Harsco Lifts Q2 Adj. Operating Income Outlook

(RTTNews) - Harsco Corp. (HSC) provided an update on its expected financial results for the second quarter and outlook for the full-year 2016.

For the second quarter, the Company currently expects U.S. GAAP operating income of $1 million. Included in this reported figure is an estimated loss provision of approximately $40 million related to the Company's railway maintenance equipment contracts with SBB, the federal railway system in Switzerland.

Excluding item, Harsco expects adjusted operating income of $41 million for the second quarter. The Company's previous guidance for the second quarter of 2016 included adjusted operating income of $22 million to $27 million.

"We are clearly disappointed with the developments on our Rail contracts with SBB. Despite this challenge, we have made considerable progress in recent months developing our highly-advanced equipment for this important customer. We look forward to executing against these contracts over the next year and remain confident that we are building a profitable business within the European rail market," said President and CEO Nick Grasberger.

As a result of increased vendor costs, ongoing discussions with the customer, and increased estimates for commissioning, certification and testing costs, as well as expected settlements with the customer, the Company concluded it will have a loss on its contracts with SBB. The majority of the equipment deliveries and related revenue recognition under these contracts are expected in 2017 through 2020. However, pursuant to generally accepted accounting principles, the loss provision is recorded when determined probable.

For the full year 2016, Harsco expects adjusted operating income, excluding the loss provision for the contracts in Q2, will exceed the previously provided guidance range of $80 million to $100 million. The Company's current expectation is that its overall outlook for operating income has improved by approximately $20 million from its last update provided in May. The 2016 guidance range above for operating income translates to a range of $32 million and $52 million on a U.S. GAAP basis including the Q2 charge as well as the charges recorded in the first quarter of the year.

Harsco will provide further information on its performance in the second quarter of 2016 and the outlook for the remainder of year when it reports quarterly financial results on August 4th.