HARSCO CORP - FORM 8-K - EX-99.1

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8-K - HARSCO CORP--8-K - HARSCO CORP	d583847d8k.htm

Jefferies 2013 Global Industrials Conference

August 14, 2013

Patrick Decker, President and CEO

Exhibit 99.1

Administrative Items

Safe Harbor

This presentation contains forward-looking statements based on management’s current expectations, estimates and

projections. All statements that address expectations or projections about the future, including statements about the

Company’s strategy for growth, product development, market position, expected expenditures and financial results are forward-

looking

statements.

Some

the

forward-looking

statements

may

identified

words

“may,”

“could,”

“believes,”

“expects,”

“anticipates,”

“plans,”

“intends,”

“projects,”

“indicates,”

and similar expressions. These statements are not

guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those

discussed more fully elsewhere in this presentation and in documents filed with the Securities and Exchange Commission by

Harsco, particularly its latest annual report on Form 10-K and quarterly report on Form 10-Q, as well as others, could cause

results to differ materially from those stated. These factors include, but are not limited to, changes in the worldwide business

environment in which the Company operates, including general market conditions; changes in the performance of the equity

and debt markets; changes in governmental laws and regulations; market and competitive changes, including pricing pressures,

market demand and acceptance for new products, services, and technologies; unforeseen business disruptions in one or more

of the many countries in which the Company operates; the seasonal nature of the Company’s business; our ability to

successfully enter into new contracts and complete new acquisitions in the timeframe contemplated; the financial condition of

the Company’s customers; the successful integration of the Company’s strategic acquisitions; the Company’s ability to

successfully implement its strategic initiatives and portfolio optimization; and the amount and timing of repurchases of the

Company’s

common

stock,

any.

The

Company

undertakes

duty

update

forward-looking

statements.

Non-GAAP Measures

This presentation contains non-GAAP financial information including adjusted operating income margin, adjusted diluted

earnings per share from continuing operations, free cash flow and adjusted return on invested capital. These non-GAAP

measures exclude special items in certain fiscal periods. For a reconciliation of these non-GAAP measures to U.S. GAAP

results and the Company’s rationale for its usage of non-GAAP measures, please see the Appendix .

Harsco at a Glance

Revenue: $1,404M

Global Market

Leader

Multi-industry exposure through four market-leading segments

2012 Total Revenues of $3,046M

18,500 Employees Across 50 Countries

Revenue: $937M

Global Market

Leader

Revenue: $352M

Global Leader in

Track Maintenance

Revenue: $353M

Leader in air cooled

heat exchangers

2012 Revenue Mix

Services

77%

Products

23%

2012 Revenues by Geography

W. Europe

35%

N. America

39%

Rest of

World 26%

Historical Harsco Performance

*Adjusted

diluted

earnings

per

from

continuing

operations,

free

cash

flow

and

adjusted

return

invested

capital

are

non-GAAP

measures. See the Appendix for a reconciliation to GAAP results.

Performance reflects weakness in end markets and need for better

execution

New Executive Management

CEO Perspective

2Q 2013 EPS of $0.30 in guidance range

Dissatisfaction with

Cash flow performance in 1H 2013

Near-term outlook

Metals & Minerals (M&M) performance in 2Q 2013

Pace of progress to improve results

End markets are very challenging

Need for better execution

Improvement Actions

Operational Process

Implement a structured and

disciplined approach to simplify

and streamline processes

Reduce number of initiatives

Focus on customer needs

Extend CI adoption

Start with M&M; Other

businesses in 2013/2014

Return to basics; Bottom-up

approach

Enhance competitive position

Portfolio Optimization

Challenged portfolio

Go-forward portfolio profile

Sustainable competitive

advantage

Position for long-term growth

Deliver strong free cash flow

through business cycles

Have attractive ROIC profiles

Reduce Company’s exposure

over time to highly cyclical and

correlated end markets

Complementary actions

expected to lead to stronger execution and results

Metals & Minerals at a Glance

Harsco Profile

Revenues and Adjusted OI Margin*

Market Drivers

*Adjusted operating margin is a non-GAAP measure. See the

Appendix for a reconciliation to GAAP results.

World’s largest provider of on-site, outsourced

services to the metals industries

Provide environmental solutions for global

metals and resource recovery

Mineral-based by-products for commercial and

industrial uses

2012 Revenues by Geography

Climbing the Value Chain Drives Improved

Growth Profile and Returns

LOW

HIGH

LOW

HIGH

ENVIRON SVCS/

BY-PRODUCTS

RESOURCE

RECOVERY

LOGISTICS

Summary of Major Contract Wins

Customer

Market

Primary Field of Play*

Term

(Years)

Estimated Value

Essar

India

$160M

Jindal Group

India

10+

$325 M

TISCO

China

RR and Env.

$500 M

Tangshan

China

RR and Env.

$375 M

Gerdau (renewal)

Brazil

Confidential

Revenues by Field of Play

RR: Resource Recovery, Env.: Environmental Services.

*Harsco provides some logistics services, mostly to support the primary field of play.

Metals & Minerals

Strengths

Leading global market position

Services critical to sustaining

customer operations

Relationships with top-tier global

customers

Value proposition highly relevant

in attractive emerging markets

Long-term (multi-year) service

contracts

Lower cost structure due to prior

restructuring actions

Contract renewal discipline

Challenges

Global steel industry remains

challenged, particularly in

developed markets

Capital intensive business largely

dependent on customer

production volumes for attractive

returns

Need to

continue wins in emerging markets

accelerate our CI journey

lower capital intensity

bring new technologies to market

Infrastructure at a Glance

Harsco Profile

2012 Revenues by Geography

Revenues and Adjusted OI Margin*

Market Driver: Global Construction Spending

Source: IHS Global Insight, 1Q 2013

($ in trillions)

*Adjusted operating margin is a non-GAAP measure. See the

Appendix for a reconciliation to GAAP results.

A comprehensive access and forming

solutions provider to major infrastructure and

construction projects

Provide suite of plant construction, upgrade

and maintenance services to various

industrial sectors

Infrastructure Focus Areas

Global project management

to drive top line growth

More efficient yard

management for improved

operational efficiency and

better customer service

Common engineering

standards to leverage

innovation and lower capital

intensity

Competitive Landscape

Construction Services

Services Provided

Formwork

Shoring

Non-Mechanical Access

Masts & Suspended Access

Platforms

Roofing & Shelters

Site & Safety

Training Services

_____________________

Note: All service offerings not in all geographies. Grey shading represents Harsco Infrastructure’s key service offering.

Leveraging service and geographic portfolio to capture larger share of

customer projects

Infrastructure

Strengths

Reputation for quality and safety

Breadth of geographic and

service profile

Up-front engineering and design

expertise

Lower cost structure due to prior

restructuring actions

Challenges

Commercial construction

recovery slower than expected

Concentration in Europe

Need to

drive top-line growth through

larger project wins

improve execution capability in

attractive markets

build CI discipline, particularly in

yard management

Rail at a Glance

Harsco Profile

Products and Services

2012 Revenues by Market Destination

Western Europe

11%

North America

40%

Rest of the World

49%

Growth -4% 17% -14%

Growth ex MOR 12% 7%

*Adjusted operating margin is a non-GAAP measure. See the

Appendix for a reconciliation to GAAP results.

A global leader in railway track maintenance

equipment, services and solutions

Provides the industry's broadest range of equipment,

parts and contract services for railway track maintenance

and new track construction, including rail grinding, track

surfacing, and track stabilization

Customers include private and government-owned

railroads and urban mass transit systems worldwide

Revenues and Adjusted OI Margin*

Expanding the Global Base

China

•8 metro grinders in 2 years

•Aftermarket growth

•Private operator market growing

•Technical service contracting

Japan

•Rail grinder win

•Surfacing product expansion

•Grinder replacement

Brazil & Peru

•Surfacing product win

•Grinding product growth

UK / Europe

•New rail grinder delivered

•Incremental rail grinder win

•Incremental contract service opportunities

•New product development

Middle East

•Aftermarket growth

•Saudi new rail investment

•UAE new track project

•GCC railway network

Canada

•

Multiple surfacing product wins

•

Hy-Rail re-entry

Australia / NZ

•Multiple surfacing product wins

India

•DFCC qualifications

•NTC projects

•Metro market

growth

United States & Mexico

•New stabilizers delivered

•Spreader-ditcher reintroduction

•Expansion of drone technology

•Aftermarket sales growth

•Incremental new product development

Southeast Asia/Far East

•Rail grinder win

•Metro market growing

•SEA high-speed connection to China

Africa

•Surfacing product win

•Freight market growing

Russia

•Privatization of rail operations

Rail

Strengths

Well positioned in an

attractive end market

Expanding global presence in

high growth markets

Growing aftermarket service

and repair business

Strong track record of

attractive growth and returns

Early adopters of CI

Challenges

Completion of large multi-

year China order –

difficult

near-term financial

comparisons

Relatively niche business;

assessing growth

opportunities in both core

and adjacent markets

Industrial at a Glance

Harsco Profile

2012 Revenues by Market

North America

90%

Rest of the World

10%

Revenues and OI Margin

Market Driver

A market leader in energy-efficient air-cooled

heat exchangers, heat transfer systems, and

industrial grating products

Significant growth potential through

globalization of the business

Industrial Products

Air-cooled heat exchangers for

natural gas compression and

pipeline distribution

Steel grating for industrial and

commercial flooring and safety

walkways

Energy efficient heat transfer systems

for heating and hot water service in

large commercial and institutional

buildings

Industrial

Strengths

Well positioned in attractive

industries

Growing aftermarket

business

Strong track record of

generating attractive growth

and returns

Early adopters of CI

Challenges

Three niche businesses;

current scale is limited

Need to

expand into overseas energy

markets

accelerate bringing new product

offerings to market

assess opportunities to grow

core and adjacent markets

Overall Focus Areas to Improve Returns

Build a robust CI culture

Lower the capital intensity of the business

Grow the businesses via market expansion & innovation

Upgrade leadership talent and depth

Simplify and streamline operational processes

Improve the portfolio mix

Focus. Align. Execute.

Build Robust CI Culture

2012

2013

Lean/Kaizen Activities

Employees Engaged in CI Events

Reaffirmed CI as core principle

Re-launched CI in Infrastructure and

M&M

Expanded CI into all corporate

functions

Launched Lean Six Sigma

Staff CI leadership roles

Advance CI maturity across all

businesses

Expand Green and Black Belt

certifications

Deploy CI to working capital and cash

return improvement

Implement Voice of Customer

methods to drive improved service

and innovation

Lower the Capital Intensity

Continue disciplined approval

and capital allocation process

Deploy global asset

management in Metals

Invest to grow Rail and

Industrial

Capital Expenditures

($ in millions)

Total Capex as % Total Harsco Revenues

2007

2008

2009

2010

2011

2012

12.0%

11.5%

5.5%

6.3%

9.5%

8.7%

Grow Top Line via Market Expansion and

Innovation

Shift of steel production to emerging

markets

Strong track record of international

expansion in Rail

Infrastructure focus on market share

growth

Expand to serve global energy production

growth

2012 Revenues by Geography

Market Expansion

Compass telematics in Rail

New resource recovery and

environmental services in

Metals

Platinum forming product in

Infrastructure

Healthy backlog of new

product development in

Industrial

Innovation

North America

39%

Rest of World

26%

Western

Europe

35%

Portfolio Assessment Attributes

Long-term attractiveness of the end markets served

Quality of value proposition for each business

Degree of competitive strength and differentiation

Long-term growth and financial return profile

Execution capability

Key Takeaways

New executive team focused on improving financial returns of

the company

Early stage deployment of CI

Shifting service and product mix to higher value offerings

Expanding presence in key growth markets

Taking actions to

Simplify operational processes

Optimize the portfolio

Opportunity for significant value creation

Jefferies 2013 Global Industrials Conference

August 14, 2013

Appendix

Non-GAAP Reconciliation

Adjusted Diluted Earnings per Share from Continuing Operations (a)

2007

2008

2009

2010

2011

2012

GAAP diluted EPS from continuing operations

3.01

2.92

1.66

0.14

(0.12)

(3.15)

Special items:

- Goodwill impairment charge - Harsco Infrastructure (b)

3.29

- Restructuring charges (c)

0.77

1.05

1.06

- Charges to exit Harsco Metals & Minerals contract (d)

0.07

- Gains associated with exited countries - Harsco Infrastructure (e)

(0.10)

- Former CEO separation expense (f)

0.04

- Gains on pension curtailment - Harsco Metals & Minerals (g)

(0.02)

- One-time Harsco Rail benefit (h)

(0.07)

- Non-cash tax charge (i)

0.45

Adjusted diluted EPS from continuing operations

3.01

2.92

1.66

0.91

1.31

1.19

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

Year Ended December 31

Non-cash goodwill impairment charge in Harsco Infrastructure ($265.0 million pre-tax).

Charges resulting from the Company's previously announced Fourth Quarter 2010 Harsco Infrastructure and 2011/2012

Restructuring Programs (Harsco Infrastructure 2010 $84.4 million pre-tax, 2011 $87.6 million pre-tax, 2012 $88.6 million pre-

tax; Harsco Metals & Minerals 2011 $12.8 million pre-tax, 2012 $5.5 million pre-tax).

Non-cash gains related to the closure of operations in certain countries in Harsco Infrastructure.

Charges as a result of exiting an underperforming contract in Harsco Metals & Minerals ($7.6 million pre-tax).

Pension curtailment gains in Harsco Metals & Minerals ($1.7 million pre-tax).

Non-cash tax charge against U.K. deferred tax assets ($36.8 million after-tax).

Reduction of estimated costs related to the first phase of Harsco Rail's large China order ($8.0 million pre-tax).

Separation expense for former CEO ($4.1 million pre-tax).

The Company's management believes diluted earnings (loss) per share from continuing operations excluding special items,

a non-GAAP financial measure, is meaningful to investors because it provides an overall understanding of the Company's

historical and future prospects. Exclusion of special items permits evaluation and comparison of results for the Company's

core business operations, and it is on this basis that management internally assesses the Company's performance. This

measure should be considered in addition to, rather than as a substitute for, other information provided in accordance with

GAAP.

Non-GAAP Reconciliation

Free Cash Flow (a)

($ in millions)

2007

2008

2009

2010

2011

2012

Net cash provided by operating activities

472

574

434

401

299

199

Plus cash payments for restructuring charges

Less maintenance capital expenditures (b)

(197)

(210)

(78)

(108)

(178)

(138)

Less growth capital expenditures (c)

(247)

(248)

(87)

(84)

(135)

(127)

Plus capital expenditures for strategic ventures (d)

Plus proceeds from sales of assets (e)

Free Cash Flow

142

292

242

(a)

(b)

(c)

(d)

(e)

Asset sales are a normal part of the business model, primarily for the Harsco Infrastructure and Harsco Metals &

Minerals Segments. Amounts for 2011 and 2012 exclude proceeds received from assets sold under

restructuring programs. Amounts for 2007 and 2009 exclude amounts related to the sale of the Company's

former Gas Technologies business group.

Year Ended December 31

The Company's management believes that free cash flow, a non-GAAP financial measure, is meaningful to

investors because management reviews cash flows generated from operations less capital expenditures net of

asset sales proceeds. It is important to note that free cash flow does not represent the total residual cash flow

available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt

service requirements, are not deducted from the measure. This measure should be considered in addition to,

rather than as a substitute for, other information provided in accordance with GAAP.

Maintenance capital expenditures are necessary to sustain the Company’s current revenue streams and include

contract renewals.

Growth capital expenditures, for which management has discretion as to amount, timing and geographic

placement, expand the Company's revenue base and create additional future cash flow.

Capital expenditures for strategic ventures represent the partner’s share of capital expenditures in certain

ventures consolidated in the Company’s financial statements.

Non-GAAP Reconciliation

Adjusted Return on Invested Capital (a)

(in thousands)

2007

2008

2009

2010

2011

2012

Net income (loss), as reported

299,492

240,945

118,777

6,754

(11,510)

(254,612)

Special items:

- Goodwill impairment charge - Harsco Infrastructure

265,038

- Restructuring charges (b)

84,440

100,780

94,498

- Charges to exit Harsco Metals & Minerals contract (c)

7,645

- Gains associated with exited countries (d)

(10,906)

- Former CEO separation expense

4,125

- Gains on pension curtailment

(1,716)

- One-time Harsco Rail benefit (e)

(7,966)

- Taxes on above special items

(21,806)

(14,171)

(9,070)

- Non-cash tax charge (f)

36,833

Adjusted net income

299,492

240,945

118,777

69,388

103,966

95,002

Total equity

1,566,119

1,413,676

1,509,834

1,468,145

1,219,918

861,624

Plus long-term debt

1,012,087

891,817

901,734

849,724

853,800

957,428

Total capital

2,578,206

2,305,493

2,411,568

2,317,869

2,073,718

1,819,052

Adjusted return on invested capital

11.6%

10.5%

4.9%

3.0%

5.0%

5.2%

(a)

(b)

(c)

(d)

(e)

(f)

Year Ended December 31

Reduction of estimated costs related to the first phase of Harsco Rail's large China order.

The Company's management believes return on invested capital excluding special items, a non-GAAP financial measure, is meaningful to

investors in evaluating the efficiency and effectiveness of the Company's long-term capital investments. Exclusion of special items permits

evaluation and comparison of results for the Company's core business operations, and it is on this basis that management internally

assesses the Company's performance. This measure should be considered in addition to, rather than as a substitute for, other information

provided in accordance with GAAP.

Non-cash tax charge against U.K. deferred tax assets.

Charges resulting from the Company's previously announced Fourth Quarter 2010 Harsco Infrastructure and 2011/2012 Restructuring

Programs.

Charges as a result of exiting an underperforming contract in Harsco Metals & Minerals.

Non-cash gains related to the closure of operations in certain countries in Harsco Infrastructure.

Non-GAAP Reconciliation

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