Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Harsco Corporation 78 335K
2: EX-3.A Amended Certificate of Designation 8 31K
3: EX-10.H Supplemental Retirement Benefit Plan 14 56K
4: EX-10.P Consulting Agreement 6 16K
5: EX-12 Computation of Ratios of Earnings to Fixed Charges 2± 9K
6: EX-21 Subsidiaries 3 14K
7: EX-23 Consent of Coopers & Lybrand 1 9K
8: EX-27.1 Financial Data Schedule 1 7K
9: EX-27.2 Restated Financial Data Schedules 1 10K
10: EX-27.3 Restated Financial Data Schedule 1 11K
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1997 Commission file number 1-3970
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HARSCO CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 23-1483991
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(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
Camp Hill, Pennsylvania 17001-8888
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 717-763-7064
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common stock, par value $1.25 per share New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. /X/
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 / /
The aggregate market value of the Company's voting stock held by non-affiliates
of the Company as of February 28, 1998 was $1,957,477,988.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
[Download Table]
Classes Outstanding at February 28, 1998
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Common stock, par value $1.25 per share 46,745,743
Preferred stock purchase rights 46,745,743
Documents Incorporated by Reference
Selected portions of the Notice of 1998 Meeting and Proxy Statement are
Incorporated by Reference in Part III of this Report.
The Exhibit index (Item No. 14) is located on pages 72 to 76.
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HARSCO CORPORATION AND SUBSIDIARY COMPANIES
INFORMATION REQUIRED IN REPORT
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PART I
Item 1. Business:
(a) Description of Business:
Harsco Corporation ("the Company") is a diversified industrial services and
engineered products company. The principal lines of business are: industrial
mill services that are provided to steel producers in 30 countries, including
the United States; scaffolding services to the industrial maintenance and
construction markets primarily in North America; railway maintenance of way
equipment and services that are provided to worldwide railroads; gas control and
containment products for customers worldwide; and several other lines of
business including, but not limited to, industrial grating and bridge decking,
industrial pipe fittings, process equipment, slag abrasives and roofing
granules. The Company's operations fall into three Operating Groups: Metal
Reclamation and Mill Services; Process Industry Products and Infrastructure and
Construction. The Company has over 300 locations in 31 countries, including the
United States.
In 1994, the Company formed a new Operating Group structure to reflect the
Company's strategic refocusing. The new Groups were formed because: (1) the
Company was no longer directly involved in the Defense business as a result of
the formation of United Defense, L.P., effective January 1, 1994, to which the
Company contributed its military tracked vehicle business; the completion of the
five-ton truck contract with the U.S. Government and the related conversion of
production to school buses in 1993; and (2) the acquisition of MultiServ
International, N.V., which substantially increased the Company's presence in
metal reclamation and mill services. Except for Defense, because it is no longer
a Group, the Company restated all the Operating Groups for the periods
presented.
In 1995, the Infrastructure, Construction and Transportation Group was renamed
the Infrastructure and Construction Group due to the Company's announced exits
from the school bus and military truck businesses. The Company ceased all bus
operations in June 1995. Truck operations were ended in June 1994.
In 1997, the Company sold its 40% interest in United Defense, L.P., completing
its strategic exit from the Defense business. The sale resulted in pre-tax cash
proceeds to the Company of $344 million and resulted in an after tax gain on the
sale of $150 million after taking into account certain retained liabilities from
the partnership and estimated post closing net worth adjustments, as well as
pre-partnership formation contingencies and other defense business
contingencies.
The operations of the Company in any one country, except the United States, do
not account for more than 10% of sales. No single customer or group under common
control represented 10% or more of the Company's sales during 1997, 1996, and
1995. There are no significant intergroup sales.
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(b) Financial Information about Industry Groups:
Financial information concerning Industry Groups is included in Note 16 to the
Consolidated Financial Statements under Item 8, "Financial Statements and
Supplementary Data".
(c) Narrative Description of Business:
(1) A narrative description of the businesses by Operating Group is as
follows:
Metal Reclamation and Mill Services
This Group provides specialized services to steel producers and non-ferrous
metallurgical industries worldwide. The services provided include metal
reclamation; slag processing, marketing, and disposal; scrap management and
handling; cleaning of slag pits; handling of raw material, steel slabs, and
molten slag; filling and grading of specified areas; and the renting of various
types of plant equipment. Highly specialized recovery and cleaning equipment,
installed and operated on the property of steel producers, together with
standard materials handling equipment, including drag lines, cranes, bulldozers,
tractors, hauling equipment, lifting magnets and buckets, are employed to
reclaim metal. The customer uses this metal in lieu of steel scrap and makes
periodic payments to the Company based upon the amounts of metal reclaimed. The
nonmetallic residual slag is graded into various sizes at on-site Company-owned
processing facilities and sold commercially. Graded slag is used as an aggregate
material in asphalt paving applications, railroad ballast and building blocks.
The Company also provides in-plant transportation and other specialized
services, including slab management systems, general plant services, and
recycling technology. Similar services are also provided to non-ferrous
metallurgical industries, such as aluminum, copper, and nickel.
This Group includes the Eastern and Western Regions of the Heckett MultiServ
Division, which operates in 30 countries on six continents.
For 1997, the percentage of consolidated net sales for metal reclamation and
mill services was 38%.
Process Industry Products
Major product classes in this Group are gas containment and control equipment,
industrial pipe fittings and process equipment.
Gas containment products include cryogenic equipment, such as bulk storage
tanks, refrigerators, dewars and freezers, and liquid cylinders; high pressure
cylinders; propane tanks; and composite pressure vessels such as self-contained
breathing apparatus and natural gas fuel tanks. Gas control products include
brass valves and regulators serving a variety of markets including the
recreational diving market and the barbecue grill industry.
Under the valves and regulators product line, an innovative propane cylinder
valve for 20-pound cylinders on gas grills continues to gain in the market
place. This propane valve is the barbecue grill standard for the industry,
because of its improved safety and convenience. The Sherwood line of scuba
equipment is among the world's most respected and reliable diving equipment for
both professional and vacation divers.
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The Company's diverse product class of process equipment includes heat and mass
transfer equipment; air-cooled heat exchangers; fractionation trays; process
equipment, blenders, dryers and mixers; industrial and institutional boilers and
hot water heaters; and wear-resistant steels used in the heavy-duty industrial
requirements of mining, steelmaking, and paper production, as well as the
ballistic armor protection of military and commercial vehicles.
The Company is a major supplier of industrial pipe fittings and related products
for the plumbing, hardware and energy industries and produces a variety of
product lines, including forged and stainless steel fittings, conduit fittings,
standard pressure fittings, swage nipples and couplings.
At the end of 1997, the Company acquired an emerging firm which specializes in
providing advanced technologies and services for the handling and disposal of
medical wastes.
For 1997, percentages of consolidated net sales of certain product classes were
as follows: gas containment and control, 21%; process equipment, 8%; and
industrial pipe fittings, 7%.
Infrastructure and Construction
Major product classes in this Group are scaffolding, shoring and concrete
forming equipment and services, railway maintenance of way equipment and
services, and industrial grating and bridge decking products. This Group also
provides roofing granules and slag abrasives.
The Group's scaffolding, shoring and concrete forming operations include steel
and aluminum support systems that are leased or sold to customers through a
North American network of some 40 branch offices. Also, the New Orleans-based
Plant Services unit provides cost-effective scaffolding and erection/dismantling
services to refineries and the petrochemical sector.
The Company's product class of railway maintenance of way equipment and services
includes specialized track maintenance equipment used by private and
government-owned railroads and urban transit systems worldwide. The equipment
manufactured by the Company includes ballast tamping machines; ballast
regulators and brooms; tie inserters and removers; spike drivers, pullers, and
reclaimers; and other systems used in the construction and maintenance of track
and railbeds. The Company's railway maintenance of way services include the Tie
Masters(TM)program, which provides day-to-day management and equipment for the
railway's tie renewal and equipment maintenance work, including training the
railway's tie and surface gang personnel to operate the equipment.
The Company manufactures a varied line of industrial grating products at
numerous plants in North America. The Company produces riveted, pressure-locked
and welded grating in steel and aluminum, used mainly in industrial flooring,
safety, and security applications for power, paper, chemical, refining and
processing applications. The Company also produces varied products for bridge
decking uses, as well as a range of fiberglass grating products.
The Company's slag abrasives and roofing granules are produced from utility coal
slag at a number of locations throughout the United States. Slag abrasives are
used for industrial surface preparation, such as rust removal and cleaning of
bridges, ship hulls, and various structures. Roofing granules are sold to
residential roofing shingle manufacturers.
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For 1997, percentages of consolidated net sales of certain product classes were
as follows: scaffolding, shoring and concrete forming equipment, 8%; railway
maintenance of way services and equipment, 8%; industrial grating and bridge
decking, 7%; and roofing granules and slag abrasives, 3%.
(1) (i) The products and services of Harsco can be divided into a
number of classes. The product classes that contributed 10% or more as a
percentage of consolidated net sales in any of the last three fiscal years are
as set forth in the following table.
[Download Table]
1997 1996 1995
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Metal Reclamation and Mill Services 38% 39% 40%
Gas Control and Containment Equipment 21% 19% 18%
(1) (ii) New products and services are added from time to time;
however, currently none require the investment of a material amount of the
Company's assets.
(1) (iii) The manufacturing requirements of the Company's operations
are such that no unusual sources of supply for raw materials are required. The
raw materials used by the Company include principally steel and to a lesser
extent aluminum which usually are readily available.
(1) (iv) While Harsco has a number of trademarks, patents and patent
applications, it does not consider that any material part of its business is
dependent upon them.
(1) (v) Harsco furnishes building products and materials and a wide
variety of specialized equipment for commercial, industrial, public works and
residential construction which are seasonal in nature. In 1997, construction
related operations accounted for 12% of total sales.
(1) (vi) The practices of the Company relating to working capital items
are not unusual compared with those practices of other manufacturers servicing
mainly industrial and commercial markets.
(1) (vii) No material part of the business of the Company is dependent
upon a single customer or a few customers, the loss of any one of which would
have a material adverse effect upon the Company.
(1) (viii) Backlog of orders stood at $225,575,000 and $211,734,000 as
of December 31, 1997 and 1996, respectively. It is expected that approximately
20% of the total backlog at December 31, 1997, will not be filled during 1998.
There is no significant seasonal aspect to the Company's backlog. Backlog for
scaffolding, shoring and forming equipment, and for roofing granules and slag
abrasives are not included in the total backlog, because they are generally not
quantifiable. Contracts for the Metal Reclamation and Mill Services Group are
also excluded from the total backlog.
(1) (ix) At December 31, 1997, the Company had no material contracts
that were subject to renegotiation of profits or termination of the contracts at
the election of the Government.
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(1) (x) The various fields in which the Company operates are highly
competitive and the Company encounters active competition in all of its
activities from both larger and smaller companies who produce the same or
similar products or services or who produce different products appropriate for
the same uses.
(1) (xi) The expense for internal product improvement and product
development activities was $6,090,000, $5,108,000, and $4,876,000 in 1997, 1996,
and 1995, respectively.
(1) (xii) The Company has become subject, as have others, to
increasingly stringent air and water quality control legislation. In general,
the Company has not experienced substantial difficulty in complying with these
environmental regulations in the past and does not anticipate making any major
capital expenditures for environmental control facilities. While the Company
expects that environmental regulations may expand, and its expenditures for air
and water quality control will continue, it cannot predict the effect on its
business of such expanded regulations. For additional information regarding
environmental matters see Note 10 to the Consolidated Financial Statements
included in Item 8, "Financial Statements and Supplementary Data".
(1) (xiii) As of December 31, 1997, the Company had approximately
14,600 employees.
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(d) Financial Information about Foreign and
Domestic Operations and Export Sales:
Financial information concerning foreign and domestic operations and export
sales is included in Note 16 to the Consolidated Financial Statements under Item
8, "Financial Statements and Supplementary Data".
Item 2. Properties:
Information as to the principal plants owned and operated by the Company is
summarized in the following table:
[Download Table]
Floor Space
Location (Sq. Ft.) Principal Products
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Infrastructure and Construction:
Fairmont, Minnesota 312,000 Railroad Equipment
West Columbia, South Carolina 224,000 Railroad Equipment
Nottingham, England 30,000 Railroad Equipment
Brendale, Australia 20,000 Railroad Equipment
Nashville, Tennessee 246,000 Grating
Nashville, Tennessee 87,000 Grating
Charlotte, North Carolina 23,000 Grating
Madera, California 48,000 Grating
Leeds, Alabama 51,000 Grating
Cheswick, Pennsylvania 56,000 Grating
Channelview, Texas 86,000 Grating
Marlboro, New Jersey 30,000 Grating
Queretaro, Mexico 63,000 Grating
Marion, Ohio 135,000 Construction Equipment
Moundsville, West Virginia 11,000 Roofing Granules/Abrasives
Drakesboro, Kentucky 38,000 Roofing Granules
Gary, Indiana 15,000 Roofing Granules/Abrasives
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Item 2. Properties (continued):
[Download Table]
Floor Space
Location (Sq. Ft.) Principal Products
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Process Industry Products:
West Jefferson, Ohio 148,000 Pipe Fittings
Crowley, Louisiana 172,000 Pipe Fittings
Houston, Texas 26,000 Pipe Fittings
Chicago, Illinois 35,000 Pipe Fittings
Hamden, Connecticut 47,000 Pipe Fittings
Vanastra, Ontario, Canada 55,000 Pipe Fittings
East Stroudsburg, Pennsylvania 172,000 Process Equipment
Port of Catoosa, Oklahoma 131,000 Heat Exchangers
Tulsa, Oklahoma 41,000 Fractionation Trays
Tulsa, Oklahoma 13,000 Fractionation Trays
Sapulpa, Oklahoma 68,000 Heat Exchangers
Birmingham, Alabama 133,000 Wear Products
Bilston, England 39,000 Fractionation Trays
Lockport, New York 104,000 Valve Manufacturing
Niagara Falls, New York 66,000 Valve Manufacturing
Jessup, Georgia 43,000 Propane Tanks
Jessup, Georgia 62,000 Propane Tanks
Bloomfield, Iowa 40,000 Propane Tanks
West Jordan, Utah 30,000 Propane Tanks
Pomona, California 56,000 Composite Pressure Vessels
Gardena, California 26,000 Composite Pressure Vessels
Harrisburg, Pennsylvania 317,000 Cylinders
Huntsville, Alabama 270,000 Acetylene Tanks
Theodore, Alabama 305,000 Cryogenic Storage Vessels
Husum, Germany 61,000 Cryogenic Storage Vessels
Shah Alam, Malaysia 25,000 Cryogenic Storage Vessels
Shah Alam, Malaysia 29,000 Cylinders
Beijing, China 134,000 Cryogenic Storage Vessels
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The Company also operates the following plants which are leased:
[Download Table]
Expiration
Floor Space Principal Date of
Location (Sq. Ft.) Products Lease
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Infrastructure and Construction:
Tulsa, Oklahoma 10,000 Grating 02/28/99
Process Industry Products:
Lansing, Ohio 67,000 Pipe Fittings 01/31/03
Cleveland, Ohio 50,000 Brass Castings 09/30/98
Harrisburg, Pennsylvania 110,000 Medical Waste Disposal 05/31/07
The Company operates from a number of other plants, branches, warehouses and
offices in addition to the above. In particular, the Company has over 185
locations related to metal reclamation in thirty countries, however since these
facilities are on the property of the steel mill being serviced they are not
listed. The Company considers all of its properties to be in satisfactory
condition.
Item 3. Legal Proceedings:
Information regarding legal proceedings is included in Note 10 to the
Consolidated Financial Statements under Item 8, "Financial Statements and
Supplementary Data".
Item 4. Submission of Matters to a
Vote of Security Holders:
There were no matters that were submitted during the fourth quarter of the year
covered by this report to a vote of security holders, through the solicitation
of proxies or otherwise.
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PART II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters:
On November 19, 1996, the Board of Directors declared a two-for-one stock split
on the Company's common stock. One additional share was issued for each share of
common stock held by shareholders of record as of the close of business on
January 15, 1997. New shares were distributed on February 14, 1997.
Harsco common stock is traded on the New York, Pacific, Boston, and Philadelphia
Stock Exchanges under the symbol HSC. At the end of 1997, there were 46,976,130
shares outstanding on a post-split basis. In 1997, the stock traded in a range
of $47 7/8 - $33 1/4 (on a post-split basis) and closed at $43 1/8 at year-end.
At December 31, 1997 there were approximately 19,000 shareholders. For
additional information regarding Harsco common stock market price and dividends
declared, see the Common Stock Price and Dividend Information under Part II,
Item 8, "Financial Statements and Supplementary Data".
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Item 6. Selected Financial Data
FIVE-YEAR STATISTICAL SUMMARY
(ALL DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
[Enlarge/Download Table]
1997 1996 1995 1994 1993(DELTA)
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INCOME STATEMENT INFORMATION
Net sales $ 1,627,478 $ 1,557,643 $ 1,495,466 $ 1,357,715 $ 960,176(e)
Income from continuing operations before
interest, income taxes, minority interest,
and cumulative effect of accounting changes 179,888 166,057 131,019 114,593 82,504
Income from continuing operations before
cumulative effect of accounting changes 100,400 83,903 61,318 46,111 39,046(a)
Income from discontinued defense business 28,424(g) 35,106 36,059 40,442 41,770
Gain on disposal of discontinued defense
business 150,008 -- -- -- --
Net income 278,832 119,009 97,377 86,553 87,618
FINANCIAL POSITION INFORMATION
Working capital $ 341,160 $ 214,519 $ 145,254 $ 254,338 $ 182,756
Total assets 1,477,188 1,324,419 1,310,662 1,314,649 1,427,612
Long-term debt 198,898 227,385 179,926 340,246 364,869
Total debt 225,375 253,567 288,673 365,984 428,378
Depreciation and amortization 116,539 109,399 104,863 99,589 74,808
Capital expenditures 143,444 150,294 113,895 90,928 83,395
Cash provided by operating activities 148,541(f) 217,202 258,815 161,395 232,220
Cash provided (used) by investing activities 196,545(f) (153,225) (97,331) (73,150) (397,666)
Cash provided (used) by financing activities (167,249) (92,944) (128,068) (103,040) 173,555
RATIOS
Return on net sales(1) 7.9% 7.6% 6.5% 6.4% 5.7%(a)
Return on average equity(2) 18.4% 18.2% 15.9% 15.7% 17.3%
Return on average assets(3) 17.1% 16.8% 14.6% 13.5% 13.4%(a)
Current ratio 1.9:1 1.7:1 1.4:1 1.9:1 1.4:1
Percent of total debt to capital(4) 22.4% 27.1% 31.6% 38.6% 45.0%
PER SHARE INFORMATION (c)
Income from continuing operations $ 2.06 $ 1.68 $ 1.21 $ .92 $ .78(a)
Income from discontinued defense
business .58(g) .71 .72 .80 .83
Gain on disposal of discontinued
defense business 3.08 -- -- -- --
Income before cumulative effect of
accounting changes 5.72 2.39 1.93 1.72 1.61(a)
Shareholders' equity 16.64 13.73 12.49 11.54 10.48
Cash dividends declared .82 .77 .75 .71 .70
OTHER INFORMATION
Average number of shares outstanding (c) . 48,754,212 49,894,515 50,504,707 50,230,321 50,072,646
Number of employees 14,600 14,200 13,200 13,000 14,200
Backlog(d) $ 225,575 $ 211,734 $ 157,129 $ 160,703 $ 146,751(b)
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FIVE-YEAR STATISTICAL SUMMARY
[DELTA] Includes MultiServ International, N.V. since date of acquisition,
August 31, 1993.
(a) Excludes cumulative effect of change in method of accounting for income
taxes, which increased net income by $6.8 million, ($.14 per share).
(b) Excludes $397.9 million contributed to United Defense, L.P., a joint
venture formed between Harsco and FMC Corporation, for comparative
purposes with 1994.
(c) Reflects two-for-one stock split to shareholders of record January 15,
1997.
(d) Excludes the estimated value of long-term mill service contracts, which
had an estimated value of $2.7 billion at December 31, 1997.
(e) Excludes the results of discontinued defense business. No restatement
of net sales is required for 1994-1996 results because the discontinued
operation was accounted for under the equity method during those years.
(f) Cash provided by operating activities for 1997 includes approximately
$100 million of income taxes paid related to the gain on the disposal
of the defense business, whereas the pre-tax cash proceeds are included
under investing activities.
(g) Includes income through August 1997 (the measurement date) from
discontinued defense business.
(1) "Return on net sales" is calculated by dividing income excluding the
gain on disposal of discontinued defense business by net sales.
(2) "Return on average equity" is calculated by dividing income excluding
the gain on disposal of discontinued defense business by quarterly
weighted average equity.
(3) "Return on average assets" is calculated by dividing income excluding
the gain on disposal of discontinued defense business before interest
expense, income taxes and minority interest by quarterly weighted
average assets.
(4) "Percent of total debt to capital" is calculated by dividing the sum of
debt (short-term borrowings and long-term debt including current
maturities) by the sum of equity and debt.
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Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations:
FINANCIAL CONDITION
The major change in the Company's financial condition and liquidity in 1997 was
the October 6, 1997 sale of its 40% limited partnership interest in United
Defense, L.P. The sale resulted in pre-tax cash proceeds of $344 million which
were recorded as investing activity. Net cash provided by operating activities
was $148.5 million in 1997 compared with $217.2 million in 1996. This decrease
is due to the approximately $100 million of income taxes paid under operating
activities, related to the gain on the sale of the defense business, whereas the
proceeds from the sale are required to be presented as a pretax amount under
investing activity. During 1997, cash distributions, which were principally from
the divested share of the Company's defense interest, of $49.1 million were
received from unconsolidated entities compared with $38.5 million in 1996. After
adjusting for taxes related to the sale of the discontinued defense business,
cash provided by operating activities would have been approximately $249
million in 1997.
Capital expenditures for 1997 were $143.4 million, compared with the record of
$150.3 million in 1996, reflecting the Company's continuing program to support
internal growth, and to improve productivity and product quality. Capital
expenditures during the past three years averaged $135.9 million. Proceeds from
the sale of property, plant and equipment in 1997 provided $14.4 million in cash
compared with $4.9 million in 1996. Cash from investing activity also included
$8.5 million expended for the acquisition at year end of Bio-Oxidation Inc., a
provider of advanced technologies and management services for the disposal of
medical waste. Cash used for financing activities for 1997 included a net
decrease in debt of $18.9 million and $39.1 million of cash dividends paid on
common stock.
The Company has maintained a policy of reacquiring its common stock in
unsolicited open market or privately-negotiated transactions at prevailing
market prices for several years. In January 1997, the Board of Directors
authorized the purchase, over a one-year period, of up to 2,000,000 shares of
the Company's common stock. In November 1997, the Board authorized the purchase
of an additional 2,000,000 shares. The total number of shares purchased under
these programs in 1997 was 2,938,741 shares of common stock for approximately
$120.5 million. Cash and cash equivalents increased $175.7 million to $221.6
million at December 31, 1997.
Other matters which could affect cash flows in the future are discussed under
Note 10 to the Consolidated Financial Statements, "Commitments and
Contingencies."
The Company continues to maintain a good financial position, with net working
capital of $341.2 million, an increase from the $214.5 million at December 31,
1996. Current assets amounted to $713.7 million, and current liabilities were
$372.5 million, resulting in a current ratio of 1.9 to 1, up from 1.7 to 1 at
December 31, 1996. With total debt of $225.4 million and equity of $781.7
million at December 31, 1997, the total debt as a percent of capital was 22.4%,
compared with 27.1% at December 31, 1996.
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The stock price range during the year was 33 1/4 - 47 7/8. The Company's book
value per share at December 31, 1997 was $16.64, compared with $13.73 at
December 31, 1996. The Company's return on average equity, excluding the gain on
the disposal of the discontinued defense business, for 1997 was 18.4%, compared
with 18.2% for the year 1996. The return on average assets, excluding the gain,
was 17.1%, compared with 16.8% for the year 1996. The return on average capital,
excluding the gain, for 1997 was 14.6%, compared with 14.1% for the year 1996.
The Company has available through a syndicate of banks a $400 million
multi-currency five-year revolving credit facility, extending through July 2001.
This facility serves as a back-up to the Company's commercial paper program. As
of December 31, 1997, there were no borrowings outstanding under this facility.
The Company has a U.S. commercial paper borrowing program under which it can
issue up to $300 million of short-term notes in the U.S. commercial paper
market. In addition, the Company has a 3 billion Belgian franc program,
equivalent to approximately U.S. $81 million. The Belgian program will be used
to borrow a variety of Eurocurrencies in order to fund the Company's European
operations. The Company limits the aggregate commercial paper and syndicated
credit facility borrowings at any one time to a maximum of $400 million. At
December 31, 1997, the Company had $30.8 million of commercial paper debt
outstanding under the commercial paper programs.
The Company's outstanding long-term notes are rated A by Standard & Poor's, A by
Fitch IBCA and A-3 by Moody's. The Company's commercial paper is rated A-1 by
Standard & Poor's, F-1 by Fitch IBCA and P-2 by Moody's. The Company also has on
file with the Securities and Exchange Commission a Form S-3 shelf registration
for the possible issuance of up to an additional $200 million of new debt
securities, preferred stock or common stock.
As indicated by the above, the Company's financial position and debt capacity
should enable it to meet its current and future requirements. As additional
resources are needed, the Company should be able to obtain funds readily and at
competitive costs.
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RESULTS OF OPERATIONS
1997 COMPARED WITH 1996
Revenues from continuing operations for 1997 were $1.63 billion, 4% above 1996.
The increase was due principally to higher product sales of gas control and
containment equipment, which included an acquisition in April of 1996. Higher
product sales were also recorded for process equipment, pipe fittings, grating,
and railway maintenance of way equipment. In addition, service sales in metal
reclamation and mill services increased despite being adversely affected by the
strengthening of the U.S. dollar, particularly against European currencies, as
well as the divesting of certain non-core businesses in Europe in April of 1996.
Service sales for scaffolding, shoring and forming equipment, as well as railway
maintenance contract services, also increased. Excluding the adverse effect of
the strengthening U.S. dollar, revenues from continuing operations for 1997 were
7% above 1996.
Cost of products sold increased, principally due to higher volume which included
an acquisition in 1996. Cost of services sold also increased as a result of
increased sales of services. Selling, general and administrative expenses
increased, as a result of higher compensation costs and sales commissions, as
well as the inclusion of an acquired company.
Income from continuing operations before income taxes and minority interest was
up 13% from 1996 due to improved performance. Higher earnings from continuing
operations in 1997 were due principally to higher results for metal reclamation
and mill services, as well as gas control and containment equipment. Income from
grating also increased, but to a lesser extent. These items were partially
offset by lower results for process equipment and railway maintenance of way
equipment and contract services, as well as a $1.4 million pre-tax provision
($.02 earnings per share) for an impairment loss arising from the disposal of
the Company's shell and tube business. Interest expense decreased as a result of
the continued reduction of the Company's outstanding debt and average interest
rate. The effective income tax rate for continuing operations for 1997 was 38%,
versus 41% in 1996. The reduction in the income tax rate is primarily due to
lower effective tax rates on United States earnings.
Income from continuing operations of $100.4 million for 1997 was up 20% from
1996. Income per common share from continuing operations was $2.06, up 23% from
the $1.68 recorded in 1996.
Income from discontinued operations, which is the after-tax results of the
Company's divested defense business through August 1997, was below the results
recorded in 1996, which reflected a full year's results. Income per common share
from discontinued operations was $.58, which was below 1996. A $150.0 million
after-tax gain ($3.08 earnings per share) was recorded in conjunction with the
disposal of the Company's defense business.
Net income of $278.8 million, which included the gain on the disposal of the
Company's defense business was up significantly from 1996, which had been the
highest performance in the history of the Company. Net income per common share
was $5.72, up significantly from 1996.
Sales of the Metal Reclamation and Mill Services Group, at $616.5 million, were
above 1996, despite the strengthening of the U.S. dollar, principally against
certain European currencies, and the divesting of certain non-core businesses in
Europe in April of 1996. Sales for the Process Industry Products Group, at
$586.5 million, were higher than 1996 due principally to
-15-
increased sales of gas control and containment equipment, which included an
acquisition in April of 1996. Sales for the Infrastructure and Construction
Group, at $424.5 million, which included higher sales for most product classes,
were above last year.
Operating profit, excluding the effect of items relating to facilities
discontinuance and reorganization costs, for the Metal Reclamation and Mill
Services Group, at $93.3 million, exceeded 1996 despite the adverse effects of
the strong U.S. dollar. Operating profit in 1997 of $93.5 million, including the
effect of facilities discontinuance and reorganization costs, for the Group was
up 11% from 1996. Operating profit, excluding the effect of items relating to
facilities discontinuance and reorganization costs, for the Process Industry
Products Group, at $59.0 million, was above the prior year and reflected
principally higher results for gas control and containment equipment, which
included an acquisition and more than offset lower income for process equipment.
Operating profit in 1997 of $57.2 million, including the effect of facilities
discontinuance and reorganization costs, for the Group was up 3% from 1996. The
Infrastructure and Construction Group posted an operating profit, excluding the
effect of items relating to facilities discontinuance and reorganization costs,
of $41.5 million, which was below the $42.8 million recorded in 1996, due
principally to lower results for railway maintenance of way equipment and
contract services. After including the effect of facilities discontinuance and
reorganization costs, operating profit of $41.2 million was slightly below the
amount recorded in 1996.
In addition to the Group reporting noted above, the Company views itself as a
diversified industrial services and engineered products company. Total
industrial service sales, which include the Metal Reclamation and Mill Services
Group and Infrastructure and Construction Group service businesses, principally
scaffolding services and railway maintenance of way services, were $782.4
million in 1997 and $761.5 million in 1996, or approximately 48% and 49% of net
sales, respectively. The total engineered products sales for 1997 were $845.1
million or approximately 52% of net sales, which includes sales from the
Infrastructure and Construction Group and the Process Industry Products Group.
The total engineered products sales for 1996 were $796.1 million or
approximately 51% of net sales.
The operating profit, excluding the effect of items relating to facilities
discontinuance and reorganization costs, for industrial services for 1997 was
$107.1 million compared with $100.4 million in 1996, which is approximately 55%
of total Group operating profit for each year. The operating profit, excluding
the effect of items relating to facilities discontinuance and reorganization
costs, from engineered products for 1997 was $86.7 million compared with $83.4
million in 1996, which is approximately 45% of total Group operating profit for
each year.
The operating profit, including the effect of expense items relating to
facilities discontinuance and reorganization costs, for industrial services for
1997 was $107.8 million compared with $99.1 million in 1996, or approximately
56% and 55%, respectively, of total Group operating profit. The operating
profit, including the effect of expense items relating to facilities
discontinuance and reorganization costs, from engineered products for 1997 was
$84.1 million compared with $82.3 million in 1996, which is approximately 44%
and 45%, respectively, of total Group operating profit.
-16-
1996 COMPARED WITH 1995
Revenues from continuing operations for 1996 were $1.56 billion, 4% above 1995.
The increase was due principally to higher sales for gas control and containment
equipment and metal reclamation and mill services, which included the
consolidation of a subsidiary in South Africa that had previously been reflected
as an equity investment. The Company acquired a majority ownership of the
subsidiary in the fourth quarter of 1995. More than offsetting the South Africa
consolidation was the divesting of certain non-core European businesses in the
Metal Reclamation and Mill Services Group during the fourth quarter of 1995 and
April 1996. In addition, higher sales were recorded for railway maintenance of
way equipment and services, scaffolding, shoring and forming equipment, roofing
granules and slag abrasives, pipe fittings and to a lesser extent grating.
Increased sales were also due in part to an acquisition made in 1996. These
increases were partially offset by the effect of ceasing school bus operations
in June 1995. Sales also decreased, but to a lesser extent, due to the
strengthening of the U.S. dollar, principally against certain European
currencies.
Cost of sales increased primarily due to higher volume, but at a rate less than
the increase in sales. Selling, general and administrative expenses increased,
principally as a result of higher compensation costs and the inclusion of
acquired companies.
Income from continuing operations before income taxes and minority interest for
1996 was up 38% from 1995. Higher earnings in 1996 reflect higher operating
results for pipe fittings, gas control and containment equipment, roofing
granules and abrasives, railway maintenance of way equipment and services, and
metal reclamation and mill services. Increased income was also due in part to an
acquisition made in 1996. Scaffolding, shoring and forming equipment recorded
lower earnings in 1996. On a comparative basis, unfavorably affecting 1995's
results were losses arising from the school bus business, which ceased
operations in June that year. The Company recorded in 1995 a pre-tax provision
of $2.1 million for the valuation of the remaining school bus operation plant
and equipment and $3 million in termination and other exit costs. 1995 also
included a $13.5 million non-cash pre-tax charge ($0.16 after-tax earnings per
share) arising from the settlement of a Federal Excise Tax reimbursement claim
with the U.S. Government. Income benefited in 1995 from the effect of a pre-tax
$6.6 million net foreign currency translation exchange gain arising from the
decline in the U.S. dollar against certain European currencies, which more than
offset a pre-tax $3.4 million foreign currency translation exchange loss due to
the devaluation of the Mexican peso. Interest expense decreased as a result of
the continued reduction of the Company's outstanding debt and average interest
rate. The effective income tax rate for 1996 at 41% was lower than the 1995 rate
of 42%.
Income from continuing operations of $83.9 million for 1996 was up 37% from
1995. Income per common share from continuing operations was $1.68, up 39% from
the $1.21 which was recorded in 1995.
Income from discontinued operations which is the after-tax results of the
Company's divested defense business was $.71 per common share in 1996, down
slightly from $.72 in 1995.
-17-
Net income of $119 million was up 22% from 1995. This net income was the highest
performance in the history of the Company.
Sales of the Metal Reclamation and Mill Services Group, at $607.7 million, were
slightly above 1995. The rate of increase was unfavorably affected by the
strengthening of the U.S. dollar, principally against certain European
currencies. Sales for the Infrastructure and Construction Group, at $408.8
million, were above last year, which included $15.7 million for the school bus
business that ceased operation in June 1995. Higher sales were recorded for all
other product classes, particularly railway maintenance of way equipment and
services and scaffolding in 1996. Sales for the Process Industry Products Group,
at $541.1 million, were higher than last year and were led by gas control and
containment equipment, which included an acquisition made in 1996. The Process
Industry Products Group also included increased sales for pipe fittings, as well
as wear products and process equipment.
Operating profit in 1996 of $85.2 million, excluding the effect of expense items
relating to facilities discontinuance and reorganization costs for the Metal
Reclamation and Mill Services Group, was ahead of 1995, which included $3.4
million of foreign currency translation exchange losses due to the devaluation
of the Mexican peso. The increase also includes higher income in 1996 due to the
consolidation of a subsidiary in South Africa, beginning October 1995. Operating
profit in 1996 of $84.2 million, including the effect of facilities
discontinuance and reorganization costs, for the Group was up 9% from 1995. The
Infrastructure and Construction Group posted an operating profit of $42.8
million, excluding the effect of expense items relating to facilities
discontinuance and reorganization costs. Operating profit increased from 1995,
which included losses arising from the school bus operation. Additionally,
improved results for roofing granules and slag abrasives, as well as railway
maintenance of way equipment and services, contributed to the higher operating
profit of the Group. After including the effect of facilities discontinuance and
reorganization costs, operating profit of $41.8 million was more than two times
the amount recorded in 1995, which included $17.6 million of pre-tax facilities
discontinuance and reorganization costs due principally to a $13.5 million
non-cash pre-tax charge arising from the settlement of a Federal Excise Tax
reimbursement claim with the U.S. Government. Operating profit for the Process
Industry Products Group, at $55.8 million, was up 21% from last year, and
reflected higher earnings for all product classes, principally gas control and
containment equipment, which included an acquisition made in 1996, and pipe
fittings.
In addition to the Group reporting noted above, the Company views itself as a
diversified industrial services and engineered products company. Total
industrial service sales, which include Metal Reclamation and Mill Services
Group and Infrastructure and Construction Group service businesses, principally
scaffolding services and railway maintenance of way services, were $761.5
million in 1996 and $745.3 million in 1995, or approximately 49% and 50% of net
sales in 1996 and 1995, respectively. The total engineered products sales for
1996 were $796.2 million or approximately 51% of net sales, which includes sales
from the Infrastructure and Construction Group and the Process Industry Products
Group. The total engineered products sales for 1995 were $750.1 million,
approximately 50% of net sales.
-18-
The operating profit, excluding the effect of expense items relating to
facilities discontinuance and reorganization costs, for industrial services for
1996 was $100.4 million compared with $96.5 million in 1995, or approximately
55% and 59%, respectively, of total Group operating profit. The operating
profit, excluding the effect of expense items relating to facilities
discontinuance and reorganization costs, from engineered products for 1996 was
$83.4 million compared with $65.8 million in 1995, which is approximately 45%
and 41%, respectively, of total Group operating profit.
The operating profit, including the effect of expense items relating to
facilities discontinuance and reorganization costs, for industrial services for
1996 was $99.1 million compared with $93.8 million in 1995, or approximately 55%
and 66%, respectively, of total Group operating profit. The operating profit,
including the effect of expense items relating to facilities discontinuance and
reorganization costs, from engineered products for 1996 was $82.3 million
compared with $47.8 million in 1995, which is approximately 45% and 34%,
respectively, of total Group operating profit.
RESEARCH AND DEVELOPMENT
The Company invested $6.1 million in internal research and development programs
in 1997. Internal funding for the Infrastructure and Construction Group amounted
to $3.2 million, primarily for railway maintenance of way equipment and
services. Expenditures for the Metal Reclamation and Mill Services and Process
Industry Products Groups were $1.5 million and $1.4 million, respectively. Total
internal research and development spending of $6.1 million increased 20% above
the $5.1 million spent in 1996.
BACKLOG
The Infrastructure and Construction Group backlog at December 31, 1997 was
$116.9 million which increased 24% over December 31, 1996, due principally to
increases in railway maintenance of way services and equipment. The year-end
backlog for the Process Industry Products Group was $108.6 million, down 7% from
December 31, 1996, due primarily to decreases in gas control and containment,
and to a lesser extent, process equipment. Backlog for scaffolding, shoring and
forming equipment, and for roofing granules and slag abrasives are not included
in the Infrastructure and Construction Group's total backlog, because they are
generally not quantifiable. Contracts for the Metal Reclamation and Mill
Services Group are also excluded from the total backlog. These contracts, have
an estimated value of $2.7 billion at year-end, which increased approximately 4%
over December 31, 1996.
OUTLOOK FOR 1998
The record results for 1997 met the Company's internal goals and forecasts, as
well as the consensus estimates of the broader financial community. We fully
expect to meet our 1998 objectives through the ongoing growth of our
repositioned core businesses. The continued strength of the U.S. dollar and,
while minimal for Harsco, the current economic uncertainties of the Asian
markets, do not undermine our confidence.
-19-
Central to Harsco's objectives for growth is our increasing concentration on
long-term, service-based relationships. Foremost is the metal reclamation and
mill services business, where our leadership in this highly competitive industry
continues to be built on long-term, renewable contracts.
We expect metal reclamation and mill services to expand further in 1998, with
both new customers and broader product service offerings to existing customers.
This revenue growth, combined with ongoing cost saving and productivity
initiatives, should again yield improved results. We expect to offer more
scaffolding services to the construction and industrial maintenance markets as
our new Sprint(R) scaffolding line becomes more recognized in the industry.
Further, we anticipate the expansion of services in the railway maintenance of
way market, led by a broadening of our Tie Masters(TM) program with a fourth
operating crew to be added in 1998. We anticipate growth from our engineered
products businesses, led by the rapid expansion of our gas containment and
control business through acquisitions and internal growth programs. The process
equipment businesses should also be a major contributor. Capital expenditures in
1998 are expected to exceed $150 million, as we further pursue internal growth
opportunities.
Subject to major economic, political and foreign currency changes, we believe
that our operations will achieve our goals for returns on capital, assets and
equity. Cash flows from operating activities are expected to reach approximately
$220 million. We expect to further improve our debt-to-capital ratio, excluding
the impact of major acquisitions, and fulfill our other stated financial
objectives, while investing appropriately for sustainable growth in our
businesses.
DIVIDEND ACTION
The Company paid four quarterly cash dividends of $.20 cents per share in 1997,
for an annual rate of $.80. At the November meeting, the Board of Directors
increased the dividend 10% to an annual rate of $.88 per share. On February 14,
1997, new shares were distributed as a result of the November 1996 meeting, at
which the Board approved a two-for-one common stock split. The Board normally
reviews the dividend periodically during the year and annually at its November
meeting. There are no material restrictions on the payment of dividends.
Harsco is proud of its history of paying dividends. The Company has paid
dividends each year since 1939. The February 1998 payment marked the 191st
consecutive quarterly dividend paid at the same or at an increased rate. During
the five-year period ended December 31, 1997, dividends paid were increased four
times. In 1997, the dividend payout rate was 30.4%, excluding the $150 million
gain on disposal of the discontinued defense business. Harsco is philosophically
committed to maintaining or increasing the dividend at a sustainable level.
ENHANCING SHAREHOLDER VALUE
A guiding principle of the Company is to build a tradition of creating
shareholder value. To that end, Harsco is striving to achieve a Return on
Capital ("ROC") of 14% in 1998. Each Division's performance is also evaluated
using the ROC measurement, which is calculated by
-20-
dividing net income excluding after-tax interest expense charges by quarterly
weighted average total debt and equity. In 1997, the Company's ROC was 14.6%,
excluding the gain on disposal of the discontinued defense business. In addition
to this key earnings-related measurement, incentive programs for both Division
and Corporate managements are based on sales growth, operating cash flow and
earnings per share goals. Harsco also has two other Corporate goals for 1998 -
to consistently achieve a Return on Equity ("ROE") of 17% - 18% and a Return on
Assets ("ROA") of 15% - 16%. In 1997, the Company's ROE was 18.4% and ROA was
17.1%, excluding the gain on disposal of the discontinued defense business.
Enhanced shareholder value will be obtained by developing and maintaining lead
industry positions in the markets served through the delivery of products and
services that provide the best value to the customer.
YEAR 2000
The Company is taking steps to ensure its operations will not be adversely
impacted by potential Year 2000 software failures. The Company has completed an
initial assessment of its software and has identified software that is currently
not Year 2000 ready. The majority of the software which is not Year 2000 ready
will be updated through normal software upgrades and replacements. The Company
is also working with external organizations that interact with the Company's
business, such as suppliers and customers, to ensure that their systems are also
Year 2000 ready. Based on its assessment, the Company believes that it is
unlikely that the Year 2000 issues will have a material effect on the Company's
operations, and that the cost of becoming Year 2000 ready will not have a
material adverse effect on the Company's financial position or results of
operations.
SAFE HARBOR STATEMENT
The nature of the Company's operations and the many countries in which it
operates subject it to changing economic, competitive, regulatory, and
technological conditions, risks, and uncertainties. In accordance with the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Company provides the following cautionary remarks regarding important factors
which, among others, could cause future results to differ materially from the
forward-looking statements, expectations and assumptions expressed or implied
herein. These include statements about our management confidence and strategies
for performance; expectations for new and existing products, technologies, and
opportunities; and expectations for market segment and industry growth.
These factors include, but are not limited to: (1) changes in the world-wide
business environment in which the Company operates, including import, licensing
and trade restrictions, currency exchange rates, interest rates, and capital
costs; (2) changes in governmental laws and regulations, including taxes; (3)
market and competitive changes, including market demand and acceptance for new
products, services, and technologies; (4) effects of unstable governments and
business conditions in emerging economies; and (5) other risk factors listed
from time to time in the Company's SEC reports. The Company does not intend to
update this information and disclaims any legal liability to the contrary.
-21-
PART II
Item 8. Financial Statements and Supplementary Data:
Index to Consolidated Financial Statements and Supplementary Data
[Download Table]
Consolidated Financial Statements of
Harsco Corporation: Page
----
Report of Independent Accountants 23
Consolidated Balance Sheet
December 31, 1997 and 1996 24
Consolidated Statement of Income
for the years 1997, 1996 and 1995 25
Consolidated Statement of Cash Flows
for the years 1997, 1996 and 1995 26
Consolidated Statement of Shareholders'
Equity for the years 1997, 1996 and 1995 27
Notes to Consolidated Financial Statements 28 - 62
Supplementary Data:
Two-Year Summary of Quarterly Results (Unaudited) 63
Common Stock Price and Dividend Information 64
-22-
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Harsco Corporation:
We have audited the accompanying consolidated balance sheets of Harsco
Corporation and Subsidiary Companies as of December 31, 1997 and 1996, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Harsco Corporation
and Subsidiary Companies as of December 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997 in conformity with generally accepted
accounting principles.
/s/ Coopers & Lyband L.L.P.
Philadelphia, Pennsylvania
January 29, 1998, except as to Note 4 and
paragraph 6 of Note 10, for which the
date is March 4, 1998.
-23-
HARSCO CORPORATION
CONSOLIDATED BALANCE SHEET
[Enlarge/Download Table]
(In thousands, except share amounts)
December 31 1997 1996
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ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................................... $ 221,565 $ 45,862
Investments in debt securities................................................. 43,867 29,180
Accounts receivable, net....................................................... 259,565 268,230
Inventories.................................................................... 135,154 126,018
Other current assets........................................................... 53,501 39,256
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TOTAL CURRENT ASSETS.................................................. 713,652 508,546
-----------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net.................................................. 511,913 513,112
Cost in excess of net assets of businesses acquired, net 187,666 195,387
Net assets of discontinued operations............................................... - 54,376
Other assets........................................................................ 63,957 52,998
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$ 1,477,188 $ 1,324,419
=======================================================================================================================
LIABILITIES
CURRENT LIABILITIES
Short-term borrowings.......................................................... $ 22,847 $ 16,856
Current maturities of long-term debt........................................... 3,630 9,326
Accounts payable............................................................... 120,148 111,912
Accrued compensation........................................................... 42,652 44,501
Income taxes................................................................... 30,572 9,860
Dividends payable.............................................................. 10,335 9,920
Other current liabilities...................................................... 142,308 91,652
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TOTAL CURRENT LIABILITIES............................................. 372,492 294,027
-----------------------------------------------------------------------------------------------------------------------
Long-term debt...................................................................... 198,898 227,385
Deferred income taxes............................................................... 36,954 34,182
Insurance liabilities............................................................... 33,389 38,876
Other liabilities................................................................... 53,753 48,662
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695,486 643,132
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, Series A junior participating cumulative preferred stock .......... - -
Common stock, par value $1.25, issued 65,854,087 and
65,458,202 shares, respectively................................................ 82,318 81,823
Additional paid-in capital.......................................................... 79,360 69,151
Cumulative translation adjustments.................................................. (49,677) (25,476)
Unrealized investment (losses), net of deferred income taxes ....................... (28) -
Cumulative pension liability adjustments............................................ (1,269) (619)
Retained earnings................................................................... 1,033,770 794,473
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1,144,474 919,352
Treasury stock, at cost (18,877,957 and 15,855,850 shares, respectively) ........... (362,772) (238,065)
-----------------------------------------------------------------------------------------------------------------------
781,702 681,287
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$ 1,477,188 $ 1,324,419
=======================================================================================================================
See accompanying notes to consolidated financial statements.
-24-
HARSCO CORPORATION
CONSOLIDATED STATEMENT OF INCOME
[Enlarge/Download Table]
(In thousands, except per share amounts)
Years ended December 31 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------
REVENUES
Product sales............................................................ $ 845,072 $ 796,161 $ 750,138
Service sales............................................................ 782,406 761,482 745,328
Other.................................................................... 1,643 1,495 4,393
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TOTAL REVENUES....................................................... 1,629,121 1,559,138 1,499,859
------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of products sold.................................................... 645,044 604,144 576,404
Cost of services sold.................................................... 584,290 573,047 566,045
Selling, general and administrative expenses ............................ 211,231 207,502 198,706
Research and development expenses........................................ 6,090 5,108 4,876
Facilities discontinuance and reorganization costs ...................... 2,578 3,280 22,809
------------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES............................................. 1,449,233 1,393,081 1,368,840
------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INTEREST, INCOME TAXES AND MINORITY INTEREST.................... 179,888 166,057 131,019
Interest income............................................................... 8,464 6,949 7,472
Interest expense.............................................................. (16,741) (21,483) (28,921)
------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTEREST ............................. 171,611 151,523 109,570
Provision for income taxes.................................................... 65,213 62,081 45,755
------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE
MINORITY INTEREST .............................................. 106,398 89,442 63,815
Minority interest in net income............................................... 5,998 5,539 2,497
------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS ................................... 100,400 83,903 61,318
Discontinued operations:
Equity in income of defense business (net of income taxes
of $14,082, $14,255, and $18,099, respectively)...................... 28,424 35,106 36,059
Gain on disposal of defense business (net of income taxes
of $100,006)......................................................... 150,008 - -
------------------------------------------------------------------------------------------------------------------------------
NET INCOME.................................................................... $ 278,832 $ 119,009 $ 97,377
==============================================================================================================================
Basic earnings per common share:
Income from continuing operations........................................ $ 2.06 $ 1.68 $ 1.21
Income from discontinued operations...................................... .58 .71 .72
Gain on disposal of discontinued operations.............................. 3.08 - -
------------------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER COMMON SHARE .............................................. $ 5.72 $ 2.39 $ 1.93
==============================================================================================================================
Average shares of common stock outstanding.................................... 48,754 49,895 50,505
==============================================================================================================================
Diluted earnings per common share:
Income from continuing operations........................................ $ 2.04 $ 1.67 $ 1.20
Income from discontinued operations...................................... .58 .70 .71
Gain on disposal of discontinued operations 3.05 - -
------------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER COMMON SHARE............................................. $ 5.67 $ 2.37 $ 1.91
==============================================================================================================================
See accompanying notes to consolidated financial statements.
-25-
HARSCO CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
[Enlarge/Download Table]
(In thousands)
Years ended December 31 1997 1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................................... $ 278,832 $ 119,009 $ 97,377
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation............................................................. 107,350 100,137 95,033
Amortization............................................................. 9,189 9,262 9,830
Gain on disposal of defense business..................................... (250,014) - -
Equity in income of unconsolidated entities.............................. (43,549) (50,083) (57,031)
Dividends or distributions from unconsolidated entities.................. 49,142 38,474 38,400
Deferred income taxes.................................................... (8,175) (829) (19,018)
Write-off of federal excise tax receivable............................... - - 13,455
Other, net............................................................... (5,614) 5,429 (1,890)
Changes in assets and liabilities, net of acquisitions and dispositions
of businesses:
Accounts receivable.................................................. (1,812) (138) 73,732
Inventories.......................................................... (13,042) 3,100 (1,583)
Accounts payable..................................................... 4,840 4,086 4,955
Other assets and liabilities......................................... 21,394 (11,245) 5,555
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NET CASH PROVIDED BY OPERATING ACTIVITIES (1)............................ 148,541 217,202 258,815
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment................................... (143,444) (150,294) (113,895)
Purchase of businesses, net of cash acquired*................................ (8,508) (21,062) (4,145)
Proceeds from sale of businesses............................................. 345,189 1,793 3,821
Proceeds from sale of property, plant and equipment.......................... 14,433 4,890 11,491
Purchases of investments available-for-sale.................................. (39,346) - -
Investments held-to-maturity: Purchases ................................... (42,241) (14,300) (3,067)
Maturities................................... 71,469 26,561 5,475
Other investing activities................................................... (1,007) (813) 2,989
------------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES......................... 196,545 (153,225) (97,331)
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net................................................... 8,291 10,911 (13,998)
Current maturities and long-term debt: Additions ........................... 61,310 187,319 27,076
Reductions........................... (88,523) (229,914) (95,884)
Cash dividends paid on common stock.......................................... (39,120) (37,921) (37,397)
Common stock issued-options.................................................. 5,939 5,726 5,660
Common stock acquired for treasury........................................... (113,161) (30,657) (14,130)
Other financing activities................................................... (1,985) 1,592 605
------------------------------------------------------------------------------------------------------------------------------------
NET CASH (USED) BY FINANCING ACTIVITIES.................................. (167,249) (92,944) (128,068)
------------------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH......................................... (2,134) (1,840) (297)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents......................... 175,703 (30,807) 33,119
Cash and cash equivalents at beginning of year............................... 45,862 76,669 43,550
------------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR........................................ $ 221,565 $ 45,862 $ 76,669
====================================================================================================================================
*PURCHASE OF BUSINESSES, NET OF CASH ACQUIRED
Working capital, other than cash............................................. $ 2,807 $ (7,625) $ 5,139
Property, plant and equipment................................................ (833) (12,315) (8,263)
Other noncurrent assets and liabilities, net................................. (10,482) (1,122) (1,021)
------------------------------------------------------------------------------------------------------------------------------------
NET CASH USED TO ACQUIRE BUSINESSES...................................... $ (8,508) $ (21,062) $ (4,145)
====================================================================================================================================
(1) Cash provided by operating activities for 1997 includes approximately
$100 million of income taxes paid related to the gain on the disposal
of the defense business, whereas the pre-tax cash proceeds are included
under investing activities.
See accompanying notes to consolidated financial statements
-26-
HARSCO CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
[Enlarge/Download Table]
CUMULATIVE ADJUSTMENTS
------------------------------------
ADDITIONAL NET UNREALIZED
COMMON STOCK PAID-IN INVESTMENT PENSION
(In thousands, except share amounts) ISSUED TREASURY CAPITAL TRANSLATION (LOSSES) LIABILITY
-------------------------------------------------------------------------------------------------------------------------------
BALANCES, JANUARY 1, 1995........................ $ 40,429 $ (191,154) $ 94,070 $ (16,020) $ - $ (99)
------------------------------------------------------------------------------------------------------------------------------
Net income.......................................
Cash dividends declared, $.745 per share ........
Translation adjustments.......................... (3,832)
Pension liability adjustments, net of $200
deferred income taxes......................... (314)
Acquired during the year, 651,722 shares ........ (18,245)
Stock options exercised, 388,654 shares ......... 243 7,092
Other, 1,666 shares.............................. 26 21
------------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1995...................... 40,672 (209,373) 101,183 (19,852) - (413)
------------------------------------------------------------------------------------------------------------------------------
Net income.......................................
Cash dividends declared, $.77 per share .........
Translation adjustments.......................... (5,624)
Pension liability adjustments, net of $157
deferred income taxes......................... (206)
Acquired during the year, 944,942 shares ........ (29,875)
Stock options exercised, 382,442 shares ......... 239 8,038
Restricted stock, net, 60,366 shares ............ 1,159 824
Other, 1,388 shares.............................. 24 18
Two-for-one stock split at par value* ........... 40,912 (40,912)
------------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1996...................... 81,823 (238,065) 69,151 (25,476) - (619)
------------------------------------------------------------------------------------------------------------------------------
Net income.......................................
Cash dividends declared, $.82 per share .........
Translation adjustments.......................... (24,201)
Unrealized investment (losses), net of $18
deferred income taxes......................... (28)
Pension liability adjustments, net of $412
deferred income taxes......................... (650)
Acquired during the year, 3,080,642 shares ...... (125,841) 34
Stock options exercised, 395,885 shares ......... 495 9,299
Restricted stock, net, 57,487 shares ............ 1,117 846
Other, 1,048 shares.............................. 17 30
------------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1997...................... $ 82,318 $ (362,772) $ 79,360 $ (49,677) $ (28) $ (1,269)
==============================================================================================================================
[Download Table]
RETAINED
(In thousands, except share amounts) EARNINGS
-----------------------------------------------------------------
BALANCES, JANUARY 1, 1995........................ $ 653,996
-----------------------------------------------------------------
Net income....................................... 97,377
Cash dividends declared, $.745 per share ........ (37,599)
Translation adjustments..........................
Pension liability adjustments, net of $200
deferred income taxes.........................
Acquired during the year, 651,722 shares ........
Stock options exercised, 388,654 shares .........
Other, 1,666 shares..............................
-----------------------------------------------------------------
BALANCES, DECEMBER 31, 1995...................... 713,774
-----------------------------------------------------------------
Net income....................................... 119,009
Cash dividends declared, $.77 per share ......... (38,310)
Translation adjustments..........................
Pension liability adjustments, net of $157
deferred income taxes.........................
Acquired during the year, 944,942 shares ........
Stock options exercised, 382,442 shares .........
Restricted stock, net, 60,366 shares ............
Other, 1,388 shares..............................
Two-for-one stock split at par value* ...........
-----------------------------------------------------------------
BALANCES, DECEMBER 31, 1996...................... 794,473
-----------------------------------------------------------------
Net income....................................... 278,832
Cash dividends declared, $.82 per share ......... (39,535)
Translation adjustments..........................
Unrealized investment (losses), net of $18
deferred income taxes.........................
Pension liability adjustments, net of $412
deferred income taxes.........................
Acquired during the year, 3,080,642 shares ......
Stock options exercised, 395,885 shares .........
Restricted stock, net, 57,487 shares ............
Other, 1,048 shares..............................
-----------------------------------------------------------------
BALANCES, DECEMBER 31, 1997...................... $1,033,770
=================================================================
* See Note 2 to the consolidated financial statements.
See accompanying notes to consolidated financial statements.
-27-
HARSCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of Harsco Corporation
and its majority-owned subsidiaries ("Company"). Investments in unconsolidated
entities are accounted for under the equity method.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand, demand deposits, and short-term
investments which are highly liquid in nature and have an original maturity of
three months or less.
INVESTMENTS IN DEBT SECURITIES
Marketable debt securities are classified as available-for-sale or
held-to-maturity. Management determines the appropriate classification of debt
securities at the time of purchase. Debt securities classified as
available-for-sale are stated at fair value, with unrealized gains and losses
reported in a separate component of shareholders' equity, net of deferred income
taxes. Realized gains and losses on sales of investments are included in other
revenues. Debt securities are classified as held-to-maturity when the Company
has the positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost. Interest on debt
securities is included in interest income.
INVENTORIES
Inventories are stated at the lower of cost or market. Inventories in the United
States are accounted for using principally the last-in, first-out (LIFO) method.
All other inventories are accounted for using the first-in, first-out (FIFO)
method and average cost.
DEPRECIATION
Property, plant and equipment is recorded at cost and depreciated over the
estimated useful lives of the assets using principally the straight-line method.
When property is retired from service, generally the cost of the retirement is
charged to the allowance for depreciation to the extent of the accumulated
depreciation, and the balance is charged to income.
INTANGIBLE ASSETS
Intangible assets consist principally of cost in excess of net assets of
businesses acquired, which is amortized on a straight line basis over a period
not to exceed 30 years. Accumulated amortization was $47.3 and $42.7 million at
December 31, 1997 and 1996, respectively.
-28-
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets, including cost in excess of net assets of businesses acquired
and other intangible assets, used in the Company's operations are reviewed for
impairment when events and circumstances indicate that the carrying amount of an
asset may not be recoverable. The primary indicators of recoverability are the
associated current and forecasted undiscounted operating cash flows. The
Company's policy is to record an impairment loss when it is determined that the
carrying amount of the asset may not be recoverable.
REVENUE RECOGNITION
Revenue is recognized for product sales when title transfers. Service sales are
recognized over the contractual period or as services are performed.
INCOME TAXES
All U.S. federal and state income taxes and non-U.S. income taxes are provided
currently on the undistributed earnings of international subsidiaries and
unconsolidated affiliated entities, giving recognition to current tax rates and
applicable foreign tax credits. Deferred taxes are provided using the asset and
liability method for temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.
ACCRUED INSURANCE AND LOSS RESERVES
The Company retains a portion of the risk for workers' compensation, automobile,
general, and product liability losses. Reserves have been recorded which reflect
the undiscounted estimated liabilities including claims incurred but not
reported. Changes in the estimates of the reserves are included in net income in
the period determined. Amounts estimated to be paid within one year have been
classified as Other current liabilities, with the remainder included in
Insurance liabilities.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's subsidiaries outside the United
States, except for those subsidiaries located in highly inflationary economies,
are principally measured using the local currency as the functional currency.
Assets and liabilities of these subsidiaries are translated at the exchange
rates at the balance sheet date. Resulting translation adjustments are recorded
in the cumulative translation adjustment, a separate component of shareholders'
equity. Income and expense items are translated at average monthly exchange
rates. Gains and losses from foreign currency transactions of these subsidiaries
are included in net income. For subsidiaries operating in highly inflationary
economies, gains and losses on foreign currency transactions and balance sheet
translation adjustments are included in net income.
Effective January 1997, the Company's operations in Mexico were accounted for as
a highly inflationary economy due to the three-year cumulative rate of inflation
at December 31, 1996 exceeding 100%. The functional currency for the Company's
operations in Mexico was changed from the peso to the U.S. dollar.
-29-
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Effective January 1998, the Company's operations in Brazil will no longer be
accounted for as a highly inflationary economy, because the three-year
cumulative rate of inflation is below 100%. The Company will measure the
financial statements of its Brazilian entity using the Brazilian real as the
entity's functional currency.
FINANCIAL INSTRUMENTS AND HEDGING
The Company has subsidiaries principally operating in North America, Latin
America, Europe and Asia-Pacific. These operations are exposed to fluctuations
in related foreign currencies, in the normal course of business. The Company
seeks to reduce exposure to foreign currency fluctuations, primarily the
European currencies, through the use of forward exchange contracts. The Company
does not hold or issue financial instruments for trading purposes, and it is the
Company's policy to prohibit the use of derivatives for speculative purposes.
The Company has a Foreign Currency Risk Management Committee that meets
periodically to monitor foreign currency risks.
The Company enters into forward foreign exchange contracts to hedge transactions
of its non-U.S. subsidiaries, for firm commitments to purchase equipment and for
export sales denominated in foreign currencies. These contracts generally are
for 90 to 180 days or less. For those contracts that hedge an identifiable
transaction, gains or losses are deferred and accounted for as part of the
underlying transactions. The cash flows from these contracts are classified
consistent with the cash flows from the transaction being hedged. The Company
also enters into forward foreign exchange contracts for intercompany foreign
currency commitments. These foreign exchange contracts do not qualify as hedges,
and they are recognized in income based on their fair market value.
OPTIONS FOR COMMON STOCK
The Company uses the intrinsic value based method to account for options granted
for the purchase of common stock. No compensation expense is recognized on the
grant date since, at that date, the option price equals the market price of the
underlying common stock. The Company discloses the pro-forma effect of
accounting for stock options under the fair value method.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share" (SFAS 128). This statement establishes standards for
computing and presenting earnings per share. Basic earnings per share is
calculated using the average shares of common stock outstanding, while diluted
earnings per share reflects the potential dilution that could occur if stock
options were exercised. The Company adopted SFAS 128 in the fourth quarter of
1997.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain reclassifications have been made to prior years amounts to conform with
current year classifications.
NEW FINANCIAL ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" (SFAS 130), which is effective for years
beginning after December 15, 1997. This statement establishes standards for the
reporting and display of comprehensive income and its components. Comprehensive
income is defined to include all changes in equity during a period except those
resulting from investments by owners and distributions to owners. The Company
will adopt SFAS 130 and begin reporting comprehensive income in the first
quarter of 1998.
In June 1997, the Financial Accounting Standards Board also issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS
131), which is effective for fiscal years beginning after December 15, 1997.
This statement establishes standards for the disclosure of segment results. It
requires that segments be determined using the "management approach," which
means the way management organizes the segments within the enterprise for making
operating decisions and assessing performance. The Company will adopt SFAS 131
in the fourth quarter of 1998, and is still evaluating its impact on the
Company's segment disclosures.
-31-
2. COMMON STOCK SPLIT
On November 19, 1996, the Board of Directors declared a two-for-one stock split
on the Company's common stock. One additional share was issued for each share of
common stock held by shareholders of record as of the close of business on
January 15, 1997. New shares were distributed on February 14, 1997. Common stock
and additional paid-in capital as of December 31, 1996 reflect this split. All
references to the number of common shares and per share amounts in the
consolidated financial statements and related notes reflect the effect of the
split for all prior periods presented.
-32-
3. DISCONTINUED DEFENSE BUSINESS
On August 25, 1997, the Company and FMC Corporation signed an agreement to sell
United Defense, L.P. for $850 million, and the sale was completed on October 6,
1997. Prior to the sale, FMC had been the managing general partner and 60% owner
of United Defense, L.P., while the Company owned the balance of 40% as the
limited partner. United Defense supplies ground combat and naval weapons systems
for the U.S. and military customers around the world.
On the Consolidated Statement of Income under Discontinued Operations, "Equity
in income of defense business" includes equity income through August 1997 (the
measurement date) from the Company's 40% interest in United Defense, L.P. The
sale resulted in pre-tax cash proceeds to the Company of $344 million and
resulted in an after tax gain on the sale of $150 million or $3.08 per share
after taking into account certain retained liabilities from the partnership and
estimated post closing net worth adjustments, as well as pre-partnership
formation contingencies and other defense business contingencies.
The Consolidated Balance Sheet as of December 31, 1996 has been restated to
segregate the Company's investment in the defense business. On the Consolidated
Statement of Cash Flows, equity in income of the defense business and
distributions from the defense business through the measurement date are
included in "Equity in income of unconsolidated entities" and "Dividends or
distributions from unconsolidated entities", respectively.
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4. PENDING ACQUISITIONS
On February 2, 1998, the Company signed a definitive agreement with Charter plc
to acquire Charter's Pandrol Jackson railway track maintenance business in a
cash transaction. Pandrol Jackson manufactures, markets worldwide, and provides
under contract a wide range of equipment and services used in railway track
maintenance. Pandrol Jackson had 1997 sales of approximately $71 million.
On February 17, the Company acquired EFI Corporation (EFIC) from Racal
Electronics Plc for approximately $7.2 million in cash. EFIC produces
lightweight composite cylinders used extensively in firefighter breathing
apparatus as well as other industrial and commercial applications. EFIC is
expected to contribute annual sales of approximately $10 million.
On February 20, 1998, the Company signed a definitive agreement to acquire
Chemi-Trol Chemical Co. for approximately $46 million. Chemi-Trol's principal
business is the production and distribution of steel pressure tanks for the
storage of propane gas and anhydrous ammonia. Chemi-Trol had sales of
approximately $50 million in 1997.
On March 4, 1998, the Company and Faber Prest Plc announced that they have
agreed to a recommended tender offer under which the Company would acquire Faber
Prest, a UK-based provider of services to worldwide steel producers and
integrated logistics services to the steel industry and other market sectors.
For the year ended September 30, 1997, Faber Prest recorded sales of (British
pound)84 million (approximately U.S. $137 million). The Company's cash offer is
valued at approximately (British pound)58 million (U.S. $95 million), and is
subject to the tender of 90% of the outstanding shares of Faber Prest's common
stock, as well as certain other conditions and regulatory approvals.
-34-
5. INVESTMENTS IN DEBT SECURITIES
The debt securities held at December 31, 1997 and 1996 consist of:
[Download Table]
(In thousands) 1997
------------------------------------------------------------------------------------
AMORTIZED UNREALIZED FAIR
AVAILABLE-FOR-SALE COST GAINS LOSSES VALUE
------------------------------------------------------------------------------------
Corporate debt securities $39,903 $- $ 46 $39,857
====================================================================================
HELD-TO-MATURITY
------------------------------------------------------------------------------------
Corporate debt securities $ 3,007 $5 $ -- $ 3,012
Government debt
securities non-U.S 1,003 1 -- 1,004
------------------------------------------------------------------------------------
$ 4,010 $6 $ -- $ 4,016
====================================================================================
[Download Table]
(In thousands) 1996
------------------------------------------------------------------------------------
AMORTIZED UNREALIZED FAIR
HELD-TO-MATURITY COST GAINS LOSSES VALUE
------------------------------------------------------------------------------------
Corporate debt securities $23,468 $ 63 $ 14 $23,517
Government debt
securities non-U.S 9,770 45 7 9,808
------------------------------------------------------------------------------------
$33,238 $108 $ 21 $33,325
====================================================================================
There were no debt securities held as available-for-sale at December 31, 1996.
At December 31, 1997 and 1996, $43.9 million and $29.2 million, respectively, of
debt securities were due in one year or less, and included on the Consolidated
Balance Sheet as Investments in debt securities. At December 31, 1996, $4.0
million were due in over one year, and included in Other assets.
For the years ended December 31, 1997, 1996, and 1995, there were no gains or
losses on sales of available-for-sale debt securities.
-35-
6. ACCOUNTS RECEIVABLE AND INVENTORIES
Accounts receivable are net of an allowance for doubtful accounts of $6.8
million and $8.5 million at December 31, 1997 and 1996, respectively.
Inventories consist of:
[Download Table]
(In thousands) 1997 1996
----------------------------------------------------------------------------------
Finished goods $ 27,639 $ 24,743
Work in process 27,979 25,843
Raw materials and purchased parts 60,982 57,581
Stores and supplies 18,554 17,851
----------------------------------------------------------------------------------
$ 135,154 $ 126,018
==================================================================================
Valued at lower of cost or market:
LIFO basis $ 101,184 $ 90,445
FIFO basis 23,989 24,663
Average cost basis 9,981 10,910
----------------------------------------------------------------------------------
$ 135,154 $ 126,018
==================================================================================
Inventories valued on the LIFO basis at December 31, 1997 and 1996 were
approximately $35.5 million and $37.1 million, respectively, less than the
amounts of such inventories valued at current costs.
-36-
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of:
[Enlarge/Download Table]
(In thousands) 1997 1996
------------------------------------------------------------------------------------------------
Land and improvements $ 22,847 $ 26,479
Buildings and improvements 119,679 129,930
Machinery and equipment 1,005,613 981,384
Uncompleted construction 54,644 49,659
------------------------------------------------------------------------------------------------
1,202,783 1,187,452
Less accumulated depreciation 690,870 674,340
------------------------------------------------------------------------------------------------
$ 511,913 $ 513,112
================================================================================================
The estimated useful lives of different types of assets are:
[Enlarge/Download Table]
--------------------------------------------------------------------------------------
Land improvements 10 years
Buildings and improvements 10 to 50 years
Certain plant, buildings and installations 5 to 15 years
(Principally Metal Reclamation and Mill Services Group)
Machinery and equipment 3 to 20 years
--------------------------------------------------------------------------------------
-37-
8. DEBT AND CREDIT AGREEMENTS
The Company has a $400 million Five-Year Competitive Advance and Revolving
Credit Facility ("credit facility") maturing in July, 2001. Borrowings under
this agreement are available in U.S. dollars or Eurocurrencies and serve as
back-up to the Company's U. S. commercial paper program. Interest rates are
either negotiated, based upon the U.S. federal funds interbank market, prime, or
based upon the London Interbank Offered Rate (LIBOR) plus a margin. The Company
pays a facility fee (currently 0.08% per annum) that varies based upon its
credit ratings. At December 31, 1997 and 1996, there were no borrowings
outstanding.
The Company can also issue up to $300 million of short-term notes in the U.S.
commercial paper market. In addition, the Company has a 3 billion Belgian franc
commercial paper program (approximately U.S. $81 million) which is used to
borrow a variety of Eurocurrencies to fund the Company's European operations.
The Company limits the aggregate commercial paper and credit facility borrowings
at any one time to a maximum of $400 million. Interest rates, which are based on
market conditions, have been lower than on comparable borrowings under the
credit facility. At December 31, 1997 and 1996, $30.8 million and $36.6 million
of commercial paper was outstanding, respectively. Commercial paper is
classified as long-term debt at December 31, 1997 and 1996, because the Company
has the ability and intent to refinance it on a long-term basis through existing
long-term credit facilities.
Short-term debt, including overdraft facilities, amounted to $22.8 million and
$16.9 million at December 31, 1997 and 1996, respectively. The weighted average
interest rate for short-term borrowings at December 31, 1997 and 1996 was 5.8%
and 6.9%, respectively.
-38-
8. DEBT AND CREDIT AGREEMENTS (CONTINUED)
Long-term debt consists of:
[Enlarge/Download Table]
(In thousands) 1997 1996
-------------------------------------------------------------------------------------------------------------
6.0% Notes due September 15, 2003............................................... $ 150,000 $ 150,000
Commercial Paper Borrowings, with a weighted
average interest rate of 3.8%.............................................. 30,757 36,614
Industrial Development Bonds, payable in varying
amounts from 2001 to 2005 with a weighted
average interest rate of 6.0%.............................................. 11,400 11,400
Project financing and other, payable in varying
amounts to 2001 with a weighted average
interest rate of 9.7%...................................................... 10,371 38,697
-------------------------------------------------------------------------------------------------------------
202,528 236,711
Less current maturities......................................................... 3,630 9,326
-------------------------------------------------------------------------------------------------------------
$ 198,898 $ 227,385
=============================================================================================================
The credit facility and certain notes payable agreements contain covenants
restricting, among other things, the amount of debt that can be issued as
defined. At December 31, 1997, the Company was in compliance with these
covenants.
The maturities of long-term debt for the four years following December 31, 1998,
are:
[Download Table]
(In thousands)
---------------------------------------------------------------------
1999 $ 2,759 2001 $37,950
2000 $ 2,494 2002 $ 486
---------------------------------------------------------------------
Cash payments for interest on all debt were (in millions) $16.3, $20.3 and $28.8
in 1997, 1996 and 1995, respectively.
The Company has on file with the Securities and Exchange Commission, a Form S-3
shelf registration for the possible issuance of up to an additional $200 million
of new debt securities, preferred stock or common stock.
-39-
9. LEASES
The Company leases certain property and equipment under noncancelable operating
leases. Rental expense under all operating leases was (in millions) $13.5, $13.7
and $12.2 in 1997, 1996 and 1995, respectively.
Future minimum lease payments under operating leases with noncancelable terms
are:
[Enlarge/Download Table]
AFTER
(In thousands) 1998 1999 2000 2001 2002 2002
-----------------------------------------------------------------------------------------------------
Minimum Lease Payments $11,027 $7,594 $5,830 $4,917 $4,012 $13,868
-----------------------------------------------------------------------------------------------------
-40-
10. COMMITMENTS AND CONTINGENCIES
DISCONTINUED DEFENSE BUSINESS - CONTINGENCIES
FEDERAL EXCISE TAX AND OTHER MATTERS RELATED TO THE FIVE-TON TRUCK CONTRACT
In 1995, the Company, the United States Army, and the United States Department
of Justice concluded a settlement of Harsco's previously reported claims against
the Army relating to Federal Excise Tax ("FET") arising under a completed 1986
contract for the sale of five-ton trucks to the Army. On September 27, 1995, the
Army paid the Company $49 million in accordance with the settlement terms. The
Company released the Army from any further liability for those claims, and the
Department of Justice released the Company from a threatened action for damages
and civil penalties based on an investigation conducted by the Department's
Commercial Litigation Branch that had been pending for several years. During the
performance of the five-ton truck contract, the Company recorded an account
receivable of $62.5 million for its claims against the Army relating to Federal
Excise Tax. As a result of accepting the $49 million in settlement, the Company
recorded a non-recurring, pre-tax, non-cash charge of $13.5 million (after-tax
charge of $8.2 million, $.16 per share) in 1995.
The settlement preserves the rights of the parties to assert claims and defenses
under the Internal Revenue Code, and rights of the Army and the Company to claim
certain amounts that may be owed by either party to reconcile possible
underpayments or overpayments on the truck contract as part of the formal
contract close-out process.
The settlement does not resolve the claim by the Internal Revenue Service that,
contrary to the Company's position, certain cargo truck models sold by the
Company should be considered to have gross vehicle weights in excess of the
33,000 pound threshold under the Federal Excise Tax law, are not entitled to an
exemption from the Federal Excise Tax under any other theory, and therefore are
taxable. On December 19, 1996, the District Director of the Internal Revenue
Service issued a 30-day letter and examination report (the "Report") that
proposed an increase in Federal Excise Tax of $33.7 million plus penalties of
$6.9 million and applicable interest currently estimated by the Company to be
$35.8 million, primarily on the grounds that those cargo truck models are
subject to the Federal Excise Tax. This proposed increase in Federal Excise Tax
takes into account offsetting credits of $9.2 million, based on a partial
allowance of the Company's $23.4 million claim that certain truck components are
exempt from the Federal Excise Tax. The Report disallowed in full the Company's
additional claim that it is entitled to the entire $52 million of Federal Excise
Tax (plus applicable interest currently estimated by the Company to be $31.3
million) the Company has paid on the five-ton trucks, on the grounds that such
trucks qualify for the Federal Excise Tax exemption applicable to certain
vehicles specially designed for the primary function of off-highway
transportation. In the event that the Company ultimately receives from the
Internal Revenue Service a refund of tax (including applicable interest) with
respect to which the Company has already received reimbursement from the Army,
the refund would be allocated between the Company and the Army. The Company
plans to vigorously contest the findings of the District Director. On March 19,
1997, the Company filed its formal written protest to these findings with the
Internal Revenue Service Office of the Regional Director of Appeals. Currently
the Company is engaged in discussions concerning these findings with the IRS
Appeals Officer assigned to this case. Although
- 41 -
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
there is risk of an adverse outcome, the Company believes that the cargo trucks
are not taxable. No recognition has been given in the accompanying financial
statements for the Company's claim with the Internal Revenue Service.
The settlement agreement with the Army preserves the Company's right to seek
reimbursement of after-imposed tax from the Army in the event that the cargo
trucks are determined to be taxable, but the agreement limits the reimbursement
to a maximum of $21 million. Additionally, in an earlier contract modification,
the Army accepted responsibility for $3.6 million of the potential tax, bringing
its total potential responsibility up to $24.6 million.
Under the settlement, the Army agreed that if the cargo trucks are determined to
be taxable, the 1993 decision of the Armed Services Board of Contract Appeals
(which ruled that the Company is entitled to a price adjustment to the contract
for reimbursement of FET paid on vehicles that were to be delivered after
October 1, 1988) will apply to the question of the Company's right to
reimbursement from the Army for after-imposed taxes on the cargo trucks. In the
Company's view, application of the 1993 decision will favorably resolve the
principal issues regarding any such future claim by the Company. Therefore, the
Company believes that even if the cargo trucks are ultimately held to be
taxable, the Army would be obligated to reimburse the Company for a majority of
the tax, (but not interest or penalty, if any), resulting in a net maximum
liability for the Company of $9.1 million plus penalties of $6.9 million and
applicable interest currently estimated by the Company to be $35.8 million. The
Company believes it is unlikely that resolution of this matter will have a
material adverse effect on the Company's financial position, however, it could
have a material effect on quarterly or annual results of operations.
M9 ARMORED COMBAT EARTHMOVER CLAIM
The Company and its legal counsel are of the opinion that the U.S. Government
did not exercise option three under the M9 Armored Combat Earthmover (ACE)
contract in a timely manner, with the result that the unit prices for options
three, four and five are subject to renegotiation. Claims reflecting the
Company's position were filed with respect to all options purported to be
exercised, totaling in excess of $60 million plus interest. In February 1998,
the Armed Services Board of Contract Appeals denied the Company's claims. The
Company intends to appeal the decision to the United States Court of Appeals for
the Federal Circuit. No recognition has been given in the accompanying financial
statements for any recovery on these claims.
OTHER DEFENSE BUSINESS LITIGATION
In 1992, the U.S. Government filed a counterclaim against the Company in a civil
suit alleging violations of the False Claims Act and breach of a contract to
supply M109A2 Self-Propelled Howitzers. The counterclaim was filed in the United
States Claims Court in response to the Company's claim of approximately $5
million against the Government for costs incurred on this contract relating to
the same issue. In May 1997, the Court issued a decision in the first phase of
the case, denying the Company's claim for reimbursement and granting the
Government's counterclaim for breach of contract and penalties under the False
Claims Act. The Court will consider the amount of damages and penalties in the
- 42 -
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
next phase of the case, and the decision will then be subject to the right of
appeal. The Government has filed a brief seeking penalties and treble damages
totaling $26 million. The Company intends to vigorously oppose this claim. The
Company and its counsel believe that resolution of these claims will not have a
material adverse effect on the Company's financial position, however, it could
have a material effect on quarterly or annual results of operations.
In 1992, the United States Government through its Defense Contract Audit Agency
commenced an audit of certain contracts for sale of tracked vehicles by the
Company to foreign governments, which were financed by the United States
Government through the Defense Security Assistance Agency. The Company
cooperated with the audit and responded to a number of issues raised by the
audit. In September 1994, the Company received a subpoena issued by the
Department of Defense Inspector General seeking various documents relating to
sale contracts between the Company and foreign governments which were funded by
the Defense Security Assistance Agency. The Company is continuing to cooperate
and is responding to Government document requests. Based on discussions with the
agent in charge and the Government auditors, it appears that the investigation
focuses on whether the Company made improper certifications to the Defense
Security Assistance Agency and other government contract accounting matters. The
Government has not asserted any claims at this time and it is too early to know
whether a claim will be asserted or what the nature of any such claim would be,
however, the Company's management and its counsel believe it is unlikely that
this issue will have a material adverse effect on the Company's financial
position.
In the fourth quarter of 1997, the Supreme Court of Switzerland upheld an
International Court of Arbitration award to Iran's Ministry of Defense of a net
amount of approximately $1.2 million. This consists of an award of $7.5 million
to Iran, offset by an award of $6.3 million to the Company for damages and legal
costs. The net liability for this award had been previously provided for by the
Company.
CONTINUING OPERATIONS - CONTINGENCIES
In June 1994, the shareholder of the Ferrari Group, a Belgium holding company
involved in steel mill services and other activities, filed a legal action in
Belgium against Heckett MultiServ, S.A. and S.E.A.E., subsidiaries of MultiServ
International N.V. (a subsidiary of the Company). The action alleges that these
two subsidiaries breached contracts arising from letters of intent signed in
1992 and 1993 concerning the possible acquisition of the Ferrari Group, claiming
that the subsidiaries were obligated to proceed with the acquisition and failed
to do so. The action seeks damages of 504 million Belgian francs (approximately
U.S. $13.6 million). The Company intends to vigorously defend against the action
and believes that based on conditions contained in the letters of intent and
other defenses it will prevail. The Company and its counsel believe that it is
unlikely that these claims will have a material adverse effect on the Company's
financial position or results of operations.
- 43 -
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
ENVIRONMENTAL
The Company is involved in a number of environmental remediation investigations
and clean-ups and, along with other companies, has been identified as a
"potentially responsible party" for certain waste disposal sites. While each of
these matters is subject to various uncertainties, it is probable that the
Company will agree to make payments toward funding certain of these activities
and it is possible that some of these matters will be decided unfavorably to the
Company. The Company has evaluated its potential liability, and its financial
exposure is dependent upon such factors as the continuing evolution of
environmental laws and regulatory requirements, the availability and application
of technology, the allocation of cost among potentially responsible parties, the
years of remedial activity required and the remediation methods selected. The
Consolidated Balance Sheet at December 31, 1997 and 1996, includes an accrual of
$3.4 million and $3.9 million respectively for environmental matters. The
amounts charged to earnings on a pre-tax basis related to environmental matters
totaled $1.7 million for the year 1997 and $1.2 million for the each of the
years 1996 and 1995.
The liability for future remediation costs is evaluated on a quarterly basis.
Actual costs to be incurred at identified sites in future periods may vary from
the estimates, given inherent uncertainties in evaluating environmental
exposures. The Company does not expect that any sum it may have to pay in
connection with environmental matters in excess of the amounts recorded or
disclosed above would have a material adverse effect on its financial position
or results of operations.
OTHER
The Company is subject to various other claims, legal proceedings and
investigations covering a wide range of matters that arose in the ordinary
course of business. In the opinion of management, all such matters are
adequately covered by insurance or by accruals, and if not so covered, are
without merit or are of such kind, or involve such amounts, as would not have a
material adverse effect on the financial position or results of operations of
the Company.
- 44 -
11. EMPLOYEE BENEFIT PLANS
PENSION BENEFITS
The Company has pension and profit sharing retirement plans, most of which are
noncontributory, covering substantially all its employees. The benefits for
salaried employees generally are based on years of service and the employee's
level of compensation during specified periods of employment. Plans covering
hourly employees generally provide benefits of stated amounts for each year of
service. The multi-employer plans which the Company participates in provide
benefits to certain unionized employees. The Company's funding policy for
qualified plans is consistent with statutory regulations and customarily equals
the amount deducted for income tax purposes. The Company's policy is to amortize
prior service costs over the average future service period of active plan
participants.
Pension expense consists of:
[Enlarge/Download Table]
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------
Defined benefit plans:
Service cost...................................... $ 9,519 $ 9,690 $ 9,232
Interest cost..................................... 15,129 15,165 13,958
Actual return on plan assets...................... (61,105) (29,911) (35,944)
Curtailment gain.................................. (5,468) - -
Net amortization and deferral..................... 28,895 5,724 14,921
-----------------------------------------------------------------------------------------------------------------------
(13,030) 668 2,167
Multi-employer plans................................... 4,457 3,789 3,610
Defined contribution plans............................. 4,131 5,910 4,530
-----------------------------------------------------------------------------------------------------------------------
Pension (income) expense.......................... $ (4,442) $ 10,367 $ 10,307
=======================================================================================================================
In 1997, the curtailment gain of $5.5 million was the result of a sizable
reduction in the number of employees under a plan related to a discontinued
facility. This gain, along with certain costs, was recorded under facilities
discontinuance and reorganization costs in the Consolidated Statement of Income.
- 45 -
11. EMPLOYEE BENEFIT PLANS (CONTINUED)
The financial status of the pension plans and amounts recognized in the
Consolidated Balance Sheet at December 31, 1997 and 1996 are:
[Enlarge/Download Table]
ASSETS EXCEED ACCUMULATED BENEFITS
ACCUMULATED BENEFITS EXCEED ASSETS
(In thousands) 1997 1996 1997 1996
-----------------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit
obligations:
Vested........................................$ 150,930 $ 143,517 $ 32,971 $ 18,322
Non-vested.................................... 7,167 6,116 1,587 1,308
-----------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation..................... 158,097 149,633 34,558 19,630
Effect of increase in compensation................. 23,972 32,947 3,801 3,051
-----------------------------------------------------------------------------------------------------------------------
Projected benefit obligation....................... 182,069 182,580 38,359 22,681
Plan assets at fair value.......................... 311,500 282,536 23,606 9,662
-----------------------------------------------------------------------------------------------------------------------
Plan assets in excess of (less than)
projected benefit obligation.................. 129,431 99,956 (14,753) (13,019)
Unrecognized prior service cost.................... 9,911 11,183 2,835 2,590
Unrecognized net (gain) loss....................... (77,784) (59,490) 3,266 2,101
Unrecognized net asset............................. (18,099) (23,529) (9) 70
Minimum liability adjustment....................... - - (4,678) (3,146)
-----------------------------------------------------------------------------------------------------------------------
Prepaid pension asset (liability).................. $ 43,459 $ 28,120 $ (13,339) $ (11,404)
=======================================================================================================================
Plan assets include equity and fixed-income securities. At December 31, 1997 and
1996, 732,640 shares of the Company's common stock with a fair market value of
$31.6 million and $25.1 million, respectively, are included in plan assets.
Dividends paid on such stock amounted to $0.6 million and $0.6 million in 1997
and in 1996, respectively.
The actuarial assumptions used for the defined benefit pension plans, including
international plans, are:
[Enlarge/Download Table]
1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------
Weighted average assumed discount rates........................... 7.4% 7.8% 7.5%
Weighted average expected long-term rates of
return on plan assets........................................ 9.1% 9.3% 9.0%
Rates of compensation increase.................................... 4.5% 5.2% 4.8%
-----------------------------------------------------------------------------------------------------------------------
The change in the assumed discount rate in 1997 increased the projected benefit
obligation by $7.6 million. The change in the assumed discount rate had the
effect of decreasing the projected benefit obligation by $9.7 million in 1996.
In 1995, changes in the assumed discount and compensation rates had the effect
of increasing the projected benefit obligation by $4.6 million.
- 46 -
11. EMPLOYEE BENEFIT PLANS (CONTINUED)
POSTRETIREMENT BENEFITS
The Company has postretirement life insurance benefits for a majority of
employees, and postretirement health care benefits for a limited number of
employees mainly under plans related to acquired companies. The cost of life
insurance and health care benefits are accrued for current and future retirees
and are recognized as determined under the projected unit credit actuarial
method. Under this method, the Company's obligation for postretirement benefits
is to be fully accrued by the date employees attain full eligibility for such
benefits. The Company's postretirement health care and life insurance plans are
unfunded.
The postretirement benefit expense (health care and life insurance) was $0.2
million for each of the years 1997, 1996 and 1995. The components of these
expenses are not shown separately as they are not material.
The 1997 and 1996 postretirement benefit liability recorded in the Consolidated
Balance Sheet consists of:
[Enlarge/Download Table]
(In thousands) 1997 1996
-----------------------------------------------------------------------------------------------------------------------
HEALTH LIFE Health Life
CARE INSURANCE TOTAL Care Insurance Total
-----------------------------------------------------------------------------------------------------------------------
Current retirees $ 2,235 $ 2,677 $ 4,912 $ 2,550 $ 2,584 $ 5,134
Future retirees 399 909 1,308 415 849 1,264
-----------------------------------------------------------------------------------------------------------------------
Accumulated benefit
obligation 2,634 3,586 6,220 2,965 3,433 6,398
Unrecognized gain 977 1,239 2,216 888 1,276 2,164
-----------------------------------------------------------------------------------------------------------------------
Accumulated postretirement
benefit liability $ 3,611 $ 4,825 $ 8,436 $ 3,853 $ 4,709 $ 8,562
=======================================================================================================================
The actuarial assumptions used for postretirement benefit plans are:
[Enlarge/Download Table]
(DOLLARS IN THOUSANDS) 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------
Assumed discount rate..................................... 7.25% 7.5% 7.0%
Health care cost trend rate .............................. 8.7% 9.1% 9.5%
Decreasing to ultimate rate............................... 5.5% 5.5% 5.5%
Effect of one percent increase in health care cost trend rate:
On cost components............................... $ 47 $ 29 $ 32
On accumulated benefit obligation................ $ 192 $ 223 $ 241
-----------------------------------------------------------------------------------------------------------------------
It is anticipated that the health care cost trend rate will decrease from 8.3%
in 1998 to 5.5% in the year 2005.
- 47 -
11. EMPLOYEE BENEFIT PLANS (CONTINUED)
SAVINGS PLAN
The Company has a 401(k) savings plan which covers substantially all U.S.
employees with the exception of any such employees represented by a collective
bargaining agreement, unless the agreement expressly provides otherwise.
Employee contributions are generally determined as a percentage of covered
employee's compensation. The expense for contributions to the plan by the
Company was (in millions) $4.5, $3.8 and $3.6 for 1997, 1996 and 1995,
respectively.
EXECUTIVE INCENTIVE COMPENSATION PLAN
Under the 1995 Executive Incentive Compensation Plan, the Management Development
and Compensation Committee awards 60% of the value of any earned performance to
be paid to participants in the form of cash and 40% in the form of restricted
shares of the Company's common stock. Upon the request of the participant, the
Committee may make the incentive award payable all in cash, subject to a 25%
reduction in the total amount of the award. Awards are made in February of the
following year. The Company accrues amounts based on performance reflecting the
value of cash and common stock which is anticipated to be earned for the current
year. Compensation expense relating to these awards was (in millions) $5.1,
$5.5, and $5.2 in 1997, 1996, and 1995, respectively.
- 48 -
12. INCOME TAXES
Income from continuing operations before income taxes and minority interest in
the Consolidated Statement of Income consists of:
[Enlarge/Download Table]
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes:
United States................................................ $ 93,386 $ 81,063 $ 51,138
International................................................ 78,225 70,460 58,432
-----------------------------------------------------------------------------------------------------------------------
$ 171,611 $ 151,523 $ 109,570
=======================================================================================================================
Provision for income taxes:
Currently payable:
Federal.................................................. $ 21,627 $ 28,965 $ 34,903
State.................................................... 4,309 6,602 8,081
International............................................ 30,538 24,931 23,882
-----------------------------------------------------------------------------------------------------------------------
56,474 60,498 66,866
Deferred federal and state................................... 9,426 1,082 (22,398)
Deferred international....................................... (687) 501 1,287
-----------------------------------------------------------------------------------------------------------------------
$ 65,213 $ 62,081 $ 45,755
=======================================================================================================================
Cash payments for income taxes were (in millions) $167.0, $85.4 and $75.5, for
1997, 1996 and 1995, respectively. Approximately $100.0 million of the taxes
paid in 1997 related to the gain on the disposal of the defense business.
- 49 -
12. INCOME TAXES (CONTINUED)
The following is a reconciliation of the normal expected statutory U.S. federal
income tax rate to the effective rate as a percentage of Income from continuing
operations before income taxes and minority interest as reported in the
Consolidated Statement of Income:
[Enlarge/Download Table]
1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------
U.S. federal income tax rate...................................... 35.0% 35.0% 35.0%
State income taxes, net of federal
income tax benefit........................................... 2.1 2.8 3.2
Export sales corporation benefit.................................. (.4) (.4) (.5)
International losses for which no tax benefit
was recorded................................................. .4 .9 2.8
Difference in effective tax rates on
international earnings and remittances....................... (.2) (.6) (.7)
Nondeductible acquisition costs................................... 1.8 1.9 2.6
Other, net........................................................ (.7) 1.4 (.6)
-----------------------------------------------------------------------------------------------------------------------
Effective income tax rate......................................... 38.0% 41.0% 41.8%
=======================================================================================================================
The tax effects of the primary temporary differences giving rise to the
Company's deferred tax assets and liabilities for the years ended December 31,
1997 and 1996 are:
[Enlarge/Download Table]
(In thousands) 1997 1996
---------------------------------------------------------------------------------------------------------------------
Deferred income taxes ASSET LIABILITY Asset Liability
---------------------------------------------------------------------------------------------------------------------
Depreciation $ -- $ 38,676 $ -- $ 40,997
Expense accruals 46,783 -- 34,799 --
Inventories 3,314 -- 3,598 --
Provision for receivables 2,089 -- 2,238 --
Postretirement benefits 3,385 -- 3,453 --
Deferred revenue -- 5,039 -- 4,985
Unrelieved foreign tax losses 6,047 -- 12,854 --
Unrelieved domestic tax losses 2,400 -- -- --
Pensions -- 10,324 -- 8,478
Investment in United Defense, L.P. -- -- 553 --
Other -- 50 -- 61
---------------------------------------------------------------------------------------------------------------------
64,018 54,089 57,495 54,521
Valuation allowance (8,039) -- (9,471) --
---------------------------------------------------------------------------------------------------------------------
Total deferred income taxes $ 55,979 $ 54,089 $ 48,024 $ 54,521
=====================================================================================================================
At December 31, 1997 and 1996, Other current assets included deferred income tax
benefits of $38.7 million and $22.2 million, respectively.
- 50 -
12. INCOME TAXES (CONTINUED)
At December 31, 1997, certain of the Company's subsidiaries had total available
net operating loss carryforwards ("NOLs") of approximately $26.2 million, of
which approximately $12.5 million may be carried forward indefinitely and $13.7
million have varying expiration dates. Included in the total are $14.2 million
of preacquisition NOLs.
During 1997 and 1996, $2.6 million and $3.7 million, respectively, of
preacquisition NOLs were utilized by the Company, resulting in tax benefits of
$1.0 million and $1.4 million, respectively.
The valuation allowance of $8.0 million and $9.5 million at December 31, 1997
and 1996, respectively, relates principally to cumulative unrelieved tax losses
which are uncertain as to realizability. To the extent that the preacquisition
NOLs are utilized in the future and the associated valuation allowance reduced,
the tax benefit will be allocated to reduce the cost in excess of net assets of
businesses acquired.
The change in the valuation allowances for 1997 and 1996 results primarily from
the utilization of international tax loss carryforwards and the release of
valuation allowances in certain international jurisdictions based on the
Company's reevaluation of the realizability of future benefits resulting from
tax planning strategies. Further, the 1997 change was also affected by the
expiration of tax loss carryforwards in certain international jurisdictions and
loss carryforwards acquired in a domestic acquisition. The release of valuation
allowances in certain jurisdictions is allocated to reduce the cost in excess of
net assets of businesses acquired. There was no reduction in 1997 or 1996.
- 51 -
13. CAPITAL STOCK
The authorized capital stock consists of 150,000,000 shares of common stock and
4,000,000 shares of preferred stock, both having a par value of $1.25 per share.
The preferred stock is issuable in series with terms as fixed by the Board of
Directors. None of the preferred stock has been issued. On June 24, 1997, the
Company adopted a revised Shareholder Rights Plan to replace the Company's 1987
Plan which expired on September 28, 1997. Under the new Plan, the Board declared
a dividend to shareholders of record on September 28, 1997, of one Right for
each share of common stock. The rights may only be exercised if, among other
things, a person or group has acquired 15% or more, or intends to commence a
tender offer for 20% or more, of the Company's common stock. Each right entitles
the holder to purchase 1/100th share of a new Harsco Junior Participating
Cumulative Preferred Stock at an exercise price of $150. Once the rights become
exercisable, if any person acquires 20% or more of the Company's common stock,
the holder of a right will be entitled to receive common stock calculated to
have a value of two times the exercise price of the right. The rights, which
expire on September 28, 2007, do not have voting power, and may be redeemed by
the Company at a price of $.05 per right at any time until the 10th business day
following public announcement that a person or group has accumulated 15% or more
of the Company's common stock. At December 31, 1997, 750,000 shares of $1.25 par
value preferred stock were reserved for issuance upon exercise of the rights.
In November 1997, the Board of Directors authorized the purchase, over a
one-year period, of up to 2,000,000 shares of the Company's common stock.
Through December 31, 1997, 938,741 shares of common stock have been purchased
under this plan.
[Enlarge/Download Table]
COMMON STOCK SUMMARY
-----------------------------------------------------------------------------------------------------------------------
SHARES TREASURY SHARES
BALANCES ISSUED SHARES OUTSTANDING
-----------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1994................................ 64,687,106 14,322,606 50,364,500
DECEMBER 31, 1995................................ 65,075,760 14,972,662 50,103,098
DECEMBER 31, 1996................................ 65,458,202 15,855,850 49,602,352
DECEMBER 31, 1997................................ 65,854,087 18,877,957 46,976,130
-----------------------------------------------------------------------------------------------------------------------
The following is a reconciliation of the average shares of common stock used to
compute basic earnings per common share to the shares used to compute diluted
earnings per common share as shown on the Consolidated Statement of Income:
[Enlarge/Download Table]
(Dollars in thousands, except per share data) 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------
Income from continuing operations............................... $ 100,400 $ 83,903 $ 61,318
=======================================================================================================================
Average shares of common stock outstanding used to
compute basic earnings per common share..................... 48,754,212 49,894,515 50,504,707
Additional common shares to be issued assuming exercise
of stock options, net of shares assumed reacquired.......... 437,660 423,149 352,222
-----------------------------------------------------------------------------------------------------------------------
Shares used to compute dilutive effect of stock options......... 49,191,872 50,317,664 50,856,929
=======================================================================================================================
Basic earnings per common share from continuing operations...... $ 2.06 $ 1.68 $ 1.21
=======================================================================================================================
Diluted earnings per common share from continuing
operations.................................................. $ 2.04 $ 1.67 $ 1.20
=======================================================================================================================
- 52 -
14. STOCK-BASED COMPENSATION
The Company's net income and net income per common share would have been reduced
to the pro forma amounts indicated below if compensation cost for the Company's
stock option plan had been determined based on the fair value at the grant date
for awards in accordance with the provisions of SFAS 123.
[Enlarge/Download Table]
(In thousands, except per share) 1997 1996 1995
---------------------------------------------------------------------------------------------------------
Net income - as reported $ 278,832 $ 119,009 $ 97,377
Net income - pro forma 277,101 117,622 96,108
Net income per common share - as reported 5.72 2.39 1.93
Net income per common share - pro forma 5.68 2.36 1.90
--------------------------------------------------------------------------------------------------------
The fair value of the options granted during 1997, 1996 and 1995 is estimated on
the date of grant using the binomial option pricing model. The major assumptions
used and the estimated fair value are listed as follows:
[Enlarge/Download Table]
EXPECTED RISK FREE RATE OF
EXPECTED STOCK INTEREST DIVIDEND FAIR
TERM VOLATILITY RATE DIVIDEND INCREASE VALUE
-----------------------------------------------------------------------------------------------------------------------
1997
Incentive Stock Options 4 years 16.0% 6.46% $.80 5% $6.52
Nonqualified Stock Options 4 years 16.0% 6.50% $.80 5% $7.24
1996
Incentive Stock Options 4 years 16.0% 5.14% $.76 5% $4.545
Nonqualified Stock Options 4 years 16.0% 6.30% $.76 5% $6.340
1995
Incentive Stock Options 4 years 16.0% 7.69% $.74 5% $3.740
Nonqualified Stock Options 4 years 16.0% 7.07% $.74 5% $4.005
-----------------------------------------------------------------------------------------------------------------------
The Company has granted stock options to Officers and Directors for the purchase
of its common stock under two shareholder approved plans.
The 1995 Executive Incentive Compensation Plan authorizes the issuance of up to
4,000,000 shares of the Company's common stock for use in paying incentive
compensation awards in the form of restricted stock and stock options. The 1995
Non-Employee Directors' Stock Plan authorizes the issuance of up to 300,000
shares of the Company's common stock for stock option awards. Options are
granted at fair market value at date of grant and become exercisable commencing
one year later. The options expire ten years from the date of grant. The award
of shares and options under the 1995 Executive Incentive Compensation Plan
commenced in 1996, while the awards of options under the 1995 Non-Employee
Directors' Stock Plan commenced in May 1995. Upon shareholder approval of these
two plans in 1995, the Company terminated the use of the 1986 stock option plan
for granting of stock option awards. At December 31, 1997, there were 3,316,302
and 254,000 shares available for granting restricted stock and stock options
under the 1995 Executive Incentive Compensation Plan and the 1995 Non-Employee
Directors' Stock Plan, respectively.
- 53 -
14. STOCK-BASED COMPENSATION (CONTINUED)
Restricted stock awards entitle the participant to full dividends, paid in
shares of restricted stock, and voting rights. Restricted stock awards generally
vest over a three year period. Unvested shares are restricted as to disposition
and subject to forfeiture under certain circumstances.
At December 31, 1997, options to purchase 793,061 shares were exercisable.
Changes during 1997, 1996 and 1995 in options outstanding were:
[Enlarge/Download Table]
SHARES UNDER OPTION PRICE WEIGHTED AVERAGE
OPTION RANGE PER SHARE EXERCISE PRICE
-----------------------------------------------------------------------------------------------------------------
Outstanding, January 1, 1995 1,347,280 $11.72 to $21.625 $18.247
Granted 362,000 21.6875 to 23.8125 21.793
Exercised (388,654) 11.72 to 21.625 17.134
Terminated and expired (35,708) 13.78 to 21.6875 20.435
-----------------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1995 1,284,918 11.72 to 23.8125 19.522
Granted 311,150 29.47 to 34.6875 29.705
Exercised (382,442) 12.44 to 29.47 18.954
Terminated and expired (11,600) 29.47 29.470
-----------------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1996 1,202,026 11.72 to 34.6875 22.243
Granted 294,600 34.28 to 37.06 34.412
Exercised (395,885) 11.72 to 29.47 20.811
Terminated and expired (15,280) 20.78 to 34.28 22.902
-----------------------------------------------------------------------------------------------------------------
OUTSTANDING, DECEMBER 31, 1997 1,085,461 $11.72 TO $37.06 $26.058
=================================================================================================================
The following table summarizes information concerning currently outstanding and
exercisable options.
[Enlarge/Download Table]
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------ -------------------------------
REMAINING
RANGE OF NUMBER CONTRACTUAL LIFE WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISABLE PRICES OUTSTANDING IN YEARS EXERCISE PRICE EXERCISABLE EXERCISE PRICE
-------------------------------------------------------------------------------------------------------------------
$11.72 - $17.625 122,936 3.1 $ 14.371 122,936 $ 14.371
20.69 - 23.8125 424,867 6.3 21.549 424,867 21.549
29.47 - 37.06 537,658 8.6 32.294 245,258 29.768
-------------------------------------------------------------------------------------------------------------------
1,085,461 793,061
===================================================================================================================
During 1997 and 1996, the Company had non-cash transactions related to stock
option exercises of $2.3 million and $1.5 million, respectively, whereby old
shares are exchanged for new shares.
- 54 -
14. STOCK-BASED COMPENSATION (CONTINUED)
The following table summarizes the restricted stock activity:
[Enlarge/Download Table]
1997 1996
----------------------------------------------------------------------------------------------------------------------
Restricted shares awarded....................................................... 57,622 60,660
Restricted shares forfeited..................................................... 135 294
Weighted average market value of stock on grant date............................ $36.6875 $32.6875
----------------------------------------------------------------------------------------------------------------------
During 1997, 1996 and 1995, the Company recorded $1.9 million, $2.1 million and
$2.0 million, respectively, in compensation expense related to restricted stock.
- 55 -
15. FINANCIAL INSTRUMENTS
OFF-BALANCE SHEET RISK
As collateral for performance and to ceding insurers, the Company is
contingently liable under standby letters of credit and bonds in the amount of
$42.0 million and $47.3 million at December 31, 1997 and 1996, respectively.
These standby letters of credit and bonds are in force from one to three years,
for which the Company pays fees to various banks and insurance companies that
range from 0.2 to 1.0 percent per annum of their face value. If the Company were
required to obtain replacement standby letters of credit and bonds as of
December 31, 1997 for those currently outstanding, it is the Company's opinion
that the replacement costs for such standby letters of credit and bonds would
not vary significantly from the present fee structure.
At December 31, 1997 and 1996, the Company had $8.4 million and $10.9 million,
respectively, of forward foreign currency exchange contracts outstanding. These
contracts are part of a worldwide program to minimize foreign currency exchange
operating income and balance sheet exposure. The unsecured contracts mature
within 12 months and are principally with major financial institutions. The
Company is exposed to credit loss in the event of non-performance by the other
parties to the contracts. The Company evaluates the creditworthiness of the
counterparties' financial condition and does not expect default by the
counterparties.
FOREIGN EXCHANGE RISK MANAGEMENT
The Company has foreign currency exposures in 30 countries. The Company's
primary foreign currency exposures are in France, Belgium, United Kingdom,
Brazil, South Africa and Mexico.
Forward foreign currency exchange contracts are used to hedge commitments, such
as foreign currency debt, the purchase of equipment, and foreign currency cash
flows for certain export sales transactions.
- 56 -
15. FINANCIAL INSTRUMENTS (CONTINUED)
The following tables summarize by major currency the contractual amounts of the
Company's forward exchange contracts in U.S. dollars as of December 31, 1997 and
1996. The "Sell" amounts represent the U.S. dollar equivalent of commitments to
sell foreign currencies, and the "Buy" amounts represent the U.S. dollar
equivalent of commitments to purchase foreign currencies.
[Enlarge/Download Table]
(In thousands) 1997
----------------------------------------------------------------------------------------------------------------
$ U.S. RECOGNIZED UNREALIZED
TYPE EQUIVALENT MATURITY GAIN (LOSS) GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------
Forward exchange
contracts:
Australian dollars Sell $2,368 1-30-98 $194 $ -
Belgian francs Buy 268 1-15-98 - -
British pounds Buy 3,536 Various in 1998 60 -
German marks Buy 564 Various in 1998 (28) -
German marks Sell 842 1-15-98 - 10
South African rand Sell 814 Various in 1998 3
----------------------------------------------------------------------------------------------------------------
$8,392 $226 $13
================================================================================================================
[Enlarge/Download Table]
(In thousands) 1996
----------------------------------------------------------------------------------------------------------------
$ U.S. RECOGNIZED UNREALIZED
TYPE EQUIVALENT MATURITY GAIN (LOSS) GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------
Forward exchange
contracts:
British pounds Buy $ 2,934 Various in 1997 $172 $ -
French francs Buy 2,239 1-30-97 (2) -
German marks Buy 1,186 Various to 1998 125 -
Italian lire Sell 164 1-10-97 - (2)
Spanish pesetas Buy 1,452 Various in 1997 - -
South African rand Sell 2,904 Various in 1997 - 191
----------------------------------------------------------------------------------------------------------------
$10,879 $295 $189
================================================================================================================
At December 31, 1997, the Company had entered into forward exchange contracts in
Australian dollars, Belgium francs, British pounds, and German marks, which were
used to hedge certain future payments between the Company and its various
subsidiaries. These forward contracts do not qualify as hedges for financial
reporting purposes. At December 31, 1997, the Company had recorded net gains of
$0.2 million on these contracts. The Company also had forward exchange contracts
in German marks and South African rand which were used to hedge equipment
purchases and receivables. Since these contracts hedge identifiable foreign
currency firm commitments, the gain was deferred.
- 57 -
15. FINANCIAL INSTRUMENTS (CONTINUED)
At December 31, 1996, the Company had entered into forward exchange contracts in
British pounds, French francs, and German marks, which were used to hedge
certain future payments between the Company and its various subsidiaries. These
forward contracts do not qualify as hedges for financial reporting purposes. At
December 31, 1996, the Company had recorded net gains of $0.3 million on these
contracts. The Company also had forward exchange contracts in Italian lire,
Spanish pesetas and South African rand which were used to hedge equipment
purchases. Since these contracts hedge identifiable foreign currency firm
commitments, the gain of $0.2 million was deferred.
The counterparties of these agreements are major financial institutions;
therefore, management believes the risk of incurring losses related to these
contracts is remote.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash and cash equivalents, investments and
accounts receivable. The Company places its cash and cash equivalents with high
quality financial institutions and, by policy, limits the amount of credit
exposure to any one institution. For investments, the Company purchases
investment grade debt securities and limits the amount of credit exposure to any
one government or commercial issuer. Concentrations of credit risk with respect
to accounts receivable are limited, due to the large number of customers in the
Company's customer base and their dispersion across many different industries
and geographies. The Company generally does not require collateral or other
security to support customer receivables.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The major methods and assumptions used in estimating the fair values of
financial instruments are:
CASH AND CASH EQUIVALENTS
The carrying amount approximates fair value due to the relatively short
period to maturity of these instruments.
INVESTMENTS
The fair values of investments are estimated based on quoted market
prices for those or similar investments.
LONG-TERM DEBT
The fair value of the Company's long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current
rates offered to the Company for debt of the same remaining maturities.
FOREIGN CURRENCY EXCHANGE CONTRACTS
The fair value of foreign currency exchange contracts are estimated by
obtaining quotes from brokers.
- 58 -
15. FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amounts and estimated fair values of the Company's financial
instruments as of December 31, 1997 and 1996 are:
[Enlarge/Download Table]
(In thousands) 1997 1996
------------------------------------------------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents................................. $ 221,565 $ 221,565 $ 45,862 $ 45,862
Investments in debt securities............................ 43,867 43,873 33,238 33,325
Long-term debt............................................ 202,528 200,319 236,711 230,037
Foreign currency exchange contracts....................... 8,392 8,661 10,879 11,520
------------------------------------------------------------------------------------------------------------------------
- 59 -
16. INFORMATION BY INDUSTRY GROUP AND GEOGRAPHIC AREA
The Company is a diversified industrial services and engineered products
company. Its operations are classified among three Operating Groups: Metal
Reclamation and Mill Services, Process Industry Products, and Infrastructure and
Construction. The Company has over 300 locations in 31 countries, including the
United States. The major products and services included in each Industry Group
and other information follows:
METAL RECLAMATION AND MILL SERVICES. This Group provides metal reclamation and
mill services primarily for the global steel industry in 30 countries. Steel
mill services include slag processing, marketing and disposal; slab management
systems; materials handling and scrap management programs; in-plant
transportation; and a variety of environmental services. Similar services are
also provided to non-ferrous metallurgical industries, such as aluminum, nickel
and copper.
PROCESS INDUSTRY PRODUCTS. Major products are industrial pipe fittings; process
equipment, including industrial blenders, dryers and mixers; heat transfer
equipment; boilers; air-cooled heat exchangers; wear resistant steels; valves,
regulators and gauges, including scuba and life support equipment; and gas
containment cylinders and tanks, including cryogenic equipment.
Major customers include various industrial markets; hardware, plumbing and
petrochemical sectors; chemical, food processing and pharmaceutical industries;
institutional building and retrofit markets; natural gas and process industries;
propane, compressed gas, life support, scuba and refrigerant gas industries; gas
equipment companies, welding distributors; medical laboratories; beverage
carbonation users; and the animal husbandry industry.
INFRASTRUCTURE AND CONSTRUCTION. Major products and services include railway
maintenance of way equipment and services; bridge decking and industrial
grating; scaffolding, shoring and concrete forming products along with their
erection and dismantling; granules for asphalt roofing shingles; and slag
abrasives for industrial surface preparation.
Products and services are provided to private and government-owned railroads
worldwide; urban mass transit operators; public utilities; industrial plants;
the oil, chemical, petrochemical and process industries; bridge repair
companies; commercial and industrial construction firms; infrastructure repair
and maintenance markets; and the residential roofing industry.
- 60 -
16. INFORMATION BY INDUSTRY GROUP AND GEOGRAPHIC AREA (CONTINUED)
OTHER INFORMATION. The operations of the Company in any one country, except the
United States, do not account for more than 10% of sales and no single customer
or group under common control represented 10% or more of the Company's sales,
during 1997, 1996 and 1995.
Identifiable assets are those assets used in each Operating Group. Corporate
assets primarily include cash, investments, prepaid pension costs and U.S.
deferred taxes. There are no significant intergroup sales.
INDUSTRY GROUP INFORMATION
[Enlarge/Download Table]
INDUSTRY GROUP NET SALES TO UNAFFILIATED CUSTOMERS OPERATING PROFIT
------------------------------------------------------------------------------------------------------------------------
(In millions) 1997 1996 1995 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------
Metal Reclamation and Mill Services(1) $ 616.5 $ 607.7 $ 604.2 $ 93.3 $ 85.2 $ 80.0
Process Industry Products 586.5 541.1 491.6 59.0 55.8 46.0
Infrastructure and Construction(2) 424.5 408.8 399.7 41.5 42.8 36.3
------------------------------------------------------------------------------------------------------------------------
1,627.5 1,557.6 1,495.5 193.8 183.8 162.3
Facilities discontinuance and
reorganization costs(3) (1.9) (2.4) (20.7)
------------------------------------------------------------------------------------------------------------------------
Industry group totals $1,627.5 $1,557.6 $1,495.5 191.9 181.4 141.6
------------------------------------------------------------------------------------------------------------------------
Equity in income of unconsolidated entities 1.0 .7 2.9
Interest expense (16.7) (21.5) (28.9)
General corporate expenses (4) (4.6) (9.1) (6.0)
------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income
taxes and minority interest $ 171.6 $ 151.5 $ 109.6
========================================================================================================================
[Enlarge/Download Table]
IDENTIFIABLE ASSETS DEPRECIATION AND AMORTIZATION CAPITAL EXPENDITURES
------------------------------------------------------------------------------------------------------------------------
(In millions) 1997 1996 1995 1997 1996 1995 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------
Metal Reclamation
and Mill Services $ 674.6 $ 698.3 $ 687.8 $ 83.2 $ 76.6 $ 73.7 $ 86.5 $ 108.9 $ 73.0
Process Industry
Products 258.6 229.3 211.9 11.8 10.6 9.5 20.2 12.4 13.4
Infrastructure and
Construction 251.7 230.5 228.7 20.3 21.0 20.4 35.2 28.3 27.2
------------------------------------------------------------------------------------------------------------------------
1,184.9 1,158.1 1,128.4 115.3 108.2 103.6 141.9 149.6 113.6
Corporate 290.0 108.6 136.7 1.2 1.2 1.3 1.5 .7 .3
Investments in
unconsolidated entities 2.3 3.3 2.6
Net assets of
discontinued operations - 54.4 43.0
------------------------------------------------------------------------------------------------------------------------
Total $ 1,477.2 $ 1,324.4 $ 1,310.7 $ 116.5 $ 109.4 $ 104.9 $ 143.4 $ 150.3 $ 113.9
========================================================================================================================
-61-
16. INFORMATION BY INDUSTRY GROUP AND GEOGRAPHIC AREA (CONTINUED)
GEOGRAPHIC AREA INFORMATION
[Enlarge/Download Table]
GEOGRAPHIC AREA NET SALES OPERATING PROFIT IDENTIFIABLE ASSETS
------------------------------------------------------------------------------------------------------------------------
(In millions) 1997 1996 1995 1997 1996 1995 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------
United States $ 1,044.8 $ 974.0 $ 916.9 $ 112.0 $ 106.7 $ 81.7 $ 569.4 $ 508.8 $ 462.8
Europe 308.9 332.4 365.8 34.5 26.0 28.8 363.4 400.7 423.8
Latin America 113.8 98.9 97.8 18.2 18.6 12.5 125.2 117.3 123.7
Asia-Pacific 55.4 60.2 50.6 11.4 14.2 9.4 45.6 59.6 59.6
All Other 104.6 92.1 64.4 15.8 15.9 9.2 81.3 71.7 58.5
------------------------------------------------------------------------------------------------------------------------
Total $ 1,627.5 $ 1,557.6 $ 1,495.5 $ 191.9 $ 181.4 $ 141.6 $ 1,184.9 $ 1,158.1 $ 1,128.4
========================================================================================================================
[Enlarge/Download Table]
EXPORT SALES
----------------------------------------------------------------------------------------------------
(In millions) 1997 1996 1995
----------------------------------------------------------------------------------------------------
Canada $ 58.7 $ 42.4 $ 40.7
Latin America 34.1 25.2 21.8
Asia-Pacific 25.3 19.7 19.6
Europe 3.4 6.5 4.5
All Others 3.9 4.0 4.1
----------------------------------------------------------------------------------------------------
Total $ 125.4 $ 97.8 $ 90.7
====================================================================================================
(1) For the year ended December 31, 1997, the Group realized a foreign currency
gain of $.4 million, and for the years ended December 31, 1996 and 1995,
the Group realized foreign currency losses of (in millions) $1.1 and $2.3,
respectively. These currency losses include $3.4 million in 1995 related to
the devaluation of the Mexican peso.
(2) Under the Infrastructure and Construction Group, the Company ceased all bus
operations in June, 1995. For 1995, the school bus operation had $15.7
million in sales and an operating loss of $6.2 million.
(3) The year ended December 31, 1995 includes a non-cash charge of $13.5
million relating to the settlement of the Federal Excise Tax reimbursement
on the completed five-ton truck contract, a $2.1 million provision for
asset impairment and $3.0 million in termination and other exit costs for
the school bus business related to the Infrastructure and Construction
Group. The year 1995 also includes $2.8 million relating to the
discontinuance of certain international facilities related to the Metal
Reclamation and Mill Services Group, and in 1996 this amounted to $1
million.
(4) General corporate expenses for the year 1995 include a $5.8 million foreign
currency translation exchange gain. For the years 1997 and 1996, foreign
currency translation exchange losses were immaterial.
- 62 -
TWO-YEAR SUMMARY OF QUARTERLY RESULTS
(Unaudited)
[Enlarge/Download Table]
(In millions, except per share) 1997
------------------------------------------------------------------------------------------------------------------------
QUARTERLY FIRST SECOND THIRD FOURTH
------------------------------------------------------------------------------------------------------------------------
Net Sales $390.7 $426.3 $407.0 $403.5
Gross Profit(1) 88.2 102.6 98.3 100.4
Income from continuing operations 18.1 24.8 27.7 29.8
Equity in income of discontinued defense business 12.0 11.6 5.5 (.7)
Gain on disposal of discontinued defense business - - - 150.0
Net Income 30.1 36.4 33.2 179.1
Basic Earnings Per Share:
Income from continuing operations .37 .50 .57 .62
Income from discontinued operations .24 .24 .11 (.01)
Gain on disposal of discontinued operations (2) - - - 3.14
Net Income (2) .61 .74 .68 3.75
------------------------------------------------------------------------------------------------------------------------
[Enlarge/Download Table]
1996
------------------------------------------------------------------------------------------------------------------------
QUARTERLY FIRST SECOND THIRD FOURTH
------------------------------------------------------------------------------------------------------------------------
Net Sales $366.7 $387.7 $395.8 $407.4
Gross Profit(1) 85.2 94.8 93.2 98.9
Income from continuing operations 15.6 22.4 22.5 23.4
Equity in income of discontinued defense business 15.5 6.9 6.6 6.1
Net Income 31.1 29.3 29.1 29.5
Basic Earnings Per Share:
Income from continuing operations .31 .45 .45 .47
Income from discontinued operations .31 .13 .14 .13
Net Income .62 .58 .59 .60
------------------------------------------------------------------------------------------------------------------------
Notes:
(1) Gross Profit is defined as Net Sales less Cost of Sales, Facilities
Discontinuance and Reorganization Costs and Research and Development
Expenses.
(2) The sum of the quarterly earnings per share data does not equal the
full year amount in the Consolidated Statement of Income due to changes
in the average shares outstanding.
- 63 -
COMMON STOCK PRICE AND DIVIDEND INFORMATION
[Enlarge/Download Table]
MARKET PRICE PER SHARE
---------------------------------------------------- DIVIDENDS DECLARED
HIGH LOW PER SHARE
-------------------------------------------- ------------------------- -------------------------- -----------------------------
1997
First Quarter........................... $ 37 5/8 $ 33 1/4 $ .20
Second Quarter.......................... 40 1/2 34 1/8 .20
Third Quarter........................... 47 7/8 39 11/16 .20
Fourth Quarter.......................... 46 9/16 39 5/16 .22
1996
First Quarter........................... $ 34 $ 29 $ .19
Second Quarter.......................... 35 32 3/8 .19
Third Quarter........................... 33 1/2 29 1/4 .19
Fourth Quarter.......................... 35 1/8 29 3/4 .20
- 64 -
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure:
None.
- 65 -
PART III
Item 10. Directors and Executive Officers of the Registrant:
(a) Identification of Directors:
Information regarding the identification of directors and positions held is
incorporated by reference to the 1998 Proxy Statement.
(b) Identification of Executive Officers:
Set forth below, as of March 6, 1998, are the executive officers (this excludes
certain corporate officers who are not deemed "executive officers" within the
meaning of applicable Securities and Exchange Commission regulations) of the
Company and certain information with respect to each of them. The executive
officers were elected to their respective offices on April 30, 1997, or at
various times during the year as noted. All terms expire on April 30, 1998.
There are no family relationships between any of the officers.
[Download Table]
Name Age Principal Occupation or Employment
---- --- ----------------------------------
Corporate Officers:
D. C. Hathaway 53 Chairman and Chief Executive Officer effective January
1, 1998. Served as Chairman, President and Chief
Executive Officer from April 1, 1994 to December 31,
1997, and President and Chief Executive Officer from
January 1, 1994 to April 1, 1994. Director since 1991.
From 1991 to 1993, served as President and Chief
Operating Officer. From 1986 to 1991 served as Senior
Vice President-Operations of the Corporation. Served as
Group Vice President from 1984 to 1986 and as President
of the Dartmouth Division of the Corporation from 1979
until 1984.
- 66 -
[Download Table]
Name Age Principal Occupation or Employment
---- --- ----------------------------------
L. A. Campanaro 49 President, Chief Operating Officer and Director of the
Corporation effective January 1, 1998. Served as Senior
Vice President and Chief Financial Officer from December
1992 to December 1997, and as Vice President and
Controller from April 1992 to November 1992. Served as
Vice President of the BMY-Wheeled Vehicles Division from
February 1992 to March 1992, and previously served as
Vice President and Controller of the BMY-Wheeled
Vehicles Division from 1988 to 1992, Vice President
Cryogenics of the Plant City Steel Division from 1987 to
1988, Senior Vice President Taylor-Wharton Division from
1985 to 1987, Vice President and Controller of
Taylor-Wharton from 1982 to 1985, and Director of
Auditing of the Corporation from 1980 to 1982.
P. C. Coppock 47 Senior Vice President, Chief Administrative Officer,
General Counsel and Secretary of the Corporation
effective January 1, 1994. Served as Vice President,
General Counsel and Secretary of the Corporation from
May 1, 1991 to December 31, 1993. From 1989 to 1991
served as Secretary and Corporate Counsel and as
Assistant Secretary and Corporate Counsel from 1986 to
1989. Served in various Corporate Attorney positions
for the Corporation since 1981.
S. D. Fazzolari 45 Senior Vice President and Chief Financial Officer of the
Corporation effective January 1, 1998. Served as Vice
President and Controller from January 1994 to December
1997 and as Controller from January 1993 to January
1994. Previously served as Director of Auditing from
1985 to 1993, and served in various auditing positions
from 1980 to 1985.
(c) Beneficial Ownership Reporting Compliance
Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934 is incorporated by reference to the section entitled
"Section 16(a) Beneficial Ownership Reporting Compliance" of the 1998
Proxy Statement.
- 67 -
Item 11. Executive Compensation:
Information regarding compensation of executive officers and directors is
incorporated by reference to the sections entitled "Executive Compensation and
Other Information" and "Directors' Compensation" of the 1998 Proxy Statement.
Item 12. Security Ownership of Certain
Beneficial Owners and Management:
Information regarding security ownership of certain beneficial owners and
management is incorporated by reference to the section entitled "Share Ownership
of Management" of the 1998 Proxy Statement.
Item 13. Certain Relationships and Related Transactions:
Information regarding certain relationships and related transactions is
incorporated by reference to the section entitled "Employment Agreements with
Officers of the Company" of the 1998 Proxy Statement.
- 68 -
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K:
(a) 1. The Consolidated Financial Statements are listed in the index to
Item 8, "Financial Statements and Supplementary Data," on page 22.
(a) 2. The following financial statement schedule should be read in
conjunction with the Consolidated Financial Statements (see Item
8, "Financial Statements and Supplementary Data"):
[Download Table]
Page
Report of Independent Accountants on Schedule II 70
Schedule II - Valuation and Qualifying Accounts
for the years 1997, 1996 and 1995 71
Schedules other than those listed above are omitted for the reason
that they are either not applicable or not required or because the
information required is contained in the financial statements or
notes thereto.
Condensed financial information of the registrant is omitted since
there are no substantial amounts of "restricted net assets"
applicable to the Company's consolidated subsidiaries.
Financial statements of 50% or less owned unconsolidated companies
are not submitted inasmuch as (1) the registrant's investment in
and advances to such companies do not exceed 20% of the total
consolidated assets, (2) the registrant's proportionate share of
the total assets of such companies does not exceed 20% of the
total consolidated assets, (3) the registrant's equity in the
income from continuing operations before income taxes of such
companies does not exceed 20% of the total consolidated income
from continuing operations before income taxes.
- 69 -
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Harsco Corporation
Our report on the consolidated financial statements of Harsco Corporation and
Subsidiary Companies (the "Company"), is included on page 23 of this Form 10-K.
In connection with our audits of such consolidated financial statements, we have
also audited the related consolidated financial statement schedule listed in the
index (Item 14(a) 2.) on page 71 of this Form 10-K.
In our opinion, the consolidated financial statement schedule referred to above,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information required
to be included therein.
/s/Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
January 29, 1998, except as to Note 4 and
paragraph 6 of Note 10, for which the
date is March 4, 1998.
- 70 -
[Enlarge/Download Table]
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
(dollars in thousands)
----------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
Additions Deductions
--------- ---------------------------
Due to
Balance at Charged to Currency Balance at
Beginning Cost and Translation End of
Description of Period Expenses Adjustments Other (1) Period
----------- --------- -------- ----------- ----- ------
For the year 1997:
Deducted from Receivables:
-------------------------
Uncollectible accounts $ 8,549 $ 1,916 $ (188) $ (3,443) $ 6,834
========== ========== ========== =========== ==========
Deducted from Inventories:
-------------------------
Inventory valuations $ 5,381 $ 1,645 $ (129) $ (3,210) $ 3,687
========== ========== ========== =========== ==========
For the year 1996:
Deducted from Receivables:
-------------------------
Uncollectible accounts $ 8,256 $ 4,969 $ (74) $ (4,602) $ 8,549
========== ========== ========= ========== ==========
Deducted from Inventories:
-------------------------
Inventory valuations $ 3,596 $ 3,260 $ (57) $ (1,418) $ 5,381
========== ========== ========= ========== ==========
For the year 1995:
Deducted from Receivables:
-------------------------
Uncollectible accounts $ 7,285 $ 2,966 $ 54 $ (2,049) $ 8,256
========== ========== ========= ========== ==========
Deducted from Inventories:
-------------------------
Inventory valuations $ 16,106 $ 1,689 $ 32 $ (14,231) $ 3,596
========== ========== ========= ========== ==========
(1) Amounts charged to valuation account during the year. During 1995, the
reduction in inventory reserves is due principally to the write off of
inventory related to the school bus business.
- 71 -
(a) 3. Listing of Exhibits Filed with Form 10-K:
[Enlarge/Download Table]
Exhibit
Number Data Required Location in 10-K
------ ------------- ----------------
2(a) Joint Venture with FMC Corporation Incorporated by reference to
Combining Harsco's BMY-Combat Form 8-K dated February 14, 1994
Systems Division with FMC Defense
Systems Group
- Participation Agreement
Dated as of January 1, 1994
- Partnership Agreement
Dated as of January 1, 1994
- Registration Rights Agreement
Dated as of January 1, 1994
2(b) Agreements for sale of 40% Incorporated by reference to Form 8-K
limited partnership interest in filed October 16, 1997, and related
United Defense L.P. Form 8-K/A
3(a) Articles of Incorporation as Exhibit volume, 1990 10-K
amended April 24, 1990
Certificate of Designation filed Exhibit volume, 1997 10-K
September 25, 1997
3(b) By-laws as amended April 25, 1990 Exhibit volume, 1990 10-K
4(a) Harsco Corporation Rights Incorporated by reference to Form
Agreement dated as of September 8-A, filed September 26, 1997
28, 1997, with Chase Mellon
Shareholder Services L.L.C.
4(b) Registration of Preferred Stock Incorporated by reference to Form
Purchase Rights 8-A dated October 2, 1987
4(c) Current Report on dividend Incorporated by reference to Form
distribution of Preferred 8-K dated October 13, 1987
Stock Purchase Rights
4(d) Debt Securities Registered Incorporated by reference to Form
under Rule 415 (6% Notes) S-3, Registration No. 33-42389
dated August 23, 1991
- 72 -
(a) 3. Listing of Exhibits Filed with Form 10-K (continued):
[Enlarge/Download Table]
Exhibit
Number Data Required Location in 10-K
------ ------------- ----------------
4(e) 6% 1993 Notes due September 15, Incorporated by reference to the
2003 described in Prospectus Prospectus Supplement dated
Supplement dated September 8, September 8, 1993 to Form S-3,
1993 to Form S-3 Registration under Registration No. 33-42389 dated
Rule 415 dated August 23, 1991 August 23, 1991
4(f) Debt and Equity Securities Registered Incorporated by reference to Form S-3,
Registration No. 33-56885 dated
December 15, 1994, effective date
January 12, 1995
Material Contracts - Credit facility
10(a) Amendment Agreement dated July 16, Exhibit to 10-Q for the period
1996 to the amended and restated ended June 30, 1996
Credit Agreement dated as of August 24, 1993,
as amended and restated as of June 21, 1994, and
as amended by an Amendment Agreement dated as of
June 20, 1995 and a second Amendment Agreement dated as
of February 29, 1996 among Harsco Corporation, the
lenders named therein and Chase Manhattan Bank.
10(b) Commercial Paper Dealer Agreement Exhibit volume, 1994 10-K
Dated October 11, 1994, Between J.P.
Morgan Securities, Inc. and Harsco
Corporation
10(c) Commercial Paper Dealer Agreement Exhibit volume, 1994 10-K
Dated October 11, 1994, Between
Lehman Brothers, Inc. and Harsco
Corporation
10(d) Issuing and Paying Agency Agreement, Exhibit volume, 1994 10-K
Dated October 12, 1994, Between
Morgan Guaranty Trust Company
of New York and Harsco Corporation
- 73 -
(a) 3. Listing of Exhibits Filed with Form 10-K (continued):
[Enlarge/Download Table]
Exhibit
Number Data Required Location in 10-K
------ ------------- ----------------
10(e) Commercial Paper Agreement with Exhibit to 10-Q for the period
Banque Bruxelles Lambert S.A./Bank ended September 30, 1996
Brussel Lambert N.V. dated
September 25, 1996.
Material Contracts - Underwriting
10(f) Underwriting Agreement for Exhibit volume, 1987 10-K
Debt Securities dated
October 22, 1987
Material Contracts - Management Contracts and Compensatory Plans
10(g) Harsco Corporation Incentive Plan Exhibit volume, 1992 10-K
as amended March 18, 1992
10(h) Harsco Corporation Supplemental Exhibit volume, 1997 10-K
Retirement Benefit Program as
amended January 27, 1998
10(i) Trust Agreement between Harsco Exhibit volume, 1987 10-K
Corporation and Dauphin Deposit
Bank and Trust Company dated
July 1, 1987 relating to the
Supplemental Retirement Benefit
Plan
10(j) Harsco Corporation Supplemental Exhibit volume, 1991 10-K
Executive Retirement Plan as
amended
10(k) Trust Agreement between Harsco Exhibit volume, 1988 10-K
Corporation and Dauphin
Deposit Bank and Trust Company
dated November 22, 1988 relating
to the Supplemental Executive
Retirement Plan
10(l) 1986 Stock Option Plan as amended Exhibit volume, 1990 10-K
10(m) 1995 Executive Incentive Compensation Proxy Statement dated March 22, 1995
Plan on Exhibit A pages A-1 through A-12
- 74 -
(a) 3. Listing of Exhibits Filed with Form 10-K (continued):
[Enlarge/Download Table]
Exhibit
Number Data Required Location in 10-K
------ ------------- ----------------
10(n) Authorization, Terms and Conditions of Exhibit volume, 1996 10-K
the Annual Incentive Awards, as
amended and Restated November 19,
1996, under the 1995 Executive Incentive
Compensation Plan
Employment Agreements -
10(o) D. C. Hathaway Exhibit volume, 1989 10-K
Uniform agreement, the same as
shown for J. J. Burdge
" L. A. Campanaro " "
" P. C. Coppock " "
" W. D. Etzweiler " "
" S. D. Fazzolari " "
10(p) Consulting Agreement for Exhibit volume, 1997 10-K
W. D. Etzweiler dated as
of March 1, 1998
10(q) Special Supplemental Retirement Exhibit Volume, 1988 10-K
Benefit Agreement for
D. C. Hathaway
Director Indemnity Agreements -
10(r) R. F. Nation Exhibit volume, 1989 10-K
Uniform agreement, same as
shown for J. J. Burdge
" A. J. Sordoni, III " "
" R. C. Wilburn " "
" R. L. Kirk " "
" N. H. Prater " "
" D. C. Hathaway " "
" J. I. Scheiner " "
" J. E. Marley " "
" C. F. Scanlan " "
10(s) Harsco Corporation Directors Exhibit volume, 1990 10-K
Retirement Plan (terminated
effective December 31, 1996)
- 75 -
(a) 3.Listing of Exhibits Filed with Form 10-K (continued):
[Download Table]
Exhibit
Number Data Required Location in 10-K
------ ------------- ----------------
10(t) Harsco Corporation Deferred Exhibit volume, 1994 10-K
Compensation Plan for
Non-Employee Directors
10(u) Harsco Corporation 1995 Non-Employee Proxy Statement dated
Directors' Stock Plan March 22, 1995 on Exhibit B
pages B-1 through B-6
10(v) Settlement Agreement dated Exhibit (b) to 10-Q for period
September 19, 1995, among the ended September 30, 1995
Company, the United States Army
and the United States Department of
Justice
12 Computation of Ratios of Exhibit volume, 1997 10-K
Earnings to Fixed Charges
21 Subsidiaries of the Registrant Exhibit volume, 1997 10-K
23 Consent of Independent Accountants Exhibit volume, 1997 10-K
27.1 Financial Data Schedule Exhibit volume, 1997 10-K
27.2 Restated Financial Data Schedules Exhibit volume, 1997 10-K
27.3 Restated Financial Data Schedules Exhibit volume, 1997 10-K
Exhibits other than those listed above are omitted for the reason that they are
either not applicable or not material.
The foregoing Exhibits are available from the Secretary of the Company upon
receipt of a fee of $10 to cover the Company's reasonable cost of providing
copies of such Exhibits.
(b) Reports on Form 8-K:
A report on Form 8-K dated October 6, 1997 was filed October 16, 1997 related to
the completion of the sale of United Defense L.P.
A report on Form 8-K/A was filed on January 5, 1998, amending the Form 8-K
(dated October 6, 1997 and filed by the Registrant on October 16, 1997) by
providing the full text of two exhibits with respect to which the Registrant had
previously sought confidential treatment.
A report on Form 8-K dated March 4, 1998 was filed March 13, 1998 related to the
announced tender off by Harsco Corporation for UK-based Faber Prest Plc.
- 76 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HARSCO CORPORATION
Date 3-19-98 By /s/ Salvatore D. Fazzolari
----------------- -----------------------------
Salvatore D. Fazzolari
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
[Download Table]
SIGNATURE CAPACITY DATE
/S/ Derek C. Hathaway Chairman & Chief
---------------------------------- Executive Officer 3-19-98
(Derek C. Hathaway) -----------
/S/ Leonard A. Campanaro President, Chief Operating
---------------------------------- Officer and Director 3-19-98
(Leonard A. Campanaro) -----------
/S/ Salvatore D. Fazzolari Senior Vice President and
---------------------------------- Chief Financial Officer
(Salvatore D. Fazzolari) (Principal Financial and
Accounting Officer) 3-19-98
-----------
/S/ Robert L. Kirk Director 3-19-98
---------------------------------- -----------
(Robert L. Kirk)
/S/ James E. Marley Director 3-19-98
---------------------------------- -----------
(James E. Marley)
/S/ Robert F. Nation Director 3-19-98
---------------------------------- -----------
(Robert F. Nation)
/S/ Nilon H. Prater Director 3-19-98
---------------------------------- -----------
(Nilon H. Prater)
/S/ Carolyn F. Scanlan Director 3-19-98
---------------------------------- -----------
(Carolyn F. Scanlan)
/S/ James I. Scheiner Director 3-19-98
---------------------------------- -----------
(James I. Scheiner)
/S/ Andrew J. Sordoni III Director 3-19-98
---------------------------------- -----------
(Andrew J. Sordoni III)
/S/ Robert C. Wilburn Director 3-19-98
---------------------------------- -----------
(Dr. Robert C. Wilburn)
- 77 -
HARSCO CORPORATION FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
Item 14(a) 3. Exhibits
[Download Table]
Exhibit Document
Number Pages
------- --------
3(a) Certificate of Designation filed
September 25, 1997 1 - 8
10(h) Harsco Corporation Supplemental
Retirement Benefit Program as amended
January 27, 1998 1 - 14
10(p) Consulting Agreement for W.D.Etzweiler
dated as of March 1, 1998 1 - 6
12 Computation of Ratios of Earnings
to Fixed Charges 1
21 Subsidiaries of the Registrant 1 - 3
23 Consent of Independent Accountants 1
27.1 Financial Data Schedule 1
27.2 Restated Financial Data Schedules 1
27.3 Restated Financial Data Schedules 1
Dates Referenced Herein and Documents Incorporated by Reference
4 Subsequent Filings that Reference this Filing
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