Harsco Corporation

Sal Fazzolari - Chairman and Chief Executive Officer Eugene Truett - Vice President-Investor Relations & Credit Steve Schnoor - Chief Financial Officer

Jeff Hammond - Keybanc Capital Markets Curt Woodworth - J.P. Morgan Bill Fisher - Raymond James Timothy Hayes - Davenport & Company Scott Blumenthal - Emerald Advisors Ted Wheeler - Buckingham Research Mark Grzymski - TimesSquare Capital Management

Thank you very much. Welcome everyone to Harsco's first quarter 2008 conference call.

It is an honor and a privilege for me to lead the call today. With me here today, I have Gene Truett, who all of you know well, our Vice President of Investor Relations & Credit and Stephen Schnoor our Chief Financial Officer.

Before we begin the call today, I would ask Gene to please read the Safe Harbor statement.

Thank you Sal. Good afternoon everyone.

As we do with beginning of all of our calls we just wanted to let you know that we will be having forward-looking statements in our discussion with you today. These statements relate to the future of our business, our operations, our results, economic expectations, and other aspects relating to and affecting our business.

While what we say today is based on the best information we have available, it is possible that the results could differ from what we tell you today. We've listed in our SEC documents reasons and risk factors that affect our business and these could be the reasons for any difference that could occur.

We invite you to review the SEC filings at your convenience. Also I would like to remind you that replays of this call and related information are available at our website.

Please take the time to access this website at your convenience and you can also hear replays at the website. Sal.

Thanks Gene. As reported this morning, we achieved another record quarterly performance.

Sales grew by 18% and diluted earnings per share from continuing operations were up 24%. We are obviously quite pleased with our strong start for 2008, particularly given all the economic turbulence in certain markets.

We expect 2008 to be another record year for the company. For the first time, we should see our revenues this year cross the $4 billion mark and we should also see the continuation of our double-digit earnings growth.

Most pleasing to us for the first quarter performance is the operating balance that we achieved. Overall operating income for the company was approximately $100 million for the quarter with Access Services accounting from 38% of the total, Minerals and Rail for 34%, and Mill Services accounting for the remaining 29%.

We believe that's very good balance. We are particularly encouraged by the continuous strong operational results of our Access Service business which set new first quarter records for [save] in operating income.

Although operating margins were down for the first quarter due to certain very explainable items, which we will get into. We are very confident that the margins for the Access Services business this year will be at least comparable to last year.

And we are also very confident that Access Service business will post another record performance in both revenues and income as well. We were quite pleased with the record quarterly performance of course of the Minerals and Rail group.

Sales, operating income and margins were all records for the quarter. As you know, or may know, particularly Gene and I have been going around meeting with lot of you or lot of our shareholders that we have worked very hard over the past couple of years in building and reshaping this group, which is now we believe poised to grow and perform well in 2008 and beyond.

2008 should be another record year for the group. The Minerals and Rail Group has now become or has come we believe of age and is equal partner with other two groups in providing earnings balance across the three scalable platforms.

The Mill Services Group did not perform up to our expectations in the first quarter due mainly to a significant escalation in fuel cost and the protractive renegotiations on certain contracts, which have deferred by several quarters is expected improvement in margins. However, let me be clear we are making progress and we are addressing the underperformance very aggressively.

One of the most important actions that we are pursuing to improve performance is the implementation in the first quarter of our enterprise, we call LeanSigma program. We believe the LeanSigma is a tool for streamlining processes and maximizing the efficiencies will greatly benefit the Mill Services business once it is fully implemented.

In addition, we have a sound strategy that deal with the significant increase in fuel cost but it will take time. Just going back to LeanSigma, this is as I said an enterprise-wide disciplined approach to process improvement.

Last year, I challenged our engineers to find a methodology that would mere and compliment our highly successful EVA system and which we could begin to implement in 2008 across the entire company. After considerable investigations we settled on a methodology from a firm called PBM Consulting Group.

They are the architects of LeanSigma in the same way that Stern Stewart [follow] our partner for EVA was the architect for EVA. LeanSigma combines Lean and Six Sigma to drive broad scale improvement in business processes.

We think it's an ideal fit with EVA. I think you've often heard me say it's a perfect marriage between EVA and Six Sigma or LeanSigma in this case.

We kicked off this LeanSigma initiative in the first quarter. A party and initial focus would be on Mill Services, but this is a powerful tool that will benefit and should benefit all of our businesses across the globe.

The other key operating strategy we were pursuing is the renegotiation of a handful of underperforming contracts. The renegotiations of these contract centers mainly around price.

We have made it clear that if we are unsuccessful in our renegotiations that we will exit these contracts. And of course any exit would be orally professional.

Our main focus however, is on successfully negotiate it and get in the higher prices. And like I've mentioned earlier, we are making good progress.

It's just that the negotiations are taking longer than we had expected. But the end result will be, we believe that most of these contracts will get resolved favorably to our satisfaction.

Significantly, escalating fuel costs are also been adjust on many fronts. For example many more contracts allow us to recruit the majority of these higher prices.

But it takes between 6 and 12 months to do so. Secondly, our use in a LeanSigma process methodology, we are closely examining fuel costs and we expect this initiative to start benefiting the year.

And finally, as we renegotiate contracts of customers, we continue to dialogue with them about possibly some of the customers assuming responsibility for fuel. Our large customers in particular can purchase fuel much more efficiently than we can.

So that’s a state of strategy as well. So we believe the recruitment through the inflation indexes the LeanSigma optimization and also the renegotiation process that we will make a significant dent in the fuel costs.

In summary then the execution of LeanSigma optimization initiative obviously in the Mill Service side, the resolution of the underperforming contracts the strategy for dealing with the escalating fuel cost, as I just mentioned and just as importantly our ongoing geographic expansion strategies that we have articulated to you over the year, are all critical in restoring margins for the Mill Services business. We do believe that this business will get better in the ensuing quarters.

I would like to emphasis that we are of course resolute in our commitment to improving the results. And we are confident that once all these strategies have been fully implemented, it will restore the margins to more historical levels.

What we do now is turn the call over to Steve, to give you a little more insight into the quarter and then we will make some other prepared comments and then we will take your questions. Thank you.

Steve.

Thanks Sal very much and good afternoon everyone. It’s a pleasure to be on the call with everyone today.

Overall, we are very pleased with our first quarter performance. In the first quarter sales, income from continuing operations and dilute earnings per share were all records with each posting double-digit percentage growth.

The overall first quarter operating margins for the company was 10.1% essentially flat with last year's 10.3%. As Sal stated, sales increased 18% in the first quarter just shy of $1 billion.

We expect to exceed the $1 billion mark in each of the remaining quarters of 2008. Organic growth contributed about 7% while acquisitions contributed 3% and foreign currency accounted for the remaining 7% of the growth in sales.

This performance again reflects Harsco's international balance, as well its ability to grow of organically and through acquisitions. In this regard we are certainly pleased with our solid organic growth rate as underpins our continued confidence in future organic growth investment opportunities.

Our diversification strategy again paid off in the first quarter as we achieved a good balance among all three business platforms. Access Services and all businesses of the Minerals and Rail Service and products group achieved increased earnings and had double-digit operating margins.

This balance achieved by strategic design enabled the company to move and offset the first quarter reduction in earnings of the Mill Services Group. As Sal mentioned we have a multifaceted strategy in place, which will result in a gradual improvement in Mill Services business throughout 2008 and beyond.

This strategy is being implemented with the utmost vigor. International sales for Harsco were 70% of total sales.

Further 86% of our sales were from Industrial services platforms. This again represents further evidence of our diversification, which provides a hedge against economic downturns.

Particularly encouraging was our sales growth in emerging markets in the first quarter. Sales grew 37% in Latin America, the Middle East, Eastern Europe and Asia-Pacific.

We believe these emerging markets are less susceptible to economic downturns than mature economies such as North America. Sales for the quarter were geographically balanced as follows: 20% in emerging economies such as the Middle East, Latin America, 33% in North America and the remaining 47% in Western Europe.

In the first quarter of last year sales in the emerging economies were only 17%. So we grew at 300 basis points in the first quarter of 2008 compared with last year.

Emerging market growth is consistent with our strategy. To remind you, our goal over the next three years is to increase sales outside North America and Western Europe to about 30% of sales, of course on a much larger base.

We are also pleased with the improvement in the return on invested capital of the first quarter. Return on capital from continuing operations improved by approximately 30 basis points to 10%.

Also worth noting, the company again improved economic value added EVA in the first quarter. Importantly over 15% of this year's record capital expenditures were approximately $62 million has been an invested in strategic growth initiatives with the remaining expenditures allocated to sustaining the current revenue stream.

Additionally, 37% of the quarter growth CapEx was invested in economies outside North America and Western Europe. This was consistent with our goal of 30% of sales coming from these economies within the next three years.

Based on the expected organic growth rate for 2008, approximately 56% or $35 million of growth capital for the quarter was invested in our growing Access Services business. The remainder of the growth CapEx were approximately $27 million was invested mainly in Mill Services business due to recent contract signings.

First quarter has historically been the slowest period for operating cash flows. Therefore as expected our debt to capital ratio increased slightly by 90 basis points during the quarter to 41.7% from 40.8% at December 31, 2007.

However, 2008 debt to capital ratio was 21% lower than the first quarter 2007 ratio of 52.6%. First quarter 2007 ratio reflected the affect of the Excell Minerals acquisition.

Our strong cash flows and the successful divestiture of the Gas Technologies business have enabled us to substantially reduce the debt to capital ratio since the Excell acquisition. Slight increase in the debt to capital ratio from December 31st is principally due to the record growth related capital, and capital expenditures in the quarter, as well as $20 million income tax payment, which is primarily related to the gain on some of our discontinued Gas Technologies business, which was divested in the fourth quarter of 2007.

According to Generally Accepted Accounting Principals, the income tax cash payment has to be reflected under operating cash flows while the proceeds from the sale of the business were reflected in cash flow from investing activities last year. Additionally, in the first quarter, the company returned $16.9 million to stockholders in the form of share buybacks.

Cash flows from operating activities in the first quarter were $32 million, $9.7 million lower than last year's record of $41.7 million. The decrease in cash flows in the quarter was expected and is due mainly to the Gas Technologies income tax payment that I mentioned earlier, as well as higher inventory approaches to meet the strong backlog demand that we have.

We are confident that we'll achieve targeted cash flow from operations of $525 million in 2008. This will be a record and will support our growth initiatives.

Let us now turn to the first quarter performance of each of the business groups. Consistent with last year, both the Minerals & Rail Services and Products group and the Global Access Services business again led Harsco’s performance setting new quarterly records for sales and operating income.

The sales growth of 20% in Access Services was well balanced throughout the world. We are particularly pleased to see that key emerging economies such as the Middle East, Eastern Europe, or Asia Pacific contributed significantly to the overall sales and income growth of the group.

As these global economies continue to make significant investment in new construction, in infrastructure, modernization and expansion. First quarter performance is well balanced and broad based.

We are especially pleased with the excellent 10% organic growth of the Access Services business in the first quarter. While margins were down slightly in the Access Services group, last years operating margins were exceptional and benefited from a $1.6 million asset sale gain and large non-recurring export sales with high margin as well as a very mild weather in Europe.

In contrast, 2008 first quarter margins were unfavorably affected by the earlier Easter holiday, which last year occurred in the second quarter. In Europe, Easter holiday is a significant vacation period and business slows considerably for the entire Easter week.

The spring construction season does not accelerate until Easter. Adjusting for these factors, first quarter margins were essentially flat with last year.

The operating margin of 10% for the quarter compares very favorably to the 7.4% in 2006. That emphasizes the tough first quarter comparison to last year's exceptional margin of 11.1%.

The outlook across large and expanding global footprint of our Access Services business remains positive. We continue to see favorable market conditions for 2008 as another record year performance.

Moving on to Mill Services, as Sal mentioned earlier, lower Mill Services performance in the first quarter compared with last year is due principally to significantly higher fuel cost and a protractive negotiations on underperforming contracts. We continue to believe that we have this business on a correct path to show gradual improvement as the year progresses.

As Sal mentioned, we have a broad-based business authorization plan in place plus we are confident that we'll gradually restore the margins of the business. As our press release reports, the estimated future value of Mill Services contracts is at record levels and global steel usage is forecast to increase in 2008 and 2009.

Therefore, the key to improvement of this business is the execution of the optimization programs articulated by Sal. We will be relentless to ensure the successful execution.

The Minerals & Rail Services and Products groups posted an exceptional first quarter performance with all business units posting higher sales, higher income, and improved operating margins. As a result, the group as a whole achieved a record operating margin of 17.7% a 580 basis point improvement over last year.

We are particularly pleased with the performance and year-on-year improvement of our Rail Services and Products business, which achieved record operating margins in the first quarter. Our strategies of value selling, business optimization and global growth are having the impact that we expected.

The 2008 and longer term outlook for the Minerals & Rail Services and Products group is very favorable. We expect another record year in 2008.

To sum up the quarter for the entire company all but one of the businesses in our portfolio had improved year-on-year operating income highlighting the strategic balance that has been achieved by the company. That balance shall allow the company to continue to improve earnings what was evident this quarter with the Access Services and Minerals & Rail Services group's performance more than offsetting a lower performance by the Mill Services.

That completes my comments and I'll now turn the call back to Sal.

Thanks Steve. Let me just quickly summarize our current outlook for you.

Based on our continuing strong end-markets, numerous international expansion opportunities and our enterprise business optimization initiatives, we are confident that we will continue to perform well in 2008. Our current expectations and outlook are for another record year.

As a result, this morning we raised our guidance from continuing operations from $3.40 to $3.50 to a new range of $3.45 to $3.55. Using a midpoint of the guidance, our expected 2008 results will represent a year-over-year improvement in diluted earnings per share of over 16%.

This will represent the fifth consecutive year of significant EPS growth for the company. The outlook for the second quarter of 2008 from continuing operations is for another record quarter.

Diluted earnings per share from continuing operations in the second quarter were forecasted to be in the range of $1.01 to $1.03 and that compares with $0.91 in the second quarter 2007. Again using the midpoint of the range, this will represent an increase of approximately 12%.

It should be noted, however, that within the Minerals and Rail group last year's second quarter included a one-time $3.2 million pre-tax asset gain of approximately $0.03 per share from the sale of property. Adjusting for this gain, our anticipated year-over-year increase in EPS in the second quarter of 2008 will approximate 16%.

Also in last year's second quarter, the Minerals and Rail group had an exceptional performance from Excell Minerals. As you may recall, we were quite emphatic during our second quarter conference call last year that Excell Minerals' results were exceptional; it would not be repeated to this degree.

Nonetheless, we expect to have another record quarter, led by a very strong performance that we expect from Access Services in the second quarter and that's underpinned by strong activity that we're seeing in regions that Steve articulated. We've had tremendous growth in the Middle East, in Asia Pacific, and other key emerging markets as well as our strong underpinning in some of the North American and Western European markets as well.

Also we do expect the Mill Services business sequentially quarter-over-quarter to perform much-much better in the second quarter than it did in the first quarter. And we of course expect the solid contribution from the Minerals and Rail group taking into consideration again, what I have said just a couple of seconds ago relative to the $3.2 million asset gain as well as exceptional performance of Excell Minerals.

Well that completes our formal comments. We will of course now be very happy to take any questions you may have.

Hi good afternoon guys.

Hi Jeff.

Hey Jeff.

I just wanted to I guess get a little more granular on this Mill Service issue and turn around. I guess, if I pull out the fuel cost impact, your margins look still down sequentially.

I just want to better understand within some of the other operational issues, what in your mind kind of got worse despite what seemingly was a more stable production environment? And then two, maybe just give us a better sense of where you see the inflection point where some of these improvements start to come together.

Maybe you answer those and I get one more?

All right Jeff. First of all, as you recall on the operation other than the things you said, which you stated very well, is if you look at some of the operational issues we are still working through some of these maintenance things by having equipment delivered.

We are just in the process of implementing these cost optimization initiatives. Some new contracts are just getting started up and should contribute.

And we expect those new contracts to perform very well as the year progresses. And you can look back at the press releases over the last 12 months starting with China late last year, as well as some in Brazil and other parts of the world and Argentina and so forth.

As those contracts kick in, you should start seeing performance. So, when you underpin it by the -- we'll start recovering a little bit of the fuel, the efficiencies start getting a little better, and the new contracts kick in and so forth.

We believe the first quarter is certainly the low point here. And so sequentially you should see, we believe, an improvement in the second quarter and that will continue to build with a much more improvement in the third quarter.

And that is the way we are seeing it right now. These negotiations on these contracts, its good news/bad news.

The bad news obviously is they are protractive. But that is the good news.

That means that we are making some headway; the customers listening; so which means that we'll probably resolve lot of these more favorably than we perhaps felt maybe even like a month or two ago. So, the things are turning more satisfactorily but it just takes, you can appreciate the bureaucracy and the amount of time to resolve these things.

Jeff it is, just one of those things. Believe me, we’d like to push them and get them done a lot quicker.

We are really at their mercy relative to timing. So on balance, this is certainly the low point.

Okay. And then shifting gears to Rail and Mineral, would you attribute the track strength simply to timing of the China contract coming on or is there more things going on there?

No, we could talk to you about Rail forever. I mean, we are very excited about the Rail story.

Again, we've been working on this Minerals and Rail group for a lot of years. Putting it together, restructuring it, changing the business model, we've changed management, we've introduced value selling, and announced LeanSigma.

It's all starting to come together now. And on the Rail side, it is not the China order at all actually, as that's coming later in the year.

This is just simply executing better, better pricing through our value proposition, going after the right type of work, and so forth. So we think there is some very good long-term prospects for this business.

Then all the businesses in that group, the Minerals business, Excell and Reed Minerals continue to perform relatively well and so forth. So as a group, we think this kind of performance can be sustained, they are running at record backlogs, and frankly we are very upbeat about this group.

Okay. Then just finally, even if you ex-out the one-time item last year in the second quarter, you had an exceptional margin quarter within Mineral and Rail and I think a lot of it was some timing around some mineral shipments.

Can you just help us out with the compare there 2Q to 2Q?

For the second quarter, Jeff?

Yeah.

Yeah, again, don't forget, you got to back up at $3.2 million asset gain where we sold the property. I mean that’s a big number, it's $0.03.

Then fundamentally, you are looking at the exceptional second quarter that Excell Minerals had last year that we said that will probably never be repeated again, and we were very serious when we said that. Having said all that, we think the group is going to do very very well not only in the second quarter but they are going perform and post quite an outstanding year with high margins and high returns characteristics.

But it is somewhat of a tough comp. When you have those two factors of the asset gain as well as the Excel Minerals exceptional performance and strong end market demand for the products that we had, where they operated literally 24/7 every single day in the quarter, which is again it's highly unusual you will ever see that again.

Okay, that’s good color. Thanks

You are welcome.

Hi, good afternoon.

Hi Curt.

Good afternoon.

You know, Sal, in terms of the fuel issue, what percentage of your contracts have fuel escalators and what is your fuel spending annually in the Mills division?

Steve, do you want to give him the fuel…

If you look at the fuel thing, Curt, the majority of our contracts, it’s a very high percent. I mean, I don't want to give you the exact percent, but it’s a very high percent of the contracts do have this.

Now keep in mind, you are not going to recover 100%. I mean it's impossible.

We believe we're going recover substantial amount of this plus what we're trying to do longer-term is two things. One is I mentioned in my comments is that we're with this LeanSigma initiative we think we can make a heck of a dent in using less fuel in the way we run the business.

And then secondly is we re-negotiate contracts in some cases where we are getting a fair hearing anyway that people are listening to what we are saying about possibly the mill absorbing that cost because they can procure it a lot cheaper than we can. So there's all those kind of dynamics going on and so this is really a timing issue more than anything.

It's just that as you well know, we have had this significant ramp up in escalation in fuel costs that happened so quickly that we just have not had the ability to recover from that.

Yeah, for fuel cost for the company in the first quarter last year was less than 4%, it's gone up for the company, it's over -- it's about 4% with Mill Services having a higher percentage than that. So that gives you an indication of where we are with the total of the fuel cost and the increase overall.

Okay. And just in terms of the optimization and the re-negotiation of the underperforming contracts, is it -- if you can reprice these contracts to where you want to be, is that going to be kind of the main hurdle to get you to the kind of 10% margin target that you guys have been I guess targeting for this year?

Yes, that’s right Curt. It's that and trying to recover some of these fuel costs and get in this equipment in place for the maintenance cost, which we are making good, so we are making a lot of progress in all of these fronts.

It doesn't appear to be obviously from the results and it's unfortunate but we had a confluence of things happening in the first quarter here. But believe me, we are very very focused on turning this thing around as quickly as humanly possible.

This business has not broken by any stretch of the imagination. There is upside to this business.

As the year progresses, you should start seeing some new contract signings and some of them in emerging markets, again consistent with our strategic objective to expand in those emerging markets. Also you should start seeing some new contract signings even in some of the more mature markets but with better terms and conditions.

And you may see actually one or two contracts as well. So as we continue to turn this, we believe that this business will return to historical levels then we will build off of that through particularly, because the LeanSigma initiatives takes years and years to really get the full effect of it.

We just started that literally in the first quarter at five of the largest sites we have in the world and we should start seeing some initial results of that probable by second, third quarter and then what we will do is we will take the best practices out of that, particularity on the fuel side and implement those across the globe, but then will redouble back and make sure that every single mill site gets the full treatment if you will when it comes to the LeanSigma. And again, Curt just emphasize, not to be the dead horse here about the balance, that’s why we have been working very hard to build up this third platform.

And as I said it has come away and it's some of our actions that we worked very hard over the last three years particularly to build this thing to get this balance and we subscribe to this balanced portfolio running the business. And I think the results this quarter really manifested that well.

Of course, we would like to have better results from Mill Services, we will get better results from Mill Services.

Okay. And then on, just kind of trying my hand were with the contracts that are underperforming.

It seems like you have to adjust for fuel margin was around 8%, 8.2% in the quarter. So, it just feels to get from there to 10 that you have to have a fairly significant amount of contracts that you are going to need to re-price, have that kind of impact on the total segment.

Is that -- can you give a sense for maybe how many contracts, what percentage of fails are somewhere that we can kind of qualify it?

We have been trying to stay away from giving you because the numbers kind of change a little bit.

Yeah.

It really is found to the underperforming contracts as well as just some general efficiency that we are trying to sort through in the operating sites.

Okay.

And that’s a combination I guess set of equipment, training, new people, expansion, we have the start-ups. I mean, again, we haven’t talked much about this.

We've had three or four new contracts that we signed late last year and you never get exactly the date they are going to start, where they were supposed to, we initially thought a lot of it would be fully effective for the first quarter, they weren't. They were picking in more in the second quarter, so those kind of dynamics are going on.

So again, it's just unfortunate, like I said that all of these factors happen in the first quarter and that are being such a poor result there.

Got it. And then for Access, you commented that you think the margins can be the same if not better than what they ended the entire year in ’07.

So, I would obviously assume margin expansion year-over-year, the next coupled of quarters. Can you just -- what’s driving that view and also if you could talk about kind of this construction market outlook, your order rates in both the US and Europe that you haven't seen recently in Access?

It’s a very fair question because again the first quarter performance from Access on a surface does not appear to be as strong as perhaps some people would have liked or would have expected. It's very explainable as Steve said.

As Steve went through all of the details of that that you had the holiday, you had the asset gain, you had some one-time export sales and so forth. But…

Right.

We looked at this very carefully for the year. If you look at the growth that we are seeing in the emerging markets, very strong.

If you look at some of the market share gain, we are seeing a few other countries that we operate in. If you look at the balance, particularly like the Middle East, Eastern Europe, parts of the US, parts of Western Europe as well, we are seeing some good market gains, very strong order fill.

As just Steve indicated, you saw that the CapEx growth investments for the first quarter were still at a pretty good level for Access services. We don’t place any orders for anything unless we have orders in hand.

So, 2008 looks very very strong for Access Services. You should see a very strong second quarter and a very strong third quarter from this group.

We are very confident of that. The margins will be fine.

So we are feeling really good about this group. We are feeling really good about the Minerals and Rail Group and of course we just talked I think quite a bit about Mill Services.

So our balance and that’s why we raised the guidance, that’s why we feel confident about the year, and we have some very good momentum and so we are, I think we sound confident and we personally I am.

Absolutely confident. I think we have a good balance.

It's not just construction, it's industrial work and it's worldwide, a lot of the emerging markets as well as so…

Yeah.

We are very confident.

Great. And just one final question on Excell.

Can you talk about the capacity expansion plans, plans you expect to put in place in this year and if you have any visibility on '09?

We are looking right now two key markets, one is in China and the other one is in Europe and hopefully by sometime this year, we should be able to make some further announcements about the new contracts at some point this year, hopefully at least in one of those locations, but possibly more.

Okay.

With this business, just like we have done with the other businesses, we go very slow at first, we want to make sure they are fully integrated, we make sure we get the foundation straight, we make sure we have the management straight, and then we start executing the growth strategy. So again, this one is going to go slow at the beginning and it will pick up momentum just like Track has taken quite a while to get them sorted out, but they are sorted out now and we feel similar situation will Excell.

Okay, great. Thank you.

You are welcome.

Afternoon.

Hi Bill.

Just on the Access margins, you mention the focus on the emerging markets and has a higher margin mix and helps. Just I remember back in December you touched on also hopefully increasing forming and shoring mix every time, I think which has better margin.

I wondered if you, looking at the growth CapEx you have this year, do you see that kind of trending forward as well?

Yeah. Bill, I will let Steve comment on this as well, but if you look at the mix of what we are seeing particularly lately all that, again we don’t buy anything without orders in hand.

The orders in hand are migrating more towards infrastructure spend, industrial maintenance, the emerging markets. So all of the things you are seeing in the headlines of the newspapers, that's where a lot of the investment is being directed towards and that’s why we feel comfortable about the balance.

And as you well know, the Formwork business is a higher value proposition and that continues to be obviously a significant part of our growth strategy.

No, I agree with Sal. This is Steve.

In a lot of our work in the Middle East is formwork and shoring because of the infrastructure build, the big part of it. On the other hand, Sal mentioned balance and the industrial services does balances out in places like the US, where the petrochemical plants are going full steam.

They need to be maintained in its capital expansion there. So depending on what markets you are in, we had that balance.

So the formwork and shoring, which has higher margins, is definitely we are going in Eastern Europe, Middle East and places like that, but in places such as Holland, US, other parts of Western Europe, we have that counterbalance of industrial services that has high EVA returns.

Okay, great. And just on the emerging market mix, does it -- higher mix, does that do anything to your tax rate forecast for this year?

Well, that's very good questioned. Bill, as you -- I'm sure you have heard us say repeatedly particularly over the last six, 12 months is that we are on long-term strategic objective to lower the overall effective tax rate.

I think that the tax rate is -- the lower tax rate is sustainable because of the way you just said and more and more earnings are coming offshore in much much lower tax jurisdictions than United States. United States has the second highest, I believe, if I am not mistaken, tax rate in the world.

And with 70% of our business now and probably I would argue a little higher income that 70% of the revenues by much higher income coming from offshore, you are going to see the tax rate we think over the long horizon continue to decline, but certainly for the near-term horizon we are comfortable at where it is right now.

Okay. So it is around 29 in the first quarter, is that right?

Yes.

Okay. And that kind of -- it looks to be sustainable near-term?

Yes.

Yes.

Okay, great. Alright, thanks very much.

You are welcome.

Hi, good afternoon. Actually all of my questions have been answered.

Thank you.

Thanks Tim.

Good afternoon everybody.

Good afternoon.

Hi Scott.

I don’t know where everybody went after two or three callers. Steve, could you give us the growth CapEx number again for Access Services?

Sure.

Steve will give you that.

That number for the quarter, the growth CapEx I believe was 37million.

Yeah, 35 million.

Okay. You said it was 35 for Access and 27 for Mill Services, I believe?

25 for Mill. 35 for Acces, 25 for Mill, and the couple of million for the Minerals and Rail and that was mostly Excell Minerals.

So that 62 million in growth CapEx came from split roughly in those proportions.

Okay. Thank you.

You are welcome.

Sal, can you give us an idea of what the scale or scope of an Excell contract would be like in the overall scheme of Harsco's business?

Well, it could be size above as our normal Mill Services contract. So it can be anywhere from say an annual run rate of 2, $3 million to possibly as high as 7, 8, 9, 10 million a year over say an average five to seven, eight, nine year contract, somewhere in those perimeters.

It depends on the project.

And are those -- do you anticipate that those contracts are going to be similar in duration to a Mill Services contracts and are you going to try and align those up with the Mill Services contract in those locations where you already are?

It will be -- it should be somewhere and as far as length of the term of the contract, but it will be a lot different in terms of some of the other characteristics, particularly like I said, we are looking at different types of markets, we are looking at different types of customers. We want a better balance out of customers, for example, we want a better balance out the geography as well.

Right now, like I said, we are targeting particularly China and some of the other Asian markets and Brazil and then parts of Western Europe where there is a high concentration of some of the higher values particularly the stainless steel producers.

Alright. Can you give us some idea as to what the actual purchase decision in some of these customers you think what tip them to actually refine on the dotted line as opposed to leaving things what they are?

Well, it's a -- one of the key things we are focusing on is the environmental services. With Excell, what seems to attract particularly the Asians more than say and as well as Brazil I actually should say that, there is a tremendous interest in solving environmental issues and Excell does a very good job.

They are very good environmental solutions company. They take these way streams.

And so, that seems to be opening up the doors right now and that's been very effective. So you really get to the very top of the organization, but the steel mills for whatever reason tend to be a bit bureaucrat and it just takes a while to get through the engineering and procurement and everyone else and then legal and then ultimately you got to remember if you get a 10-year contract it does 5, 6, $7 million a year in revenues that’s a big contract.

And a lot of times those have to go through the Board. So then you have to go in front of their Boards to get approval.

So you can appreciate it does take time. Unfortunately, these things just don’t happen overnight.

Sure. That’s understood.

Looking to Mill Services just for a second, do you have any idea or have you done any work on how long would it be -- if you took your current contract, the current population of contracts that you hold, how long would it take to roll-off all of the contracts that don’t have fuel escalator?

Or that don’t have fuel?

Yeah.

That don’t have fuel escalation?

Correct.

Well, I don’t think we can answer that question simply because the average life of the contract, Scott, is 7.8 years. They roll-off at various times.

They get renewed at various times. We’ve never separated it that way in all honesty.

Okay. But I guess it is safe to say that all new ones have it?

Yeah. We are trying to get the customers in some cases to take that ownership of that directly, so we are not even involved in any fuel discussions at all.

In fact, we already have one or two contracts that have that provision now where we were able to successfully get that in.

Okay. That was re-negotiated?

They give us -- they provide all of the energy because as you know, I mean, our business model is that we are on their site 24/7, so we have one or two cases where they actually provide all of the energy for us to do the service. So that way they can control it better, they can procure it better, and it's a win-win for both sides.

What we are trying to do is get more and more customers accept that and that’s part of the strategy. It takes time.

We got to go around -- don’t forget, we are at 170 sites and it's site by site, country by country, and there is a lot of work to be done on the fuel side. We think when it's all done, all of this work that we should get a pretty good result.

Understood. That’s very helpful.

And I guess my last one, you mention that Rails and Minerals very strong and the Chinese order really doesn't kick in into later in the year. We are going to start to see that in Q3 or is that a Q4 event?

Yeah, there should be one -- yeah, you could possibly see one order going out the late Q2, but certainly Q3. It doesn't really ramp up to much higher degree until next year.

The bulk of the orders are in '09 and 10 and then is a little bit a tail off in 11 as well and there is a front-end here obviously in '08, but the majority of the order will be pretty evenly shipped and recognize during '09 and 10.

Hey, great. Thank you.

You are welcome.

Hi. Good afternoon all.

Good afternoon.

Hi Ted.

I wondered if I could just ask another couple of questions on Excell. What do you think the growth rate of that business will be?

I guess you are still obviously working it and taking it to the places that you look at. I mean what should we think about if we look at '09 and '10 as to what kind of growth rate that company can endeavor?

Yeah. I mean, this year for example you should see low double-digit growth rate for example.

Even on top of that blow out second quarter?

No, we are talking revenue growth, right.

Right.

Yeah. I mean revenue growth is for the year, you should see roughly double-digit revenue growth for the business this year compared to last year and it could be high as possibly 50% but it's somewhere in that range.

Now is that sustainable? We think that as we move out into the out years that certainly, high single-digit, low double-digit for the next two, three years should be achievable and again with the focus of getting better geographic spread and they are really focusing in more on these environmental type services or like I said our primary focus right now with Excell is really to grow Brazil, Asia, certain parts of Europe, and also to better develop the mineral side, the coal product side, where we take way streams and dispose off those way streams into cement, agricultural, and turfing and some of those markets and braces and so forth.

So that side of the equation is going be a little slower because we want to make sure we are in the right markets because you do have to make obviously an investment for that, so we got to pick where we want that investment because geography is very critical there. And so it becomes a scalability issue, it becomes an investment issue, so we want to make sure we get that right.

In your ownership and sort of digging into the issues surrounding Excell, are there competing coal product companies out there that you have encountered or do you guys still have some prioritize sort of head-start on particularly the turf side?

Well, I mean, to our knowledge what we do and where we do it, there are not a whole lot of people that do it the way we do it when you consider that we take the entire way stream from beginning to end. You may have people that do some of the front-end, some of the back-end, but to our knowledge, no one and MultiServ does a little bit of this on the Mill Services side as well.

So you got MultiServ, you got Re Minerals and you got Excell, all three of them actually do similar type of work and to our knowledge, there aren't many companies that provide 100% solution if you will.

And lastly on Excell, are there any of these cost issues cropping up. I know fuel, I don’t know what the deal is on there?

It's minimal. I mean, if you see MultiServ, we have a tremendous of equipment and obviously that equipment uses a lot of diesel and like I mentioned earlier we think the LeanSigma initiative is going to benefit there, benefit us here because it's looking at all ways that we run our equipment, how we move equipment, even for example at times you have the equipment that sits here idle for various reasons.

So there is a lot of different ways to look at that and we are hoping when we are done with this result this year that we will be able to implement these best practices across the globe.

But Excell doesn't have the kinds of margin pressures?

No, nowhere to the scale of the Mill Service business, no.

Well, thanks for the run down. Nice job.

Thank you.

Hey, good afternoon everyone.

Good afternoon.

Good afternoon.

I apologize if you already talked about it, but you mentioned the new contract opportunities in the Track Technologies business. I am wondering if you could still elaborate on that a little bit?

Sure. Well, the Track Technologies, what we have been doing is changing the business model and we are focusing on obviously the services side, we are focusing it more on assembly, less manufacturing.

Obviously we have a very strong export market. We have a very strong parts business and also the geography is very important.

We are making some good headways for example in Brazil and even in the Middle East, of course china is very big in our future. We are working on projects, we are bidding on projects in India.

We are looking at a lot of things in North America, from Canada particularly and the US of course, which is our base and the UK. So we have a very nice balance of services, products, geographies and we have really a full play and we have more than enough work to keep us busy for the next few years.

So what we are focusing on now is to make sure that the work we do take on does have very high return characteristics and hopefully they are more of the longer-term contract nature than just simply one-off quarter.

Do you think or are you seeing the effects on Rail globally with fuel cost rising and transportation cost escalating? Is this -- are you beginning to see the stage of -- the early stages of a pickup in that business, is this your sense or…?

I think so, I mean if you look at where a lot of the focus is coming from our customers across the globe and that's in rail grinding. And rail grinding is direct technology that lowers the amount of energy required to move a train from Point A to Point B.

Right.

So, yeah, it's absolutely we are seeing tremendous inquires. The Chinese orders are all grinding.

The India order we are bidding on right now that’s all grinding. We had inquiries, like I said from Brazil, from Japan and Singapore and many other markets around the world and a lot of them are focused on grinding technology and some of them also on new track construction because in some cases they need to replace some rail and that's very expensive, so you want obviously the best equipment you can to do that.

And also from a competitive standpoint, are you in a position -- you have some pricing power in this market assuming that demand is strong?

Yeah, we think we are very really well positioned, absolutely and a lot of it is due to what we have been doing last few years of outsourcing manufacturing, taking -- converting more to the services side and those kind of things.

Great. Thanks very much for taking my questing.

You are welcome.

Yes, thank you very much. I appreciate all the questions.

Again, I just want to reiterate briefly what we said earlier and that is that we do have complete confidence in this business. We think we are going to have a very very good year.

We should post record results again underpinned by both Access Services, Minerals and Rail, and we do believe that the Mill Services business will start to show improvement in the second quarter sequentially over the first quarter as we start to build and recover in that business. So again, we thank you for your support and we look forward to speaking with you soon.

Thank you very much.