* Free cash flow improvement of $122 million for the first six months;
   cash flow from operations totals $156 million for the same period
 * Capital expenditures reduced by $176 million or 68% for the first six
   months, ahead of planned reductions
 * Second quarter highlights include record results from Harsco Rail and
   130 basis point reduction in Debt to Capital ratio 
 * Company continues to expand countermeasures and now expects annual
   savings of approximately $125 million, up from $100 million
 * Unilateral contract action by the Company's largest customer has been
   satisfactorily resolved
 * Full Year earnings guidance is revised to a range of $1.72 to $1.82
   from a previous range of $1.90 to $2.10, due principally to the
   protracted credit freeze and severe recession which are having a
   significant negative impact on construction markets

HARRISBURG, Pa., July 27, 2009 (GLOBE NEWSWIRE) -- Worldwide industrial services company Harsco Corporation (NYSE:HSC) reported second quarter 2009 results from continuing operations.

Second Quarter 2009 Highlights

As expected, the stronger U.S. dollar compared with last year and unprecedented low global steel production as well as the ongoing credit freeze continued to have a substantial negative impact on sales and income. Second quarter 2009 diluted earnings per share from continuing operations were $0.52, compared with the record $1.07 in the second quarter of last year. Second quarter income from continuing operations was $43.0 million, compared with $92.9 million last year. Sales in the quarter totaled approximately $0.8 billion, compared with $1.1 billion in the second quarter of last year. Foreign currency translation decreased sales by $115 million and accounted for about a third of the sales decline. Foreign currency translation decreased operating income by approximately $14 million or $0.13 per share in this year's second quarter, in addition to reducing overall operating margins by 40 basis points. Historically low global steel production caused Harsco Metals' results to be substantially lower compared with last year, but improved sequentially into positive territory over the first quarter's operating loss.

For the first six months of 2009, sales, income from continuing operations, and diluted earnings per share were below last year's results. Income from continuing operations was $64.0 million, or $ 0.77 per diluted share, compared with $152.3 million, or $1.74 per diluted share in the first six months of 2008. Sales for the first six months of 2009 were approximately $1.5 billion, a decrease of 29 percent from approximately $2.1 billion in the same period a year ago. Foreign currency translation decreased sales for the first six months by approximately $256 million and operating income by approximately $28 million, or $0.27 per share. Foreign currency translation accounted for approximately 42 percent of the sales decline in the first six months.

Despite the global economic challenges, the Company posted strong second quarter and six-month cash flows from operations, which resulted in lower debt levels, an improved debt to capital ratio, and a more liquid balance sheet.

Comment

Commenting on the Company's results, Harsco Chairman and Chief Executive Officer Salvatore D. Fazzolari said, "As we anticipated, our second quarter performance was sharply lower year-over-year due to the ongoing global financial and economic turbulence. Activity levels in the non-residential construction markets continued to deteriorate throughout the quarter due principally to the lack of credit and the protracted economic downturn, while global steel production stabilized at near historically low rates.

"We continue to face three substantial headwinds that are having a significant adverse impact on our business. They are: a strong year-over-year U.S. dollar, which negatively impacts the translation of approximately 70 percent of our total revenues; the worst downturn in the history of the steel industry, where global production remains at near unprecedented low levels; and the continuing credit freeze, which is causing cancellation and deferral of non-residential construction activity. In addition, the originally expected benefits from stimulus packages have not yet materialized in many of our key markets.

"As we enter the second half of the year, it appears that the strong dollar is starting to moderate and global steel production should show a slight improvement from the historical lows of the first half. However, we are not seeing any notable signs that the credit freeze throughout the world is improving, and we are not seeing any meaningful benefits from stimulus funds, as the deferral and cancellation of non-residential construction projects continues unabated with significant negative impact on construction markets. Thus, with the deterioration of our markets during the quarter and the continuation into the third quarter, it is difficult to see any short-term improvement in the Harsco Infrastructure business.

"We proactively and aggressively continued to implement additional countermeasures in the second quarter and we expect to continue through the remainder of the year. The countermeasures that we implemented in the fourth quarter of 2008 and the additional countermeasures taken in the first half of 2009 are beginning to manifest themselves in our results. At a full run-rate, we now expect these benefits to approximate $125 million in total annual cost reductions.

"We remain confident that the benefits from our aggressive cost reduction countermeasures, our expansion in emerging markets and our strong market positions in industries that are fundamental to global growth are setting the foundation for future success."

Second Quarter Business Review

Harsco Infrastructure

Several factors contributed to this Segment's lower performance in the second quarter, including: a stronger U.S. dollar which negatively impacted approximately 80 percent of Harsco Infrastructure's revenues and earnings; the continued lack of available credit that has resulted in cancelled and delayed construction projects, as well as export sales of equipment being sharply down; and the deepening recession in several key markets.

Sales in the second quarter decreased 28 percent to $309 million from $429 million last year, in large part due to the stronger U.S. dollar. The significant strengthening of the U.S. dollar in the second quarter had a negative impact on sales from foreign currency translation of $51 million, and accounted for 42 percent of the decline in year-over-year sales. The remainder of the decline was due principally to lower operating performance in the U.K., where sales declined by approximately $42 million. Operating income was approximately $25 million in the quarter, compared with $58 million in last year's second quarter. Here again, negative foreign currency translation was a major factor in the decline. Negative foreign currency translation reduced operating income by $8 million, or nearly one quarter of the year-over-year decline. Also contributing to the decline in income in the second quarter were lower business activity across many regions, principally in the U.K., Eastern Europe and Scandinavia due to the impact of frozen credit markets, which also adversely impacted the Company's Germany-based equipment sales export business; higher restructuring costs of $1.7 million; and pricing pressures, as competitors aggressively pursued orders, particularly in the European and North American markets. Partially offsetting these negative factors were reduced costs and improved results from the Gulf Region of the Middle East and the Asia Pacific region, all of which contributed solidly to the second quarter performance.

Operating margins were 8.1 percent in the second quarter, compared with 13.5 percent last year. Negative foreign currency translation reduced margins approximately 100 basis points, with the remainder due to reorganization costs and the ongoing global economic and financial climate.

The severe recessionary construction environment in Europe and North America, pricing pressures, and the stronger U.S. dollar are all expected to continue to negatively impact year-over-year results for the remainder of 2009. Additionally, the Company does not expect any meaningful near-term benefit from stimulus packages, particularly in the U.S. The strong U.S. dollar will continue to adversely impact results in the second half, but it should not be as material as the first half. The Company expects that second half results should benefit from its aggressive countermeasures as the cost reductions begin to take full effect. However, the second half results for this Segment will still be down from 2008's second half performance.

Harsco Metals

The stronger U.S. dollar also negatively impacts approximately 80 percent of the revenues and earnings of Harsco Metals. This factor in combination with the deterioration of the global steel markets and unprecedented low steel production, the breadth and depth of which the industry has never seen before, plus the deepening global recession in certain geographies, all contributed to another poor operating performance.

Sales in the second quarter decreased 42 percent to $259 million from $445 million last year. Here again, the significant strengthening of the U.S. dollar in the second quarter had a negative impact on sales from foreign currency translation of $58 million, or approximately one-third of the reduction in year-over-year sales in the quarter. Operating performance was also down sharply due to the deterioration of the global steel markets and unprecedented declines in global steel production. Many mills throughout the world were only operating in the 40 percent-plus capacity range in the second quarter. The operating income of $4 million compares with income of $37 million last year. Negative foreign currency translation represented $6 million, or 17 percent of the year-over-year decline in income. The remainder of the decline in operating income was due to the substantial reduction in global steel production and higher reorganization costs.

Operating margins were 1.6 percent in the second quarter, compared with 8.3 percent last year. Negative foreign currency translation reduced margins approximately 150 basis points, with the remainder of the decline resulting from higher reorganization costs and the current global economic climate.

Overall global demand for steel remains weak and the Company does not foresee any measurable pickup in its Harsco Metals operations for the year. However, the second half performance should show improvement over the first half, with an expected modest improvement in steel production. The second half performance should also benefit from the positive contribution to earnings from the Company's countermeasures, as well as the start-up of new contracts.

As reported in Harsco's SEC filings, the Company and its largest customer, ArcelorMittal, have been in active dialogue to resolve the unilateral action taken by the customer to revise fixed-fee provisions of certain contracts. The Company is pleased to report that its senior management in partnership with ArcelorMittal senior management have resolved satisfactorily all major differences, with an outcome that should have long-term benefits for both parties.

Harsco Minerals & Rail

As expected, operating results in the second quarter for Harsco Rail were a record. The significant decline in metal prices and production adversely impacted the sales and earnings of the Harsco Minerals operations. Harsco Industrial performed relatively well in the quarter, although the ongoing economic and financial environment still poses many near-term challenges.

Sales of $209 million in the second quarter of 2009 were 7 percent lower than the $225 million in the same period last year. Foreign currency translation negatively impacted sales by over $6 million or approximately 40 percent of the year-over-year decline. Operating income was approximately $43 million in the second quarter, compared with $52 million last year. Negative foreign currency translation in the quarter lowered income by $1.4 million over last year. Operating margins were 20.4 percent in the second quarter of 2009, compared with 23.1 percent last year.

The near-term outlook for the Harsco Minerals & Rail Group remains mixed.