets. Sales of an acquired company, net of dispositions of non-core
businesses, also contributed to the increase in sales. Excluding the unfavorable
foreign exchange translation effect of the strengthening U.S. dollar,
particularly relative to the euro, revenues increased by more than 12%.
-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.)
COST OF SALES AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Cost of services and products sold increased proportionately with the increase
in total revenues. Selling, general and administrative expenses increased
slightly, but at a significantly lower rate than the increase in total revenues
due to the Company's continuing cost reduction, process improvement and
reorganization efforts. The increase in selling, general and administrative
expenses was due principally to higher compensation costs related to an acquired
company and employee annual salary increases.
INTEREST EXPENSE
Interest expense was higher than last year's comparable period due to additional
borrowings as a result of increased capital expenditures (investments), and to a
lesser extent, acquisitions and share repurchases.
OPERATING INCOME
As a result of factors disclosed in previous sections, operating income
increased.
PROVISION FOR INCOME TAXES
The effective income tax rate for the first quarter of 2000 was 35% versus 36.5%
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 $20.2 million was significantly above 1999 due to the factors
previously disclosed. Basic earnings per common share were $.50, significantly
above $.36 in 1999. Diluted earnings per common share were $.50, significantly
above $.35 in 1999.
SEGMENT ANALYSIS
HARSCO MILL SERVICES SEGMENT
<TABLE>
<CAPTION>
AMOUNT PERCENT
(DOLLARS ARE IN MILLIONS) 2000 1999 INCREASE INCREASE
- ------------------------ --------- --------- -------- --------
<S> <C> <C> <C> <C>
Sales $ 191.6 $ 173.1 $ 18.5 11%
Operating income 20.1 16.5 3.6 22%
Segment net income 11.2 8.5 2.7 32%
</TABLE>
-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.)
First quarter sales of the Harsco Mill Services Segment were significantly above
last year's comparable period. Sales increased despite the unfavorable effect of
foreign exchange translation and the disposition of a non-core business.
Increased demand for services resulted from improved domestic steel production
levels and capacity utilization. Additionally, steel production levels and the
demand for mill services increased at certain international locations. Excluding
the unfavorable foreign exchange translation effect of the strengthening U.S.
dollar, particularly relative to the euro, and the disposition of a non-core
business, sales increased by 16%.
Operating income of the Harsco Mill Services Segment was significantly above
1999. The increase reflected the improved operating environment for mill
services, as well as the favorable effects of continuous process improvement
programs and reorganization efforts. On a comparative basis, 1999 included a
large foreign currency transaction gain in Brazil.
Net income of the Harsco Mill Services Segment was also significantly above
1999. The increase reflects the conditions previously discussed.
<TABLE>
<CAPTION>
HARSCO GAS AND FLUID CONTROL SEGMENT
AMOUNT PERCENT
(DOLLARS ARE IN MILLIONS) 2000 1999 INCREASE INCREASE
- ------------------------- ---------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 135.3 $ 134.1 $ 1.2 1%
Operating income 11.1 8.0 3.1 39%
Segment net income 6.4 4.5 1.9 42%
</TABLE>
First quarter sales of the Harsco Gas and Fluid Control Segment were slightly
above 1999. This included the unfavorable effect of lower sales of process
equipment due in part to the disposition of non-core businesses. Increased sales
of gas control and containment equipment, as well as industrial fittings
reflected increased demand in the industrial gas and oil markets. Excluding the
unfavorable effect of dispositions of non-core businesses, sales increased by
4%.
Operating income of the Harsco Gas and Fluid Control Segment was significantly
above 1999 due principally to increased demand in the industrial gas and oil
industries and the favorable effects of reorganization efforts. The increase in
income also includes a $1.3 million pre-tax gain due to the sale of a non-core
business that was partially offset by a $0.8 million valuation provision related
to the write-down of assets held for disposal.
Net income of the Harsco Gas and Fluid Control Segment was also significantly
above 1999. The increase reflects the conditions previously discussed.
-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.)
HARSCO INFRASTRUCTURE SEGMENT
<TABLE>
<CAPTION>
AMOUNT PERCENT
(DOLLARS ARE IN MILLIONS) 2000 1999 INCREASE INCREASE
- ----------------------------------- --------- --------- -------- --------
<S> <C> <C> <C> <C>
Sales $ 122.2 $ 97.4 $ 24.8 25%
Operating income 8.8 6.3 2.5 40%
Segment net income 4.6 3.2 1.4 44%
</TABLE>
First quarter sales of the Harsco Infrastructure Segment were significantly
above last year's comparable period due to increased sales of railway
maintenance-of-way contract services and equipment; scaffolding, shoring, and
forming services; and grating products. The continuing improvement in
non-residential construction activity was a primary reason for increased sales
of scaffolding, shoring and forming services and grating products. Improvement
in this industry was not significantly adversely affected by the gradually
increasing interest rates. The significant increase in sales of railway
maintenance-of-way services and equipment includes the effect of the Pandrol
Jackson acquisition in the fourth quarter of 1999.
Operating income of the Harsco Infrastructure Segment increased significantly.
The improvement reflects increased sales and the favorable effects of
reorganization efforts.
Net income of the Harsco Infrastructure Segment also increased significantly
reflecting the conditions previously discussed.
-18-
<PAGE> 19
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.)
SERVICES AND ENGINEERED PRODUCTS ANALYSIS
The company is committed towards increasing its presence and strategic growth in
services-related businesses. To further those ambitions, the company has
committed substantial capital investments in those businesses. These
investments, principally in mill services; scaffolding, forming and shoring
services; and railway maintenance-of-way services have contributed to higher
levels of sales and income for the businesses.
<TABLE>
<CAPTION>
(DOLLARS ARE IN MILLIONS) 2000 1999
- -------------------------------------------------------------------------------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- -------- -------
<S> <C> <C> <C> <C>
SALES
- -----
Services $ 230.8 51% $ 200.2 49%
Engineered products 218.3 49% 204.4 51
-------- --- -------- ---
Total sales $ 449.1 100% $ 404.6 100%
======== === ======== ===
OPERATING INCOME
- ----------------
Services $ 23.1 58% $ 17.6 57%
Engineered products 16.9 42% 13.2 43
-------- --- -------- ---
Total segment operating income $ 40.0 100% $ 30.8 100%
======== === ======== ===
EBITDA*
- ------
Services $ 50.1 67% $ 42.7 68%
Engineered products 24.8 33% 20.1 32%
-------- --- -------- ---
Total segment EBITDA $ 74.9 100% $ 62.8 100%
======== === ======== ===
</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.
First quarter 2000 sales, operating income and EBITDA for both services and
engineered products increased substantially from the comparable period in 1999.
The increases reflect improved economic conditions in markets served by the
company and the favorable effects of cost reductions, process improvements and
reorganization efforts.
-19-
<PAGE> 20
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 READINESS
The Company has taken steps to assure that its operations are not adversely
impacted by potential Year 2000 computer failures. The Company's Year 2000
readiness process has been completed for information technology and
non-information technology systems. Additionally, Year 2000 readiness
assessments have been completed of critical third parties including significant
business partners, suppliers, and major customers. As of March 31, 2000, no
mission critical third parties have indicated that they are not Year 2000 ready.
Through April 30, 2000 the Company has not experienced any material Year 2000
failures.
As of March 31, 2000, the Company has incurred approximately $3.3 million in
cumulative Year 2000 readiness costs. The Company does not expect to incur
additional Year 2000 readiness costs unless a material Year 2000 failure occurs.
The Company believes that its major Year 2000 risks involve the continuing Year
2000 readiness and performance of third parties. The impact of such Year 2000
risks and potential failures on the Company's financial position or results of
operations cannot be estimated.
The Company has developed contingency plans to be invoked in the event of a
material Year 2000 failure. However, if there is an extended Year 2000 failure
by several third parties or of supporting infrastructures, there could be a
material adverse impact on the Company's financial position or results of
operations.
Year 2000 Statements contained herein about Harsco products and services are
Year 2000 Readiness Disclosures, pursuant to the Year 2000 Information and
Readiness Disclosure Act, 15 U. S. C. 1-note.
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 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.
-20-
<PAGE> 21
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 risk of foreign currency exposure is currency
volatility, such as the 1999 foreign exchange fluctuations experienced in Brazil
and the decline of the euro. Such exposures may result in reduced sales, income,
and cash flows. The situations in Brazil and Europe are not expected to have a
material adverse impact on the Company's financial position or results of
operations. However, these and similar risks could result in a material impact
on the Company's financial position or results of operations in the future.
To illustrate the recent effect of foreign currency exchange rate changes due to
the strengthening of the U.S. dollar, in the first three months of 2000 sales
would have been 1.2 percent greater using the average exchange rates for the
first three months of 1999. A similar comparison for the year 1999, shows that
sales would have increased 2.5 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 March 31, 2000, these contracts
amounted to $3.1 million and all mature within 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 of $489.0 million as of March 31, 2000 was approximately 33%
at fixed rates of interest. The weighted average interest rate of total debt was
approximately 5.9%. At current debt levels, a one percentage increase in
interest rates would increase interest expense by approximately $3.3 million per
year.
The Company is also 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 were forced to file for bankruptcy
protection. The situation improved in the second half of 1999. 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. Harsco mill services
segment provides services at steel mills worldwide. The future financial impact
on the Company associated with the risks cannot be estimated.
On April 6, 2000, the Company agreed to invest $20 million in S3Networks, LLC, a
start-up company providing internet and e-business consulting services to
Fortune 1000 companies. The transaction is further described under "Item 5. -
Other Information - Subsequent Event". 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.
-21-
<PAGE> 22
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 4. SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS
At the annual meeting of shareholders held on April 25, 2000 in Camp Hill,
Pennsylvania, two members of the Board of Directors were reelected to terms
expiring in 2003 and one member of the Board of Directors was reelected to a
term expiring in 2001 under the classified Board structure enacted at the 1986
Annual Meeting. Members elected to terms expiring in 2003 include D. C.
Hathaway, Chairman and Chief Executive Officer of the Company; and J. J.
Jasinowski, President of the National Association of Manufacturers. R. F.
Nation, retired President of Penn Harris Company, was elected to a term expiring
in 2001.
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>
D. C. Hathaway 34,795,903 443,144 -
J. J. Jasinowski 34,809,143 429,904 -
R. F. Nation 34,719,470 519,577 -
</TABLE>
Shareholders approved the appointment of PricewaterhouseCoopers LLP, as
independent accountants to audit the financial statements of the Company for the
fiscal year ending December 31, 2000 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>
34,922,932 72,963 243,152 -
</TABLE>
ITEM 5. OTHER INFORMATION
DIVIDEND INFORMATION
On March 16, 2000, the Company announced that the Board of Directors declared a
quarterly cash dividend of 23.5 cents per share, payable May 15, 2000, to
shareholders of record on April 14, 2000.
-22-
<PAGE> 23
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART II - OTHER INFORMATION
SUBSEQUENT EVENT
On April 6, 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 to Fortune 1000 corporations. Cash
of $6 million has been invested with an additional $14 million to be paid over a
period not to exceed fifteen months from the initial investment date. The
investment will be accounted for under the equity method. Since the Company is
the principal provider of initial capital for S3Networks, LLC, the Company will
record 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.
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 report on Form 8-K dated December 22, 1999 was filed on January 7, 2000
relating to an agreement with the United States Government on behalf of the
Company's former BMY Combat Systems Division to settle a long-standing
Government investigation into contract certifications made in the early 1990s.
-23-
<PAGE> 24
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.
HARSCO CORPORATION
-----------------------------
(Registrant)
DATE May 5, 2000 /S/ Salvatore D. Fazzolari
---------------------------- -----------------------------
Salvatore D. Fazzolari
Senior Vice President, Chief
Financial Officer and Treasurer
DATE May 5, 2000 /S/ Stephen J. Schnoor
---------------------------- -----------------------------
Stephen J. Schnoor
Vice President and Controller
-24-
<PAGE> 1
HARSCO CORPORATION Exhibit 12
Computation of Ratios of Earnings to Fixed Charges
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Three YEARS ENDED DECEMBER 31
Months Ended -------------------------------------------------------------------
3/31/00 1999 1998 1997 1996 1995
------- ---------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Pre-tax income from continuing
operations (net of minority interest
in net income) $ 31,707 $ 142,312 $ 174,874 $ 165,613 $ 145,984 $ 107,073
Add fixed charges computed below 10,402 37,418 28,417 24,263 26,181 33,121
Net adjustments for equity companies (150) 365 139 (694) (181) (466)
Net adjustments for capitalized
interest 32 (535) (10) - - -
------- ---------- --------- --------- ------------ -------------
Consolidated Earnings Available
for Fixed Charges $ 41,991 $ 179,560 $ 203,420 $ 189,182 $ 171,984 $ 139,728
========= ========= ========= ========= =========== =============
Consolidated Fixed Charges:
Interest expense per financial
statements (1) $ 7,490 $ 26,968 $ 20,504 $ 16,741 $ 21,483 $ 28,921
Interest expense capitalized - 893 128 128 131 134
Portion of rentals (1/3) representing
an interest factor 2,912 9,557 7,785 7,394 4,567 4,066
Interest expense for equity companies
whose debt is guaranteed (2) - - - - - -
--------- --------- --------- --------- ------------ -------------
Consolidated Fixed Charges $ 10,402 $ 37,418 $ 28,417 $ 24,263 $ 26,181 $ 33,121
========= ========= ========= ========= =========== =============
Consolidated Ratio of Earnings to
Fixed Charges 4.04 4.80 7.16 7.80 6.57 4.22
========= ========= ========= ========= =========== =============
</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
1995 through 1999, and the three month period ending March 31, 2000.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 45,848
<SECURITIES> 0
<RECEIVABLES> 335,221
<ALLOWANCES> (12,035)
<INVENTORY> 175,998
<CURRENT-ASSETS> 615,592
<PP&E> 1,509,560
<DEPRECIATION> (839,747)
<TOTAL-ASSETS> 1,655,841
<CURRENT-LIABILITIES> 402,382
<BONDS> 449,500
0
0
<COMMON> 82,804
<OTHER-SE> 566,999
<TOTAL-LIABILITY-AND-EQUITY> 1,655,841
<SALES> 449,135
<TOTAL-REVENUES> 449,488
<CGS> 354,500
<TOTAL-COSTS> 410,315
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (37)
<INTEREST-EXPENSE> 7,490
<INCOME-PRETAX> 32,871
<INCOME-TAX> 11,505
<INCOME-CONTINUING> 20,202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,202
<EPS-BASIC> .50
<EPS-DILUTED> .50
</TABLE>
