Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - HARSCO CORP | ex992pressrelease.htm |
| EX-2.1 - EXHIBIT 2.1 - HARSCO CORP | ex21omnibusagreement.htm |
| 8-K - 8-K - HARSCO CORP | a8-kdocumentxsept212016.htm |
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On September 15, 2016, Harsco Corporation (the “Company”), and its subsidiary Harsco (UK) Group Limited (together with the Company, the “Harsco Entities”), entered into an Omnibus Agreement (the “Omnibus Agreement”) with CDR Bullseye Holdings, L.P., Bullseye G.P., LLC, Bullseye Partnership, L.P., Bullseye Holdings, L.P. and Brand Energy & Infrastructure Holdings, Inc. (“Brand”), pursuant to which Brand repurchased the Harsco Entities’ 26 percent interest in Brand (the "Transaction").
In exchange for the Harsco Entities’ interest, (i) the Harsco Entities received $145 million in cash, and (ii) the Company’s obligations to pay to Brand and its subsidiaries future amounts under Section 8.2(i)(iv) of that certain Purchase Agreement, dated as of September 15, 2013, as amended, by and between the Company, Brand Energy & Infrastructure Services, Inc. (f/k/a Bullseye, Inc.), Brand and CDR Bullseye Holdings, L.P. were satisfied. The book value of the related pension obligation equaled approximately $22 million at the time of the Transaction.
As a result of the sale, the Company’s obligation to make quarterly payments under the terms of a limited partnership agreement that governed the operation of the strategic venture terminated. Those quarterly payments were made either (at the Company’s election) (i) in cash, with total payments to equal approximately $23 million per year on a pre-tax basis, or (ii) in kind through the transfer of approximately 3% of the Company’s equity interest in Brand on an annual basis (the "unit adjustment liability"). The book value of the unit adjustment liability was approximately $65 million at the time of the Transaction.
The following unaudited pro forma condensed consolidated financial information is based on the Company’s historical consolidated financial statements and is intended to provide information about how the Transaction might have affected the Company’s historical consolidated financial statements if it had closed on: January 1, 2015, in the case of the condensed consolidated statement of operations for the year ended December 31, 2015; January 1, 2016, in the case of the condensed consolidated statement of operations for the six months ended June 30, 2016; and June 30, 2016, in the case of the condensed consolidated balance sheet as of June 30, 2016. The unaudited pro forma condensed consolidated financial information is based on available information and assumptions that the Company believes are reasonable. The unaudited pro forma condensed consolidated financial information is for illustrative and informational purposes only and is not intended to represent or be indicative of what the Company's financial condition or results of operations would have been had the Transaction occurred on the dates indicated. The unaudited pro forma condensed consolidated financial information also should not be considered representative of the Company’s future financial condition or results of operations.
For information with respect to certain items reflected in the unaudited pro forma condensed consolidated financial information, please refer to the notes to the unaudited pro forma condensed consolidated financial information.
The unaudited pro forma condensed consolidated financial information should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, and the unaudited condensed consolidated financial statements, including the notes thereto, included in the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2016.
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HARSCO CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2016 | ||||||||||||||||
(In thousands) | Harsco Historical | Less: Harsco's Equity Investment in Brand | Transaction Related Adjustments | Pro Forma | ||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 69,238 | $ | — | $ | 145,000 | a | $ | 214,238 | |||||||
Trade accounts receivable, net | 265,241 | — | — | 265,241 | ||||||||||||
Other receivables | 16,875 | — | (1,101 | ) | b | 15,774 | ||||||||||
Inventories | 208,243 | — | — | 208,243 | ||||||||||||
Other current assets | 80,503 | (4,310 | ) | — | 76,193 | |||||||||||
Total current assets | 640,100 | (4,310 | ) | 143,899 | 779,689 | |||||||||||
Investments | 236,112 | (233,901 | ) | — | 2,211 | |||||||||||
Property, plant and equipment, net | 531,292 | — | — | 531,292 | ||||||||||||
Goodwill | 394,423 | — | — | 394,423 | ||||||||||||
Intangible assets, net | 47,078 | — | — | 47,078 | ||||||||||||
Other assets | 110,016 | (6,557 | ) | — | 103,459 | |||||||||||
Total assets | $ | 1,959,021 | $ | (244,768 | ) | $ | 143,899 | $ | 1,858,152 | |||||||
LIABILITIES | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Short-term borrowings | $ | 10,129 | $ | — | $ | — | $ | 10,129 | ||||||||
Current maturities of long-term debt | 35,588 | — | — | 35,588 | ||||||||||||
Accounts payable | 113,532 | — | — | 113,532 | ||||||||||||
Accrued compensation | 40,736 | — | — | 40,736 | ||||||||||||
Income taxes payable | 7,192 | — | — | 7,192 | ||||||||||||
Insurance liabilities | 11,927 | — | — | 11,927 | ||||||||||||
Advances on contracts and other customer advances | 107,912 | — | — | 107,912 | ||||||||||||
Due to unconsolidated affiliate | 7,715 | — | (7,715 | ) | c | — | ||||||||||
Unit adjustment liability | 11,681 | (11,681 | ) | — | — | |||||||||||
Other current liabilities | 121,536 | — | — | 121,536 | ||||||||||||
Total current liabilities | 467,948 | (11,681 | ) | (7,715 | ) | 448,552 | ||||||||||
Long-term debt | 832,339 | — | — | 832,339 | ||||||||||||
Deferred income taxes | 15,364 | — | — | 15,364 | ||||||||||||
Insurance liabilities | 25,078 | — | — | 25,078 | ||||||||||||
Retirement plan liabilities | 210,482 | — | — | 210,482 | ||||||||||||
Due to unconsolidated affiliate | 14,138 | — | (14,138 | ) | c | — | ||||||||||
Unit adjustment liability | 52,510 | (52,510 | ) | — | — | |||||||||||
Other liabilities | 40,213 | — | — | 40,213 | ||||||||||||
Total liabilities | 1,658,072 | (64,191 | ) | (21,853 | ) | 1,572,028 | ||||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||||||||
HARSCO CORPORATION STOCKHOLDERS’ EQUITY | ||||||||||||||||
Preferred stock | — | — | — | — | ||||||||||||
Common stock | 140,622 | — | — | 140,622 | ||||||||||||
Additional paid-in capital | 169,048 | — | — | 169,048 | ||||||||||||
Accumulated other comprehensive loss | (488,302 | ) | 23,786 | — | (464,516 | ) | ||||||||||
Retained earnings | 1,199,313 | (204,363 | ) | 165,752 | d | 1,160,702 | ||||||||||
Treasury stock | (760,391 | ) | — | — | (760,391 | ) | ||||||||||
Total Harsco Corporation stockholders’ equity | 260,290 | (180,577 | ) | 165,752 | 245,465 | |||||||||||
Noncontrolling interests | 40,659 | — | — | 40,659 | ||||||||||||
Total equity | 300,949 | (180,577 | ) | 165,752 | 286,124 | |||||||||||
Total liabilities and equity | $ | 1,959,021 | $ | (244,768 | ) | $ | 143,899 | $ | 1,858,152 | |||||||
See accompanying notes to the unaudited pro forma condensed consolidated financial information.
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HARSCO CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended, June 30 2016 | ||||||||||||||||
(In thousands, except per share amounts) | Harsco Historical | Less: Harsco's Equity Investment in Brand | Transaction Related Adjustments | Pro Forma | ||||||||||||
Revenues from continuing operations: | ||||||||||||||||
Service revenues | $ | 475,120 | $ | — | $ | — | $ | 475,120 | ||||||||
Product revenues | 248,094 | — | — | 248,094 | ||||||||||||
Total revenues | 723,214 | — | — | 723,214 | ||||||||||||
Costs and expenses from continuing operations: | ||||||||||||||||
Cost of services sold | 381,325 | — | — | 381,325 | ||||||||||||
Cost of products sold | 218,632 | — | — | 218,632 | ||||||||||||
Selling, general and administrative expenses | 100,304 | — | 750 | e | 101,054 | |||||||||||
Research and development expenses | 1,838 | — | — | 1,838 | ||||||||||||
Other expenses | 10,370 | — | — | 10,370 | ||||||||||||
Total costs and expenses | 712,469 | — | 750 | 713,219 | ||||||||||||
Operating income from continuing operations | 10,745 | — | (750 | ) | 9,995 | |||||||||||
Interest income | 1,087 | — | — | 1,087 | ||||||||||||
Interest expense | (26,168 | ) | — | 463 | f | (25,705 | ) | |||||||||
Change in fair value to the unit adjustment liability and loss on dilution of equity method investment | (13,706 | ) | 13,706 | — | — | |||||||||||
Loss from continuing operations before income taxes and equity income | (28,042 | ) | 13,706 | (287 | ) | (14,623 | ) | |||||||||
Income tax expense | (9,834 | ) | (4,141 | ) | 277 | e | (13,698 | ) | ||||||||
Equity in income of unconsolidated entities, net | 2,481 | (2,481 | ) | — | — | |||||||||||
Loss from continuing operations | (35,395 | ) | 7,084 | (10 | ) | (28,321 | ) | |||||||||
Less: Net income attributable to noncontrolling interests | (3,149 | ) | — | — | (3,149 | ) | ||||||||||
Loss from continuing operations attributable to Harsco Corporation | $ | (38,544 | ) | $ | 7,084 | $ | (10 | ) | $ | (31,470 | ) | |||||
Weighted-average shares of common stock outstanding | 80,288 | 80,747 | ||||||||||||||
Basic loss per share from continuing operations attributable to Harsco Corporation common stockholders | $ | (0.48 | ) | $ | (0.39 | ) | ||||||||||
Diluted weighted-average shares of common stock outstanding | 80,288 | 80,747 | ||||||||||||||
Diluted loss per share from continuing operations attributable to Harsco Corporation common stockholders | $ | (0.48 | ) | $ | (0.39 | ) | ||||||||||
See accompanying notes to the unaudited pro forma condensed consolidated financial information.
3
HARSCO CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended, December 31, 2015 | ||||||||||||||||
(In thousands, except per share amounts) | Harsco Historical | Less: Harsco's Equity Investment in Brand | Transaction Related Adjustments | Pro Forma | ||||||||||||
Revenues from continuing operations: | ||||||||||||||||
Service revenues | $ | 1,092,725 | $ | — | $ | — | $ | 1,092,725 | ||||||||
Product revenues | 630,367 | — | — | 630,367 | ||||||||||||
Total revenues | 1,723,092 | — | — | 1,723,092 | ||||||||||||
Costs and expenses from continuing operations: | ||||||||||||||||
Cost of services sold | 909,995 | — | — | 909,995 | ||||||||||||
Cost of products sold | 446,366 | — | — | 446,366 | ||||||||||||
Selling, general and administrative expenses | 242,112 | — | 1,552 | e | 243,664 | |||||||||||
Research and development expenses | 4,510 | — | — | 4,510 | ||||||||||||
Loss on disposal of the Harsco Infrastructure Segment and transaction costs | 1,000 | — | — | 1,000 | ||||||||||||
Other expenses | 30,573 | — | — | 30,573 | ||||||||||||
Total costs and expenses | 1,634,556 | — | 1,552 | 1,636,108 | ||||||||||||
Operating income from continuing operations | 88,536 | — | (1,552 | ) | 86,984 | |||||||||||
Interest income | 1,574 | — | — | 1,574 | ||||||||||||
Interest expense | (46,804 | ) | — | 1,194 | f | (45,610 | ) | |||||||||
Change in fair value to the unit adjustment liability | (8,491 | ) | 8,491 | — | — | |||||||||||
Income from continuing operations before income taxes and equity income | 34,815 | 8,491 | (358 | ) | 42,948 | |||||||||||
Income tax expense | (27,678 | ) | (3,068 | ) | 573 | e | (30,173 | ) | ||||||||
Equity in income of unconsolidated entities, net | 175 | (175 | ) | — | — | |||||||||||
Income from continuing operations | 7,312 | 5,248 | 215 | 12,775 | ||||||||||||
Less: Net income attributable to noncontrolling interests | (144 | ) | — | — | (144 | ) | ||||||||||
Income from continuing operations attributable to Harsco Corporation | $ | 7,168 | $ | 5,248 | $ | 215 | $ | 12,631 | ||||||||
Weighted-average shares of common stock outstanding | 80,234 | 80,234 | ||||||||||||||
Basic income per share from continuing operations attributable to Harsco Corporation common stockholders | $ | 0.09 | $ | 0.16 | ||||||||||||
Diluted weighted-average shares of common stock outstanding | 80,365 | 80,365 | ||||||||||||||
Diluted income per share from continuing operations attributable to Harsco Corporation common stockholders | $ | 0.09 | $ | 0.16 | ||||||||||||
See accompanying notes to the unaudited pro forma condensed consolidated financial information.
4
HARSCO CORPORATION
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
(1) Explanation of Transaction related adjustments
(a) Reflects the cash consideration received at the closing of the Transaction related to the Company's sale of its remaining 26% equity interest in Brand.
(b) Reflects the elimination of certain receivables from Brand related to transition services arising from the Company's joint venture with CD&R. These elimination of these balances were included as part of the Transaction.
(c) Reflects the settlement of the balances due to Brand related to the funding of certain transferred defined benefit pension plan obligations. The settlement of these balances was included as part of the Transaction.
(d) Reflects the Company's estimated loss of approximately $39 million related to the Transaction. Because this loss is not tax deductible, there is no estimated income tax impact.
(e) Reflects the elimination of the income related to transition services fees received by the Company from Brand had the Transaction closed on January 1, 2015 and 2016, respectively. These adjustments were tax effected at the Company's appropriate statutory income tax rate.
(f) Reflects the elimination of the accretion related to the accrued pension related liabilities noted above had the Transaction closed on January 1, 2015 and 2016, respectively. These adjustments are not tax deductible and had no impact on the Company's income tax expense.
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