Enviri Corporation · NYSE:NVRI
Enviri — Harsco — 5th Annual Credit Suisse Small & Mid Cap Conference (September 2014)
41 slides from Enviri's conference presentation, Sep 16, 2014
Slide 1: Credit Suisse Small & Mid Cap Conference
Credit Suisse Small & Mid Cap Conference September 16, 2014 Harsco Corporation. Alri
Slide 2: Administrative Items: Forward-Looking Statements
Administrative Items Forward-Looking Statements The Company’s presentation contain forward-looking statements based on management's current expectations, estimates and projections. The nature ofthe Company's business and the many countries in which toperates subjectit to changing economic, compettiv
Slide 3: Key Takeaways
Key Takeaways Q Much has been accomplished over the past several quarters: v Sale of Infrastructure business into joint venture with CD&R and Brand “Right-sized” corporate overhead structure Realigned employee incentive program Built strategic plans including plan to double ROIC in Metals & Minerals
Slide 4: Rigorous focus on return-based capital allocation
Rigorous focus on return-based capital allocation Management team building strong core capabilities ©2014 Harsco Corporation. Alrights reserved.
Slide 5: Harsco at a Glance
Harsco at a Glance Diversified global engineered products and services company ee HARSCO HARSCO HARSCO) ’ BRAND : METALS & MINERALS OUETe ma | ENERGY A IMERASTRUCTURE SERVICES =| Revenue: ~$1.4B Revenue: ~$365MM Revenue: ~$285 MM | Revenue: ~$3B / Global marketleader Highly engineered Customizedprov
Slide 6: Financial Strategy
Financial Strategy = Primary focus is return on invested capital 2 Improve capital allocation and boost efficiency in Metals & Minerals 2 Growth in Rail and Industrial will be accretive to ROIC = Expect moderate growth in revenue over the next three years; cash earnings to outpace top-line growth 2
Slide 7: Summary of Harsco Financial Targets
Summary of Harsco Financial Targets Key assumptions Expected impact Modest growth in end markets Rail successful in winning major new contracts Includes benefits from major initiatives in Metals & Minerals Improvements in contract and product mix Price and efficiency gains exceed inflation Limited g
Slide 8: 2014 Outlook
2014 Outlook Highlights Industrial experiencing favorable volume growth and operating leverage; Hammco acquisition also accretive Rail performing in line with plan and prior year as aftermarket parts contributions offset expiration of China contract LST and nickel pricing driving higher revenues wit
Slide 9: 2014 Outlook
2014 Outlook 2013* 2014 Outlook* Adjusted Operating $152 million $170to $180 million Income Free Cash Flow $20 million $35 million to $65 million ROIC 6% 7.5% to 8.0% Net interest $48 million $43 million to $47 million Expense Effective Tax Rate NMF 31% to 33% Adjusted Earnings per Share $0.87 $0.92
Slide 10: Metals & Minerals — Case for Change
Metals & Minerals — Case for C Historical focus on growth, as opposed to return on capital, has produced weak operating performance. Poor execution and the decline of the global steel industry have also contributed. % of customer sites 100 100 a a ° = 2 i Total Acceptable Startup performers Under pe
Slide 11: Metals & Minerals Improvement Plan - What is Different
Metals & Minerals Improvement Plan - What is Different #ARSS2. Q Extensive analysis of performance drivers on a contract-by-contract basis Q Broad internal involvement and support Q Outside support provided relevant benchmarks and analytical rigor Q Focus not simply on cost, but also on core process
Slide 12: Project Orion - Update
Project Orion - Update Q There are four work streams; summary of accomplishments to date: 1. Above Site 2. At-Site 3. Bid & Contract 4, Under- Improvements Improvements Management performing Sites + Communicationcomplete —_« Indirect headcount reduction + New org structurein place + Refined underper
Slide 13: Underperforming sites
Underperforming sites are prioritized based on ‘fastest return’ ... ... and triage efforts expanded beyond pilot sites identified in early 2014 - - ES Ee Ee Eee el + te spn wn i) iB oS) a SSC eerie ° o o oo 0 = Pi asta tan? ©2014 Harsco Corporation. Alrights reserved.
Slide 14: Metals & Minerals - Financial Targets
Metals & Minerals - Financial Targets 2013 Long-Range Plan Category Actuals 2017 range around base Revenue $1.4B $1.3-$1.4B EBIT' Margin T% 10-11% FCF $54M $130-$150M ROIC% 5% 8-9%? (1), Excludes impactot specialitems (2) 12-13% excluding goodwill EBIT: Segment operating income as reportedin 10-K FC
Slide 15: Summary and Major Priorities
Summary and Major Priorities Q Achieve 2014 financial plan; underlying business trends are attractive Q Business focus and financial outlook have remained consistent Q Execute Metals & Minerals Improvement Plan; capital allocation to this business will be closely linked to successful execution of Pr
Slide 16: Rigorous focus on return-based capital allocation
Rigorous focus on return-based capital allocation Management team building strong core capabilities ©2014 Harsco Corporation. Alrights reserved.
Slide 17: Appendix
Appendix 014 Harsco Corporation. Allrights
Slide 18: Metals & Minerals at a Glance
Metals & Minerals at a Glance Revenue Breakdown by Region = Global market leader in 30 Psioon fares countries _ \ a Mill services a Resource recovery Latin America a Environmental solutions 16% = ~75 customers globally ‘Western Europe = ~170 customersites os B d ti \ iti Revenues ($ MM) = Broad oper
Slide 19: Industrial at a Glance
Industrial at a Glance Revenue Breakdown by Market = Three businesses with premium quality Australia _ Others products and powerful 100+ year brand heritage = Broad attractive end markets — energy and construction = Strong position in US, with expanding international presence Revenues ($ MM) =e = St
Slide 20: Rail at a Glance
Rail at a Glance Revenue Breakdown by Region South America = Strong base in NA markets and China Europe 18% = Profitable recurring aftermarket parts Hit mrien and services = Expanding core capabilities globally (NPD, Engineering & Manufacturing) = Leveraged China Rail order to pursue other large glo
Slide 21: Brand
BRAND Modeling Assumptions 4 ~10% CAGR EBITDAgrowth 4 $300-$400 MM debtreduction 2 8x exit multiple Total equity = $0.8B Total equity $1.7 — $2.2B Cash proceeds Expected exit proceeds ~$330 MM‘ $500 - $650 MM ° ° 2014 2015 201 ” Exit date Annual payments $14MM(after-tax) until “knocked out” 1. Inclu
Slide 22: Business Sensitive to Many Macro Drivers
Business Sensitive to Many Macro Drivers Many business drivers Expect slight increase in most significant Generally drive bottom line Liquid Steel Production Within current scope of + Liquid Steel Geatsbone Production Pp : Hee ae ~0.8% liquidsteel Logistics labor rental production equals~1% Ol deman
Slide 23: Q2 2014 Financial Summary
Q2 2014 Financial Summary Highlights QO Q2 adjusted operating income within expected range: = $41M versus guidance of $40-45M = Rail and Industrial performance strong via favorable mix and organic growth Q Net contract outcomes in M&M positive for 3" consecutive quarter Q Hammco contributions increa
Slide 24: Q2 2014 Key Performance Indicators
Q2 2014 Key Performance Indicators “ (&- milions, except EPS) Change vs. 2013 Second Quarter $ % Revenues 535 26 5% Adjusted Operating Income 41 (8) (16)% % of Sales 7.6% (190)bps Adjusted Earnings Per Share $0.17 $(0.12) (41)% Free Cash Flow 20 16 nmf ROIC 6.1% (10)bps (1) Excludes special items an
Slide 25: Q2 Earnings Bridge — Reported to Adjusted
Q2 Earnings Bridge — Reported to Adjusted (S- millions, except EPS) Operating EPS Income Reported 6.2 (0.19) Infrastructure loss on disposal 3.2 0.04 Infrastructure Transaction costs 0.2 - M&M Project Orion charges 8.5 0.11 M&M contract termination 11.6 0.14 charges M&M site exit and 10.9 0.13 under
Slide 26: Q3 2014 Outlook
Q3 2014 Outlook QO Q3 adjusted operating income is expected to be between $43 to $48 million versus $41 million in Q3 2013* Q Adjusted earnings per share of $0.26 to $0.31 Q Year-over-year changes include: = Positive net contract changes in Metals & Minerals Project Orion benefits Hammco accretion a
Slide 27: 2014 Segment Outlook
2014 Segment Outlook Excluding non-recurring items 2014 versus 2013 Revenues tlow single digits Metals & Minerals Operating Income + high single to low double digits Drivers + Improved contract mix, LST and nickel prices New contract ramp-up and site exits Revenues thigh single to low double digits
Slide 28: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures waasco CORPORATION TraiingTwehe RETURN ON HIVESTED CAPITAL EXCLUOMG SPECIAL ENS stents AND HARSCO INFRASTRUCTURE SEGMENT (a) ‘Ended vecember3t, (nhousans) mb Net loss from continuing operations, as reported ($216,696) Spectra = Harsco neste Seprentossondpose — = H
Slide 29: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures HARSCO CORPORATION EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND AMORTIZATION EXCLUDING HARSCO INFRASTRUCTURE SEGMENT (EBITDA) (a) TwelveMonths forPeriodEnded (in milions) December34,2013 Income (loss) from continuing operations $ (228) Addback Interest
Slide 30: Reconciliation of Non-GAAP Measures
Reconciliation HARSCO CORPORATION of Non-GAAP Measures EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) (Unaudited) (a) 2017 Projected (lemition) Low High Income (loss) from continuing operations $5 S17 Addback Interest expense 45 50 Income tax expense (beneft) 50 55 De
Slide 31: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures HARSCO CORPORATION FREE CASH FLOW EXCLUDING HARSCO INFRASTRUCTURE SEGMENT (Unaudited) TwelveMonths forPeriodEnded {un thousands) December34, 2013. Net cash provided by operating activities $ 188,255 Less maintenance capital expenditures (a) (128,331) Less growth c
Slide 32: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures HARSCO CORPORATION FREE CASH FLOW (Unaudited) (a) 2017 Projected (inthousands) Low High Net cash provided by operating activities $265,000 $305,000 Less capital expenditures, (b) (185,000) (165,000) lus total proceeds fromassetsales and capital expenditures forstr
Slide 33: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures HARSCO CORPORATION ‘OPERATING INCOME (LOSS) EXCLUDING SPECIAL ITEMS AND HARSCO INFRASTRUCTURE SEGMENT (Unaudited) (a) TwelveMonths forPeriodEnded (in thousands) December34,2013 ‘Operating income (loss), as reported ($134,799) Harsco infrastructure Segmentloss on d
Slide 34: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures HARSCO CORPORATION RECONCILIATION OF DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS EXCLUDING SPECIAL ITEMS AND HARSCO INFRASTRUCTURE SEGMENT (Unaudited) (inthousands) Twelve Months Ended December31, 2013, ‘Diluted loss per share rom continuing operations,
Slide 35: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures HARSCO CORPORATION FREE CASH FLOW (Unaudited) (inmiltions) Low High ‘Net cash provided by operating activities $25 $280 Less capital expenditures (a) (240) (250) Plus total proceeds fromasset sales and capil expenditures for strategic ventures (0) 30 35 Free Cashf
Slide 36: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures HARSCO CORPORATION RECONCILIATION OF DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS EXCLUDING SPECIAL ITEMS AND HARSCO INFRASTRUCTURE SEGMENT (Unaudited) ‘ThreeMonths Ended Six Months Ended June 30 June 30 (Inthousands) 2014 2013 (a) 2014 2013 (a) Diuted ea
Slide 37: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures HARSCO CORPORATION REVIEW OF OPERATIONS BY SEGMENT EXCLUDING SPECIAL ITEMS AND HARSCO INFRASTRUCTURE SEGMENT (Unaudited) Harsco Less Consolidated Totals, Aipinoapante) Metals& Harsco Harsco Harsco Consolidated Harsco —_—ExcludingHarsco Minerals Infrastructure Indu
Slide 38: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures HARSCO CORPORATION RECONCILIATION OF OPERATING INCOME (LOSS) BY SEGMENT EXCLUDING SPECIAL ITEMS AND HARSCO IMFRASTIUCTIRE SECHEXT (Unaate foe “i cela, Metals & Harsco Harsco Harsco ‘Consolidated Les: Harsco Excluding Harsco Ninerals Infrastructure Industrial Rall
Slide 39: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures HARSCO CORPORATION RECONCILIATION OF OPERATING INCOME (LOSS) BY SEGMENT EXCLUDING SPECIAL ITEMS AND HARSCO INFRASTRUCTURE SEGMENT (Unaudited) ihe ‘iia lads (inthousands) Meus& arco Hameo taco consoiited —Less:Hareo —“Brelaing asco, Minis nfasucure dwttal «= fal Ca
Slide 40: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures HARSCO CORPORATION FREE CASH FLOW (Unaudited) ‘ThreeMonths Ended Six Months Ended ‘June 30 June 30 (inthousands) 2044 2013 a ms. Net cash provided by operating activities $ 46921 $5295 $7444 $85,369, Less maintenance capital expenditures (a) (29,896) 8,878) (55,90
Slide 41: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures HARSCO CORPORATION RETURN ON INVESTED CAPITAL EXCLUDING SPECIAL ITEMS AND HARSCO INFRASTRUCTURE SEGMENT (a) Fang Twelve Hants for Period Ended ‘june 20 (n tousands) zou 2013 (a) Return on invested capital excluding special tems and the Natioss om contming PSSTOTS,
Harsco — 5th Annual Credit Suisse Small & Mid Cap Conference (September 2014) on 6ix