Harsco Corporation Reports Second Quarter 2018 Results

• Q2 GAAP Operating Income of $54 Million
• Operating Income Excluding Unusual Items Increased 20 Percent Compared with the Prior-Year Quarter to $52 Million, Exceeding Guidance Due to Strong Performance in Industrial and Rail As Well As Lower Corporate Costs
• Q2 Revenues Increased 9 Percent Compared with the Prior-Year Quarter
• GAAP Diluted Earnings per Share Totaled $0.48, While Adjusted Diluted Earnings per Share Excluding Unusual Items Increased 64 Percent to $0.36
• 2018 Full-Year Adjusted Operating Income Guidance Increased to Between $175 Million to$185Million; Compared with Prior Range of $165 Million to $180 Million

CAMP HILL, Pa. – (August 2, 2018) – Harsco Corporation (NYSE:HSC) today reported second quarter 2018 results. On a U.S. GAAP ("GAAP") basis, second quarter of 2018 diluted earnings per share from continuing operations were $0.48, which included Altek Group acquisition costs, a non-cash deferred tax asset valuation allowance adjustment, expenses incurred to amend and reprice the Company's credit facilities and a Metals & Minerals expense accrual reversal. Excluding these items, diluted earnings per share from continuing operations in the second quarter of 2018 were $0.36. These figures compare with second quarter of 2017 GAAP and adjusted diluted earnings per share from continuing operations of $0.22.

GAAP operating income from continuing operations for the second quarter of 2018 was $54 million. Excluding the above unusual items, operating income for the second quarter of 2018 was $52 million, which exceeded the guidance range of $45 million to $50 million previously provided by the Company.

"The second quarter included a number of achievements and milestones for Harsco,” said President and CEO Nick Grasberger. “The company reached its highest level of quarterly profitability in a number of years and each segment delivered double-digit margins. In addition, the momentum across our businesses continued to strengthen, as evidenced by strong backlog growth within Rail and Industrial. The added market visibility and continued internal execution has enabled us to once again raise our guidance for the year.”

“We also continue to pursue a pipeline of growth opportunities across Harsco. During the quarter, we completed our first acquisition in Metals & Minerals in over a decade. Altek fits perfectly with our environmental solutions strategy and provides us a breakthrough innovation that expands Harsco’s capabilities in managing industrial waste into the aluminum industry. We are confident that our continued execution against our strategic priorities will enable Harsco to achieve its financial goals and create additional value for shareholders.”

Harsco Corporation—Selected Second Quarter Results

($ in millions, except per share amounts)

(1) 2017 figures reflect new pension accounting standard

Consolidated Second Quarter Operating Results
Total revenues were $432 million, an increase of 9 percent compared with the prior-year quarter as a result of higher revenues in each of the Company's business segments. The second quarter of 2018 included revenues of approximately $8 million related to the Company's multi-year contracts with SBB, or the federal railway system in Switzerland.

GAAP operating income from continuing operations was $54 million, while operating income excluding unusual items was $52 million for the second quarter of 2018. These figures compare with GAAP and adjusted operating income of $43 million in the same quarter of last year. Operating income in each of the Company's operating segments improved in comparison with the prior-year quarter. Also, Corporate spending decreased relative to the prior-year period, contributing to the year-on-year increase in operating income.

The Company's GAAP and adjusted operating margins in the second quarter of 2018 increased to12.4percent and 11.9 percent, respectively, versus an operating margin of 10.9 percent in the second quarter of 2017.

Second Quarter Business Review

Metals & Minerals

($ in millions)

(1) 2017 figures reflect new pension accounting standard

Revenues increased 5 percent to $272 million, mainly as a result of higher steel output and service levels as well as increased Applied Product sales. The segment's operating income in the second quarter of 2018 totaled $36 million, or $33 million when excluding the unusual items in the quarter. These figures compare with operating income of $31 million in the prior-year period. The improvement in adjusted operating earnings is attributable to the above items as well as positive impacts from net contract changes relative to the prior-year quarter, which were partially offset by higher general and administrative costs to support the Company's growth strategy. Lastly, the segment's operating margin was 13.1 percent and adjusted operating margin was 12.2 percent in the second quarter of 2018, compared with an operating margin of 12.1 percent in the same quarter of 2017.

Industrial

($ in millions)

(1) 2017 figures reflect new pension accounting standard

Revenues increased 25 percent to $92 million, due to increased demand and higher product prices across the Company's Industrial businesses. Meanwhile, operating income increased to $14 million from $9 million as a result of improved demand and more favorable product mix and margins. The segment's operating margin increased to 15.4 percent from 12.6 percent in the comparable quarter last year.

Rail

($ in millions)

(1) 2017 figures reflect new pension accounting standard

Revenues increased 9 percent to $68 million, including SBB revenues of approximately $8 million in the second quarter of 2018. Excluding the SBB impact, higher after-market parts revenues were offset by lower contract services revenues and machine sales outside of North America. Meanwhile, operating income totaled $9 million compared with $8 million in the prior-year quarter, with the increase attributable to higher demand and a more favorable mix of after-market parts as well as lower selling and administrative costs. These benefits were partially offset by a less favorable machine mix and lower contract services contributions. Lastly, the segment's operating margin was 12.8 percent in the second quarter of 2018, or 14.4 percent after excluding the SBB revenues.

Cash Flow

Net cash provided by operating activities totaled $55 million in the second quarter of 2018, compared with $53 million in the prior-year period. Further, free cash flow was $28 million in the second quarter of 2018, compared with $30 million in the prior-year period. The year-over-year change in free cash flow reflects an increase in net capital expenditures, partially offset by a modest increase in net cash from operating activities.

2018 Outlook

The Company's 2018 guidance is increased to reflect revised forecasts for the Industrial and Rail segments, as well as Corporate spending, as compared with the guidance provided along with the Company's first quarter 2018 results. For Industrial, operating income guidance is improved to reflect better demand and visibility relative to prior expectations. As a result, demand growth, a more favorable product mix and manufacturing savings are now expected to support a larger year-on-year increase in operating income compared with 2017. For Rail, operating income is expected to increase more than previously anticipated due to improved equipment demand in North America and higher sales of after-market parts. For the year, adjusted operating income in Rail is anticipated to be higher compared with 2017, as increased demand for after-market parts and Protran Technology products will be partially offset by a less favorable mix of equipment sales and lower contributions from contracting services. Meanwhile, Corporate spending is now expected to be similar to 2017, and the Metals & Minerals outlook is unchanged despite less favorable FX rates relative to a few months ago. For the year relative to 2017, higher customer steel output and commodity prices, new contract ramp-ups, operational savings and improved profitability in certain Applied Products businesses in M&M are expected to be only partially offset by exited sites and investments to support M&M growth initiatives.

Key highlights in the Outlook are included below.

Full Year 2018

• GAAP operating income and adjusted operating income for the full year are expected to range from $177 million to $187 million and $175 million to $185 million, respectively; versus $165 million to$180million previously and compared with 2017 GAAP operating income of $145 million and 2017 adjusted operating income of $150 million.
• GAAP and adjusted diluted earnings per share from continuing operations for the full year are expected in the range of $1.31 to $1.39 and $1.19 to $1.27, respectively; versus $1.11 to $1.24 previously and compared with 2017 GAAP diluted earnings per share of $0.09 and 2017 adjusted diluted earnings per share of $0.74.
• Free cash flow is expected in the range of $90 million to $100 million, versus $85 million to $100 million previously and compared with $93 million in 2017. Also, the free cash flow outlook anticipates net capital expenditures of between $125 million and $135 million and growth-oriented capital spending of $45 million to $50 million in 2018.
• Net interest expense is forecasted to range from $36 million to $37 million; compared with$45 million in 2017.
• The effective tax rate is expected to range from 26 percent to 28 percent.
• Adjusted return on invested capital is expected to range from 14.5 percent to 15.5 percent; compared with 11.5 percent in 2017.

Q3 2018

• GAAP and adjusted operating income of $50 million to $55 million; compared with GAAP operating income of $35 million and adjusted operating income of $39 million in the prior-year quarter.
• GAAP and adjusted earnings per share from continuing operations of $0.34 to $0.40; compared with GAAP earnings per share of $0.16 and adjusted earnings per share of $0.20 in the prior-year quarter.

Conference Call

The Company will hold a conference call today at 9:00a.m. Eastern Time to discuss its results and respond to questions from the investment community. The conference call will be broadcast live through the Harsco Corporation website at www.harsco.com. The Company will refer to a slide presentation that accompanies its formal remarks. The slide presentation will be available on the Company’s website.

The call can also be accessed by telephone by dialing (800) 611-4920, or (973) 200-3957 for international callers. Enter Conference ID number 60474064. Listeners are advised to dial in at least five minutes prior to the call.

Replays will be available via the Harsco website and also by telephone through August 16, 2018 by dialing (800) 585-8367, (855) 859-2056 or (404) 537-3406.

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About Harsco Corporation

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.

Forward-Looking Statements

The nature of the Company's business 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 Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, the Company provides the following cautionary remarks regarding important factors that, among others, could cause future results to differ materially from the results contemplated by forward-looking statements, including the expectations and assumptions expressed or implied herein. Forward-looking statements contained herein could include, among other things, statements about management's confidence in and strategies for performance; expectations for new and existing products, technologies and opportunities; and expectations regarding growth, sales, cash flows, and earnings. Forward-looking statements can be identified by the use of such terms as "may," "could," "expect," "anticipate," "intend," "believe," "likely," "estimate," "outlook," "plan" or other comparable terms.

Factors that could cause actual results to differ, perhaps materially, from those implied by forward-looking statements include, but are not limited to: (1) changes in the worldwide business environment in which the Company operates, including general economic conditions; (2) changes in currency exchange rates, interest rates, commodity and fuel costs and capital costs; (3) changes in the performance of equity and bond markets that could affect, among other things, the valuation of the assets in the Company's pension plans and the accounting for pension assets, liabilities and expenses; (4) changes in governmental laws and regulations, including environmental, occupational health and safety, tax and import tariff standards; (5) market and competitive changes, including pricing pressures, market demand and acceptance for new products, services and technologies; (6) the Company's inability or failure to protect its intellectual property rights from infringement in one or more of the many countries in which the Company operates; (7) failure to effectively prevent, detect or recover from breaches in the Company's cybersecurity infrastructure; (8) unforeseen business disruptions in one or more of the many countries in which the Company operates due to political instability, civil disobedience, armed hostilities, public health issues or other calamities; (9) disruptions associated with labor disputes and increased operating costs associated with union organization; (10) the seasonal nature of the Company's business; (11) the Company's ability to successfully enter into new contracts and complete new acquisitions or strategic ventures in the time-frame contemplated, or at all; (12) the integration of the Company's strategic acquisitions; (13)the amount and timing of repurchases of the Company's common stock, if any; (14) the outcome of any disputes with customers, contractors and subcontractors; (15) the financial condition of the Company's customers, including the ability of customers (especially those that may be highly leveraged and those with inadequate liquidity) to maintain their credit availability; (16) implementation of environmental remediation matters; (17) risk and uncertainty associated with intangible assets; and (18) other risk factors listed from time to time in the Company's SEC reports. A further discussion of these, along with other potential risk factors, can be found in Part I, Item 1A, "Risk Factors," of the Company's Annual Report on Form10-K for the year ended December 31, 2017. The Company cautions that these factors may not be exhaustive and that many of these factors are beyond the Company's ability to control or predict. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. The Company undertakes no duty to update forward-looking statements except as may be required by law.

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