Enviri Corp (NVRI) 2005 Q1 法說會逐字稿

Good afternoon. My name is Misty and I will be your conference facilitator. At this time, I would like to welcome everyone to the Harsco Corporation first-quarter earnings release conference call. [Operator instructions] Also this telephone conference presentation and accompanying Webcast made on behalf of Harsco Corporation are subject to copyright by Harsco Corporation and all rights are reserved. Harsco Corporation will be recording this teleconference. No other recordings or redistribution of this telephone conference by any other party are permitted without the express written consent of Harsco Corporation. Your participation indicates your agreement. I would now like to introduce Mr. Derek Hathaway, Chairman, President, and CEO of Harsco Corporation. Mr. Hathaway, you may begin your conference.

Thank you, Misty. Good afternoon, ladies and gentlemen, it's a pleasure to welcome you here today to our first-quarter 2005 conference call. I have with me today Ken Julian, Gene Truett, Mark Kimmel and Sal Fazzolari, all of whom have been introduced to you previously. Before we commence, I'm going to ask Mark Kimmel to read the Safe Harbor Statement.

Thank you, Derek. Good afternoon, everyone. Just to remind you that our discussions with you today and our responses to your questions will likely contain forward-looking statements. These statements are based on our current expectations and beliefs about our business and will likely be regarding future results, expectations, and operations. While our statements are based on the best information currently available, future results could differ materially from these statements. Some of the factors and uncertainties that could result in these differences are discussed in our SEC filings and were mentioned in our press release today. We invite you to review these at your convenience. I would also like to remind you that replays of this call and other information are available at the Harsco website, www.harsco.com. You can also access telephone replays of this call by dialing the numbers provided in this morning's press release. Thank you.

Harsco reported this morning our first-quarter diluted earnings per share from continuing operations were a record $0.55 compared with the $0.41 last year, a 34% increase. We also achieved record sales of $640 million in the first quarter. All businesses either achieved or exceeded internal expectations in the first quarter, and particularly pleasing and noteworthy was the strong performance of the Access Services business and the Engineered Products and Services group of businesses. Overall, Harsco's margins improved by 80 basis points to 7.4%. And as we stated in our December conference, a strategic objective in 2005 is to improve the overall margins of the Company. We believe that this is a good start, particularly as we know traditionally the first quarter is our weakest quarter where we absorb many of the costs but don't have the volume for a number of reasons. So it's particularly pleasing that we are off to a good start in that direction. I'm now going to ask Sal Fazzolari to give you more details on our earnings release and then we'll take your questions and followed by, if appropriate, a few closing comments. Thank you, Sal.

Good afternoon, everyone, it's a pleasure to be here with you again today. Before we discuss the first-quarter performance in a little more detail, I would like to make a brief comment about accounting for stock options. Many companies, I'm sure you've noted in recent press releases, that have been very proactive in expensing options in 2005. I just wanted to remind our audience today that Harsco discontinued issuing stock options about three years ago. Thus, the new rules on accounting for stock options will not have a material effect on our results.

Now, let's move on to the quarter. In addition to what Derek said and what we said in the press release today, there are a few salient points I would like to make relative to the first-quarter performance that is not evident in the public information. I’d like to start off first of all with cash flows. As you saw in the press release, cash flows did improve quite considerably in the first quarter, very pleased with that performance, $48 million. This strong performance, I would add, was achieved even after we made a discretionary or voluntary cash contribution of about $9.4 million to our UK plan. As you may recall, and we did articulate this back last December, that we said that were going to make voluntary contributions to the UK pension plan, on the Access Services side. We believe that this strong cash flow performance for the first quarter is a good start towards achieving our expected record $320 million for the year.

Also, we're pleased the debt-to-cap ratio is unchanged in the first quarter and traditionally, historically, as you will recall, our cash flows and our debt tend to be not very strong in the first quarter. This is a departure from that with the debt to cap being unchanged. We're very pleased with that overall. Debt even declined slightly in the quarter to $623 million, but that was due to foreign currency translation. Also I think it's important for you to note that about 87% of our debt is fixed, and that is fixed in primarily two currencies, that is the sterling and the dollar. And in fact the first maturity of our long-term debt is not till the year 2010. Thus, in the period of rising interest rates, this will not have -- generally will not have a material effect on our business.

Additionally, as you recall, I'm sure from reading our 10-K, you'll note that higher interest rates long term will benefit our pension plans as well, and we've put in some sensitivity analysis in the 10-K on that fact. Higher interest rates could also modestly help our Access Services business because it helps on the lease vs. buy analysis. As we will discuss in more detail a little later, the majority of our cash flows for the next five years, because of our situation with our debt being fixed and most of our current debt by the end of the year expected to be paid off, we will be devoting the majority of our free cash flow towards growth initiatives. Another point I think is noteworthy is that the annualized return on invested capital improved considerably in the first quarter, by 110 basis points to 7.8%. This, we believe, is a very good start towards our 2005 goal of achieving a 10 to 10.5% return on invested capital. EVA also improved in the first quarter in 7 of our 9 business units.

Moving on to the backlogs, our total backlog for the Company was up 6% over December 31 and was up 20% over last March 31. I would like to remind you that this does not include the contract backlogs for Mill Services, which, as you may recall, we report only on an annual basis at December 31, and Access Services backlogs which are not applicable due to the nature of the business.

Our effective tax rate increased from 31 to 32.3% in the first quarter compared to last year. This increase in the rate was due principally to the expiration of certain tax holidays at international locations.

A little bit about growth. Consistent with our growth initiatives, we invested a total of $58 million in Cap-X during the first quarter. This is an increase of $12 million or 25% over the 2004 first quarter. Over $29 million of the $58 million that was invested was on growth projects in the first quarter. Our primary growth focus is the global industrial services business. These growth investments represent over 50% of the Cap-X spending for the first quarter. This trend we believe should continue for the remainder of the year. I would add that these growth investments were allocated between our three primary growth platforms, that is Mill Services, Access Services, and Railway Services, with the Mill Services business accounting for over 60% of that total growth investment. This is due to our success in continuing to add services to existing Mill customers as well as initiating services at new mill sites. A final point, export sales for the quarter also increased 28% over last year's first quarter.

Now, let's turn to the performance of each business group starting with the Mill Services. Mill Services turned in another very strong performance. Sales grew 9% organically and 5% from positive foreign currency translation, for a total of 14%. And as I mentioned earlier, we invested $29 million in growth capital during the first quarter, with over $18 million of that going to the Mill Services segment. We expect the positive organic growth momentum to continue for the remainder of 2005. However, I'd like to point out that foreign currency translation should not be as much of a factor in 2005 as it was in 2004. Most of our Mill Services growth this year should come primarily from add-on services and investments, including some possible bolt-on acquisitions. I'd also like to point out that acquisitions are not historically factored into any of our guidance that we give you, nor are divestitures, for that matter.

As we stated in the press release, Mill Services' operating margin in the first quarter declined 60 basis points. The decline in margins was due principally to approximately $3.6 million in higher energy costs and to a lesser extent higher maintenance and start-up costs compared with the first quarter 2004. These costs were partially offset by higher volumes, operating efficiencies, and also from new investments. We are addressing the margin matter on many fronts. Let me give you some examples of some of our initiatives. Where allowed in the contract due to indexation, we are negotiating price increases to recover certain costs, including fuel. Through our Six Sigma program, we are focused on improving operating efficiency with the specific objective of lowering overall maintenance and other costs. The full commissioning of a major contract is expected to be completed by mid-year, which should lower start-up costs in the second half of the year. We are also negotiating, and in some cases even exiting, underperforming contracts. And, finally, new investments are expected to improve overall margins. As we stated in December, we are targeting operating margins in Mill Services between 11 and 12% in the 2005-2007 time horizon. We remain confident that these margins will be achieved.

I would also like to remind our audience of our successful Mill Services business model. Some important points to remember- 80% of our revenues are generated outside the United States. We are also strategically positioned in over 30 countries at over 160 sites with strong positions in key markets such as Brazil and Eastern Europe, with a growing but selective presence in China. We have a disciplined capital allocation policy driven by EVA. Our investment for the most part is mobile, that is we can move to most parts of the world wherever we have opportunities, which provides maximum flexibility and lowers the overall risk of loss.

The recent Wall Street Journal article on steel production caused what many believe to be an over reaction by the market. The facts as published recently by the International Iron and Steel Institute or IISI show that global steel production for the first quarter of 2005 actually increased by 6.5% compared with last year. And even if you exclude the China factor, steel production grew by approximately 1% year to date.

Moving on to our Access Services business, the 16% sales growth in Access Services was led by strong performance in the Middle East, with the U.S. and several other international locations, particularly Western Europe, also performing well. The increase in sales in the first quarter consisted of $21 million from recent growth initiatives and $5 million from positive foreign currency translation. Most noteworthy for the quarter are the margins from the Access Services segment. Margins improved by 290 basis points to 5.1%. This was accomplished in the seasonally slowest quarter for the year for this business. We believe this business is on target for achieving our 2005 operating margins goal of 7 to 7.5%. This will be a 70 to 120 basis point improvement over 2004 margins. We expect margins to further improve beyond 2005. As you recall, and as we stated in December, we are focused on achieving ongoing margin improvement in this business with the ultimate target of 10% or better by the 2006-2007 time frame.

As most of you know, the Engineered Products and Services group includes Harsco Track Technologies, Reed Minerals, IKG Industries, Paterson-Kelley and Air-X-Changers. This group turned in a strong performance in the first quarter. The improved results were broad based, with all units posting higher operating income. This trend is expected to continue for the remainder of the year. Sales increased 25% while operating margins increased by 120 basis points. Backlog for this group increased approximately 3% from December but was 18% over last March.

Gas Technologies segment performance in the first quarter was mixed. The Cryogenics, Cylinder and Composite businesses all posted strong revenue and earnings growth compared with last year's first quarter. This strong performance, however, was partially offset by the poor performance of the Valve business. The Propane line of business, as expected, posted much lower results year-over-year due to strong first-quarter performance in 2004, which was driven by a rush of pre-buying as customers hedged against rising steel prices. The propane business is expected to perform well in 2005 as a whole, as it returns to its more normal business cycle. Backlogs for Gas Technologies are up 17% over December and 29% over last March. We expect this business to perform better for the remainder of the year. That completes my comments and I'll turn the call back over to Derek.

Thank you, Sal, thank you. May we now go into the usual question and, I hope, answer session, please?

[Operator instructions] Your first question comes from Bill Fisher with Raymond James.

Just a couple quick ones. The Engineered Products business obviously was very strong on the sales side and you mentioned the backlogs are up and whatnot, but I assume Reed wasn't the type of business that has that kind of sales growth, and I'm just trying to get a little more color on where that 25% was really driven by?

Our Air-X-Changers business, which as you know, has suffered a little in the energy crisis with all the goings on in that business, I think was the principal area of recovery. Backlogs picked up and production clearly picked up and revenues picked up. You'll recall that Air-X by all measures a few years ago used to be our strongest business and then declined with the problems associated with lack of capital expenditure in that industry, but at the moment our backlogs are higher than they've been and we expect that recovery to continue for the rest of the year. IKG continues to perform in its recovery very well. Reed continues to do the same as it's done for a number of years, which is unspectacularly to marginally increase its profitability in the niche business that it's in. HTT, our Railway business, still is not in full gear and we continue to attack the change in the business model there and we're still looking at margins and continue to reorganize that business. The business we're writing presently is clearly in line with our strategic goals of less manufacturing and sales and more manufacturing and services. And so it was on target internally with its numbers, but they're conservative numbers based upon our need to continuously invest in that reorganization. So that's an overview of where the strength was, Bill.

Okay. And just to -- maybe a quick follow-up just on -- you mentioned at the end of the year on the steel prices and -- both in this business and I guess Gas Technologies -- how LIFO and whatnot had hit you. If steel prices stay down where they have been recently, would that be a further benefit as you move through the year?

We don't make that calculation, basically, until the end of the year, although we do make LIFO provisions clearly on a monthly basis. There's been a little indication of some minor softening in steel prices. So the LIFO question I think the jury's still out on that, but we wouldn't expect to be increasing our LIFO reserve this year based upon our current knowledge of what's happening.

Yeah, Bill, our guidance has not changed on that. What we said in December still holds.

Okay. Great. Thank you.

Your next question comes from Yvonne Varano with Jefferies.

Thanks. You gave us a little color on the HTT business, but could you talk a little more about your visibility there in terms of the orders coming in for equipment and how we might see that spread out throughout the year in terms of a concentration. I know last year it was heavy in 4 Q.

Well, I think our production is more even this year because last year was the intake of big orders and certainly -- if you recall, as we gathered momentum, we had it all to do in the final quarter to deliver the year in that particular business and we were successful in doing that. Production now is a little more evenly spread, as we enter into some of these long-term contracts and presently we are delivering on time and meeting our requirements. Our China order continues, UK orders continue, European orders continue and Indian orders continue and I'm just going from memory here, but we're quite happy. The interesting thing is -- on that model is that we are deeply into now the services side, which is where I'm looking to show improvements. We are in the process of signing deals for long-term contracts with major railways around the world to service their equipment, much in line with the Mill Services model. So that particular strategy is undoubtedly working, even as we speak here.

And I know that the U.S. is becoming a smaller portion of this business, but any comments on what domestic railways are doing in terms of maintenance and OI? spending.

I think our success in the short to medium term will actually be in signing service agreements with the class 1 railways in the United States. Clearly, it's a more difficult situation to set up service operations internationally, although we are established in the United Kingdom and we use that as a benchmark or a plate for further progress. But the service model is initially being -- we are focusing that attention in the United States and that's where you'll be hearing I guess in the not too distant future of some reasonable successes along those lines.

Great. Thanks so much.

Your next question comes from James Gentile with Sidoti & Company.

I was wondering if you can give us a little bit more detail in terms of the Access Segment. You addressed the price increase domestically and the firming up of activity there and we saw pretty impressive year-over-year margin expansion by about 300 basis points, yet you continue to forecast the 7 to 7.5% operating margin. It seems if you kind of triangulate from your first-quarter performance and assuming that the volume and price trend continues through the year, that you would be able to exceed that, so I was wondering, what I'm missing in terms of what you're expecting next -- over the next couple quarters there?

By your very question I don't think you're missing anything, actually, James. Here we have a bifurcated margin issue where margins domestically differ from the margins internationally, particularly SGB. You recall that, I think last year, we reported about a 3 -- 3.6% difference in our margins because of the pension issue in the United Kingdom. And so the blended rate of 7.5, in fact, would be substantially higher if in-fact when you add back the present retardation of that margin improvement by the pension expense. Sal's just indicated to you that we paid in, I think, $9.4 million in the quarter and we paid in money in December of last year. And that investment in the pension fund has improved the margin situation somewhat and we believe that in the out years, there could even be some benefits which accrue to us, which will improve the margins in our SGB business. The pleasing aspect has been that we have been working, as a management team here, very diligently on our Patent Construction Systems company. There have been significant management changes, significant reorganization of territories, pricing improvements, particularly in our rental fleet. We have a record rental fleet out there at the moment, at slightly high margins, rental rates, which are improving the margin. So I am pleased with the effort that's gone in, the changes that have been made, and with the results which are beginning to accrue. So with SGB penalized margin-wise by pensions, but actually doing very, very well. The last couple of months have been indicative of the successes we are having with some of these longer term contracts. We are still busy, as you may have read, in the Middle East, and that looks like it’s continuing for some time to come. And in other major areas, that's the evidence for the optimism regarding margin. So it's continuing volumes in SGB and other than US operations, aided by some slight relief on pension expense, and also higher volumes, a bit better pricing, lower costs, and reorganization of our Patent Construction Systems business.

Great. Thank you, Derek.

[Operator instructions] Your next question comes from Jeff Hammond with KeyBanc Capital Markets.

I guess to go back to Access, can you talk about -- or remind us what the price increase you've put in domestically relative to that 3% realization and maybe give us a sense of what you're seeing from your competitors in terms of price increases?

I don't quite understand the 3% realization. What's the --

I mean, did you put a 3% price increase through and you're realizing a 3% price improvement or did you put through 5.

Yes, basically, that's it. Clearly, we are sensitive to market conditions and it's a competitive business but we just decided that enough was enough and we needed to do that. And that's sticking. So it's a larger volume out there. I say record equipment out there with a marginal increase. The improvement in Patent at the moment isn't spectacular, but it's encouraging. And moving in the right direction. And we are just going to build on that foundation and it's always, as you know, a combination of issues. It's not just one that's going to solve this issue, but, as I've said, reduced expenses and management reorganization and aggressive marketing and realistic pricing, all, I'm afraid, ”101” stuff in running a business, I guess.

Are you seeing your competitors follow with price increases?

Frankly, no. We have Europeans in there anxious to deal with some of the problems they've got in Europe by relocating equipment, so there are competitive forces in play. And so that's something that we need to do gently and it may well be that they'll follow our lead, it may well be that they won't. But it's fundamentally necessary at the moment to do it and that's why we've done it.

Sure. And then on the margin improvement, the 290 basis points, is there a way to quantify any favorable impact from the pension changes you've made of that 290?

The pensions was about -- roughly about a penny, Jeff, in Access. Now, in total, it was not much of a factor for the Company, but it was primarily because of the investments that we recently made, like Derek said, the two infusions of cash, which total almost $20 million, one in December and one in January.

Okay. And then back to the Mill Services margin, Sal, you said over the '05 to '07 time frame, 11 to 12% is the target, you stand by that. So that would assume that in '05 we would get to at least the low end of that. Can you give us a better sense of timing where some of these fuel escalation clauses, maybe the contracts start -- where you start to see some of that correct?

Well, you know, Jeff, every contract is different so it's when the contract renews, so it's a gradual thing. But getting to the broader issue, those are costs that we deal with. We're doing many other things, as I indicated. Particularly, we're addressing the operational efficiencies of each site and we're making some good progress here. We're also reorganizing in some cases even exiting certain contracts that are significantly underperforming. So there's a lot -- we're tackling this on many, many fronts. Having said all that, we do stand by the fact that we do believe that we will achieve our targets for the year. One thing that I was thinking about as I'm hearing some of the comments that are coming through about the concerns on the Mill Services margins, if you recall, if you go back in '02, the margins were only 9.1% in the first quarter, they were 8.9% in the first quarter of '03. '04 was just an unusually very strong first quarter. And there's a lot of reasons for that, you know. Not as high maintenance costs, plant shutdowns. There's all kinds of variables that affect that. And now this year we come in at 10.1%. So if you look at it from a historical perspective, it's not really materially off. And we think, Q2, Q3, and Q4 we're going to be on and for the year we should be able to exceed our 10.6 that we achieved last year, and that's where we're targeting.

Okay. Great. That's very helpful.

Jeff, before you go, I just want to thank you for the observation you made in your upgrade comments today, which I read just before I came in to the meeting here. What you did do is confirm, as other of the people that follow us and write about us, the sell side analysts do, I want to thank you all for the job that you've been trying to do and impressing upon people that we're not a steel company. It's very important to us. Gene Truett and I and Sal have been working very hard on this perception in the industry for what we're doing in the sectors in which we're performing, for now a couple years. And we thought, really, that we've done a half-decent job on that until recent weeks. Although we're not a steel company, clearly, we are so interested in this industry and so pleased to be associated with it that we've got $800 million invested around the world, and clearly by our behavior we are enthusiastic about what we're doing. We do provide on-site services to help steel mills, and we're very competitively priced with the technologies that they need to help them make their steel more efficiently, to deal with their environmental issues, to add value inexpensively to what they sell, a number of issues. And I think you made an important point today, as have some of your colleagues been trying to do, and we appreciate that very much. Thank you.

Thanks, guys.

[OPERATOR INSTRUCTIONS] YOUR NEXT QUESTION COMES FROM STEVE MCBOYLE WITH LORD ABBETT.

A couple of questions. First, I just wanted to clarify the pension benefit within Access. I think you said $0.01 within Access.

Right.

Is there a way to actually characterize that in a basis point benefit?

Yes. It's about -- yes, actually, there is. It was about I think 50 basis points, roughly.

Okay. Great.

Of the -- the significant change in the quarter.

Okay. Thank you. And then, secondly, with regards to the escalation clauses, can you just refresh me amongst your contracts in place today the mix that would have escalation clauses embedded within them? And then in those instances how they're actually structured?

I don't have that detail in front of me, I'm afraid, as to the number and the quantum of the indices. All that I do know is the quantum that's been mentioned today. It's about $3.6 million impact in the quarter, which, in the context of things, I wouldn't call that a material sum but one where there are -- as a natural flow on these indices will be agreed to as we go along. There are annual dates for these indices to be considered but I think, if you are looking for any upside, it can only be in the context of that $3 million plus. There's nothing dramatic going to happen there, either way, in fact. But clearly important as far as margins are concerned and clearly money we're entitled to recover under the terms of the agreements.

Maybe just for my benefit, in the past number of quarters, have you had a absolute dollar energy drag of that magnitude? Because obviously we've been in a period where energy costs have been increasing for a while.

We had it in the fourth quarter and -- particularly in the fourth quarter and the first quarter. They've been the two quarters most impacted.

And so this is just merely an issue of anniversary of contracts.

That's correct, yes.

Re-upping the indices as opposed to having any issue -- having your customers agree to escalation clauses.

Oh no. Those clauses are done on a renegotiation. But once the contracts are in place, these indices click in and they are generally reviewed as an automatic entitlement under the terms of the agreement.

Okay. And then the organic growth of 9% within Mill Services. Do you break that down between what would be a new customer versus add-on services?

A lot of them -- the organic growth is a combination of higher steel production in certain parts of the world, as well as new add-on services. And it was pretty broad based. I mean, the U.S., Brazil, China, across the board. So there's not one that sticks out. It's just incremental. And again that's consistent with our strategy, that we like to make these small targeted investments in some of these key markets and thus to offset the swings in steel production from region to region.

And then my last question. Just with regards to the Valve and Propane declines that you saw in the quarter year-over-year. You obviously spoke to the fact that they were challenging comps, but I'm just curious is there anything else meaningfully going on in that industry, to the extent I'm somewhat familiar with trendy industries and they also seem to be showing some meaningful declines in that business?

No. The biggest change was in the propane business and we expected that as we mentioned last year. All along we were consistent in saying that we had an unusual pattern where we had a significant amount of prebuying in the first quarter of last year and they turned in an all-time record first-quarter performance. That is out of character for them, given the seasonality of their business and so forth. This year, we're back to what we call the more normal cycle of that business, and a more normal cycle shows that this business does not perform that well in the first quarter. So you have a huge difference in comps year-over-year. That's what's really driving the performance of the first quarter in the Gas Technologies group, and to a lesser extent the Valve business performed worse than we had expected so that exacerbated the situation, but it was clearly driven by the Propane business.

Great. Thank you very much.

Thank you very much.

At this time, there are no further questions. Mr. Hathaway, are there any closing remarks, sir?

Well, thank you. I think in summary we are very pleased with our first-quarter performance and the increased shareholder value that's been created. And we are just going to continue with our strategic investment initiatives in 2005. Our cash flow, as Sal said earlier, will be used to fund an increasing level of growth projects. Clearly a concern and rightfully so to our supporters and ourselves and shareholders is the initiative on margin expansion. We declared that that was our intent for 2005 and we will be diligently and vigorously pursuing it.

Just to reiterate that in today's press release we refined our current outlook for 2005 by increasing the bottom of our range by $0.05, but keeping the high end of the range unchanged. And we will keep that under review and watch how things go and as we always do we'll keep you informed as to how we see things. And if we were to do the $3.15, then that would be an approximate increase of about 15% year-over-year. Our outlook for the second quarter is in the range of $0.81 to $0.85 and this would be an increase of up to about 13% over last year's second quarter at $0.75 per share.

Our confidence in 2005 is supported by the growth momentum in our industrial services businesses, growing backlogs, our international balance, which lessens our dependence on the U.S. economic cycle, and our strong and growing cash flows. And as Sal has explained, as we visit with the investment community and as we talk to shareholders in these conference calls and we try to reiterate, a disciplined financial approach to everything that we do.

And whilst again we have reported record results, we are mindful that the Harsco share price is affected really principally by two external factors. One is the overall market sentiment and secondly, the market's view of the industries and the economies we operate in and the industries we sell to. And I hope that my remarks regarding the industries we sell to will at least ring some bells and, as you've seen, what we're trying to do is to produce consistent predictable earnings that are increasing on an annual basis. And for this reason, Harsco's management strategy over these past several years has been to build a platform for growth that was not overly dependent on any one economy or any one industry. And I believe that if you look at our record, we have to date and we hope to continue to accomplish this important strategic goal.

Harsco's operations are clearly balanced geographically. We operate in some 40 countries and approximately 60% of our revenues are generated outside of the United States. As to the industries we serve, they are broad-based as well and include global metals, non-residential construction, railroad and general industrial companies.

Sal has already said to you that more recently there was a report in the Wall Street Journal that might have indicated the domestic steel industry as having produced 10% less steel through April 9th of this year compared with the same period in 2004. The fact is that steel production in the U.S. through April 9th was down less than 1% over last year. We get the numbers on a weekly basis. We watch production very, very carefully, and it's of interest for you, I'm sure, to know that Harsco and its Mill Services division is placed with the companies that are growing, companies that have a long-term future in this industry and that are in several geo graphies, which are important to us as we've said in the past, and we'll continue to stress in the future. The primary driver of revenues in our Mill Services business is liquid steel production. And Sal has just noted that the global steel production was up 6.5% in the first quarter of 2005 after an 8.9% increase in 2004. And the continued strength of global steel production is important to Harsco because 80% of our Mill Services revenues are generated outside of the United States in some 30 countries around the world. And I might also note that in 2004 approximately 80% of our Access Services business revenues were also generated outside the United States in some 20 countries. We like to think that we are where the action is and we'll try to maintain our position as being where the action is.

So to accomplish our ultimate goal of increasing shareholder value, we believe Harsco's a well-balanced operations over a broad geographic base can be expected to generate reasonable, predictable, and consistent revenues, earnings, and cash flow. And offer somewhat of a hedge against the domestic cyclicality, which we've experienced. So that's the summary.

I would refer you to our annual report and to reread my letter to shareholders. I meant it very sincerely when I encouraged all of our employees not to sun bathe too long in the success, but to remain diligent, not to become complacent because of incumbency, but to shake ourselves up from time to time, keep our heads down, to continue to produce these results. We're not going to be complacent. We're going to drive ahead with this strategy and I believe that we've got the management team, we have the workforce and we've got the will to do these things. So we look forward to another quarter and look forward to talking with you again in a few months' time and in the meantime, wish you all well. Thank you for your support.

This concludes today's Harsco Corporation first-quarter earnings release conference call. You may now disconnect