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Harsco Corporation Reports Fourth Quarter 2012 Results

Including a $265 million, non-cash goodwill impairment charge, GAAP operating loss from continuing operations was $247 million in the fourth quarter of 2012. This compares with a loss of $57 million in the prior-year quarter. Excluding special items, adjusted operating income from continuing operations increased 5 percent to $46 million in the quarter. Adjusted operating income margin increased 50 basis points to 6.1 percent. This performance primarily reflects the timing of equipment deliveries in Rail and benefits from the Company's cost reduction strategies. These factors were partially offset by lower results in Metals & Minerals. Foreign currency translation negatively impacted operating income by $2 million in the quarter.

Non-Cash Goodwill Impairment Charge

The Company recorded a $265 million, non-cash goodwill impairment charge related to the Infrastructure segment in the fourth quarter of 2012 as part of its annual goodwill impairment testing. While the business has demonstrated improved operating performance in the face of a prolonged market recovery, particularly in Europe, it was determined that a goodwill impairment charge was required at this time.
Table 1—Special Items Fourth Quarter Year
  2012 2011 2012 2011
GAAP diluted EPS from continuing operations  ($3.27)  ($1.14)  ($3.15)  ($0.12)
Goodwill impairment (a) 3.29   3.29  
Restructuring charges (b)  0.22  1.05  1.06  1.05
Charges to exit Metals contract (c) 0.07   0.07  
Gains associated with exited countries (d)      (0.10)  
Non-cash tax charge (e)   0.45   0.45
Former CEO separation expense (f)      0.04  
Gains on pension curtailment (g)      (0.02)  
One-time Rail benefit (h)        (0.07)
Adjusted diluted EPS from continuing operations $0.30 (i)  $0.36 $1.19  $1.31
(a) Non-cash goodwill impairment charge in Infrastructure (4Q 2012 $265.0 million pre-tax).
(b) Charges resulting from the Company's previously announced restructuring plans in Infrastructure (4Q 2012 $16.9 million pre-tax; 12 Months 2012 $88.6 million pre-tax; 4Q 2011 and 12 Months 2011 $87.6 million pre‑tax) and Metals & Minerals (4Q 2012 $4.0 million pre-tax; 12 Months 2012 $5.5 million pre-tax; 4Q and 12 Months 2011 $12.8 million pre-tax).
(c) Charges as a result of exiting an underperforming contract in Metals & Minerals (4Q 2012 $7.6 million pre-tax).
(d) Non-cash gains related to the closure of certain European operations in Infrastructure (12 Months 2012 $10.9 million pre-tax).
(e) Non-cash tax charge against U.K. deferred tax assets (4Q 2011 $36.8 million after-tax).
(f) Separation expense for former CEO (1Q 2012 $4.1 million pre-tax).
(g) Pension curtailment gain in Metals & Minerals (1Q 2012 $1.7 million pre-tax).
(h) Reduction of estimated costs related to the first phase of Rail's large China order (2Q 2011 $8.0 million pre‑tax).
(i) Does not total due to rounding.

Consolidated 2012 Results

Including the $3.29 per share goodwill impairment charge, GAAP diluted loss per share from continuing operations was $3.15 for the full year 2012, compared with a loss of $0.12 in 2011. Excluding special items, adjusted diluted earnings per share from continuing operations were $1.19 in 2012, compared with $1.31 in 2011, as noted above in Table 1.

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