CAMP HILL, Pa., Nov. 08, 2017 (GLOBE NEWSWIRE) -- Harsco Corporation (NYSE:HSC) today reported third quarter 2017 results. On a U.S. GAAP basis, third quarter 2017 diluted earnings per share from continuing operations were $0.16, which included a bad debt expense related to a Metals & Minerals customer that previously entered voluntary administration under Australian law that was not previously included in guidance. This GAAP figure also included an anticipated asset-sale gain of $3.8 million and a number of offsetting expense items, including severance and exit costs as well as professional fees, in the quarter. Excluding this unanticipated bad debt expense, diluted earnings per share from continuing operations in the third quarter of 2017 were $0.20. These figures compare with a GAAP diluted loss per share from continuing operations of $0.41 and diluted earnings per share from continuing operations of $0.14, excluding a non-cash loss related to the Company selling its interest in Brand Energy & Infrastructure Services, in the third quarter of 2016.

GAAP operating income from continuing operations for the third quarter of 2017 was $34 million. Excluding the unanticipated bad debt expense, operating income for the third quarter of 2017 was $39 million, which exceeded the guidance range of $30 million to $37 million previously provided by the Company.

“Each of Harsco’s businesses performed well in the third quarter and I am pleased that our quarterly financial results exceeded guidance,” said President and CEO Nick Grasberger. “Metals & Minerals and Rail results were better than anticipated due to favorable business fundamentals and product mix as well as strong operational execution. The underlying market trends and our internal performance in each of our segments are encouraging. As a result, we have raised the mid-point of our operating income outlook for the full year 2017. Looking ahead, we remain focused on initiatives to drive sustainable growth and operational excellence. We are confident that our actions will strengthen capital returns and create value for shareholders."

Consolidated Third Quarter Operating Results

Total revenues were $385 million, an increase of 5 percent compared with the prior-year quarter as a result of higher revenues in the Company's Metals & Minerals and Industrial segments. Foreign currency translation positively impacted third quarter 2017 revenues by approximately $6 million compared with the prior-year quarter.

GAAP operating income from continuing operations for the third quarter of 2017 was $34 million, while operating income from continuing operations excluding the unanticipated bad debt expense was $39 million in the third quarter of 2017. These figures compare with operating income of $29 million in the same quarter last year. Operating income in the Industrial and Metals & Minerals segments, excluding the bad debt expense in the third quarter of 2017, improved in comparison with the prior-year quarter, while operating income declined modestly in Rail.

The Company's operating margin was 8.8 percent on a reported basis and 10.0 percent excluding the bad debt expense versus an operating margin of 7.8 percent in the third quarter of 2016.

Third Quarter Business Review

Revenues increased 3 percent to $255 million, as a result mainly of higher steel output and service levels as well as foreign exchange translation. Meanwhile, GAAP operating income in the third quarter of 2017 totaled $24 million and operating income excluding the bad debt expense totaled $29 million, compared with operating income of $24 million in the prior-year period. The 20 percent improvement in operating earnings, excluding the bad debt expense, is mainly attributable to increased underlying demand for mill services and higher contributions from certain Applied Products. The reported operating margin was consistent with the prior year, while the segment's operating margin excluding bad debt expense improved by 160 basis points to 11.3 percent versus last year’s third quarter.

Revenues increased 23 percent to $78 million, principally due to increased demand for air-cooled heat exchangers from U.S. energy customers. Operating income increased to $13 million from $6 million in the prior-year quarter. This increase resulted from improved demand for heat exchangers and improved sales mix, as well as an approximate $4 million asset-sale gain realized from monetizing a grating-fencing facility in Queretaro, Mexico. This property sale had been previously anticipated within annual and quarterly guidance. Finally, the segment’s operating margin increased to 16.4 percent including the asset-sale gain (11.6 percent excluding the gain), from 10.0 percent in the comparable quarter last year.

evenues decreased 10 percent to $51 million as lower equipment shipments offset higher after-market parts and contract services revenues compared with the prior-year quarter. Operating income totaled $4 million in the third quarter of 2017, which represented a modest year-over-year decline as higher parts and services contributions and more favorable product-sales mix offset the impact of lower equipment demand. As a result, the segment's operating margin of 8.1 percent was consistent with the operating margin in the third quarter of 2016.

Cash Flow

Net cash provided by operating activities totaled $36 million in the third quarter of 2017, compared with $76 million in the prior-year period. Further, free cash flow was $22 million in the third quarter of 2017, compared with $60 million in the prior-year period. The year-over-year change in free cash flow reflects lower net cash from operating activities principally as a result of increased inventory to support large contracts and fewer customer advances in Rail, which had been anticipated.

2017 Outlook

The Company's 2017 Outlook range is updated to reflect recent performance and current expectations for the final quarter of 2017. For the full-year, adjusted operating income guidance for Metals & Minerals is increased to reflect higher service levels, a more favorable services mix, higher commodity prices and recent foreign exchange rates. As a result, it is anticipated that operational savings, new sites and services, higher customer steel output, and increased commodities prices will support an increase in adjusted operating income in Metals & Minerals for the year compared with 2016.

The outlooks for the remaining business segments are generally unchanged from previous guidance. For Industrial, higher demand for heat exchangers from U.S. energy customers is expected to drive an increase in operating income for the year. Meanwhile, third-quarter timing benefits in Rail are to reverse in the current quarter, and as a result, adjusted operating income in Rail is still expected to modestly decline from 2016 as higher international demand for equipment and parts as well as Protran technologies is anticipated to be fully offset by weaker demand in the North American market. Lastly, Corporate spending is projected to increase compared with 2016 largely as a result of higher pension and other benefit program costs as well as professional fees.

Key highlights in the Outlook are included below.

Full Year 2017

• GAAP operating income for the full year is expected to range from $132 million to $137 million; compared with GAAP operating income of $63 million in 2016.
• Adjusted operating income for the full year is expected to range from $137 million to $142 million; this compares with guidance of $125 million to $140 million previously and adjusted operating income of $116 million in 2016.
• Free cash flow is expected in the range of $85 million to $95 million, including net capital expenditures of between $85 million and $95 million; compared with free cash flow guidance of $80 million to $95 million previously and $100 million in 2016.
• Net interest expense is forecasted to range from $46 million to $47 million.
• The effective tax rate is expected to range from 36 percent to 38 percent.
• GAAP earnings per share from continuing operations for the full year are expected in the range of $0.61 to $0.65; compared with GAAP loss per share of $1.07 in 2016.
• Adjusted earnings per share from continuing operations for the full year are currently expected in the range of $0.65 to $0.69; this compares with guidance of $0.55 to $0.69 previously and adjusted earnings per share of $0.48 per share in 2016.
• Adjusted return on invested capital is expected to range from 9.5 percent to 10.5 percent; compared with 6.9 percent in 2016.

Q4 2017

• Adjusted operating income of $28 million to $33 million; compared with GAAP operating income of $24 million and adjusted operating income of $28 million in the prior-year quarter.
• Adjusted earnings per share from continuing operations of $0.11 to $0.15; compared with a GAAP loss per share of $0.19 and adjusted earnings per share of $0.16 in the prior-year quarter.

About Harsco

Harsco Corporation serves key industries that are fundamental to worldwide economic development, including steel and metals production, railways and energy. Harsco’s common stock is a component of the S&P SmallCap 600 Index and the Russell 2000 Index. Additional information can be found at www.harsco.com.