Jefferies 2013 Global Industrials Conference August 14, 2013 Patrick Decker, President and CEO © 2013 Harsco Corporation, All Rights Reserved. Exhibit 99.1 |
| 1 © 2013 Harsco Corporation, All Rights Reserved. Administrative Items Safe Harbor This presentation contains forward-looking statements based on management’s current expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the Company’s strategy for growth, product development, market position, expected expenditures and financial results are forward- looking statements. Some of the forward-looking statements may be identified by words like “may,” “could,” “believes,” “expects,” “anticipates,” “plans,” “intends,” “projects,” “indicates,” and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this presentation and in documents filed with the Securities and Exchange Commission by Harsco, particularly its latest annual report on Form 10-K and quarterly report on Form 10-Q, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to, changes in the worldwide business environment in which the Company operates, including general market conditions; changes in the performance of the equity and debt markets; changes in governmental laws and regulations; market and competitive changes, including pricing pressures, market demand and acceptance for new products, services, and technologies; unforeseen business disruptions in one or more of the many countries in which the Company operates; the seasonal nature of the Company’s business; our ability to successfully enter into new contracts and complete new acquisitions in the timeframe contemplated; the financial condition of the Company’s customers; the successful integration of the Company’s strategic acquisitions; the Company’s ability to successfully implement its strategic initiatives and portfolio optimization; and the amount and timing of repurchases of the Company’s common stock, if any. The Company undertakes no duty to update forward-looking statements. Non-GAAP Measures This presentation contains non-GAAP financial information including adjusted operating income margin, adjusted diluted earnings per share from continuing operations, free cash flow and adjusted return on invested capital. These non-GAAP measures exclude special items in certain fiscal periods. For a reconciliation of these non-GAAP measures to U.S. GAAP results and the Company’s rationale for its usage of non-GAAP measures, please see the Appendix . |
| 2 © 2013 Harsco Corporation, All Rights Reserved. Harsco at a Glance Revenue: $1,404M Global Market Leader Multi-industry exposure through four market-leading segments 2012 Total Revenues of $3,046M 18,500 Employees Across 50 Countries Revenue: $937M Global Market Leader Revenue: $352M Global Leader in Track Maintenance Revenue: $353M Leader in air cooled heat exchangers 2012 Revenue Mix Services 77% Products 23% 2012 Revenues by Geography W. Europe 35% N. America 39% Rest of World 26% |
| 3 © 2013 Harsco Corporation, All Rights Reserved. Historical Harsco Performance *Adjusted diluted earnings per share from continuing operations, free cash flow and adjusted return on invested capital are non-GAAP measures. See the Appendix for a reconciliation to GAAP results. Performance reflects weakness in end markets and need for better execution |
| 4 © 2013 Harsco Corporation, All Rights Reserved. New Executive Management |
| 5 © 2013 Harsco Corporation, All Rights Reserved. CEO Perspective 2Q 2013 EPS of $0.30 in guidance range Dissatisfaction with Cash flow performance in 1H 2013 Near-term outlook Metals & Minerals (M&M) performance in 2Q 2013 Pace of progress to improve results End markets are very challenging Need for better execution |
| 6 © 2013 Harsco Corporation, All Rights Reserved. Improvement Actions Operational Process Implement a structured and disciplined approach to simplify and streamline processes Reduce number of initiatives Focus on customer needs Extend CI adoption Start with M&M; Other businesses in 2013/2014 Return to basics; Bottom-up approach Enhance competitive position Portfolio Optimization Challenged portfolio Go-forward portfolio profile Sustainable competitive advantage Position for long-term growth Deliver strong free cash flow through business cycles Have attractive ROIC profiles Reduce Company’s exposure over time to highly cyclical and correlated end markets Complementary actions expected to lead to stronger execution and results |
| 7 © 2013 Harsco Corporation, All Rights Reserved. Metals & Minerals at a Glance Harsco Profile Revenues and Adjusted OI Margin* Market Drivers *Adjusted operating margin is a non-GAAP measure. See the Appendix for a reconciliation to GAAP results. . World’s largest provider of on-site, outsourced services to the metals industries Provide environmental solutions for global metals and resource recovery Mineral-based by-products for commercial and industrial uses 2012 Revenues by Geography |
| 8 © 2013 Harsco Corporation, All Rights Reserved. Climbing the Value Chain Drives Improved Growth Profile and Returns LOW HIGH LOW HIGH ENVIRON SVCS/ BY-PRODUCTS RESOURCE RECOVERY LOGISTICS Summary of Major Contract Wins Customer Market Primary Field of Play* Term (Years) Estimated Value Essar India RR 15 $160M Jindal Group India RR 10+ $325 M TISCO China RR and Env. 25 $500 M Tangshan China RR and Env. 20 $375 M Gerdau (renewal) Brazil Confidential Revenues by Field of Play RR: Resource Recovery, Env.: Environmental Services. *Harsco provides some logistics services, mostly to support the primary field of play. |
| 9 © 2013 Harsco Corporation, All Rights Reserved. Metals & Minerals Strengths Leading global market position Services critical to sustaining customer operations Relationships with top-tier global customers Value proposition highly relevant in attractive emerging markets Long-term (multi-year) service contracts Lower cost structure due to prior restructuring actions Contract renewal discipline Challenges Global steel industry remains challenged, particularly in developed markets Capital intensive business largely dependent on customer production volumes for attractive returns Need to continue wins in emerging markets accelerate our CI journey lower capital intensity bring new technologies to market |
| 10 © 2013 Harsco Corporation, All Rights Reserved. Infrastructure at a Glance Harsco Profile 2012 Revenues by Geography Revenues and Adjusted OI Margin* Market Driver: Global Construction Spending Source: IHS Global Insight, 1Q 2013 ($ in trillions) *Adjusted operating margin is a non-GAAP measure. See the Appendix for a reconciliation to GAAP results. . A comprehensive access and forming solutions provider to major infrastructure and construction projects Provide suite of plant construction, upgrade and maintenance services to various industrial sectors |
| 11 © 2013 Harsco Corporation, All Rights Reserved. Infrastructure Focus Areas Global project management to drive top line growth More efficient yard management for improved operational efficiency and better customer service Common engineering standards to leverage innovation and lower capital intensity |
| 12 © 2013 Harsco Corporation, All Rights Reserved. Competitive Landscape Construction Services Services Provided Formwork Shoring Non-Mechanical Access Masts & Suspended Access Platforms Roofing & Shelters Site & Safety Training Services _____________________ Note: All service offerings not in all geographies. Grey shading represents Harsco Infrastructure’s key service offering. Leveraging service and geographic portfolio to capture larger share of customer projects |
| 13 © 2013 Harsco Corporation, All Rights Reserved. Infrastructure Strengths Reputation for quality and safety Breadth of geographic and service profile Up-front engineering and design expertise Lower cost structure due to prior restructuring actions Challenges Commercial construction recovery slower than expected Concentration in Europe Need to drive top-line growth through larger project wins improve execution capability in attractive markets build CI discipline, particularly in yard management |
| 14 © 2013 Harsco Corporation, All Rights Reserved. Rail at a Glance Harsco Profile Products and Services 2012 Revenues by Market Destination Western Europe 11% North America 40% Rest of the World 49% Growth -4% 17% -14% Growth ex MOR 12% 7% 2% *Adjusted operating margin is a non-GAAP measure. See the Appendix for a reconciliation to GAAP results. . A global leader in railway track maintenance equipment, services and solutions Provides the industry's broadest range of equipment, parts and contract services for railway track maintenance and new track construction, including rail grinding, track surfacing, and track stabilization Customers include private and government-owned railroads and urban mass transit systems worldwide Revenues and Adjusted OI Margin* |
| 15 © 2013 Harsco Corporation, All Rights Reserved. Expanding the Global Base China •8 metro grinders in 2 years •Aftermarket growth •Private operator market growing •Technical service contracting Japan •Rail grinder win •Surfacing product expansion •Grinder replacement Brazil & Peru •Surfacing product win •Grinding product growth UK / Europe •New rail grinder delivered •Incremental rail grinder win •Incremental contract service opportunities •New product development Middle East •Aftermarket growth •Saudi new rail investment •UAE new track project •GCC railway network Canada • Multiple surfacing product wins • Hy-Rail re-entry Australia / NZ •Multiple surfacing product wins India •DFCC qualifications •NTC projects •Metro market growth United States & Mexico •New stabilizers delivered •Spreader-ditcher reintroduction •Expansion of drone technology •Aftermarket sales growth •Incremental new product development Southeast Asia/Far East •Rail grinder win •Metro market growing •SEA high-speed connection to China Africa •Surfacing product win •Freight market growing Russia •Privatization of rail operations |
| 16 © 2013 Harsco Corporation, All Rights Reserved. Rail Strengths Well positioned in an attractive end market Expanding global presence in high growth markets Growing aftermarket service and repair business Strong track record of attractive growth and returns Early adopters of CI Challenges Completion of large multi- year China order – difficult near-term financial comparisons Relatively niche business; assessing growth opportunities in both core and adjacent markets |
| 17 © 2013 Harsco Corporation, All Rights Reserved. Industrial at a Glance Harsco Profile 2012 Revenues by Market North America 90% Rest of the World 10% Revenues and OI Margin Market Driver A market leader in energy-efficient air-cooled heat exchangers, heat transfer systems, and industrial grating products Significant growth potential through globalization of the business |
| 18 © 2013 Harsco Corporation, All Rights Reserved. Industrial Products Air-cooled heat exchangers for natural gas compression and pipeline distribution Steel grating for industrial and commercial flooring and safety walkways Energy efficient heat transfer systems for heating and hot water service in large commercial and institutional buildings |
| 19 © 2013 Harsco Corporation, All Rights Reserved. Industrial Strengths Well positioned in attractive industries Growing aftermarket business Strong track record of generating attractive growth and returns Early adopters of CI Challenges Three niche businesses; current scale is limited Need to expand into overseas energy markets accelerate bringing new product offerings to market assess opportunities to grow core and adjacent markets |
| 20 © 2013 Harsco Corporation, All Rights Reserved. Overall Focus Areas to Improve Returns Build a robust CI culture Lower the capital intensity of the business Grow the businesses via market expansion & innovation Upgrade leadership talent and depth Simplify and streamline operational processes Improve the portfolio mix Focus. Align. Execute. |
| 21 © 2013 Harsco Corporation, All Rights Reserved. Build Robust CI Culture 2012 2013 Lean/Kaizen Activities Employees Engaged in CI Events Reaffirmed CI as core principle Re-launched CI in Infrastructure and M&M Expanded CI into all corporate functions Launched Lean Six Sigma Staff CI leadership roles Advance CI maturity across all businesses Expand Green and Black Belt certifications Deploy CI to working capital and cash return improvement Implement Voice of Customer methods to drive improved service and innovation |
| 22 © 2013 Harsco Corporation, All Rights Reserved. Lower the Capital Intensity Continue disciplined approval and capital allocation process Deploy global asset management in Metals Invest to grow Rail and Industrial Capital Expenditures ($ in millions) Total Capex as % Total Harsco Revenues 2007 2008 2009 2010 2011 2012 12.0% 11.5% 5.5% 6.3% 9.5% 8.7% |
| 23 © 2013 Harsco Corporation, All Rights Reserved. Grow Top Line via Market Expansion and Innovation Shift of steel production to emerging markets Strong track record of international expansion in Rail Infrastructure focus on market share growth Expand to serve global energy production growth 2012 Revenues by Geography Market Expansion Compass telematics in Rail New resource recovery and environmental services in Metals Platinum forming product in Infrastructure Healthy backlog of new product development in Industrial Innovation North America 39% Rest of World 26% Western Europe 35% |
| 24 © 2013 Harsco Corporation, All Rights Reserved. Portfolio Assessment Attributes Long-term attractiveness of the end markets served Quality of value proposition for each business Degree of competitive strength and differentiation Long-term growth and financial return profile Execution capability |
| 25 © 2013 Harsco Corporation, All Rights Reserved. Key Takeaways New executive team focused on improving financial returns of the company Early stage deployment of CI Shifting service and product mix to higher value offerings Expanding presence in key growth markets Taking actions to Simplify operational processes Optimize the portfolio Opportunity for significant value creation |
Jefferies 2013 Global Industrials Conference August 14, 2013 Appendix © 2013 Harsco Corporation, All Rights Reserved. |
| 27 © 2013 Harsco Corporation, All Rights Reserved. Non-GAAP Reconciliation Adjusted Diluted Earnings per Share from Continuing Operations (a) 2007 2008 2009 2010 2011 2012 GAAP diluted EPS from continuing operations 3.01 $ 2.92 $ 1.66 $ 0.14 $ (0.12) $ (3.15) $ Special items: - Goodwill impairment charge - Harsco Infrastructure (b) - - - - - 3.29 - Restructuring charges (c) - - - 0.77 1.05 1.06 - Charges to exit Harsco Metals & Minerals contract (d) - - - - - 0.07 - Gains associated with exited countries - Harsco Infrastructure (e) - - - - - (0.10) - Former CEO separation expense (f) - - - - - 0.04 - Gains on pension curtailment - Harsco Metals & Minerals (g) - - - - - (0.02) - One-time Harsco Rail benefit (h) - - - - (0.07) - - Non-cash tax charge (i) - - - - 0.45 - Adjusted diluted EPS from continuing operations 3.01 $ 2.92 $ 1.66 $ 0.91 $ 1.31 $ 1.19 $ (a) (b) (c) (d) (e) (f) (g) (h) (i) Year Ended December 31 Non-cash goodwill impairment charge in Harsco Infrastructure ($265.0 million pre-tax). Charges resulting from the Company's previously announced Fourth Quarter 2010 Harsco Infrastructure and 2011/2012 Restructuring Programs (Harsco Infrastructure 2010 $84.4 million pre-tax, 2011 $87.6 million pre-tax, 2012 $88.6 million pre- tax; Harsco Metals & Minerals 2011 $12.8 million pre-tax, 2012 $5.5 million pre-tax). Non-cash gains related to the closure of operations in certain countries in Harsco Infrastructure. Charges as a result of exiting an underperforming contract in Harsco Metals & Minerals ($7.6 million pre-tax). Pension curtailment gains in Harsco Metals & Minerals ($1.7 million pre-tax). Non-cash tax charge against U.K. deferred tax assets ($36.8 million after-tax). Reduction of estimated costs related to the first phase of Harsco Rail's large China order ($8.0 million pre-tax). Separation expense for former CEO ($4.1 million pre-tax). The Company's management believes diluted earnings (loss) per share from continuing operations excluding special items, a non-GAAP financial measure, is meaningful to investors because it provides an overall understanding of the Company's historical and future prospects. Exclusion of special items permits evaluation and comparison of results for the Company's core business operations, and it is on this basis that management internally assesses the Company's performance. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP. |
| 28 © 2013 Harsco Corporation, All Rights Reserved. Non-GAAP Reconciliation Free Cash Flow (a) ($ in millions) 2007 2008 2009 2010 2011 2012 Net cash provided by operating activities 472 $ 574 $ 434 $ 401 $ 299 $ 199 $ Plus cash payments for restructuring charges - - - 11 23 81 Less maintenance capital expenditures (b) (197) (210) (78) (108) (178) (138) Less growth capital expenditures (c) (247) (248) (87) (84) (135) (127) Plus capital expenditures for strategic ventures (d) - - - - 1 13 Plus proceeds from sales of assets (e) 17 26 23 22 17 32 Free Cash Flow 45 $ 142 $ 292 $ 242 $ 27 $ 60 $ (a) (b) (c) (d) (e) Asset sales are a normal part of the business model, primarily for the Harsco Infrastructure and Harsco Metals & Minerals Segments. Amounts for 2011 and 2012 exclude proceeds received from assets sold under restructuring programs. Amounts for 2007 and 2009 exclude amounts related to the sale of the Company's former Gas Technologies business group. Year Ended December 31 The Company's management believes that free cash flow, a non-GAAP financial measure, is meaningful to investors because management reviews cash flows generated from operations less capital expenditures net of asset sales proceeds. It is important to note that free cash flow does not represent the total residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP. Maintenance capital expenditures are necessary to sustain the Company’s current revenue streams and include contract renewals. Growth capital expenditures, for which management has discretion as to amount, timing and geographic placement, expand the Company's revenue base and create additional future cash flow. Capital expenditures for strategic ventures represent the partner’s share of capital expenditures in certain ventures consolidated in the Company’s financial statements. |
| 29 © 2013 Harsco Corporation, All Rights Reserved. Non-GAAP Reconciliation Adjusted Return on Invested Capital (a) (in thousands) 2007 2008 2009 2010 2011 2012 Net income (loss), as reported 299,492 $ 240,945 $ 118,777 $ 6,754 $ (11,510) $ (254,612) $ Special items: - Goodwill impairment charge - Harsco Infrastructure - - - - - 265,038 - Restructuring charges (b) - - - 84,440 100,780 94,498 - Charges to exit Harsco Metals & Minerals contract (c) - - - - - 7,645 - Gains associated with exited countries (d) - - - - - (10,906) - Former CEO separation expense - - - - �� - 4,125 - Gains on pension curtailment - - - - - (1,716) - One-time Harsco Rail benefit (e) - - - - (7,966) - - Taxes on above special items - - - (21,806) (14,171) (9,070) - Non-cash tax charge (f) - - - - 36,833 - Adjusted net income 299,492 $ 240,945 $ 118,777 $ 69,388 $ 103,966 $ 95,002 $ Total equity 1,566,119 $ 1,413,676 $ 1,509,834 $ 1,468,145 $ 1,219,918 $ 861,624 $ Plus long-term debt 1,012,087 891,817 901,734 849,724 853,800 957,428 Total capital 2,578,206 $ 2,305,493 $ 2,411,568 $ 2,317,869 $ 2,073,718 $ 1,819,052 $ Adjusted return on invested capital 11.6% 10.5% 4.9% 3.0% 5.0% 5.2% (a) (b) (c) (d) (e) (f) Year Ended December 31 Reduction of estimated costs related to the first phase of Harsco Rail's large China order. The Company's management believes return on invested capital excluding special items, a non-GAAP financial measure, is meaningful to investors in evaluating the efficiency and effectiveness of the Company's long-term capital investments. Exclusion of special items permits evaluation and comparison of results for the Company's core business operations, and it is on this basis that management internally assesses the Company's performance. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP. Non-cash tax charge against U.K. deferred tax assets. Charges resulting from the Company's previously announced Fourth Quarter 2010 Harsco Infrastructure and 2011/2012 Restructuring Programs. Charges as a result of exiting an underperforming contract in Harsco Metals & Minerals. Non-cash gains related to the closure of operations in certain countries in Harsco Infrastructure. |
| 30 © 2013 Harsco Corporation, All Rights Reserved. Non-GAAP Reconciliation |