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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2003

OR

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to ______

Commission File Number   1-3970  

HARSCO CORPORATION

(Exact name of registrant as specified in its charter)
     
 Delaware   23-1483991
(State of incorporation)   (I.R.S. Employer Identification No.)
 
 Camp Hill, Pennsylvania   17001-8888
(Address of principal executive offices)   (Zip Code)
 Registrant’s Telephone Number   (717)763-7064

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES     x              NO    o   

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES    x             NO    o  

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

         
Class   Outstanding at October 31, 2003
Common stock, par value $1.25 per share
     40,851,770  
 

 

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HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I — FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)

  Three Months Ended Nine Months Ended
September 30 September 30
(In thousands, except per share amounts) 2003 2002 2003 2002
Revenues from continuing operations:                    
     Service sales   $ 376,951   $ 342,668   $ 1,098,673   $ 988,226  
     Product sales     153,234    167,851     455,874    491,241  
        Total revenues     530,185    510,519     1,554,547    1,479,467  
Costs and expenses from continuing operations:  
     Cost of services sold     277,994    249,731     812,217    718,839  
     Cost of products sold     121,991    134,024     367,284    388,253  
     Selling, general and administrative expenses     81,553    78,200     243,518    237,223  
     Research and development expenses     695    642     2,367    2,206  
     Other (income) expenses     2,172    (137 )   4,509    2,901  
        Total costs and expenses     484,405    462,460     1,429,895    1,349,422  
        Operating income from continuing operations     45,780    48,059     124,652    130,045  
 
Equity in income of affiliates, net     10    138     271    428  
Interest income     482    1,008     1,558    3,238  
Interest expense     (10,271 )  (11,109 )   (30,797 )  (33,559 )
        Income from continuing operations before  
           income taxes and minority interest     36,001    38,096     95,684    100,152  
 
Income tax expense     (10,781 )  (11,736 )   (29,266 )  (30,927 )
        Income from continuing operations before  
           minority interest     25,220    26,360     66,418    69,225  
 
Minority interest in net income     (1,846 )  (1,665 )   (5,120 )  (4,698 )
Income from continuing operations     23,374    24,695     61,298    64,527  
Discontinued operations:  
     Loss from operations of discontinued business     (206 )  (548 )   (415 )  (2,582 )
     Gain on disposal of discontinued business     106    2,071     634    4,939  
     Income related to discontinued defense business     8,030    —     8,030    —  
     Income tax expense     (2,838 )  (546 )   (2,953 )  (851 )
Income from discontinued operations     5,092    977     5,296    1,506  
        Net Income   $ 28,466   $ 25,672   $ 66,594   $ 66,033  
Average shares of common stock outstanding     40,752    40,514     40,637    40,304  
 
Basic earnings per common share:  
     Continuing operations   $ .57   $ .61   $ 1.51   $ 1.60  
     Discontinued operations     .12    .02     .13    .04  
Basic earnings per common share   $ .70 (a) $ .63   $ 1.64   $ 1.64  
Diluted average shares of common stock outstanding     41,100    40,646     40,877    40,707  
 
Diluted earnings per common share:  
     Continuing operations   $ .57   $ .61   $ 1.50   $ 1.58  
     Discontinued operations     .12    .02     .13    .04  
Diluted earnings per common share   $ .69   $ .63   $ 1.63   $ 1.62  
Cash dividends paid per common share   $ .2625   $ .25   $ .7875   $ .75  
(a) Does not total due to rounding.

See accompanying notes to consolidated financial statements.

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HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I — FINANCIAL INFORMATION

CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)

September 30 December 31
(In thousands) 2003 2002(a)
ASSETS            
Current assets:  
     Cash and cash equivalents   $ 76,565   $ 70,132  
     Accounts receivable, net     458,067    388,872  
     Inventories     187,692    181,712  
     Other current assets     51,209    61,686  
         Total current assets     773,533    702,402  
Property, plant and equipment, net     832,331    804,495  
Goodwill, net     389,610    377,220  
Other assets     107,629    102,493  
Assets held for sale     5,804    12,687  
         Total assets   $ 2,108,907   $ 1,999,297  
LIABILITIES  
Current liabilities:  
     Short-term borrowings   $ 15,915   $ 22,362  
     Current maturities of long-term debt     9,701    11,695  
     Accounts payable     168,512    166,871  
     Accrued compensation     44,321    39,456  
     Income taxes     48,217    43,411  
     Dividends payable     10,715    10,642  
     Other current liabilities     187,009    179,413  
         Total current liabilities     484,390    473,850  
Long-term debt     617,214    605,613  
Deferred income taxes     64,866    62,096  
Insurance liabilities     43,544    44,090  
Other liabilities     157,278    167,069  
Liabilities associated with assets held for sale     988    2,039  
         Total liabilities     1,368,280    1,354,757  
COMMITMENTS AND CONTINGENCIES  
SHAREHOLDERS’ EQUITY  
Common stock     84,137    83,793  
Additional paid-in capital     118,645    110,639  
Accumulated other comprehensive expense     (189,895 )  (242,978 )
Retained earnings     1,331,405    1,296,855  
      1,344,292    1,248,309  
Treasury stock     (603,665 )  (603,769 )
         Total shareholders’ equity     740,627    644,540  
         Total liabilities and shareholders’ equity   $ 2,108,907   $ 1,999,297  
(a) As permitted by the Financial Accounting Standards Board (FASB) Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” 2002 information has been reclassified for comparative purposes.

See accompanying notes to consolidated financial statements.

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HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I — FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

Nine Months Ended
September 30
(In thousands) 2003 2002
Cash flows from operating activities:            
   Net income   $ 66,594   $ 66,033  
   Adjustments to reconcile net income to net  
      cash provided (used) by operating activities:  
        Depreciation     123,433    115,911  
        Amortization     1,262    1,245  
        Equity in income of affiliates, net     (271 )  (428 )
        Dividends or distributions from affiliates     1,335    144  
        Other, net     (3,908 )  7,684  
        Changes in assets and liabilities, net of acquisitions  
           and dispositions of businesses:  
              Accounts receivable     (53,637 )  (22,851 )
              Inventories     (3,151 )  (5,968 )
              Accounts payable     (5,921 )  (12,713 )
              Net disbursements related to discontinued defense business     (1,039 )  (1,054 )
              Other assets and liabilities     29,717    15,678  
        Net cash provided by operating activities     154,414    163,681  
Cash flows from investing activities:  
   Purchases of property, plant and equipment     (96,827 )  (86,132 )
   Purchase of businesses, net of cash acquired     (23,529 )  (436 )
   Proceeds from sales of assets     14,218    54,906  
   Other investing activities     —    16  
        Net cash used by investing activities     (106,138 )  (31,646 )
Cash flows from financing activities:  
   Short-term borrowings, net     (14,078 )  (19,553 )
   Current maturities and long-term debt:  
              Additions     264,879    103,093  
              Reductions     (273,862 )  (190,308 )
   Cash dividends paid on common stock     (31,971 )  (30,156 )
   Common stock issued-options     7,485    13,459  
   Other financing activities     (4,160 )  (3,586 )
        Net cash used by financing activities     (51,707 )  (127,051 )
Effect of exchange rate changes on cash     9,864    4,034  
Net decrease in cash of discontinued operations     —    1  
Net increase in cash and cash equivalents     6,433    9,019  
Cash and cash equivalents at beginning of period     70,132    67,407  
Cash and cash equivalents at end of period   $ 76,565   $ 76,426  

See accompanying notes to consolidated financial statements.

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HARSCO CORPORATION AND SUBSIDIARY COMPANIES
PART I — FINANCIAL INFORMATION

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)

  Three Months Ended Nine Months Ended
September 30 September 30
(In thousands) 2003 2002 2003 2002
Net income     $ 28,466