Harsco Corporation
Annual Report 2014

Plain-text annual report

Blueprint for Success 2014 Summary Annual Report Financial Summary Dollars in thousands, except per share amounts 2014 2013 2012 2011 2010 Total revenues from continuing operations $2,065,738 $2,896,520 $3,046,018 $3,302,740 $3,038,678 Operating income (loss) from continuing operations 63,471 (134,799) (174,790) 87,649 78,431 Income (loss) from continuing operations attributable to Harsco Corporation stockholders (24,902) (226,449) (253,693) (9,447) 10,885 Current ratio Return on average equity Return on average assets 1.2:1 (4.4) % 2.7 % 1.4:1 (29.1) (4.6) Diluted earnings (loss) per share from continuing operations $««««««««(0.31) $««««««««(2.80) 1.7:1 (21.7) (5.2) % % 1.5:1 (0.6) % 2.6 % 1.5:1 0.7 % 2.3 % $ ÷÷÷(3.15) ** $÷÷÷«÷(0.12) * ** $÷÷÷«÷0.13 **** % % **** Book value per share Cash dividends declared per share Diluted average shares outstanding (in thousands) Number of employees 4.44 0.82 7.52 0.82 80,884 12,200 80,755 12,300 10.69 0.82 80,632 18,500 15.16 0.82 80,736 19,650 18.23 0.82 80,761 19,300 Revenues from Continuing Operations Dollars in millions United States International Operating Income (Loss) from Continuing Operations Dollars in millions 14 13 12 11 10 2,066 2,897 3,046 3,303 3,039 Diluted Earnings (Loss) per Share from Continuing Operations In dollars (0.31) 14 13 12 (2.80) (3.15) 0 11 496 (0.12) 992 1488 1984 2480 2976 3472 3968 63 (135) (175) 14 13 12 11 10 88 78 Cash Dividends Declared per Share In dollars 14 13 12 11 0.82 0.82 0.82 0.82 10 0.13 10 0.000000 91.599998183.199997274.799995366.399994457.999992 0.82 * After loss on disposal of Harsco Infrastructure segment and other special items of $3.63 per share in 2013. ** After restructuring and non-cash goodwill impairment charges of $4.35 per share in 2012. *** After fourth quarter restructuring charges of $1.50 per share in 2011. ****After fourth quarter restructuring charges of $0.77 per share in 2010. 0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 HARSCO CORPORATION F. Nicholas Grasberger, III President and Chief Executive Officer Fellow Shareholders: Nearly two years ago, I joined Harsco’s leadership team to help been identified as underperforming. In addition, we have refined a venerable industrial manufacturing and services company rebuild and reinforced our global operating standards—The Harsco Way its way to sustainable success. Our mission is simple and straight- of Working—consistently throughout all Metals & Minerals sites. forward: to deliver above-market improvements in income, cash Drawn from the demonstrated success of our highest-performing flow and return on invested capital (ROIC) and create renewed locations, they bring uniform best practices to such site-level value for our shareholders. activities as safety, operations, maintenance and general manage- Now, seven months into my tenure as Harsco’s CEO, I’m ment. For example, by streamlining operations and managing our seeing clear signs that Harsco’s resurgence is underway. maintenance and equipment more efficiently, we expect to realize The Harsco Blueprint approximately $35-$40 million in annualized benefits. Harsco’s two manufacturing businesses, Harsco Rail and We balanced disciplined, pragmatic thinking with decisive action Harsco Industrial, continue to win market share through product throughout 2014. First, we completed the sale and merger of our innovation, quality, reliability and an acute customer focus. Harsco Infrastructure division and retained a minority ownership position Rail is emerging as a truly international business with a long in the combined business. The value of this investment grew runway for growth. Major new wins in Europe supporting the Swiss during the year, and we anticipate continued growth ahead. When railway system speak to this group’s growing footprint and its we eventually exit our position in a few years, we expect to generate capacity to build strong local relationships. Its Intelligent Solutions significant cash proceeds to invest in further growth opportunities. group is forming technology partnerships that respond directly to Second, we constructed and began to execute the detailed critical railway needs, such as keeping trackside employees safer plan to boost the financial and operational performance of our with a new collision avoidance system. Harsco Rail is also leading Metals & Minerals business. Our Project Orion improvement plan the way with innovative equipment solutions for higher output and focuses on a more disciplined, analytical process to allocate greater precision that help customers complete track maintenance capital; a new organizational structure aligned around operational faster and more efficiently. and functional excellence; and cost reduction. The result should Harsco Industrial derives much of its revenue from the natural be improved contract outcomes leading to higher profit margins gas industry. This has been a solid growth platform over the past and returns on capital. As evidence, we have now turned around several years, and the recent dip in energy prices does not alter approximately 30 percent of the locations previously identified our strategic priorities or weaken our confidence in the long-term as underperforming into contracts that are better able to gener- potential of this segment. In 2014 we successfully integrated our ate acceptable returns. We also are exiting a small number of Hammco acquisition and gained an established position in the sites where we did not see acceptable solutions. By early 2016, process cooler segment of the energy and petrochemical markets. we expect to address all of the contracts that have previously We also moved forward on a new, consolidated manufacturing 2014 SUMMARY ANNUAL REPORT 1 facility for air coolers that will begin operating in mid-2015. It will with the greatest respect and appreciation two long-standing board reduce costs, integrate Lean manufacturing concepts and expand colleagues, Dr. Bob Wilburn and Andrew Sordoni, who retired from capacity to support the natural gas market. Our IKG business is the board in 2014. working to expand its traditional metal grating products focus with complementary offerings, while our Patterson-Kelley unit intro- Initial signs of success. Looking back on 2014, I’m generally duced its new SONIC® stainless steel boiler and patented NURO™ pleased—but not nearly satisfied—with the improved results I saw touchpad controls system to very encouraging customer response. across a number of key metrics. Focused Leadership Return on invested capital. ROIC provides shareholders with Building and executing a new blueprint takes a highly competitive a powerful tool for making investment decisions by measuring mindset—and a strong will to win. In filling key positions, I look how effectively Harsco deploys shareholder capital. By improving for proven leaders who share a passion for success and a commit- capital allocation and boosting efficiency, we increased Harsco’s ment to our values. In 2014 we further strengthened our senior overall ROIC by approximately 60 basis points, from 6 percent executive team by welcoming a new chief financial officer, a new to 6.6 percent. With ROIC-accretive investments in our growth group president of Harsco Metals & Minerals, and a new chief businesses, we anticipate another meaningful jump in 2015 human resources officer. Our team members have diverse on the way to 10 to 12 percent over time. backgrounds, but have each held leadership positions in highly successful organizations that expect excellence, encourage Top-line revenue growth. Harsco is executing a plan to scale our innovation and inspire personal achievement. I’m excited to see Rail and Industrial businesses and return Harsco Metals & Minerals us working toward the same goals, with shared enthusiasm to sustainable growth. In 2014 revenue increased to $2.07 billion, for transforming Harsco into a better company. up approximately 3 percent over 2013, excluding the former Harsco is enormously fortunate to be led by a strong Board Infrastructure segment. of Directors whose keen insights and wisdom also bring tremendous value to our transformation. In particular, I want Capital spending. In 2014 Harsco recorded $208 million in to thank David Everitt for serving as Interim CEO into the second maintenance and growth capital expenditures. We continued to half of 2014. His exceptional leadership experience and pragmatic invest in growth platforms while applying greater discipline to advice have made a lasting mark on our planning and execution. managing capital commitments in Harsco Metals & Minerals. After his assignment as Interim CEO, Dave was elected chairman of Harsco’s board, where his direct familiarity with the Harsco Free cash flow. Strong working capital performance in Rail helped transformation objectives will be invaluable. We have also added increase our free cash flow to $52 million from $20 million last two new members to the Harsco board, Elaine La Roche and year. We sustained our dividend for the 258th consecutive quarter, Phil Widman. Both bring to our board outstanding global leadership rewarding shareholders with steady, predictable returns and a credentials. Elaine is a seasoned senior financial services executive better than 4 percent yield on their Harsco investment. By staying now serving as a senior advisor to the China International Capital the course, Harsco can continue to generate attractive dividends Corporation US. Phil recently retired as senior vice president and while using our underlying cash flow to invest in growth areas CFO of Terex, a leading global manufacturer for the construction, that deliver high potential returns. mining and infrastructure sectors. In addition, we acknowledge 2 2014 SUMMARY ANNUAL REPORT HARSCO CORPORATION attractive dividends while using our underlying cash flow to invest “ By staying the course, Harsco can continue to generate in growth areas that deliver high potential returns.” Debt/leverage. Maintaining reasonable leverage positions will competitive and environmentally attractive. And in Harsco Industrial, enable Harsco to take advantage of fragmented industries and our Air-X-Changers and Hammco units are helping natural gas make smart, synergistic acquisitions when they are available. companies bring clean fuel to markets around the world, while In 2014, we continued to maintain a prudent leverage position our ultra-efficient PK boiler and hot water systems are helping and will continue to evaluate potential acquisitions as they commercial buildings reduce energy consumption. become available. These and other solutions provide a meaningful opportunity for Harsco to better express our own core values and environ- Adjusted operating income. Lower corporate costs along with mental stewardship. Harsco is delivering real benefit as an gains in Industrial and Rail resulted in $153 million in adjusted emerging environmental solutions company focused on resource operating income, compared with $152 million in 2013. recovery, environmental services and sustainability. Earnings per share. Harsco is committed to creating long-term 2015 Outlook shareholder value by using its capital efficiently to generate I believe Harsco now has the people and plan in place to drive income. In 2014, higher tax rates and an adjustment for our sustainable success. Each of our portfolio businesses showed Brand Energy joint venture contributed to adjusted EPS of $0.72, considerable progress in 2014. Our challenge for 2015 is to compared with prior-year adjusted EPS of $0.87. We have accelerate this momentum and ultimately translate our opera- repurchased more than 700,000 shares of stock on a selective tional initiatives into improved financial performance. We will basis to take advantage of the current market valuation and drive our Project Orion improvement plan in Metals & Minerals, reaffirm our confidence in Harsco shares. engineer growth in our Rail and Industrial segments, and further Last but by no means least, I am also pleased to report a sharpen the focus of our corporate functions to better support full year without an employee casualty, and our best-ever results our businesses. in injury reduction, two indicators of our fundamental commitment I want to sincerely thank our more than 12,000 employee to employee safety. New Sources of Value colleagues for creating value every day at our more than 170 Harsco operating locations in approximately 35 countries worldwide. By delivering on our commitments and producing As global competition increases, customers are seeking lower- tangible results, we will reward our investors for continuing cost solutions that also address growing environmental concerns. to support our direction and sharing our confidence. Harsco is expanding its products and services to meet these changing needs. Harsco Metals & Minerals is emphasizing value-added resource recovery services, especially in markets like China and India. These services include recovering valuable metal from slag, turning residual waste into useful aggregate F. Nicholas Grasberger, III and using mineral byproducts for agricultural applications. Harsco President and Chief Executive Officer Rail is engineering growth by building a robust and profitable March 2, 2015 aftermarket parts and services business to help major railroads extend equipment life cycles. It is also introducing new technology and services that make rail transportation even more cost 2014 SUMMARY ANNUAL REPORT 3 HARSCO CORPORATION HARSCO CORPORATION Blueprint for Success Harsco is following a detailed blueprint for long-term success. Across our global enterprise, we’re creating a sustainable future as an ROIC-focused organization that wins through customer-focused innovation, disciplined execution and a re-ignited passion for success. We’re adopting new operating standards that bring enhanced consistency to our worldwide sites. We’re forging new supplier relationships that support global expansion. We’re strengthening manufacturing processes based on Lean principles. And in every Harsco business, we’re creating new value and revenue streams by meeting customer demand for environmental solutions. 4 2014 SUMMARY ANNUAL REPORT Building Best-in-Class Performance Standards Division-wide adoption of consistent operating standards in all functions and disciplines is helping Harsco Metals & Minerals improve its performance and better satisfy its customers. In the global steel industry, customers evaluate supplier performance based on variables like employee safety, service quality, reliability, productivity, and environmental responsibility. As part of its turnaround process, Harsco Metals & Minerals is implementing common operating practices throughout the world, known as “The Harsco Way,” that are helping us achieve the Developing a New Innovation Engine Product innovation is creating competitive advantage for Harsco Industrial Patterson-Kelley—and is changing highest levels of safety and customer satisfaction while the face of commercial boiler systems. improving business performance. Harsco Metals & Minerals serves customers across 170 global sites, and we’re striving to bring greater consistency to the way we operate and the services we deliver. We’ve clearly defined performance standards, established worldwide best practices for achieving them, and introduced new analytics to measure success. One of our latest tools is Bloodhound™, our proprietary online system for maximizing the metal yield of our metal recovery plants. More than a technological innovation, Bloodhound™ also aligns with our commit- ment to continuous improvement. It gives our customers detailed, up-to-the-minute telemetrics on the rate and flow of recovered metal content. These new practices are creating a win-win for customers, and for Harsco. Customers benefit from greater predictability of Harsco’s performance and cost, consistent excellence in operations, and high levels of service and responsiveness. Harsco is improving operating performance by collecting more site-level data and using it to improve safety and environmental impact. This data also empowers managers to make local operating decisions based on a clear picture of costs relative to their operating budgets and financial returns. At the Patterson-Kelley division, a new concept-to-commercialization engine has helped jump-start new product offerings and drive steady growth. Patterson-Kelley listened carefully as commercial boiler customers throughout North America expressed a strategic need to boost efficiency and expand product offerings. We entered the stainless steel boiler market in late 2013 with our patented SONIC® product, and favorable response pushed sales far beyond first-year goals. We are now developing more sizes of SONIC®, and pre-orders for these models are growing even before production begins. We also introduced the space-friendly MACH ’n’ Roll™ domestic hot water heating system, one of the most compact units of its type in the commercial boiler marketplace. At the end of 2014, we completed work on a new NURO™ touchpad control platform that covers all aspects of a boiler’s operations. With two patents pending, NURO™ is a true differenti- ator that is earning rave reviews—and is driving increased demand for all of our products. The controller is available on the SONIC® boiler platforms now and will soon be integrated into our entire boiler product line. Together, these products demonstrate how a commitment to pacesetting engineering, continuous improvement and customer focus can keep a 135-year-old division at the forefront of change. 2014 SUMMARY ANNUAL REPORT 5 HARSCO CORPORATION Building Total Life Cycle Support New relationships are positioning Harsco Rail to support new global contracts—and to grow our long-term value to customers. When customers around the world negotiate large rail equipment contracts, they pay close attention to how original equipment manufacturers will support their equipment throughout the product life cycle. Public and private railroads around the world are responding favorably to our customer-focused service model. We’re driving leading-edge innovation directly in response to customer needs, both now and into the future. Harsco’s customer-first philosophy figured prominently in two recent, long-term contracts signed with SBB, the national railway company of Switzerland, each valued at more than $100 million. Harsco will produce specialized utility track vehicles and catenary maintenance units, both to the highest European specifications. Harsco Rail contracted to purchase a meaningful portion of the content from Swiss suppliers, and also will utilize components and advanced technology from other proven European railway suppliers. And by meeting customer objectives for locally sourced and supported content, we’re helping boost local economies while building reliable supply lines throughout the product life cycle. 6 2014 SUMMARY ANNUAL REPORT Mapping an Efficient Manufacturing Layout Moving five individual manufacturing plants under one roof will add capacity and accelerate the production cycle, so Harsco Industrial AXC can help energy producers meet growing demand for natural gas. At Harsco Industrial AXC, Lean analysis revealed that our Air-X-Changers engineered coolers traveled dozens of miles between plants during the manufacturing process. That meant extra transportation expense, a longer production cycle and higher fixed costs driven by the use of multiple facilities. HARSCO CORPORATION Engineering a Sustainable Future Harsco is building an effective environmental blueprint that delivers innovative, sustainable solutions to our customers and our communities. Harsco shares with our customers a deep commitment to sustainable actions that protect and sustain personal safety and preserve the environment for future generations. In Mexico, employees at the Harsco Industrial IKG plant established aggressive goals to reduce waste and consumption of energy and water—and decrease the plant’s carbon footprint. They trained employees of Harsco and other local companies how To create greater capacity and efficiency, we’re consolidating to enact environmentally sustainable processes and practices. five plants into one—a massive former auto glass manufacturing They also developed a program to teach local school children to facility in Tulsa, Oklahoma, that increases total floor space become more conscious of the environment and to use natural by more than 50 percent. resources responsibly. The plant has already achieved tangible By designing the plant layout from the ground up, we’re energy reductions totaling several thousands of dollars per month. using insights from our Lean initiatives to optimize production Our Metals & Minerals teams are engaging with customers workflow. The end result will be a facility that enables us to better worldwide to address a wide range of site-specific environmental serve the natural gas industry with increased capacity, higher needs. Harsco is regarded as an industry leader for converting productivity and improved on-time delivery. It adds to a tightly production materials once thought of as waste into new, useable managed business that has consistently delivered products such as agricultural fertilizers, abrasive blasting agents solid incremental savings from Lean operating principles. and roadway materials. We’re also demonstrating our commitment by reducing the environmental impact on our communities. In 2014, Harsco Rail implemented two new projects. One reduced electrical consump- tion at a major manufacturing plant facility by nearly 20,000 kWh through more efficient lighting, while a second significantly reduced landfilled waste by reusing packaging materials. With baseline metrics now in place, we’re establishing regular assessments of our environmental, health, and safety performance at facilities worldwide. The data will help us— and our customers—document the impact our sustainable practices are having on operational performance. 2014 SUMMARY ANNUAL REPORT 7 HARSCO CORPORATION HARSCO CORPORATION 2014 Harsco At a Glance Harsco’s diversified industrial businesses serve major markets that are fundamental to global economic growth—steel, railways and energy We operate in approximately 35 countries at more than 170 locations, and we employ more than 12,000 people Highly engineered OEM to energy markets harscoaxc.com harscoikg.com harscopk.com Customized provider of railway track maintenance equipment and services harscorail.com Global leader in mill services to the steel and metals industries harsco-m.com Joint Venture With the sale of its Infrastructure business in November 2013, Harsco holds an approximate 29% equity interest in Brand Energy & Infrastructure Services, a premier provider of integrated specialty services to the global energy, industrial and infrastructure markets beis.com 8 2014 SUMMARY ANNUAL REPORT PROFILE (cid:115) Diversified business group with premium quality products and 100-year brand heritages (cid:0) (cid:115) Air-cooled heat exchangers (cid:0) (cid:115) Industrial metal grating products (cid:0) (cid:115) High-efficiency boilers and water heaters PROFILE (cid:115) Original Equipment Manufacturer for railway track maintenance and new track construction (cid:115) US market leader with expanding footholds in Asia, Europe and India (cid:115) Major product categories include track surfacing, grinding and utility vehicles PROFILE (cid:115) Premier provider of material processing and environmental services for industrial by-products (cid:0) (cid:0) (cid:0) (cid:0) (cid:115)(cid:0) Onsite mill services (cid:0) (cid:115)(cid:0) Resource recovery and recycling (cid:0) (cid:115)(cid:0) Applied product technologies for sustainable solutions (cid:115) Deep operational expertise across a broad service and product range (cid:115) 170 customer sites in approximately 35 countries PROFILE (cid:115) Brand’s extensive portfolio of specialized industrial service offerings includes work access, coatings, insulation, refractory, formwork and shoring, cathodic protection, specialty mechanical services, and other related crafts (cid:115) More than 50 years of unmatched experience and reputation HARSCO CORPORATION 2014 Consolidated Revenues 2014 Global Revenue Sources 2014 Adjusted Segment Operating Income $2,066M Metals & Minerals 67% Industrial 20% Rail 13% $2,066M North America 46% Western Europe 28% Rest of the World 26% $192M Metals & Minerals 47% Industrial 33% Rail 20% Excludes Special Items and General Corporate Expense MARKETS STRATEGIC DIRECTION REVENUES BY GEOGRAPHY (cid:115) Broad, attractive end-markets (cid:115) Growth in natural gas and petrochemical production (cid:115) Industrial capacity expansion (cid:115) Improvement in the US construction sector (cid:115) Product innovation supports growth and expansion to new customers (cid:115) Investing in mid-2015 plant consolidation for air coolers – answers growing market demand for shorter lead times (cid:115) Strong North America market base and expanding international presence Total $413M North America 93% Rest of the World 43% North America 93% Rest of the World 7% MARKETS STRATEGIC DIRECTION REVENUES BY GEOGRAPHY (cid:115) National railway operators, metro transit systems and short lines (cid:115) Scalable business in a large, fragmented market (cid:115) Sizable pipeline of bidding opportunities in attractive global markets (cid:115) Large aftermarket opportunity supported by strong installed equipment base Total $276M North America 51% Asia 28% Europe 16% Rest of the World 5% (By destination) MARKETS STRATEGIC DIRECTION REVENUES BY GEOGRAPHY (cid:115) Contracted services to major steel and metals production plants (cid:115) Preferred environmental solutions partner to the industry’s heightened environmental requirements (cid:115) Growing portfolio of Applied Products– abrasives, fertilizers, road base and commercial aggregate (cid:115) Flexible operating structure scalable to business needs (cid:115) Deploying Harsco Way standards for consistent reliability and efficiency – and increased customer satisfaction (cid:115) Improving overall returns through disciplined execution (cid:115) Highly confident in improved contract outcomes Total $1,378M Western Europe 40% Rest of the World 36% North America 24% MARKETS STRATEGIC DIRECTION REVENUES BY GEOGRAPHY (cid:115) Operates in five key market segments: Upstream/Midstream (cid:115) Harsco received cash proceeds of approximately $300 million from Joint Venture (cid:115) Downstream (cid:115) Power Generation Industrial (cid:115) Infrastructure formation (cid:115) Continued expectation for business growth and income contribution (cid:115) Opportunity for substantial exit proceeds in the future Approximately $3B (est.) North America 75% Western Europe 17% Rest of the World 8% 2014 SUMMARY ANNUAL REPORT 9 Management’s Report on Internal Control Over Financial Reporting Management of Harsco Corporation, together with its consolidated Because of its inherent limitations, internal control over financial subsidiaries (the “Company”), is responsible for establishing and reporting may not prevent or detect misstatements. Also, projections of maintaining adequate internal control over financial reporting, as defined any evaluation of effectiveness to future periods are subject to the risk in Securities Exchange Act Rule 13a-15(f) or 15d-15(e). The Company’s that controls may become inadequate because of changes in conditions, internal control over financial reporting is a process designed under the or that the degree of compliance with the policies and procedures supervision of the Company’s principal executive and principal financial may deteriorate. officers to provide reasonable assurance regarding the reliability of Management has assessed the effectiveness of its internal control financial reporting and the preparation of the Company’s consolidated over financial reporting at December 31, 2014 based on the framework financial statements for external reporting purposes in accordance with established in Internal Control—Integrated Framework (2013) issued by accounting principles generally accepted in the United States of America. the Committee of Sponsoring Organizations of the Treadway Commission The Company’s internal control over financial reporting includes (COSO). Based on this assessment, management has determined that policies and procedures that: the Company’s internal control over financial reporting was effective • Pertain to the maintenance of records that, in reasonable detail, at December 31, 2014. accurately and fairly reflect transactions and dispositions of assets of the Company; • Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements F. Nicholas Grasberger, III in accordance with accounting principles generally accepted in the President and Chief Executive Officer United States of America, and that receipts and expenditures of the March 2, 2015 Company are being made only in accordance with authorizations of management and the directors of the Company; and • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets Peter F. Minan that could have a material effect on the Company’s consolidated financial statements. Chief Financial Officer March 2, 2015 Report of Independent Registered Public Accounting Firm To The Stockholders of Harsco Corporation: In our opinion, the information set forth in the accompanying condensed We have audited, in accordance with the standards of the Public Company consolidated financial statements is fairly stated, in all material respects, Accounting Oversight Board (United States), the consolidated balance sheets in relation to the consolidated financial statements from which it has of Harsco Corporation and its subsidiaries as of December 31, 2014 and been derived. 2013, and the related consolidated statements of operations, changes in equity, cash flows and comprehensive income (loss) for each of the three years in the period ended December 31, 2014 (not presented herein) appearing in Harsco’s annual report on Form 10-K for the year ended December 31, 2014; and in our report dated, March 2, 2015, we PricewaterhouseCoopers LLP expressed an unqualified opinion on those consolidated financial statements. March 2, 2015 10 2014 SUMMARY ANNUAL REPORT HARSCO CORPORATIONCondensed Consolidated Balance Sheets (In thousands, except share amounts) ASSETS Current assets: Cash and cash equivalents Trade accounts receivable, net Other receivables Inventories Assets held-for-sale Other current assets Total current assets Investments Property, plant and equipment, net Goodwill Intangible assets, net Other assets Total assets LIABILITIES Current liabilities: Short-term borrowings Current maturities of long-term debt Accounts payable Accrued compensation Income taxes payable Dividends payable Insurance liabilities Advances on contracts Liabilities of assets held-for-sale Due to unconsolidated affiliate Unit adjustment liability Other current liabilities Total current liabilities Long-term debt Deferred income taxes Insurance liabilities Retirement plan liabilities Due to unconsolidated affiliate Unit adjustment liability Other liabilities Total liabilities COMMITMENTS AND CONTINGENCIES HARSCO CORPORATION STOCKHOLDERS’ EQUITY Preferred stock, Series A junior participating cumulative preferred stock Common stock, par value $1.25 (issued 112,357,348 and 112,198,693 shares at December 31, 2014 and 2013, respectively) Additional paid-in capital Accumulated other comprehensive loss Retained earnings Treasury stock, at cost (31,697,498 and 31,519,768 shares at December 31, 2014 and 2013, respectively) Total Harsco Corporation stockholders’ equity Noncontrolling interests Total equity Total liabilities and equity The complete financial statements for Harsco Corporation as of December 31, 2014 may be found in the Company’s Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on March 2, 2015. December 31, 2014 December 31, 2013 $«««÷62,843 $«««÷93,605 325,104 28,145 177,265 1,355 87,110 681,822 288,505 663,244 416,155 58,524 155,551 353,181 46,470 155,689 113,968 75,842 838,755 298,856 711,346 431,265 53,261 108,265 $2,263,801 $2,441,748 $÷÷«16,748 $÷÷«÷7,489 25,188 146,506 53,780 1,985 16,535 12,415 117,398 – 8,142 22,320 144,543 565,560 829,709 6,379 35,470 350,889 20,169 71,442 25,849 20,257 181,410 53,113 7,199 16,536 10,523 24,053 109,176 24,954 22,320 129,739 606,769 783,158 8,217 41,879 241,049 27,292 84,023 42,526 1,905,467 1,834,913 – 140,444 165,666 (532,491) 1,290,208 (749,815) 314,012 44,322 358,334 – 140,248 159,025 (370,615) 1,381,321 (746,237) 563,742 43,093 606,835 $2,263,801 $2,441,748 2014 SUMMARY ANNUAL REPORT 11 HARSCO CORPORATIONCondensed Consolidated Statements of Operations (In thousands, except per share amounts) Years ended December 31 Revenues from continuing operations: Service revenues Product revenues Total revenues Costs and expenses from continuing operations: Cost of services sold Cost of products sold Selling, general and administrative expenses Research and development expenses Goodwill impairment charge Loss on disposal of Harsco Infrastructure Segment and transaction costs Other expenses Total costs and expenses Operating income (loss) from continuing operation Interest income Interest expense Change in fair value to unit adjustment liability Income (loss) from continuing operations before income taxes and equity income (loss) Income tax expense Equity in income (loss) of unconsolidated entities, net Loss from continuing operations Discontinued operations: Income (loss) on disposal of discontinued business Income tax (expense) benefit related to discontinued business Income (loss) from discontinued operations Net loss Less: Net income attributable to noncontrolling interests Net loss attributable to Harsco Corporation Amounts attributable to Harsco Corporation common stockholders: Loss from continuing operations, net of tax Income (loss) from discontinued operations, net of tax Net loss attributable to Harsco Corporation common stockholders Weighted-average shares of common stock outstanding Basic loss per share attributable to Harsco Corporation common stockholders: Continuing operations Discontinued operations Basic loss per share attributable to Harsco Corporation common stockholders Diluted weighted-average shares of common stock outstanding Diluted loss per share attributable to Harsco Corporation common stockholders: Continuing operations Discontinued operations Diluted loss per share attributable to Harsco Corporation common stockholders The complete financial statements for Harsco Corporation as of December 31, 2014 may be found in the Company’s Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on March 2, 2015. 2014 2013 2012 $1,365,696 700,042 2,065,738 $2,229,966 666,554 2,896,520 $2,340,996 705,022 3,046,018 1,151,842 1,766,730 1,861,732 494,944 285,252 6,348 – 6,057 57,824 2,002,267 63,471 1,702 (47,111) (9,740) 8,322 (27,171) (1,558) (20,407) 176 (66) 110 (20,297) (4,495) 467,485 481,052 9,570 – 291,372 15,110 3,031,319 (134,799) 2,087 (49,654) (966) (183,332) (34,912) 1,548 (216,696) (2,398) 906 (1,492) (218,188) (9,753) 487,784 503,339 9,139 265,038 – 93,776 3,220,808 (174,790) 3,676 (47,381) – (218,495) (35,251) 564 (253,182) (1,843) 924 (919) (254,101) (511) ««÷$÷÷(24,792) «$««(227,941) «$««(254,612) $÷÷(24,902) 110 $÷÷(24,792) 80,884 $««(226,449) (1,492) $««(227,941) 80,755 $««(253,693) (919) «$««(254,612) 80,632 $÷÷÷÷(0.31) $««««««««(2.80) $««««««««(3.15) – (0.02) (0.01) ÷÷$÷÷÷÷(0.31) ÷÷$÷÷««««(2.82) ÷÷$÷÷««««(3.16) 80,884 80,755 80,632 $÷÷÷÷(0.31) $««««««««(2.80) $««««««««(3.15) – (0.02) (0.01) ÷÷$÷÷÷÷(0.31) ÷÷$÷÷««««(2.82) ÷÷$÷÷««««(3.16) 12 2014 SUMMARY ANNUAL REPORT HARSCO CORPORATIONCondensed Consolidated Statements of Cash Flows (In thousands) Years ended December 31 Cash flows from operating activities: Net loss Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation Amortization Change in fair value to the unit adjustment liability Deferred income tax expense (benefit) Equity in (income) loss of unconsolidated entities, net Dividends from unconsolidated entities Harsco 2011/2012 Restructuring Program non-cash adjustment Goodwill impairment charge Loss on disposal of the Harsco Infrastructure Segment Other, net Changes in assets and liabilities, net of acquisitions and dispositions of businesses: Accounts receivable Inventories Accounts payable Accrued interest payable Accrued compensation Advances on contracts Harsco Infrastructure Segment 2010 Restructuring Program accrual Harsco 2011/2012 Restructuring Program accrual Other assets and liabilities Net cash provided by operating activities Cash flows from investing activities: Purchases of property, plant and equipment Proceeds from the Infrastructure Transaction Proceeds from sales of assets Purchase of businesses, net of cash acquired* Payment of unit adjustment liability Other investing activities, net Net cash provided (used) by investing activities Cash flows from financing activities: Short-term borrowings, net Current maturities and long-term debt: Additions Reductions Cash dividends paid on common stock Dividends paid to noncontrolling interests Purchase of noncontrolling interests Contributions from noncontrolling interests Common stock issued — options Common stock acquired for treasury Deferred pension underfunding payment to unconsolidated affiliate Other financing activities, net Net cash used by financing activities Effect of exchange rate changes on cash Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period *Purchase of businesses, net of cash acquired Working capital Property, plant and equipment Goodwill Intangible assets Other noncurrent assets and liabilities, net Net cash used to acquire businesses The complete financial statements for Harsco Corporation as of December 31, 2014 may be found in the Company’s Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on March 2, 2015. 2014 2013 2012 $÷(20,297) $(218,188) $(254,101) 164,588 11,738 9,740 7,551 1,558 – – – 3,865 39,376 7,026 (19,991) (28,901) 70 5,699 92,769 – (2,672) (46,273) 225,846 (207,978) 15,699 14,976 (26,336) (22,320) (2,721) (228,680) 221,266 15,775 966 (18,427) (1,548) 37 – – 271,296 2,735 (34,504) 18,510 14,319) (1,836) (9,860) (21,365) (6,788) (17,705) (26,428) 188,255 (246,147) 303,039 18,984 (2,849) (2,123) (8,219) 62,685 251,905 20,212 – (10,708) (564) 308 31,443 265,038 – (27,098) 22,016 2,365 (37,649) (319) 517 (63,923) (5,211) (7,883) 12,531 198,879 (265,023) – 49,779 (740) – (3,284) (219,268) 8,851 (1,901) (43,464) 177,499 (131,007) (66,322) (2,186) – – – (941) (7,688) – (21,794) (6,134) (30,762) 93,605 316,804 (498,600) (66,211) (3,381) (166) 4,825 371 – – (405) (248,664) (3,921) (1,645) 95,250 285,850 (184,372) (66,068) (2,605) – 8,097 725 – – (2,709) (4,546) (999) (25,934) 121,184 $÷«62,843 $÷«93,605 $÷«95,250 $÷÷(1,107) (330) (6,839) (17,575) (485) $÷(26,336) $««««««««««««– (2,437) – – (412) $÷÷(2,849) «««$««««««««««««– – – – (740) $÷÷÷«(740) 2014 SUMMARY ANNUAL REPORT 13 HARSCO CORPORATIONCondensed Consolidated Statements of Changes in Equity (In thousands, except share and per share amounts) Balances, January 1, 2012 Net income (loss) Cash dividends declared: Common @ $0.82 per share Noncontrolling interests Total other comprehensive income (loss), net of deferred income taxes of $2,700 Contributions from noncontrolling interests Sale of investment in consolidated subsidiary Stock options exercised, 38,900 shares Vesting of restricted stock units and other stock grants, net 68,558 shares Amortization of unearned stock-based compensation, net of forfeitures Balances, December 31, 2012 Net income (loss) Cash dividends declared: Common @ $0.82 per share Noncontrolling interests Total other comprehensive income, net of deferred income taxes of $(18,447) Contributions from noncontrolling interests Purchase of subsidiary shares from noncontrolling interest Noncontrolling interests transferred in the Infrastructure Transaction Stock options exercised, net 20,000 shares Vesting of restricted stock units and other stock grants, net 74,297 shares Amortization of unearned stock-based compensation, net of forfeitures Balances, December 31, 2013 Net income (loss) Cash dividends declared: Common @ $0.82 per share Noncontrolling interests Total other comprehensive loss, net of deferred income taxes of $20,264 Contributions from noncontrolling interests Noncontrolling interests transferred in the Infrastructure Transaction Vesting of restricted stock units and other stock grants, net 130,925 shares Treasury shares repurchased, 150,000 shares Amortization of unearned stock-based compensation, net of forfeitures Common Stock Issued $139,914 Treasury $(744,644) Additional Paid-in Capital $149,066 Retained Earnings $1,996,234 (254,612) (66,132) 49 117 (561) 661 959 1,959 Accumulated Other Comprehensive Income (Loss)(a) $(364,191) Noncontrolling Interests Total $43,539 $1,219,918 511 (254,101) (46,977) (2,605) 439 8,602 (704) (66,132) (2,605) (46,538) 8,602 (704) 710 515 1,959 $140,080 $(745,205) $152,645 $1,675,490 $(411,168) $49,782 $÷«861,624 (227,941) (66,228) 40,553 9,753 (218,188) (4,764) 302 4,825 107 (66,228) (4,764) 40,855 4,825 (185) (16,912) (15,909) 400 1,185 3,220 25 143 (1,032) (292) 1,003 375 2,074 3,220 $140,248 $(746,237) $159,025 $1,381,321 $(370,615) $43,093 $÷«606,835 (24,792) (66,321) 4,495 (20,297) (161,876) (2,319) (1,602) 1,560 (905) (66,321) (2,319) (163,478) 1,560 (905) 1,551 (2,864) 4,572 196 (714) (2,864) 2,069 4,572 Balances, December 31, 2014 $140,444 $(749,815) $165,666 $1,290,208 $(532,491) $44,322 $÷«358,334 (a) 2013 includes changes due to the Infrastructure transaction consummated November 26, 2013. The complete financial statements for Harsco Corporation as of December 31, 2014 may be found in the Company’s Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on March 2, 2015. 14 2014 SUMMARY ANNUAL REPORT HARSCO CORPORATIONFive-Year Statistical Summary (In thousands, except per share, employee information and percentages) 2014 2013(a) 2012 2011 2010 Statement of operations information Revenues from continuing operations Amounts attributable to Harsco Corporation common stockholders Income (loss) from continuing operations Income (loss) from discontinued operations Net income (loss) Financial position and cash flow information Working capital Total assets Long-term debt Total debt Depreciation and amortization Capital expenditures Cash provided by operating activities Cash provided (used) by investing activities Cash used by financing activities Ratios Return on average equity (b) Current ratio (c) Per share information attributable to Harsco Corporation common stockholders Basic – Income (loss) from continuing operations – Loss from discontinued operations – Net income (loss) Diluted – Income (loss) from continuing operations – Loss from discontinued operations – Net income (loss) Other information Book value per share (e) Cash dividends declared per share Diluted weighted-average number of shares outstanding Number of employees $2,065,738 $2,896,520 $3,046,018 $3,302,740 $3,038,678 (24,902) 110 (24,792) (226,449) (1,492) (227,941) (253,693) (919) (254,612) (9,447) (2,063) (11,510) 10,885 (4,131) 6,754 $«««116,262 2,263,801 $«««231,986 2,441,748 $÷«428,868 2,975,969 $«««377,163 3,338,877 $÷«387,082 3,469,220 829,709 871,645 176,326 (207,978) 225,846 (228,680) (21,794) 783,158 810,904 237,041 (246,147) 188,255 62,685 (248,664) 957,428 969,266 272,117 (265,023) 198,879 (219,268) (4,546) 853,800 908,772 310,441 (313,101) 298,776 (255,822) (39,554) (4.4) % 1.2:1 (29.1) % 1.4:1 (21.7) % 1.7:1 (0.6) % 1.5:1 849,724 884,932 315,239 (192,348) 401,427 (202,023) (171,521) 0.7% 1.5:1 «$««««««««(0.31) «$««««««««(2.80) $÷÷÷««(3.15) $÷÷÷««(0.12) $÷÷÷÷«0.14 – «$««««««««(0.31) $««««««««(0.31) – (0.02) «$««««««««(2.82) $««««««««(2.80) (0.02) (0.01) $÷÷÷««(3.16) $÷÷÷««(3.15) (0.01) (0.03) (0.05) $÷÷÷««(0.14) (d) $÷÷÷÷«0.08(d) $÷÷÷««(0.12) $÷÷÷÷«0.13 (0.03) (0.05) ««$««««««««(0.31) $÷÷÷««(2.82) $÷÷÷««(3.16) $÷÷÷««(0.14) (d) $÷÷÷÷«0.08 $«««««««««4.44 $÷÷«÷÷0.820 80,884 12,200 $«««««««««7.52 $÷÷«÷÷0.820 80,755 12,300 $÷÷÷«10.69 $÷÷÷«««0.820 $÷÷÷«15.16 $÷««÷÷«0.820 $÷÷÷«18.23 $÷««÷÷«0.820 80,632 18,500 80,736 19,650 80,761 19,300 Includes impacts of the Infrastructure Transaction consummated on November 26, 2013. (a) (b) Return on average equity is calculated by dividing income (loss) from continuing operations by average equity throughout the year. (c) Current ratio is calculated by dividing total current assets by total current liabilities. (d) Does not total due to rounding. (e) Book value per share is calculated by dividing total equity by shares outstanding. 2014 SUMMARY ANNUAL REPORT 15 HARSCO CORPORATION Reconciliation of Diluted Earnings (Loss) Per Share From Continuing Operations Excluding Special Items and Harsco Infrastructure Segment (Unaudited) (In thousands) Twelve Months Ended December 31 Diluted loss per share from continuing operations, as reported Harsco Metals & Minerals Segment site exit and underperforming contract charges (a) Harsco Metals & Minerals Segment contract termination charges (b) Harsco Metals & Minerals Segment Brazilian labor claim reserves (c) Harsco Metals & Minerals Segment Project Orion Charges (d) Harsco Infrastructure Segment loss on disposal (e) Strategic transaction review costs (f) Harsco Infrastructure transaction costs (g) Harsco Rail Segment grinder asset impairment charge (h) Gains associated with exited Harsco Infrastructure operations retained (i) Non-cash tax impact of Harsco Infrastructure transaction (j) Harsco Metals & Minerals Segment bad debt expense (k) Harsco Infrastructure Segment depreciation expense reduction on assets classified as held-for-sale (l) Adjusted diluted earnings per share from continuing operations, excluding special items Plus Harsco Infrastructure Segment (income) loss from continuing operations (m) Adjusted diluted earnings per share from continuing operations excluding special items and Harsco Infrastructure Segment 2014 $(0.31) 0.59 0.14 0.11 0.11 0.04 0.04 0.02 – (0.02) – – – $«0.72 – $«0.72 2013 $(2.80) – – – – 3.16 – 0.19 0.08 – 0.38 0.02 (0.21) $«0.82 0.05 $«0.87 (a) Harsco Metals & Minerals Segment charges primarily attributable to site exit costs and non-cash long lived asset impairment charges associated with strategic actions from Project Orion’s focus on underperforming contracts (Full year 2014 $50.1 million pre-tax). (b) Harsco Metals & Minerals Segment charges incurred in connection with the termination of a contract for a customer in receivership (Full year 2014 $11.6 million pre-tax, which includes $7.7 million primarily for non-cash long lived asset impairment and $3.9 million pre-receivership receivable bad debt reserve charges). (c) Brazilian labor claim reserve adjustments in the Harsco Metals & Minerals Segment (Full year 2014 $7.5 million pre-tax). (d) Harsco Metals & Minerals Segment Improvement Plan (“Project Orion”) restructuring charges (Full year 2014 $12.0 million pre-tax). (e) Loss resulting from the Harsco Infrastructure Transaction, which was consummated in the fourth quarter of 2013 (Full year 2014 $3.9 million pre-tax; Full year 2013 $271.3 million pre-tax). (f) Strategic transaction review costs recorded as Corporate expenses (Full year 2014 $3.5 million pre-tax). (g) Harsco Infrastructure Transaction costs recorded as Corporate expenses (Full year 2014 $2.2 million pre-tax; Full year 2013 $20.1 million pre-tax). (h) Asset impairment charge on rail grinder equipment in the Harsco Rail Segment (Full year 2014 $0.6 million pre-tax; Full year 2013 $9.0 million pre-tax). (i) Currency translation gains associated with exited Harsco Infrastructure operations retained recorded as an offset of Corporate expenses (Full year 2014 $2.2 million pre-tax). (j) Non-cash tax impact of Harsco Infrastructure Segment sale – undistributed earnings of subsidiaries and deferred tax valuation allowance (Full year 2013 $30.8 million). (k) Bad debt expense incurred in the Harsco Metals & Minerals Segment (Full year 2013 $2.6 million pre-tax). (l) Depreciation expense reduction from classification of Harsco Infrastructure Segment assets as held-for-sale (Full year 2013 $17.3 million pre-tax). (m) Includes equity in income of affiliates and noncontrolling interests (Full year 2013 $(2.9) million). Segment operating results incorporate reclassifications for the three months and twelve months ended December 31, 2013 to conform to the revised manner in which the Company now allocates corporate expenses to operating segments as a result of changes in organizational structure resulting from the Infrastructure Transaction, which was consummated in the fourth quarter of 2013. The changes do not impact the Company’s previously reported consolidated revenues from continuing operations, operating income from continuing operations or income from continuing operations before income taxes and equity income. The Company’s management believes adjusted diluted earnings per share from continuing operations excluding special items and the Harsco Infrastructure Segment, which are non-U.S. GAAP financial measures, are useful to investors because they provide 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. Exclusion of the Harsco Infrastructure Segment from 2013 provides a basis for comparison of ongoing operations and prospects since the segment was divested in the fourth quarter of 2013. These measures should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP. 16 2014 SUMMARY ANNUAL REPORT HARSCO CORPORATIONReconciliation of Operating Income (Loss) By Segment Excluding Special Items and Harsco Infrastructure Segment (Unaudited) (In thousands) Twelve Months Ended December 31, 2014: Operating income (loss), as reported Harsco Metals & Minerals Segment site exit and underperforming contract charges Harsco Metals & Minerals Segment contract termination charges Harsco Metals & Minerals Segment Brazilian labor claim reserves Harsco Metals & Minerals Segment Project Orion Charges Harsco Infrastructure Segment loss on disposal Strategic transaction review costs Harsco Infrastructure transaction costs Harsco Rail Segment grinder asset impairment charge Gains associated with exited Harsco Infrastructure operations retained Harsco Metals & Minerals Harsco Infrastructure Harsco Industrial Harsco Rail Corporate Consolidated Totals Less: Harsco Infrastructure Consolidated Totals Excluding Harsco Infrastructure $÷÷«9,858 $÷÷÷÷÷÷– $÷63,680 $÷37,137 $(47,204) $÷÷«63,471 $÷÷÷÷÷÷– $÷÷«63,471 50,111 11,557 7,451 11,992 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 590 – – – – 3,865 3,531 2,192 – 50,111 11,557 7,451 11,992 3,865 3,531 2,192 590 – (2,205) (2,205) – – – – – – – – – 50,111 11,557 7,451 11,992 3,865 3,531 2,192 590 (2,205) Adjusted operating income (loss), excluding special items $÷÷«90,969 $÷÷÷÷÷÷– Revenues, as reported $1,377,592 $÷÷÷÷÷÷– $÷63,680 $412,532 $÷37,727 $275,614 $(39,821) $÷«152,555 $÷÷÷÷÷÷– $÷«152,555 $÷÷÷÷÷– $2,065,738 $÷÷÷÷÷÷– $2,065,738 Twelve Months Ended December 31, 2013: Operating income (loss), as reclassified (a) Harsco Infrastructure Segment loss on disposal Harsco Infrastructure transaction costs Harsco Rail Segment grinder asset impairment charge Harsco Metals & Minerals Segment bad debt expense 2,592 Harsco Infrastructure Segment depreciation expense reduction on assets classified as held-for-sale – (17,281) $÷÷«95,310 $(255,326) $÷58,977 $÷27,710 $(61,470) $(134,799) $«255,326 $÷«120,527 – – – 271,296 – – – – – – – – – – 8,999 – – – 20,076 – – – 271,296 20,076 8,999 2,592 (271,296) – – – – 20,076 8,999 2,592 (17,281) 17,281 – Adjusted operating income (loss), excluding special items $97,902 $÷÷(1,311) $÷58,977 $÷36,709 $(41,394) $÷«150,883 $÷÷«1,311 $÷«152,194 Revenues, as reported $1,359,004 $«885,377 $365,972 $286,167 $÷÷÷÷÷– $2,896,520 $(885,377) $2,011,143 (a) The Company has reclassified segment operating results for the twelve months ended December 31, 2013 to conform to the revised manner in which the Company now allocates corporate expenses to operating segments as a result of changes in organizational structure resulting from the Infrastructure Transaction, which was consummated in the fourth quarter of 2013. The changes do not impact the Company’s previously reported consolidated revenues from continuing operations, operating income from continuing operations or income from continuing operations before income taxes and equity income. The Company’s management believes adjusted operating income excluding special items and the Harsco Infrastructure Segment, which are non-U.S. GAAP financial measures, are useful to investors because they provide 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. Exclusion of the Harsco Infrastructure Segment from 2013 provides a basis for comparison of ongoing operations and prospects since the segment was divested in the fourth quarter of 2013. These measures should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP. 2014 SUMMARY ANNUAL REPORT 17 HARSCO CORPORATIONReturn on Invested Capital Excluding Special Items and Harsco Infrastructure Segment (a) (Unaudited) (in thousands) Net loss from continuing operations, as reported Special items: Harsco Metals & Minerals Segment site exit and underperforming contract charges Harsco Metals & Minerals Segment contract termination charges Harsco Metals & Minerals Segment Brazilian labor claim reserves Harsco Metals & Minerals Segment Project Orion Charges Harsco Infrastructure Segment loss on disposal Strategic transaction review costs Harsco Infrastructure transaction costs Harsco Rail Segment grinder asset impairment charge Gains associated with exited Harsco Infrastructure operations retained Non-cash tax impact of Harsco Infrastructure transaction Harsco Metals & Minerals Segment bad debt expense Harsco Infrastructure Segment depreciation expense reduction on assets classified as held-for-sale Taxes on above special items Non-cash tax impact of Harsco Infrastructure transaction Net income from continuing operations, as adjusted After-tax interest expense (b) Net operating profit after tax, as adjusted Average equity Plus average debt Average capital Return on invested capital excluding special items Net operating profit after tax, as adjusted, from above After-tax (income) loss from Harsco Infrastructure Segment excluding special items Net operating profit after tax, as adjusted Average capital, from above Trailing Twelve Months for Period Ended December 31 2014 $÷÷(20,407) 2013 $÷(216,696) 50,111 11,557 7,451 11,992 3,865 3,531 2,192 590 (2,205) – – – (4,166) – 64,511 29,680 – – – – 271,296 – 20,076 8,999 – – 2,592 (17,281) (23,724) 30,790 76,052 31,281 $÷÷«94,191 $÷«107,333 $÷«563,138 857,169 $1,420,307 $÷«771,176 1,022,015 $1,793,191 6.6% 6.0% $÷÷«94,191 $÷«107,333 – $ 94,191 $1,420,307 954 $ 108,287 $1,793,191 Return on invested capital excluding special items and Harsco Infrastructure Segment 6.6% 6.0% (a) Return on invested capital excluding special items and the Harsco Infrastructure Segment is net income from continuing operations excluding special items, after-tax Harsco Infrastructure Segment results, and after-tax interest expense, divided by average capital for the year. The Company uses a trailing twelve month average for computing average capital. (b) The Company’s effective tax rate approximated 37% on an adjusted basis for both periods for interest expense. The Company’s management believes return on invested capital excluding special items and the Harsco Infrastructure Segment, which are non-U.S. GAAP financial measures, are meaningful in evaluating the efficiency and effectiveness of the capital invested in the Company’s business. 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. Exclusion of the Harsco Infrastructure Segment provides a basis for comparison of ongoing operations and prospects since the segment was divested in the fourth quarter of 2013. These measures should be considered in addition to, rather than as a substitute for, net income or other information provided in accordance with U.S. GAAP. 18 2014 SUMMARY ANNUAL REPORT HARSCO CORPORATIONFree Cash Flow (Unaudited) (In thousands) Net cash provided by operating activities Less maintenance capital expenditures (a) Less growth capital expenditures (b) Plus capital expenditures for strategic ventures (c) Plus total proceeds from sales of assets (d) Free Cash Flow Plus Harsco Infrastructure Segment negative Free Cash Flow Free Cash Flow excluding Harsco Infrastructure Segment Twelve Months Ended December 31 2014 $«225,846 (133,231) (74,747) 6,876 27,379 $÷«52,123 – $÷«52,123 2013 $«188,255 (128,331) (117,816) 5,864 18,984 $÷(33,044) 52,962 $÷«19,918 (a) Maintenance capital expenditures are necessary to sustain the Company’s current revenue streams and include contract renewal. (b) 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. (c) Capital expenditures for strategic ventures represent the partner’s share of capital expenditures in certain ventures consolidated in the Company’s financial statements. (d) Asset sales are a normal part of the business model, primarily for the Harsco Metals & Minerals Segment. For the full year ended December 31, 2014, this line item also includes proceeds of $12.4 million from the Harsco Infrastructure Transaction net working capital settlement. The Company’s management believes that free cash flow, which is a non-U.S. 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. Exclusion of the Harsco Infrastructure Segment from 2013 provides a basis for comparison of ongoing operations and prospects since the segment was divested in the fourth quarter of 2013. This measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with U.S. GAAP. Review of Operations By Segment (Unaudited) (In thousands) Harsco Metals & Minerals Harsco Infrastructure Harsco Industrial Harsco Rail General Corporate Consolidated Totals Twelve Months Ended December 31, 2014 Twelve Months Ended December 31, 2013 Revenues $1,377,592 – 412,532 275,614 – $2,065,738 Operating Income (Loss) $÷«9,858 – 63,680 37,137 (47,204) $«63,471 Revenues $1,359,004 885,377 365,972 286,167 – Operating Income (Loss) $÷«95,310 (255,326) 58,977 27,710 (61,470) $2,896,520 $(134,799) The Company has reclassified segment operating results for the twelve months ended December 31, 2013 to conform to the revised manner in which the Company now allocates corporate expenses to operating segments as a result of changes in organizational structure resulting from the Infrastructure Transaction, which was consummated in the fourth quarter of 2013. The changes do not impact the Company’s previously reported consolidated revenues from continuing operations, operating income from continuing operations or income from continuing operations before income taxes and equity income. 2014 SUMMARY ANNUAL REPORT 19 HARSCO CORPORATIONHARSCO CORPORATION Board of Directors and Corporate Leadership (As of March 10, 2015) Corporate Leadership F. Nicholas Grasberger, III President and Chief Executive Officer Peter F. Minan Chief Financial Officer Russell C. Hochman Interim General Counsel, Chief Compliance Officer and Corporate Secretary Richard E. Lundgren, Jr. Senior Vice President and Group President Harsco Metals & Minerals Scott H. Gerson Vice President and Group President Harsco Industrial Scott W. Jacoby Vice President and Group President Harsco Rail Anthony A. DeGregorio Vice President and Chief Information Officer Tracey L. McKenzie Vice President and Chief Human Resources Officer William H. Alexander Vice President – Global Real Estate & Facilities Management A. James Howell Vice President – Internal Audit Michael H. Kolinsky Vice President – Tax, Treasury and Risk Management Kathrine Rushefsky Vice President – Human Resources Global Services Linda Toth Vice President – Global Compliance and Ethics Jeremy Zahn Vice President – Global Environmental, Health and Safety Board of Directors David C. Everitt Retired Co-leader, Agriculture and Turf Division Deere & Company Director since 2010 Serves as Non-Executive Chairman James F. Earl 1, 2 Executive Vice President and President – GATX Rail International GATX Corporation Director since 2012 Kathy G. Eddy 3C CPA and Founding Partner McDonough, Eddy, Parsons & Baylous, AC Director since 2004 Stuart E. Graham 2 Chairman Skanska AB Director since 2009 F. Nicholas Grasberger, III President and Chief Executive Officer Harsco Corporation Director since 2014 Terry D. Growcock 2C Retired Chairman The Manitowoc Company Director since 2008 Henry W. Knueppel 1 Retired Chairman and Chief Executive Officer Regal Beloit Corporation Director since 2008 Elaine La Roche 1, 3 Senior Advisor China International Capital Corporation US Director since 2014 James M. Loree 1C, 3 President and Chief Operating Officer Stanley Black & Decker, Inc. Director since 2010 Phillip C. Widman 1 Retired Senior Vice President and Chief Financial Officer Terex Corporation Director since 2014 Board Committees 1 Audit Committee 2 Management Development and Compensation Committee 3 Nominating and Corporate Governance Committee C Indicates Committee Chair 20 2014 SUMMARY ANNUAL REPORT Shareholder Information Company News Company information, archived news releases and SEC filings are available free of charge 24 hours a day, seven days a week via Harsco’s website at harsco.com. Harsco’s quarterly earnings conference calls and other significant investor events are posted when they occur. Securities analysts, portfolio managers, other representatives of institutional investors and other interested parties seeking information about Harsco should contact the Director of Investor Relations at Harsco’s corporate office, telephone 717-612-5628 or email ir @harsco.com. Annual Meeting April 29, 2015, 9:00 a.m. 350 Poplar Church Road Camp Hill, PA 17011 Transfer Agent and Registrar Shareholder communications regarding transfer of shares, book-entry shares, lost certificates, lost dividend checks or changes of address should be directed to: By Mail: By Overnight Delivery: Computershare P. O. Box 30170 College Station, TX 77842-3170 Computershare 211 Quality Circle, Suite 210 College Station, TX 77845 By Calling: 800-850-3508 (U.S. and Canada) 312-360-5100 (other countries) Shareholders can also view real-time account information and request transfer agent services online at the Computershare Investor Services website: computershare.com/investor. Computershare Investor Services can be accessed through telecommunications devices for the hearing impaired by calling: 800-952-9245 (U.S. and Canada), 781-575-4592 (other countries) Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103 Quarterly Share Price and Dividend Information Harsco Corporation common stock is listed on the New York Stock Exchange (NYSE) under ticker symbol HSC. At year-end 2014, there were 80,659,850 shares outstanding and approximately 11,700 stockholders. HARSCO CORPORATION As shown below, during 2014, the Company’s common stock traded in a range of $16.48 to $28.19 and closed at $18.89 at year-end. High and low per share data are as quoted on the NYSE. Four quarterly cash dividends were paid in 2014 for an annual rate of $0.82. There are no significant restrictions on the payment of dividends. First Quarter High Low Dividends Declared Second Quarter High Low Dividends Declared Third Quarter High Low Dividends Declared Fourth Quarter High Low Dividends Declared 2014 $ 28.19 21.16 0.205 27.77 22.43 0.205 27.56 19.26 0.205 21.81 16.48 0.205 2013 $ 26.02 22.84 0.205 24.75 20.98 0.205 27.03 23.20 0.205 28.99 23.86 0.205 Comparison of Five-Year Cumulative Total Return* Among Harsco Corporation, the S&P Midcap Index, and the Dow Jones US Diversified Industries Index $214.97 $214.87 $69.05 09 10 11 12 13 14 Harsco Corporation S&P Midcap 400 Index Dow Jones US Diversified Industrials Index Harsco Corporation S&P Midcap 400 12/09 12/10 12/11 12/12 12/13 12/14 100.00 90.40 67.55 80.22 98.92 69.05 100.00 126.64 124.45 146.69 195.84 214.97 Dow Jones US Diversified Industrials 100.00 122.86 123.84 149.61 212.64 214.87 * $100 invested on 12/31/09 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright © 2015 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved. Copyright © 2015 Dow Jones & Co. All rights reserved. Summary Annual Report 250 This Summary Annual Report is designed to present our 2014 results in a 200 simple, easy-to-read and cost-efficient format. The more detailed financial 150 information and analysis included in previous annual reports are contained in our Form 10-K filing with the Securities and Exchange Commission, which was 50 distributed to shareholders along with this summary report. A copy of our 0 Form 10-K filing may also be obtained from Harsco Investor Relations at the address on the back cover, or it can be viewed and downloaded from our Harsco website at harsco.com. 100 200 250 150 100 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 0 uncertainties. In accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, 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, revenues, 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,” “plan,” or other comparable terms. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. Please refer to our Annual Report filed on Form 10-K for further discussion. 200 100 150 250 50 50 0 HARSCO S& P Midcap 400 Dow Jones Harsco Corporation World Headquarters 350 Poplar Church Road Camp Hill, PA 17011 USA 717-763-7064 harsco.com SKU 002CSN4A10 

Continue reading text version or see original annual report in PDF format above