Enviri Corp (NVRI) 2010 Q4 法說會逐字稿

Good morning. My name is Stephanie and I will be your conference facilitator. At this time, I would like to welcome everyone to the Harsco Corporation fourth-quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (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 redistributions of this telephone conference by any other party are permitted without the expressed written consent of Harsco Corporation. Your participation indicates your agreement. I would now like to introduce Mr. Sal Fazzolari, Chairman of Harsco Corporation. Mr. Fazzolari, you may begin your call.

Thank you, Stephanie. Good morning, everyone. I would like to welcome you to Harsco's fourth-quarter 2010 conference call. I have here with me today Gene Truett, our Vice President of Investor Relations and Credit, I may add, he is also our Senior Credit Officer and Steve Schnoor, our Chief Financial Officer. Before we begin, I will ask Gene to read the Safe Harbor statement.

Thank you, Sal. Good morning everyone. As we do at the beginning of all of our calls, we just want to let you know that we will be having forward-looking statements in our discussions 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.

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 have listed in our SEC statements reasons and risk factors that affect our businesses and these could be the reasons for any differences that could occur. We invite you to review the SEC filings at your convenience. I would 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. Sal?

Thanks, Gene. Our call this morning will commence with some very brief comments from me and then I will turn the call over to Steve as we traditionally do and then obviously to give you some further color on the quarter and then, of course, we will review the outlook with you and take your questions. So without further ado, let's get into some brief comments.

As noted this morning in the press release, we were very pleased with our fourth-quarter performance. But I am glad to be turning the final page on 2010. As we all know, 2010 overall was a disappointing year due to the poor performance of the Harsco Infrastructure business. Nevertheless, we strongly believe that much was achieved in 2010 that sets the foundation for improved performance in 2011.

And as you saw in the press release this morning, we did end the year on a very positive note. We exceeded our $200 million free cash flow target despite the significant operating losses at Harsco Infrastructure. We believe this to be a considerable achievement in 2010.

Our balance sheet is in the best shape it has been in over a decade. We have paid down the majority of our short-term debt. We have successfully executed the Harsco Infrastructure restructuring plan. And, as of today, I am pleased to report that we are almost 90% complete with the restructuring actions with some asset sales and a few branch closures remaining. We can now finally begin to look forward to executing our strategic plan for growth of this business as we transition into a period of stability, which will set the foundation for stronger future performance.

Harsco Rail closed out the year the same way it began -- on a very strong note. Harsco Rail's performance in 2010 eclipsed all others relative to earnings, cash flows and EVA.

And finally, I am pleased to report that the global rebranding of Harsco that we commenced well over three years ago is now substantially complete. All businesses have been rebranded across the globe as Harsco. As part of our transformation, we have realigned the business platforms into four segments as they were reported in today's press release. This realignment includes appointing executives, as you well know, to run each segment, which provides not only more transparency, but also better focus on execution.

I will now turn the call over to Steve to give you some more details on our performance for the fourth quarter. Steve?

Thank you, Sal. And good morning everyone. First, I am proud to report that we exceeded our targeted $200 million of free cash flow for 2010. I view this as a significant accomplishment in light of the poor economic conditions faced by our Infrastructure business throughout the year. $209 million of free cash flow for 2010 follows record free cash flow of $269 million in 2009. From 2008 through 2010, we have generated almost $600 million of free cash flow.

As reported in this morning's press release, we recorded earnings per share from continuing operations of $0.15 for the fourth quarter. This excludes the previously announced restructuring charge recorded in the Harsco Infrastructure business. The fourth-quarter restructuring charge amounts to $84 million, in line with our estimates, or $0.77 per share.

As a reminder, the associated pretax restructuring savings are estimated at $43 million for 2011 and over $60 million on an annualized basis beginning in 2012.

Overall, fourth-quarter earnings exceeded our expectations as equipment shipments from our Rail business were higher than expected. Also as expected, earnings were below the fourth-quarter 2009 earnings per share of $0.50, which included a net tax benefit, accounting for approximately $0.14 per share compared with the fourth quarter of 2010.

Fourth-quarter sales are slightly lower than last year primarily due to the effect of foreign currency translation. Foreign currency translation reduced sales by approximately $19 million compared with 2009. Therefore, before the negative foreign currency effect, sales increased by approximately 1% for the quarter.

Fourth-quarter results reflect stable market conditions for our Metals and Minerals business; the continued strong performance of our Rail business reflecting its high backlog; but also reflects weak global market conditions in nonresidential construction affecting our Infrastructure business and to a lesser extent our Industrial business.

With that as background, fourth-quarter sales in the Metals and Minerals business exceeded 2009, but earnings and operating margins were lower due to special items. Excluding net special items, operating income and margins in that business exceeded last year. Sales and earnings were lower for the Rail business, as expected, due to the timing of shipments, but it should be noted that 2010 was a record year for sales, income and operating margins in the Rail business.

Sales increased for Harsco Industrial, but income and operating margins were lower. The Metals and Minerals business performance met our expectations for the fourth quarter while the Rail business exceeded our expectations. Better-than-expected performance from our Rail business results from the acceleration of a significant shipment in the fourth quarter at the customer's request. This shipment was planned for delivery in the first quarter of 2011. Accordingly, first-quarter 2011 results will also be impacted.

Consistent with the prior quarters of 2010, the Infrastructure business recorded a loss in the fourth quarter. The quarterly loss of $14.4 million, excluding the restructuring charge, was slightly higher than the third-quarter loss due to seasonal factors and consistent with what we had expected. Compared with the fourth quarter of 2009, foreign currency translation did not have a material effect on the operating income of this business.

The biggest factor that affected our 2010 full-year performance was the weak market conditions in nonresidential construction and the associated effect on sales volume and rental rates in our Infrastructure business. A promising sign is that rental rates appear to have stabilized in the fourth quarter, remaining the same sequentially as the third quarter, although still significantly below 2009. We expect that equipment utilization will decline in the first quarter of 2011 due to the normal sequential first-quarter seasonal slowdown. First quarter is the worst of the year for this business.

On a corporate-wide basis, selling, general and administrative expenses increased slightly in the fourth quarter and full year compared with 2009. The increase was attributable to the SG&A cost of the businesses acquired within the last year at the end of 2009, as well as the professional fees incurred for the Company's supply chain initiative. It should be noted that the fourth-quarter SG&A expense was the lowest amount of 2010.

I will now review our cash flows and our liquidity position and then discuss performance by each business segment in more detail. During 2010, we continued to effectively control and efficiently use capital as evidenced by our free cash flow performance. Capital expenditures in 2010 of $192 million were in line with our expectations and well below the pre-2009 run rate of over $400 million per year.

As we have previously mentioned, our new capital spending disciplines supported by business integration and new information systems was put in place during 2008. We fully expect to continue to see the benefits of these initiatives in the years ahead.

The December cash balance of $124 million is higher than normal as a result of very strong cash collections during December. Our debt to total capital ratio as of December 31 was 37.6%. This is the lowest debt to capital ratio in at least 12 years. Our year-end net debt to net capital ratio is 34.1%, the lowest it has been since September 2005. This compares with 35.5% as of September 30, 2010 and 37.1% as of December 31, 2009. So our balance sheet is in great shape, providing us substantial financial flexibility.

Let's now review the fourth-quarter performance of each of the business groups. As expected, the difficult environment for global and nonresidential construction activity experienced in 2009 and throughout 2010 continued to negatively affect the performance of our Infrastructure group in the fourth quarter.

In response to that, we have undertaken a major restructuring in the fourth quarter that will significantly reduce costs in future years. The restructuring included branch and office closings, employee reductions and productline rationalization. The majority of the net cost has been incurred and estimated pretax benefits are $43 million in 2011 and over $60 million on an annualized basis thereafter. In 2011, the benefits will increase sequentially during each quarter with the full annualized rate effective by the fourth quarter of the year.

On a positive note, despite the operating loss, the Infrastructure business was cash positive and generated $28 million of free cash flow for 2010.

With early signs of increased quoting activity and new awards, a stabilizing rental rate and the effect of increasing restructuring cost savings as the year progresses, the first quarter is expected to be by far the worst of the year with sequential improvements expected throughout 2011. The main positive effect on the full-year 2000 results in the Infrastructure business is expected to be the benefit of the $43 million of savings from the restructuring program.

In the fourth quarter of 2010, steel production of our customers approximated the production levels experienced in the fourth quarter of 2009. As expected, the fourth-quarter production was slightly lower than the third quarter of 2010. Additionally, we incurred approximately $5 million of additional net special charges in the fourth quarter of this year compared with 2009, including employee severance and benefit payments and asset write-downs associated with exited contracts. Excluding the $5 million, operating income would have been approximately $29 million and operating margin would have been approximately 7.7%, both exceeding 2009.

In the first quarter of 2011, we expect steel production to remain at the level experienced in the fourth quarter and also expect similar volume as the fourth quarter in our Minerals business. The outlook for the full year 2011 for the Metals and Minerals business is positive resulting from new contract startups and contract renewals with increased volumes.

Harsco Rail reported better-than-expected results in the fourth quarter as a significant shipment was accelerated from the first quarter of 2011 at the request of a customer. As expected, operating income was below last year due to the timing of shipments to China in 2009. For the full year 2010, we are pleased to report that the Rail business posted record sales, operating income and operating margins.

Although due to the timing of shipments, first-quarter 2011 operating income will be substantially less than the first quarter of 2010, we expect the Rail business to continue to perform well for the full year 2011, as backlog and bidding activity remain strong. However, due to the timing of shipments, sales and income will be weighted more heavily to quarters two through four. Conversely, in 2010, the majority of the Rail business, sales and income were recorded in quarters one and two. This is one of the major reasons why we expect the first quarter of 2011 earnings per share to be below the first quarter of 2010.

Overall, Harsco Industrial results were in line with our expectations for the fourth quarter, below last year's operating income due principally to higher LIFO costs and a bad debt recovery in 2009 that didn't repeat in 2010. We expect the improved results in 2011 for Harsco Industrial as we increase our presence in emerging markets via new joint ventures. That completes my comments. I will now turn the call back to Sal.

Thanks, Steve. Let me just briefly summarize our current outlook for the first quarter of 2011 and for the year. Again, with respect to the first quarter of '11 outlook, Harsco Metals and Minerals and Harsco Industrial segments are both expected to show improved results year-over-year. Harsco Rail, as we articulated in December and as Steve just articulated, will be well below the record first quarter of 2010. Again, due to the timing of shipments. And of course, again, as we just mentioned, this is being further exacerbated by the request of a customer to accelerate an order from the first quarter of '11 to the fourth quarter of 2010, which is worth a couple million dollars in earnings. So you can see that it had quite a bit of an impact to both quarters.

For Harsco Infrastructure, we believe that we are now finally starting to see the bottom of the cycle in our key end-markets. The first quarter, however, as you well know, is historically seasonally the worst for the Infrastructure business. Given the current market conditions and also I am sure you noted the flooding in Australia, and we have a pretty sizable business in Australia, that has caused quite a disruption. So the combination of those things, we again expect our Infrastructure business to incur an operating loss in the first quarter of 2011.

The loss, from what we can see right now, is expected to be greater than the first-quarter 2010 operating loss due mainly again to the results of all the things we just mentioned. Plus last year's first quarter included a significant contribution from our Middle Eastern operations where we have substantial rental income. That rental income is down substantially year-over-year. So it will certainly affect Q1 of '11.

So the final piece of this as well that is impacting the first-quarter 2011 performance in Infrastructure are the final pieces of the restructuring actions, which will also impact to the tune of approximately $2 million and that is all built into our guidance. So, therefore, as we have been saying all along, we expect overall first-quarter 2011 results to be below those of the first quarter of last year, again due to the near-term difficulties in Infrastructure and due to the timing of the Harsco Rail shipments.

Our present outlook for the quarter diluted EPS from continuing ops is to be in a range of breakeven to $0.05 as we laid out in the press release. And again, I will repeat, it should be noted that the outlook does include about a net $2 million in additional restructuring costs for Harsco Infrastructure as well.

And also, as we stated this morning in the press release, we have obviously maintained our outlook for the full year, retained our guidance and that is EPS from continuing ops of $1.25 to $1.35 per share. So that completes our formal comments. We obviously will be pleased to take your questions now.

(Operator Instructions). Chase Becker, Credit Suisse.

Hi, good morning. Just following up on the Infrastructure comments, you are mentioning that you expect that non-res likely bottoms in the first quarter and I am just curious as to where you are hearing that. Are you hearing that from customers? Are rental rates getting to a point where you feel like we are at the bottom? Any color would be helpful.

That's a good question, Chase. Principally two things. One is, as Steve indicated, the rental rates seemed to have stabilized as we saw through the fourth quarter and early 2011. So that gives us hope.

Secondly, anecdotally, we are hearing from all of our people on the ground throughout the world in key regions that activity is picking up a little bit. At least the quoting activity, we are seeing a little bit of life. Certainly we are not seeing the deferrals, the cancellations and all the nightmarish things that we encountered last year or started to encounter last year at this time. So it is a little more anecdotal on the latter point. On the rental rates, it is more specific. Hopefully that helps.

Okay, and then I guess trying to tie the commentary from your Analyst Day, it sounds like you are slightly incrementally more positive on this business. Am I reading that incorrectly? I mean obviously I know you have got to get through a restructuring, but the market conditions sound -- this sounds better than what I was hearing at the Analyst Day. Is that incorrect?

We are hopeful, but we have got a long way to go. It is way too early to tell, in all honesty. So we don't want to raise any expectations. I think as we get into the April call, hopefully then we can give you a more precise answer and something that is based on -- I think the first-quarter performance is going to tell a lot from a lot of respects -- rental rates, how much life there is to this quoting and bidding and so forth. I think we are three months too early right now.

Okay. And then lastly, can you just give us an update on sort of the bidding environment for the Rail business, some international opportunities that you are looking at?

I'd tell you, that thing I can comment very positively on because I just had a report on that and I can tell you that the bidding is at an all-time high. I mean we are bidding work everywhere in the world. Are we going to get all that work? Of course not, but we are very optimistic about this business for the next couple years certainly and even obviously beyond that. So we hope to land quite a few of those. We are hopeful that you will see some further press releases in the next couple months announcing some new wins that we recently were given. So yes, that business is moving along very nicely.

Okay, great. Thank you.

Michael Wherley, Janney Capital Markets.

Good morning, guys. I just have a couple of questions on the Infrastructure. So what was the utilization rate?

Utilization rate in the fourth quarter was somewhat less than the third quarter. We don't really give that specific data, but it was less, somewhat less from a seasonal perspective than the third. Our rental rate, however, was stable, as I said.

Yes, Mike, one thing you will notice as the year progresses is that the utilization rate will go up. Part of it is because the rationalization of equipment and also because we are using equipment more efficiently now given our global inventory system that we just implemented. And as we -- and as activity picks up a little bit as we expect it to pick up later in the year. So you will see -- and I think that is what we said in December as well that we did expect utilization rates. But again, I will remind you that even though utilization rates, of course, are very important in this business, the real driver of this business, the economic driver of this business is really rental rates. That is what has the greatest impact.

Okay, and how much are they down versus like a year ago?

The rental rates?

Yes.

Rental rates in the fourth quarter, they were down from the same period in 2009 by about 10% to 12%. But the key thing here we need to look at is what the trend is and a trend, as I said, from the third to the fourth quarter was a stable rental rate, which for us that is a good sign.

And then just on some of your other initiatives in the Infrastructure, I am wondering if you have opened any of the other supercenters in the US.

Yes, wow, that is interesting. We are getting close to opening our second one for the Northeast. That will be open in early April. We had a few of the others that are somewhat open already because we are using, in some cases, established branches that were there. Like, for example, Las Vegas was one that was already there and we just closed four branches around it. We have done a similar thing in the Pacific Northwest and are doing a similar thing in the Southeast and the other one that is coming up is the one in the Northeast. So the majority of them will be up and running as we get into the second quarter here.

Okay. And what about sort of the different sales push towards going after some of the civil build? How is that effort going in sort of changing that sales approach?

We are making progress. As we mentioned, as Ivor mentioned in December as you will recall, that he revamped the entire salesforce, particularly in North America, and to a lesser extent in other parts of the world. We have added skills in both civil, as well as industrial, sales skills that is and we are making progress. You saw the order we got in Holland, the industrial job. We were also recently awarded a few other jobs throughout the world, industrial jobs, a few civil jobs. We haven't announced them yet. There will be some further announcements. So we are making progress.

Okay. Do you expect to have to make a big investment on the sales side to pay for some of the new salespeople or will it kind of balance out with maybe some of the people that were --

No, I mean -- let me make sure I understand. Are you saying did we add a lot of headcount or --

Yes, yes.

Okay, no, we may have added incrementally a few bodies, but what we did is we changed the quality. We changed people that were order takers to actual salespeople and not only that, we brought in salespeople and put the right incentives behind them. So we totally revamped the incentive program and we improved greatly the quality of the salespeople as opposed to order takers.

And we also improved the quality of the head of industrial business and the head of the civil infrastructure segment, the forming segment of the business as well. So we improved the quality of those people.

In each of the regions for that matter.

Right.

Thanks a lot, guys.

Jeff Hammond, KeyBanc Capital Markets.

Hi, good morning, guys. With the segment reporting change, certainly we are working off our old models. Can you give us a better sense of maybe how the Minerals business performed on its own year-over-year or how Metals versus Minerals versus Industrial maybe performed versus your expectations?

Basically the Metals business performance year-over-year, after you consider the special charges that we mentioned in the press release and my script, they performed better than last year. The Minerals business was also slightly better, higher volumes due to commodity price increases offset somewhat by a little bit of a reduction in earnings on the side that relates to the abrasives and the roofing granules. So overall, both businesses performed above expectation.

Okay. And then Industrial sounded pretty much in line. Can you walk through what the $5 million or so of charges were for in the Metals and Minerals business?

Basically the charges relate to severance payments, some employee benefit payments, as well as some asset write-downs related to contracts we decided not to renew in the quarter.

And do you see those -- I mean do you see any additional charges in that business going forward or have we made the changes we need to make?

There is really no anticipated significant charges such as that. I mean if we decide at some time in 2011 that we want to exit a contract, it could occur, but there is nothing significant expected at this point.

Yes, Jeff, we don't have anything in mind right at the moment. But as you well know, this is very dynamic. And if you look historically, we always have some of these, not to the level we had obviously in the fourth quarter, number one, but we do have these come up. And also as you well know, we have taken a very aggressive stand on these contract renewals and particularly, as we mentioned in December, I think as Galdino was implying, we still have a few contracts that, although they may not be losing money, we are not happy with the performance. And so if we can't get those things turned around through the contract renegotiation process, we may agree with the customer to mutually part ways.

And then I think that is the right strategy because we have plenty of opportunities. We are bidding a lot of work. Particularly now that we are bidding a lot of work together with Metals and Minerals. So it is not ever good to leave a site because obviously we are very proud of what we do, but there are times when you have to do that.

And in most cases, in most of the cases when we leave a site, we don't have significant costs involved. In this case, because of where the contracts were, that is why the costs were incurred.

Yes, we also, Jeff, in that $5 million, there was probably $1 million in severance costs of some headcount reductions that we made as well. We realigned a few of the regions to take some layers of management out and those kind of things. So that is not the majority of it, but that is part of it.

Okay. And then shifting gears to Rail, can you give us a sense of really what has changed versus the analyst meeting? Like what is the magnitude of the pull-forward or when you laid out 2011, it was already seasonally weak. Is there more -- was there even more pull-forward --

No, no, Jeff. It is real simple. I mean nothing has changed. If you go back to the chart that Scott Jacoby showed where we said that last year 30% of the revenues were generated in the first quarter. This year, we expect 17%. So it is a huge variance there. The only difference really from what Scott said is we had this one order, which was worth about $2 million in earnings in rough numbers that we had expected to be in '11 that went into the fourth quarter of 2010 and that was because the customer wanted that equipment delivered. That is the only change from what Scott said.

Okay, okay, good. That is helpful. And then just I am trying to better understand this $43 million of restructuring benefit. When do we start to get that, how does that flow out through the year? And then as you think of 2Q picking up seasonally and then getting a restructuring benefit, is 2Q the inflection point where we start to make money in this business or is it too soon to say that?

I think it is too soon to say that. Jeff, like I was saying earlier I think to Mike or Chase, I can't remember who it was, about I'd like to get Q1 under our belt. And then in April obviously we will be able to give you a lot more definitive commentary on this. But certainly the benefits will continue to improve each quarter. There will be a little bit in Q1, more in Q2, more in Q3 and more in Q4 as it ramps up obviously because there are still actions going on here in the first quarter. So that is point one.

Point two, like I said, let's see how we do the first quarter and then we can give you more specific commentary. I am just a little hesitant to say -- you know what I mean -- it is just too much uncertainty right now.

Sure. And then just I guess a final question, it seems like steel pricing feels a lot better as we move into this year. Utilization seemed a little bit more resilient in the fourth quarter. Are you feeling, relative to your December forecast, feeling any different about just the steel production, steel utilization levels?

No, Jeff, because -- no change at this moment anyway. I mean we had factored that in. We talked to all of our customers. I don't think the view of our customers has changed dramatically from what -- we talked to them in December. We just recently talked to a lot of our customers here in January and there is really no material change from where we were. Again, because of the global nature and all the ins and outs and so forth.

I mean for example, to give you an example, I don't know if you read recently where Brazil is having a tough time actually steel wise where other parts of the world, they are a little more optimistic. And there is a lot of dynamics behind that -- the exports, the value of the currencies and so forth and so on.

So there are all these dynamics going on, but on a global basis, we feel that our view has not changed. We think we are going to have a good year here in 2011 in Metals and Minerals. We will have -- included in that are some startup costs on some projects. Particularly we are hopeful to get the China project that we talked about in December where we did the joint venture. So there will be quite a bit of startup costs. Those are all factored into our guidance, of course. So you have got all these things going on, but just leave you with the thought is we feel that '11 will be a good year, but we have not changed our view of that.

Okay, great, thanks, guys.

Eric Glover, Canaccord.

Hi, good morning. Just to follow up on that last point. You mentioned Brazil as somewhat of a weakness. I was wondering if you could talk about other geographic areas of strength and weakness in the Metals business.

The Middle East, for example, the Middle East steel production is suffering a little bit because of the slowdown in construction with principally Dubai, of course. With the massive slowdown in Dubai since last year, certainly that has been affected somewhat. Brazil has a currency export issue that is primarily driving that.

But the rest of -- the US, North America is actually not bad. Asia is very robust. Europe is okay, not great, but it is okay. So those are the dynamics on the Metals side. And by the way, that doesn't -- it kind of somewhat mirrors to a certain degree the Infrastructure business.

Okay, thanks. And then, in the past, you have talked about reworking some of the Metals contracts that are lower profitability for you. How far along are you in that process and how should we think about the impacts to the P&L of the reworked contracts in 2011?

Well, that's a very good question. Tough to give you very specifics other than we still have a handful of contracts that we are not pleased with; they are not losing money, so we are all for that. As you well know, taking you back three years, we had a number of contracts that were losing money and we dealt with all of those over the last couple years and so forth.

Now we have been in a phase over the last 12 months or so and into this year where we are trying to improve the performance of contracts that are below our cost of capital, that are not performing to the level we expect. But it is a handful of them.

Eric, I think what you want to do is look at this as an ongoing cultural issue that isn't just a '10, '11. It is an ongoing thing that, as contracts come up for renewal, we will always be looking at that point of view, making sure we can maximize, certainly meet our cost of capital and then exceed our cost of capital. But there is no contract or number of contracts today that I think we would call out to you that were significantly impacting our results.

Okay, great. Thank you.

Glenn Wortman, Sidoti.

Yes, good morning, everyone. Just on the Infrastructure side, if rental rates stay where they are today, can you just quantify the year-over-year hit to profitability in 2011?

Well, we've said that -- we went into this a little bit, as you remember, in December. There are a lot of moving pieces here. The regions -- when we give you that rental rate, it is a global blended rate. So you are talking about 40 some countries and it is hard to give you a very precise answer on that because it is going to depend on which region the volumes pick up. It is going to depend on the utilization as well in those regions, so there are a lot of moving pieces.

I guess the better way to look at this is that if rental rates do not deteriorate further and that is -- by the way, that's what we said. In December, as you'll recall, we said that, for 2011, that we expect rental rates to hold from the base, roughly from the base we had in 2010. So we are assuming no improvement. So the benefits for 2011 really are going to come from the restructuring actions principally and secondly, if we can get some volumes up in some of the regions where we are working very aggressively with the new salesforces.

Okay. And then just on Rail, there is more talk now of maybe a high-speed rail initiative here in the US. Could you just maybe just talk a little bit how you are positioned to potentially take advantage of that over the long term?

We have been -- I am very pleased where we are with the rail business of course. Obviously you can tell from the numbers and our comments earlier. We are very well-positioned. As Scott indicated back in December at the conference, he laid out a global map where we now have a presence in many countries, many regions throughout the world. Obviously we have also done a total refocus on the US market because we may have not been as focused on it as we perhaps should have been in the past, but we are now very well engaged in the US. We are very well engaged in key regions of the world. We have put people on the ground in all these key regions.

We, again, improved our salesforce in the rail business just like we have done in Metals and just like we had done in Infrastructure and we think the investment that we are making in professional marketing and sales people in all of our businesses, which is quite a departure, I may add, for Harsco. I think that is going to pay dividends down the road in all the businesses. So like I mentioned earlier, the bidding activity is very robust and we are very active. So it is very encouraging.

Again, and just lastly, can you just update us on your priorities for your cash?

I'm sorry. What was the question? Priorities for cash, okay. I mean one of the main priorities for the use of cash would be the joint ventures we talked about. For example, the TISCO one in China. I mean that would be to us -- working with that partner, that would be a good use of free cash flow. We could achieve in excess of our cost of capital. So we are looking at that in the Metals and Minerals business and some of the other businesses as well as a use of cash. Joint ventures is one of the key things -- that is the primary thing we're looking at right now.

Okay. All right, thanks for taking my questions.

Jeff Hammond, KeyBanc Capital Markets.

Just to follow on on the cash deployment, I think your buyback was set to expire at the end of this month. Do you have plans or have you reupped that?

The buyback has been renewed by the Board. It has been approved by the Board.

Okay, but that didn't seem to make the comments about cash deployment. Is that an area of focus?

We look at all areas, Jeff. We continue to look at all areas depending on the opportunities we have, the joint ventures and other investments. That is something we would consider, but it is just one of the items that we have an opportunity for.

Jeff, on the cash, on the free cash, again, just to remind you, as you well know, the first half of the year is very weak, so we have got to be very careful with what we do with cash the first half of the year where we generate most of our cash the second half of the year. So you need to put that aside, first of all.

Second of all, as Steve said, if we get this -- if we are fortunate enough to land this contract with TISCO, it is going to require a substantial amount of CapEx and so that would be a top priority. We are also working on other similar joint ventures in all of our businesses throughout the world, which could require some additional investment and we treat these more like acquisitions because that is actually a better way to do it as opposed to acquisitions.

Certainly, believe me, there is a lot of dialogue regarding the use of free cash and we will do the right thing for shareholders and we are looking at dividends, we are looking at share repurchases, but we are trying to balance that with growth in some very good opportunities as well. And I am sure that the shareholders would like us to invest in projects that are going to return a pretty good return on capital.

So we are weighing all those things. I think we have a little time given the seasonality of our cash flows. So be patient with us. Just suffice it to say that we will do the right things for the shareholders.

And what is the renewal, what is the magnitude of the buyback?

2 million shares.

Okay, thanks, guys.

(Operator Instructions). There are no further questions at this time.

Well, thank you. In closing, just a couple comments. We are eagerly looking forward to 2011. As I said earlier, we are very pleased to have turned the page on 2010. As we stated in December, this will be a transition year for Harsco as we begin our new growth cycle.

I am pleased that the restructuring of Harsco Infrastructure will soon be behind us and we can once again start looking forward. Harsco Rail, as we just indicated, continues to perform well and we are examining ways currently to accelerate its growth.

The synergies of Harsco Metals and Minerals with combining the two businesses here in the fourth quarter are already starting to show benefits and we are hopeful as the year progresses that we can announce some very meaningful projects in this group.

And we also look forward to the global expansion of our Industrial group and some announcement on that as well.

And finally, the final point I would like to make is on our One Harsco initiative is coming together very well and we expect to see our cost structure and our breakeven point continue to decline over the next five years, particularly as we get into 2012.

With that said, I would like to thank you for your ongoing support and thank you for joining us on the call today.

Thank you. This concludes today's conference call. You may now disconnect.