Harsco Corporation (HSC)
Q2 2012 Earnings Call
July 31, 2012 10:00 am ET
Eugene M. Truett – Vice President of Investor Relations and Credit
Henry W. Knueppel – Interim Chairman and Chief Executive Officer
Stephen J. Schnoor – Senior Vice President, Chief Financial Officer and Treasurer
Galdino J. Claro – Executive Vice President and Chief Executive Officer of the Harsco Metals & Minerals Group
William Fisher – Raymond James
Jeffrey D. Hammond – KeyBanc Capital Markets
Glenn Wortman – Sidoti & Company
Bill Nasgovitz – Heartland Funds
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Good morning. My name is Martina, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Harsco Corporation Second Quarter Earnings Release Conference Call. (Operator Instructions) Also, this telephone conference presentation and accompanying webcast, made on behalf of Harsco, are subject to copyright by Harsco and all rights are reserved. Harsco will be recording this teleconference. No other recordings or distribution of this telephone conference by any other party are permitted without expressed written consent of Harsco. Your participation indicates your agreement.
I would now like to introduce Mr. Eugene Truett, Vice President, Investor Relations and Credit of Harsco Corporation. Mr. Truett, you may begin your call.
Eugene M. Truett
Thank you, Martina, good morning. I would like to welcome everyone to Harsco’s second quarter 2012 earnings release conference call. I’m here this morning with Henry Knueppel, Harsco’s Interim Chairman and CEO, obviously we’ll have more to say about that on the call; Steve Schnoor, Harsco’s CFO and Treasurer; Galdino Claro, Executive Vice President and Group CEO Harsco Metals & Minerals is on the line with us.
Also this morning with us today is Jim
Jacobson who joined Harsco yesterday as our Director, Investor Relations. We will get the new information on Jim’s background later today to all of you. As most of you, I’ll be retiring at early September and Jim will be assuming my Investor Relation responsibilities.
As we do at the beginning of all of our calls, we want to let you know that there maybe forward-looking statements in our discussions with you today. These statements relate to the future of our business, our operations, results, economic expectations and other aspects relating to and affecting our business. What we say today is based on our best information available; it is possible that the results could differ from what we tell you today.
We’ve listed in our SEC statements reasons and risk factors that affect our businesses. We invite you to review the SEC filings at your convenience. I would also like to remind you that replays of this call and related information are available on our website. Please take the time to access this information at your convenience.
I’d like now to turn the call over to Henry Knueppel. Henry?
Henry W. Knueppel
Thank you, Gene. I would also like to add my welcome to all of those participating in the call this morning. Thank you for your continuing interest in Harsco. We are going to add to our typical agenda this morning. I will make some opening remarks about the second quarter; Steve Schnoor will give you some technical details and future details on the results; Galdino Claro will then give you some comments on the Metals & Minerals business; and I will finish up with some brief comments regarding the third quarter, and we will have time for questions.
While a number of substantial headwinds remain in our two largest businesses, we are pleased with the results achieved in the second quarter, as reported this morning. Despite overall business levels and revenues being down relatively significantly, adjusting for one-time items, income was comparable to last year’s second quarter.
This was accomplished with a clear dedication by the entire Harsco team to bringing our costs down. Achieving margin improvements on down revenues was a significant accomplishment and one I’m sure the investment community can truly appreciate. Fairly, we would prefer increased revenues, but those cards simply are not being dealt currently.
Importantly in the quarter, measurable progress was made in our previously announced restructuring initiatives, principally within our infrastructure segment. Results in the infrastructure also benefited from previously announced $6.7 million pre-tax non-cash gain related to the closure of certain foreign operations.
While our restructuring efforts are, at this point, overachieving our original targets, our markets are down and offsetting some of the expected savings. Unfortunately, there is no immediate clear insight on this front. I can tell you however, our focus is not on expanding – is now on expanding our selling efforts and taking full advantage of our capabilities in this business.
Further progress is also made in our Metals & Minerals business in the quarter with the signing of a new 20 year environmental services contract with Tangshan Iron & Steel, part of China’s largest steel maker. Other notable new contracts and contract renewals were also signed in the quarter as previously announced.
Both our Harsco Rail and Harsco Industrial business units had results in the quarter that exceeded our expectations. Harsco Rail continues to enjoy a strong order book and continued strong bidding activity. Rail is benefiting from growing global market acceptance of its high-technology rail, maintenance-of-way equipment, parts, and services, as well as delivery of the second phase of a multi-year large equipment order from the Ministry of Rails of China.
As previously reported, Rail's results in the second quarter of last year included an $8 million pre-tax non-cash one-time gain from the reduction of estimated costs related to the first phase of large equipment order to China. We do not expect this gain to be repeated.