Harsco Corporation
Annual Report 2010

Plain-text annual report

Putting Knowledge to Work We Hel p Build the World 2010 S um mary An nual Report Forward-Looking Statements The nature of the Company’s business and the many countries in which it operates subject it to changing economic, competitive, regulatory and technological conditions, risks and uncertainties. In accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary remarks regarding important factors that, among others, could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied herein. Forward-looking statements contained herein could include, among other things, statements about our management confidence and strategies for performance; expectations for new and existing products, technologies and opportunities; and expectations regarding growth, sales, cash flows, earnings and Economic Value Added (“EVA®”). These statements can be identified by the use of such terms as “may,” “could,” “expect,” “anticipate,” “intend,” “believe” or other comparable terms. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. Please refer to our Annual Report filed on Form 10-K for further discussion. Harsco is evolving into a new kind of industrial solutions company. We’re building on our strong innovation heritage to develop solutions that address our customers’ toughest operating and environmental challenges. We’re cultivating new relationships and adopting new technologies to expand our knowledge base, so our employees can deliver a higher level of insight and value. And we’re bringing the strengths of OneHarsco to markets around the world, where customers benefit from our shared knowledge and ability to innovate. This Summary Annual Report is designed to present our 2010 results in a simple, easy-to-read and cost-efficient format. The more detailed financial information and analysis included in previous annual reports is contained in our Form 10-K filing with the Securities and Exchange Commission, which was distributed to shareholders along with this summary report. A copy of our Form 10-K filing may also be obtained from Harsco Investor Relations at the address on the back cover, or it can be viewed and downloaded from our Harsco website at www.harsco.com. Harsco Corporation 2010 Summary Annual Report 1 Fellow Shareholders: As we turn the final page on 2010 and transition into 2011, we are cautiously optimistic that after almost three years of turbulence, the worst of the global economic crisis is behind us. We enter 2011 in excellent financial condition, with a significantly lower cost structure and with the transformation of the Company substantially complete. We are well positioned to resume our growth. 2010 was a year of continuing economic fallout due to This past year marked our 71st consecutive year of dividends, the late cycle nature of our Infrastructure business, and going back to 1939. as a consequence our 2010 performance fell short of expecta- tions. With the inclusion of a fourth quarter charge of Harsco Infrastructure continued to struggle as the nonresi- $84.4 million or $0.77 per share for realigning the Infrastruc- dential construction market fared far worse than we expected ture business, income from continuing operations dropped throughout the year. The restructuring that we undertook to $10.9 million, or $0.13 per diluted share. Our revenues in the fourth quarter will enable us to right-size this business increased slightly to just over $3.0 billion, an encouraging to current market realities and build a better disciplined performance given Infrastructure’s steep decline. and more focused business model for the future. We expect savings from this restructuring of approximately $43 million We have continued to respond to the external economic in 2011, with full annualized savings of more than $60 million challenges with aggressive actions to permanently remove starting in 2012. Pending the eventual market recovery in costs from our businesses and lower our break-even points. this business, we will use 2011 to solidify our base and build These initiatives have made us a fitter, healthier company, the long-term structural improvements that we feel certain and the resulting benefits will strengthen our performance will underpin our future success. for years to come. We added an additional $85 million in further cost reductions in 2010 to the $100 million already The encouraging performance of our three other business achieved by our 2008–2009 initiatives, giving us total platforms suggests that the economic environment may sustainable cost savings of about $185 million per year finally be improving in their respective markets. In 2010 once fully implemented. Harsco Metals and Harsco Minerals worked side by side as an integrated platform to address the growing customer We also generated $209 million in free cash flow in 2010. demand for environmental solutions. Our work for the This is the second-highest total in our history, after the U.S. Environmental Protection Agency to reclaim an record $269 million we achieved in 2009. This is an excellent abandoned steel mill site in Alabama won national and number, particularly given the difficulties we faced, and it local praise for eliminating several million tons of stockpiled speaks to Harsco’s exceptional resilience and fiscal health. slag materials over the next several years at no taxpayer Among many other benefits, our strong cash flows enabled expense. We’re positioning these highly synergistic busi- us to continue our long-standing tradition of predictable nesses for further growth by expanding into emerging and consistent dividend payments to our shareholders. markets and targeting new opportunities for Harsco 2 Harsco Corporation 2010 Summary Annual Report Salvatore D. Fazzolari Chairman, President and Chief Executive Officer innovation. These include further penetration into non- Harsco’s Transformation and Renewal steel markets as well as compatible adjacent markets that As we reflect on our performance and the transformation can benefit from our knowledge-based solutions. For of Harsco, particularly over the past three years, I’m 2010, the Harsco Metals & Minerals segment generated operating income of $118 million, up 172 percent from a year reminded of what Henry David Thoreau once said, “It is not what you look at that matters, it is what you see.” ago, and sales of $1.5 billion, an increase of 16 percent. As we emerge from arguably the most adverse business conditions in our Company’s modern history, we see Another year of record performance from Harsco Rail good reason for optimism. underscores the increasing scale and strength of this business and the efficiencies being gained through our Our balance sheet is in the best shape it has been in more Lean Continuous Improvement culture. The large Class I– than a decade. We have generated approximately $600 million level railroads in particular, both domestically and abroad, in free cash flow over the past three years, a 400 percent are responding to Harsco Rail’s integrated solutions-based increase from the $122 million we realized during the three approach, which combines innovative new equipment global economic boom years of 2005–2007. We have reduced technologies with strong aftermarket support and expert our cost structure by a significant $185 million. We have contract services. In 2010 Harsco Rail set new records of grown our Emerging Markets/Rest of the World revenues to $313 million in revenues and $66 million in operating income. 25 percent of our total. More and more we are becoming a total solutions company, well beyond a competent provider of Harsco Industrial worked actively to build its technology basic services and products. Innovation, technology and and quality leadership, while continuing its investment efficiency are driving our economic engine and increasing in Lean processes. Although revenues and operating income the value we provide. We demonstrated the power of our declined in 2010, due principally to the downturn in non- knowledge-based solutions with our announcement in residential construction and higher LIFO costs, our outlook December 2010 of the significant joint venture we currently are for the future of this business remains upbeat. Under a formalizing in China with TISCO, the world’s largest stainless new generation of leadership, we’re executing aggressive steel company. With an expected start-up in early 2012, this plans to use the footprint and resources of “OneHarsco” new project will tap into our expertise for implementing zero to scale this group’s engineered products across the waste management technologies that capture the waste stream globe, with near-term market targets of South America, by-products of our customers and convert them into productive Australia, China and the Middle East. commercial materials that add to a cleaner environment. Harsco Corporation 2010 Summary Annual Report 3 We have worked hard on building a best-of-class global leadership team. We passionately believe that the “right” people provide the ultimate competitive advantage. We are committed to our core value of recruiting, developing and retaining the “A-Team.” We have expanded and rebalanced our international foot- both energetic and highly motivated young leaders print to reduce our dependency on European and North who are passionate about their businesses and thrive American markets and increase our opportunities in faster- on creating new opportunities. growth developing and emerging markets. Our scalable network now reaches more than 50 countries and will 2011: A Transition Year continue to grow. We are well positioned to accelerate With our critical restructuring and transformation work our expansion by creating additional joint ventures and mainly behind us, we can now look forward with greater alliances with established market partners. By 2015, confidence to the restoration of growth over the next we expect to generate approximately 35 percent of our five years. In several respects, 2011 will be our transition total revenues from markets outside of North America and year. Over the course of this year, we will have stabilized Western Europe, including the all-important emerging the Infrastructure business and put it on a path to increasing and developing markets. profitability. We will enter the start-up phase of key strategic growth investments throughout the world, and Finally and most important, we have worked hard on we will begin to realize many of the substantial cost building a best-of-class global leadership team. We passion- reduction benefits that we expect from our Infrastructure ately believe that the “right” people provide the ultimate realignment. Thus, we look for 2011 to establish the competitive advantage. We are committed to our core foundation for our return to consistent growth. value of recruiting, developing and retaining the “A-Team.” The leaders we have appointed to run each of our four Global Collaboration, Standardization platforms bring renewed vigor and broad global experience and Integration: “OneHarsco” to our business. In his first full year leading our Harsco Going forward, all four Harsco business platforms will Metals & Minerals segment, Galdino Claro has redefined benefit from our “connect and collaborate” business model. the way these businesses go to market and has reposi- Becoming “OneHarsco” empowers us to work together tioned the group for sustainable and profitable growth as more efficiently and maximizes the power of our shared the global metals industry recovers. Ivor Harrington has knowledge and resources. This platform also enables us to similarly developed an aggressive turnaround strategy for scale the business more efficiently across the globe and Harsco Infrastructure that will reduce its cost structure and fully leverage our enterprise-wide advantages. One example realign its resources to restore momentum. Scott Jacoby is our global supply chain initiative, which is starting to at Harsco Rail and Scott Gerson at Harsco Industrial are deliver more coordinated planning, logistics, scheduling 4 Harsco Corporation 2010 Summary Annual Report Harsco Global Senior Operations Team (left to right) Ivor J. Harrington Executive Vice President and Group CEO Harsco Infrastructure Galdino J. Claro Executive Vice President and Group CEO Harsco Metals and Harsco Minerals Salvatore D. Fazzolari Chairman, President and Chief Executive Officer Harsco Corporation Scott H. Gerson Vice President and Group President Harsco Industrial Scott W. Jacoby Vice President and Group President Harsco Rail 2010 Report Card Our Promise Our Progress Lower the break-even point of all business platforms Achieved an additional $85 million in permanent cost reductions, increasing our three-year total to $185 million Deliver $200 million of free cash flow Achieved $209 million of free cash flow Continue to rebalance the global business footprint with a robust emerging markets strategy 2010 revenues from emerging markets increased to 25%, nearly twice the percentage just three years ago Improve the business model by investing in technology and innovation (cid:116)(cid:1) (cid:36)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:90)(cid:14)(cid:88)(cid:74)(cid:69)(cid:70)(cid:1)(cid:74)(cid:78)(cid:81)(cid:77)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:105)(cid:38)(cid:79)(cid:87)(cid:74)(cid:84)(cid:74)(cid:80)(cid:79)(cid:70)(cid:69)(cid:1)(cid:39)(cid:86)(cid:85)(cid:86)(cid:83)(cid:70)(cid:119)(cid:1)(cid:1) strategy for becoming a knowledge-based solutions business (cid:116)(cid:1) (cid:47)(cid:70)(cid:88)(cid:1)(cid:40)(cid:77)(cid:80)(cid:67)(cid:66)(cid:77)(cid:1)(cid:42)(cid:79)(cid:79)(cid:80)(cid:87)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:47)(cid:70)(cid:85)(cid:88)(cid:80)(cid:83)(cid:76)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:74)(cid:79)(cid:68)(cid:83)(cid:70)(cid:66)(cid:84)(cid:70)(cid:69)(cid:1) collaboration worldwide (cid:116)(cid:1) (cid:38)(cid:84)(cid:85)(cid:66)(cid:67)(cid:77)(cid:74)(cid:84)(cid:73)(cid:70)(cid:69)(cid:1)(cid:79)(cid:70)(cid:88)(cid:1)(cid:80)(cid:71)(cid:109)(cid:68)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:1)(cid:53)(cid:70)(cid:68)(cid:73)(cid:79)(cid:80)(cid:77)(cid:80)(cid:72)(cid:90)(cid:1)(cid:48)(cid:71)(cid:109)(cid:68)(cid:70)(cid:83) Strengthen the balance sheet to provide a solid foundation for future growth Reduced our debt-to-capital ratio to approximately 38%, (cid:85)(cid:73)(cid:70)(cid:1)(cid:77)(cid:80)(cid:88)(cid:70)(cid:84)(cid:85)(cid:1)(cid:109)(cid:72)(cid:86)(cid:83)(cid:70)(cid:1)(cid:84)(cid:74)(cid:79)(cid:68)(cid:70)(cid:1)(cid:18)(cid:26)(cid:26)(cid:25) and integration throughout our operations. We will We also continue to build and modernize the integrated begin to see the financial and operating benefits of this global computer and engineering systems that are vital new structure in 2011 and beyond. Another is our focus to share knowledge and information across our enterprise, on significantly improving our sales and marketing and with our customers, suppliers and research partners. discipline. We are developing a highly professional and These systems underpin our innovation pipeline, and effective sales and marketing group in each of our major help us deliver more knowledge to help our customers business platforms, particularly Infrastructure and improve their performance. Metals & Minerals. The investment we’re making in this very important part of the organization will enable us Corporate Governance to better target and win future business. With the recent appointments of David C. Everitt of Deere & Company and James M. Loree of Stanley Black & Decker Harsco Corporation 2010 Summary Annual Report 5 Targeting $200 million in free cash flow each year Generate $1 billion in free cash flow Potential uses of free cash flow: (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:81)(cid:3) Sizable Joint Venture Capital Expenditures (cid:81)(cid:3) Strategic Acquisitions (cid:81)(cid:3) Dividends (cid:81)(cid:3) Share Repurchases (cid:81)(cid:3) Debt Reduction to the Harsco Board of Directors, we have filled open to continue its strong performance, and we are examining Board positions with senior executives from leading ways to accelerate its growth. The combination of Harsco corporations having strong global brands and a dedicated Metals and Harsco Minerals is already showing benefits, emphasis on technology and solutions. They also share and we are optimistic that this business will be awarded our strong commitment to the discipline of Economic Value meaningful projects in 2011. And we are also excited about Added (EVA®). We are grateful for the many contributions the global expansion of our Harsco Industrial group, which of Geoffrey D. H. Butler and D. Howard Pierce as they retire previously was a North America-focused business. Our from our Board after a combined three decades of distin- “OneHarsco” initiative is coming together, and we expect guished service to the Board and Company. We also thank to see our cost structure and break-even points continue Richard Neuffer upon his retirement from Harsco for guiding to decline as a result over the next five years, particularly the successful turnaround and growth of our Rail and as we move into 2012. Industrial businesses. We are proud to say throughout Harsco,“We help build It is with great sadness that we also say farewell to the world.” Our expertise in generating knowledge-based Jim Scheiner, who passed away in February 2011 at a solutions positions us for long-term growth in key indus- too-young age of 66. Jim was a caring, dedicated and tries that play a fundamental role in economic progress conscientious person, one of the finest I’ve ever known. and global infrastructure development. We eagerly look He joined our Harsco Board in 1995, and his passion for forward to 2011 and the beginning of a new growth era the Company was boundless. He will be truly missed. for Harsco and our shareholders. A New Beginning As the final page is turned on the highly turbulent period of 2008–2010, the new year brings cautious optimism and new momentum. I am pleased that the restructuring of Harsco Infrastructure is mostly behind us, and we can Salvatore D. Fazzolari Chairman, President and Chief Executive Officer once again start looking forward. Harsco Rail is expected March 10, 2011 6 Harsco Corporation 2010 Summary Annual Report Financial Highlights Dollars in thousands, except per share amounts 2010 2009 2008 2007 2006 Total revenues from continuing operations $3,038,678 $2,990,577 $3,967,822 $3,688,160 $3,025,613 Operating income from continuing operations Income from continuing operations attributable to Harsco Corporation stockholders 78,431 218,656 411,988 457,805 344,309 10,885 133,838 245,623 255,115 186,402 Current ratio Return on average capital Return on average equity Return on average assets Debt to total capitalization Diluted earnings per share from continuing operations Book value per share Cash dividends declared per share Diluted average shares outstanding (in thousands) Number of employees 1.5:1 2.4 % 0.7 % 2.3 % 37.6 % 1.6:1 7.6 % 9.1 % 6.3 % 39.5 % 1.4:1 10.6 % 14.6 % 10.3 % 41.1 % 1.5:1 11.8 % 18.9 % 13.0 % 40.3 % 1.4:1 10.4 % 16.4 % 12.0 % 47.4 % $«««««««««0.13* $÷÷÷«÷1.66 $÷÷÷«÷2.92 $÷÷÷«÷3.01 $÷÷÷«««2.21 18.23 0.820 80,761 19,300 18.79 «««0.805 80,586 19,600 18.09 0.78 84,029 21,500 18.99 0.7275 84,724 21,500 14.01 0.665 84,430 21,500 * After fourth quarter restructuring charge of $0.77 per share Harsco Corporation 2010 Summary Annual Report 7 Area Manager Jerry Holeman and Site Manager John Schmalzried at the Nucor-Yamato Steel works, where Harsco provides onsite mill services. The processing and management of industrial waste streams has become a core specialty of Harsco—and a critical need of our customers throughout the world in response to growing environmental demands. Metals & Minerals At Harsco Metals and Harsco Minerals, we are redefining our services by applying innovative technologies and best practices across the entire work stream—from managing materials onsite to transforming by-product wastes into profitable and environmentally beneficial products. We’re building new momentum to strengthen our financial performance and transform our customer relationships. Harsco Corporation 2010 Summary Annual Report 9 There’s a new norm in our industries, driven by emerging markets, industry consolidation and changing economics. We’re responding with fresh new thinking and a strong execution discipline. Our #1 goal is to grow from being a good service provider to a great solutions partner to our customers. Through the natural synergies between our Harsco Metals lower break-even points position us very well to further enhance and Harsco Minerals businesses, we are able to offer custom- our future performance. ers a unique value proposition. Harsco Metals works side by Reinventing ourselves like this also gives us a solid plat- side with metals producers in more than 30 countries and at form for further change. We continue to improve our business more than 160 locations. Our 24/7 onsite partnerships give us model to better leverage our intrinsic knowledge and expertise an in-depth understanding of the challenges our customers face, to develop new solutions for our customers. We’ve created a and powerful insights into the kinds of solutions that will benefit them. In parallel, Harsco Minerals helps industrial customers in the stainless steel and energy sectors manage their waste streams by recovering valuable metals and turning other by-products into a full range of mineral applications. With the complementary strengths of these two businesses, we can provide customers with new, fully integrated solutions that go far beyond the capabilities of our competitors. In 2010, we worked on many levels to reinvent ourselves and maximize this opportunity. The past three years of economic downturn produced an unprecedented decline in global steel production. At the same time, our markets have been changing, with large-scale consolidation of some of the industry’s major producers and a growing shift to emerging market economies. To build the foundation for our future growth, we have been Our Global Innovation Network will bring together the best thinking of performing clean sheet assessments of our operations to identify and implement new best practices to manage our labor, assets and capital expenditures more efficiently. We’re implementing new strategies to turn around underperforming contracts. We’re creating additional operating leverage and leading universities, researchers and even other industries to develop new solutions for our customers. In 2010, we established a new research and development relationship with Beijing’s University of Science and Technology, China’s most prestigious technical institute for iron and steelmaking technologies. Pictured in the foreground are Regional President Dan Attorre with Professor Yanping Bao, Vice Dean of the economic value by applying our existing resources to support School of Metallurgical and Ecological Engineering. additional contract work with our customers. And we are retooling our procurement system to take better advantage new Chief Technology Office that will help position our Metals of our global scale. and Minerals businesses at the leading edge of innovation This new foundation significantly strengthened our 2010 for the stainless steel, carbon steel, nonferrous metals and financial performance. Now, as customers start to rebuild minerals industries. We are creating global centers of excellence production and the capacity utilization rates of their mills where we will work side by side with customers to discover gradually climb, our improved cost base and substantially new insights, develop new innovative solutions and deploy 10 Harsco Corporation 2010 Summary Annual Report Q&A with Galdino J. Claro Executive Vice President and Group CEO Harsco Metals and Harsco Minerals Q. What value will Harsco deliver by offering customers A. Customers seek innovative ways to recycle and reuse by-products integrated metals and minerals solutions? so they can lower costs and more effectively manage their waste streams. Harsco is the only full-service provider that brings complementary metals and minerals expertise together to create value across the entire work stream. Q. How effectively does Harsco’s global metals and A. Two trends are changing the landscape of the world steelmaking minerals footprint meet the needs of global customers? industry. Industry consolidation is creating larger companies that need proven solutions for managing the waste streams of all their operations. And the industry footprint is shifting toward develop- ing countries that offer better capital and labor dynamics. Harsco has the scale and reach to deliver integrated solutions wherever our customers operate. Q. What knowledge and expertise can customers A. Our new 3D Innovation™ model will give us powerful capabilities count on from Harsco to help them reach their key performance goals? to discover customer challenges, develop leading solutions and deploy best operating practices. It brings together the very best insight and experience in full collaboration with our custom- ers, and enables us to recover and recycle more materials and transform them into environmentally benefi cial products. Q. What opportunities does Harsco have to expand A. In recent years we’ve reached out to producers of aluminum, its metals services beyond the steel industry? zinc, ferrochrome and copper with targeted solutions that help them manage their material fl ow and remediate their waste streams. Our innovation network will help expand our horizon for new opportunities and new markets. In addition, we work with energy producers to transform ash from power generation into best practices to create value, both for customers and sharehold- ers. Through intelligent networking, we are tapping into the broad expertise of academia, research organizations and the wider scientifi c community, and we will deploy this acquired knowl- edge as strategic innovation partners to our customers. We are already reaping the benefi ts of our new knowledge- based solutions approach. Late in 2010, we announced the largest joint venture partnership in Harsco history, a 25-year agreement with the world’s largest stainless steel company, China’s TISCO. As we formalize the detailed agreements and obtain the necessary Chinese government approvals, we are excited to embark on this major collaborative partnership. Together, we will address the processing and metal recovery of TISCO’s stainless and carbon steel slag by-products across a wide range of “zero-waste” commercial applications, from mineral recyclables to agricultural and turf fertilizers. The environ- mental benefi ts are substantial, as are the potential opportunities for similar partnerships with other major customers. At a time when our metals and minerals markets continue to face diffi cult environmental and economic pressures, we are positioning Harsco as the fi rst and only global service provider fully capable of delivering integrated solutions that harness the best available technology and innovation to solve our customers’ challenges. Although the market dynamics remain diffi cult to predict for 2011, we will continue to build deeper and stronger partnerships with our customers, open new markets, drive future value creation and clearly differentiate Harsco from our competition. Whether it is carbon and specialty steel in North America and Europe, aluminum in the Middle East, zinc in Peru, stainless steel in China or ferrochrome in South Africa, high-quality mineral abrasives and granules. The products we our knowledge-based solutions are helping global producers lower their capital expenses and implement sustainable business practices. engineer also take us beyond the steel industry with applications in road construction, commercial construction, turf and agriculture. Harsco Corporation 2010 Summary Annual Report 11 Left to right in foreground, Doug Greene, Omar Gurrola, Lourdes Romero, Tina Sprenkle and Sadim Garnett, at the new Las Vegas Super Center. Our new Super Centers feature a world-class warehouse management system that will serve customers faster, better and more efficiently. Infrastructure After enduring one of the most challenging years ever in the global construction sector, we enter 2011 fitter, more focused and better integrated, and with a solid plan to restore our growth momentum. Under OneHarsco, we’re prepared to deliver more value to our customers than ever before, and to take our expertise to virtually every corner of the world. Harsco Corporation 2010 Summary Annual Report 13 From a hydroelectric plant in Laos, to a flood control system in Venice, to concrete forming of an airport control tower in California, we’re using our knowledge and capabilities to deliver differentiated value at some of the world’s most complex and visible project sites. In most normal times, just about every country is building and asset base to deliver improved performance. We’re also something, and Harsco Infrastructure has the proven expertise expanding our support to recurring industrial plant maintenance and global footprint to support them. We serve large, complex programs, where we serve as a multi-disciplined provider projects wherever global contractors do business. This past of industrial insulation services, site services and scaffolding year, however, was anything but normal. We continued to face to major petrochemical, energy and manufacturing clients. In uncertainty and volatility in virtually all of our core markets. 2010, we secured additional work with existing power plant Our commercial and nonresidential construction clients in particular struggled to obtain capital, and consequently deferred or stopped many of their major projects. Pricing pressures on the limited remaining work grew even more intense. These widespread conditions helped make 2010 an incredibly tough and disappointing year— the weakest yet in the extended down cycle for major construction projects. This deep trough required urgent action, and also some painful customers in North America, and with petrochemical cus- tomers throughout the United Kingdom and in Europe, most notably Shell and SABIC, two of the world’s largest in this sector. Additionally, we signed new service contracts to support customers in the Middle East, and we are pursuing opportunities in China, India, Australia and Latin America. Our 2010 restructuring will help us better optimize medicine. We have taken deep cuts in our branch structure our global footprint so we can respond more flexibly and and staffing in order to bring our business into better align- cost-effectively to customer and market opportunities. We are ment with market conditions. We’ve introduced new leadership consolidating our branch and office system so we can serve and re-tooled our market strategies. This includes sharpening clients through larger facilities that are strategically positioned and our geographical focus, better managing our equipment, and fully equipped to support larger-scale projects and customers. implementing a new, segment-focused sales process aimed Our new Super Center in Las Vegas, Nevada, demonstrates at emphasizing our technical differentiation. As we enter 2011, the power of this new approach. We combined five existing we expect this new business strategy to stabilize performance facilities into a world-class logistics center that manages compre- and return Harsco Infrastructure to profitable growth in 2012 hensive rental equipment resources for scaffolding, shoring and and beyond. forming to support local sales, engineering and customer Going forward, we will increase our focus on larger service resources throughout the entire southwest U.S. region. infrastructure and industrial-sector construction projects where On a parallel path, we are realigning our product assets we are able to apply our global footprint, technical expertise so we can deliver the right products, to the right places, with the 14 Harsco Corporation 2010 Summary Annual Report Q&A with Ivor J. Harrington Executive Vice President and Group CEO Harsco Infrastructure Q. What is your strategy for returning Harsco Infrastructure to greatness? A. In this economy, we’re working relentlessly to reduce operating costs without removing capability. We’re reengineering key processes such as sales and inventory management. We’re also building a more efficient global footprint and branch structure. We’re looking to grow new partnerships in markets around the world that expand our technical capabilities without increasing our overhead costs. These moves will position us to take full advantage of our technical strengths and seize new opportunities that align with our global capabilities. Q. How does Harsco Infrastructure help customers address their economic challenges? A. We help customers operate more efficiently with lower operating and capital costs by providing innovative ways to shorten and improve new construction or regular plant right designs and installation support to serve customers in different regions and locations. This will include remote areas that are hard to reach, but where we feel we can offer tremendous advantages because of our size and scope. Our markets are worldwide and we have a substantial amount of capability that we can put to work. Now that we are operating as a single business under OneHarsco, our team can draw on the vast knowledge that exists across our organization and apply it to opportunities wherever our customers take us. Our new global footprint and asset base also require maintenance schedules. For example, the complex formwork a more effective sales orientation that takes full advantage of both our market insights and the strengths of OneHarsco. We have made new technology investments in sales man- agement tools that give us greater visibility into our prospect pipeline. We’ve brought in sales leaders who have established new business development parameters and disciplines, and have made each sales associate accountable for building backlog and enhancing customer engagements. One operating practice that will not change is our total commitment to employee and customer safety, and we intend to further reinforce this area as well. In 2010, SABIC, one of the world’s leading petrochemical and industrial companies, awarded us their prestigious Safety, Health and Environment Award for Global Contractors for our safety performance at the Geleen petrochemicals plant in The Netherlands. The award honors more than three years of work at this site without any EU-OSHA violations. In 2011, we expect to begin seeing the benefits of reposi- tioning our platform, capabilities and resources. We will pursue customer and market opportunities as a re-energized and refocused business that delivers more integrated, knowledge- based solutions and unrivalled total value. installations we design for bridges can actually require less shoring, and therefore use less equipment. On our industrial sites, we are applying technology solutions such as our proprietary scaffold tracking software to operate with greater efficiency at a time when customers are reducing maintenance budgets. Q. What differentiates Harsco in the knowledge and expertise it brings to large infrastructure projects? A. Our customers recognize our technical skills and global reach; they also look to us for our experience in managing the costs and risks associated with large and complex projects. Design is critical to each project’s success. So is our ability to provide the labor required to erect these solutions, to certify them for safety, and then to manage them so they’re completed on time and on budget. Q. What processes does Harsco Infrastructure rely on to create safe job sites? A. Safety is a pillar of the Harsco culture. But maintaining safe workplaces and safe practices requires unrelenting effort. We conduct regular safety reviews and inspections, and we run one of the industry’s most comprehensive programs for safety training. I intend to heighten our safety focus even further because our performance simply needs to be better. Harsco Corporation 2010 Summary Annual Report 15 Harsco Rail’s automated drone tamper to the left and TRT-909 track renewal system above are just two of the technology innovations Harsco has introduced to remain at the forefront of railway track maintenance. Rail Harsco’s proprietary technology and expanding geographic footprint keep railroads operating at peak efficiency. We create value by delivering innovative solutions using a powerful blend of game-changing new products, reliable aftermarket support and expert contract services. In 2010 these capabilities helped Harsco Rail deliver another year of record results. Harsco Corporation 2010 Summary Annual Report 17 Customer Process Engineer Shane Thomason with Harsco Rail Sr. Sales Representative Buster Johnson, along the railway mainline. Our evolution has taken us from being a primary equipment provider to a true knowledge- based partner. We’re working closely with leading rail customers around the world to create new solutions that anticipate their future needs. We offer integrated programs that begin with some of the We are also growing our Aftermarket Parts and Contract industry’s most efficient and dependable rail maintenance Services businesses. These give us a stable and recurring equipment. Our global aftermarket services deliver the critical revenue base throughout the equipment lifecycle, and we believe spare parts that keep these machines running reliably through- revenues from both these areas will continue to increase as we out their lifecycle. And more and more, we’re seeing customers develop new strategies to serve our expanding global customer turn to our expert contract services to assume direct responsibility base. Together we expect Parts and Services to account for for track maintenance and new track construction. more than 40 percent of our 2011 revenues. All three areas—equipment, parts and services—contributed Much of our success reflects our culture of Lean Continuous to our record performance in 2010. Even as some railroads Improvement, which is driven directly by our employees. Over continued to hold the line on their investments in new rolling the last two stock and infrastructure, we continued to expand our share of years, our nine the new track maintenance equipment market as customers fully trained embrace our innovative new products. We have evolved from Continuous our legacy as a manufacturer Improvement and support provider that process lead- largely designed and built ers initiated equipment to order. Today, over 75 Kaizen as a knowledge-based events that organization, we are work- have spanned ing closely with leading rail our entire organization, from manufacturing to quality, engineer- customers around the world ing and accounting. More than half of our domestic employees to gather their input and create new solutions that anticipate have participated in at least one Continuous Improvement their future needs. As examples, the unmanned drone tamper program, and together we have reduced our manufacturing we’ve developed in North America responds directly to specific costs and improved our capacity to respond to multiple orders customer objectives. It accomplishes the work of a traditional with shorter lead times. ballast tamping machine while also saving on fuel and manpower. Technology has also contributed to our growth, and we In 2010, we sold nine additional units, and we are now working continue to introduce leading-edge tools into the solutions to apply similar technology to other pieces of equipment. We are environment. Our engineers are using the latest 3-D design also developing a new Automated Switch Inspection Vehicle—a tools to drive innovation and significantly accelerate our ability total track solution that helps customers inspect, analyze, plan, to turn concepts into real hardware that our customers can put schedule and replace switches. To support our innovation to work. We also continue to increase our capacity to provide pipeline, we plan to more than double our Research and customers with fully integrated, turnkey technical solutions Development budget in 2011. that solve their most difficult track-related issues. 18 Harsco Corporation 2010 Summary Annual Report Harsco employees John Glenn III and Juan Medrano stand with the commemorative “gold tie,” marking 500,000 new crossties installed accident-free in a single work season. The work included the high-speed rail corridor between St. Louis and Chicago. Using our success in North America as a platform, we are also creating new growth op- portunities by diversifying our geographic and product footprint. In China, we continue to add to our presence by securing additional orders with metro transit systems. In Brazil, the rail infrastructure is expanding to support steady GDP growth. Harsco’s existing Brazilian footprint gives us a well- established platform to deliver our integrated solutions. We’re excited also by the potential opportunities for railway expansion and modernization in the Middle East. In all these locations, we are gaining ground by working hand in hand with railway and rapid transit system operators, engineers and maintenance teams to address their needs. We’re listening and we’re responding—better than ever before. Q&A with Scott W. Jacoby Vice President and Group President Harsco Rail Q. How will customers benefit as Harsco Rail continues to evolve from an equipment manufacturer to a solutions provider? A. Global rail customers can now tap our expertise to improve virtually every facet of their track operations. We’re applying our innovation and experience to develop new products that create competitive advantage and lower the costs of railway mainte- nance. Our aftermarket parts keep equipment operating and improve long-term returns on investment. Customers who use our outsourced track maintenance services benefit from our comprehensive approach to total track maintenance equipment operation and fleet maintenance, which allows them to concen- trate on what they do best—moving freight and people. Q. How is Harsco Rail positioned to help drive the expansion of the global rail industry? A. Railway systems are expanding almost everywhere, from North America to India, China, Brazil and the Middle East. We’re building our expertise in all these markets. In the past two years alone, we’ve established physical offices and onsite personnel in several of these markets. The new relation- ships we are building today create long-term opportunities for our support of customers’ operations. Q. How important has the multi-year production order in China been to Harsco Rail’s growth? A. We will continue to build and deliver on this order throughout 2011 and into 2012. Having it on the books has enabled us to improve our engineering, purchasing and manufacturing processes and become a leaner and more efficient organization. At the same time, it has given us the opportunity to reach out and expand our global base with other customers. As such, I’d say it has underpinned the growth of our business across the board. Q. What impact is Harsco Rail’s culture of Continuous Improvement having on operations? A. Continuous Improvement has changed the way we do business. It’s not a special initiative—it’s the way we operate. It has allowed us to grow more profitably. It has helped us improve cycle times and plan our key strategic goals through policy deployment. Our experience puts us in a better position to provide efficient knowledge-based solutions to our customers. Harsco Corporation 2010 Summary Annual Report 19 Left to right, Arturo Laguna, QC Inspector; Stephanie Bargas, Applications Engineer; and 50-year employee Bic Bickford, Technical Product Advisor, at the Harsco Industrial Air-X-Changers plant. Future markets for our air-cooled heat exchangers include anywhere in the world there are large reserves of natural gas to be compressed or transported. Industrial Harsco’s engineered products help our cus- tomers meet the growing demand for natural gas, address the grating requirements of infrastructure projects and reduce energy costs for commercial and institutional build- ings. Under the OneHarsco umbrella, we are tapping the worldwide Harsco footprint to expand our base of operations and deploy new strategies designed to accelerate our growth. Harsco Corporation 2010 Summary Annual Report 21 Our goal is to continually reinvent ourselves with innovative, knowledge-based solutions that stay ahead of our competition and serve an ever-expanding global customer base. Harsco Industrial is evolving from a ing prospects in both Brazil and China. In Brazil, the 2014 primarily domestic U.S. manufacturer World Cup and 2016 Olympic Games are expected to add to of engineered industrial products an already strong climate for infrastructure revitalization and to a global enterprise that can expansion that also applies to other parts of Latin America. support customers around the world. Our rugged industrial grating products provide the durable Each of our three Harsco Industrial open-grid walkways and flooring used extensively in high-traffic businesses is expanding its footprint public spaces, manufacturing plants and other industrial sites by using Harsco’s existing in-country such as offshore oil and gas platforms. In China, our joint resources and experience to create new business opportunities venture prospects will enable us to respond more quickly and alliances. and competitively to China’s significant infrastructure invest- In 2010 the Harsco Industrial Air-X-Changers business set ment while also producing materials that can be exported the groundwork for an expected 2011 joint venture in Australia, throughout the region. a region with plentiful shale-based natural gas reserves. Our Harsco Industrial Patterson-Kelley commercial water With global rig counts on the rise, our made-to-order products heating and boiler systems are reinforcing our long-held help natural gas producers increase their up-time and efficiency position as the technology of choice to help large institutions while realizing important environmental and economic benefits. and commercial We are sharing knowledge and cultivating skills to ensure that building proper- our highly engineered products are built locally with the consistently high level of quality our customers expect. ties lower their energy costs Our strategy for establishing local joint venture partnerships and operate with helps limit the amount smaller equip- of Harsco capital ment footprints. required to support To maintain our our expansion, product leadership, and enables us to we are building a enter new markets new innovation more rapidly. methodology that The Harsco combines voice-of-the-customer input with Design for Industrial IKG grating LeanSigma quality and efficiency. By 2015, we expect this business is pursuing methodology to help us generate a sizable component of our a similar joint venture revenues from products developed and brought to market strategy with encourag- within 18 months or less. 22 Harsco Corporation 2010 Summary Annual Report Q&A with Scott H. Gerson Vice President and Group President Harsco Industrial Q. How does Harsco Industrial help the Company create value? A. The global markets we serve—natural gas, industrial construction and large commercial institutions—are all fundamental to the world’s economic growth and progress. We’ve been successful in generating significant free cash flow for our shareholders. We also have a long history of delivering the consistent EVA growth shareholders expect, while at the same time placing a relatively low demand on the Company’s capital. Q. How will OneHarsco contribute to Harsco Industrial’s global growth strategy? A. Harsco’s global network gives us direct access to Company resources, facilities and expertise in more than 50 countries. As a result, we can follow our customers anywhere in the world they need us and serve them through local facilities and regional support centers. We also can share customer knowledge and contacts with other Harsco businesses to identify new sales opportunities. Harsco has tremendous strength overall that we’re just starting to access. Q. What knowledge-based solutions can Harsco Industrial provide its global customers and distributors? A. As early adopters of Lean processes, we’ve developed the experience and resources across our organization to stream- line processes and eliminate waste. We’ve also developed significant expertise in engineering and IT infrastructure that we’re able to share with our global partners to build competitive edge and gain market share. Q. As the new leader for the Harsco Industrial group, what strikes you most about these businesses? A. The quality of our people and our products speaks for itself. What I’ve been most surprised and excited to discover is the This initiative is an extension of the sharp focus on Lean manufacturing and knowledge-based solutions we apply across all our Industrial businesses. In three years, Lean processes have already produced more than $1 million in bottom-line savings. We are training certified practitioners within all our businesses and sharing this knowledge with our joint venture partners and key suppliers to introduce the same practices. We have also become a more valued partner to our customers and distributors, where we are applying our engineering and IT expertise to help them reduce costs, automate and integrate processes and gain market share. These relationships position us to continue to leapfrog our competition and grow with our customers for years to come. In 2011 our expectations for the Harsco Industrial group include incremental growth in free cash flow and improved EVA performance. We will use our global footprint to pursue aggressive growth in Latin America, Australia, China and the Middle East. By 2015, we look to produce 30 percent of Harsco Industrial’s revenues from markets outside the United States. untapped global potential of these businesses. I’m looking onward to what’s ahead for us, and I know my people are, too. Harsco Corporation 2010 Summary Annual Report 23 Harsco At a Glance Global Revenue Sources 2010 Revenues 2010 Operating Income Western Europe 39% North America 36% Latin America 9% Middle East and Africa 7% Eastern Europe 4% Asia–Pacific 5% Metals & Minerals 48% Infrastructure 34% Rail 10% Industrial 8% Metals & Minerals 150% Infrastructure -185% Rail 84% Industrial 55% Corporate -4% We operate in more than 50 countries and employ approximately 19,000 people. Operating Companies Description Major Services & Products (cid:116) The world’s largest provider of 24/7 onsite environmental and logistics solutions to the global metals industry; operations at over 160 sites in more than 30 countries (cid:116)(cid:1)(cid:1)Proprietary technologies and services for minimizing the environmental impacts of waste streams from metals production (cid:116)(cid:1)Industry pioneer in transforming steel and energy industry by-products into commercially viable applications (cid:116)(cid:1)(cid:1)24/7 onsite services for the recovery and handling of metal production metallics and by-products (cid:116)(cid:1) Mineral products for a range of commercial applications including industrial abrasives, roofing granules, and agricultural and turf soil conditioners (cid:116)(cid:1) One of the world’s largest and most complete providers of engineered access and forming systems for major construction and industrial maintenance projects (cid:116)(cid:1)(cid:1)The industry’s broadest portfolio of rental equipment and installation solutions and related engineering expertise for scaffolding, shoring and concrete forming systems (cid:116)(cid:1) Balanced global footprint and comprehensive range (cid:116) Access services and equipment for industrial plant of equipment and services to serve customers in every location they operate maintenance (cid:116)(cid:1)(cid:1)Award-winning emphasis on safety (cid:116) A global leader in providing equipment and service (cid:116) Comprehensive equipment, parts and contract services solutions for the maintenance and construction of railway track (cid:116) Increasing customer-focused technology and new– product development pipeline for railway track maintenance and new track construction, including rail grinding, track renewal and reconditioning, and track stabilization (cid:116)(cid:1) Engineered products for industries that are fundamental (cid:116) Air-cooled heat exchangers for natural gas compression to world economic growth and progress and pipeline distribution (cid:116) Strong free cash flow and EVA® generation (cid:116)(cid:1) Steel grating for industrial and commercial flooring and safety walkways (cid:116)(cid:1)(cid:1)Ultra-efficient heat transfer systems for heating and hot water service in large commercial and institutional buildings 24 Harsco Corporation 2010 Summary Annual Report 24 Harsco Corporation 2010 Summary Annual Report Total Revenues $3.0 billion Operating Income $78 million Operating Margin 2.60% 2% 64% 470 bps Diluted Earnings per Share $0.13 92% Declared Dividends per Share $0.820 2% Comparison of Five-Year Cumulative Total Returns* Among Harsco Corporation, the S&P Midcap 400 Index and the Dow Jones Diversified Industrials Index Harsco Corporation S&P Midcap 400 12/05 12/06 12/07 12/08 12/09 12/10 $100.00 114.65 195.88 86.22 103.21 93.30 100.00 110.32 119.12 75.96 104.36 132.16 Dow Jones US Diversified Industrials 100.00 109.54 116.92 59.57 67.61 83.06 * $100 invested on 12/31/05 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Markets 2010 Highlights (cid:116)(cid:1)(cid:1)Global and regional producers of carbon steel, stainless steel, aluminum, zinc and copper (cid:116)(cid:1)(cid:1)Repositioned the Metals and Minerals businesses as a co-integrated solutions provider for customers (cid:116)(cid:1)(cid:1)Commercial and industrial users of mineral products (cid:116)(cid:1) Exceeded sales goal for the year including the agriculture, turf, and construction and restoration industries (cid:116)(cid:1)Significantly lowered the cost base and break-even point of the business (cid:116)(cid:1)(cid:1)Strengthened the leadership team (cid:116) Healthy project pipeline; well-positioned for market upturn (cid:116)(cid:1)Serves the worldwide industrial maintenance, infrastructure construction and commercial and multi-family construction sectors (cid:116)(cid:1) Implemented broad-based restructuring to right-size and align the business for new market conditions (cid:116)(cid:1)New leadership and strategies in place (cid:1) (cid:116)(cid:1) Increasing focus on larger, more complex projects in the global infrastructure and industrial sectors (cid:116) Implemented significant cost reductions and permanently reduced break-even point to restore competitive advantage (cid:116)(cid:1) Major domestic and international railways, short lines (cid:116)(cid:1)(cid:1)Posted record performance and growing global and high-speed metro transit systems market penetration (cid:116)(cid:1) Expanding footprint includes significant emphasis (cid:116)(cid:1)(cid:1)Ongoing implementation of Lean Continuous Improve- in emerging markets, including China, Brazil, India and the Middle East and Africa ment initiatives to enhance efficiency and responsiveness (cid:116)(cid:1) Natural gas processors, industrial plant and safety engineers, and boiler and water heater equipment operators and distributors (cid:116)(cid:1) Significant growth potential through leveraging of “OneHarsco” (cid:116)(cid:1)(cid:1)Strong EVA® value generation (cid:116)(cid:1) Successful expansion of the heat exchangers business into Australia (cid:116)(cid:1)(cid:1)Received one of our largest-ever single orders for heat transfer products Harsco Corporation 2010 Summary Annual Report 25 Harsco Corporation 2010 Summary Annual Report 25 Management’s Report on Internal Control Over Financial Reporting Management of Harsco Corporation, together with its consolidated of any evaluation of effectiveness to future periods are subject to subsidiaries (the Company), is responsible for establishing and maintain- the risk that controls may become inadequate because of changes ing adequate internal control over financial reporting. The Company’s in conditions, or that the degree of compliance with the policies and internal control over financial reporting is a process designed under procedures may deteriorate. the supervision of the Company’s principal executive and principal Management has assessed the effectiveness of its internal control financial officers to provide reasonable assurance regarding the over financial reporting at December 31, 2010 based on the framework reliability of financial reporting and the preparation of the Company’s established in Internal Control — Integrated Framework issued by the financial statements for external reporting purposes in accordance Committee of Sponsoring Organizations of the Treadway Commission with U.S. generally accepted accounting principles. (COSO). Based on this assessment, management has determined that The Company’s internal control over financial reporting includes the Company’s internal control over financial reporting is effective at policies and procedures that: December 31, 2010. (cid:115)(cid:0) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company; (cid:115)(cid:0) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in Salvatore D. Fazzolari accordance with U.S. generally accepted accounting principles, Chairman, President and Chief Executive Officer and that receipts and expenditures of the Company are being made February 24, 2011 only in accordance with authorizations of management and the directors of the Company; and (cid:115)(cid:0) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s financial statements. Stephen J. Schnoor Because of its inherent limitations, internal control over financial Senior Vice President, Chief Financial Officer and Treasurer reporting may not prevent or detect misstatements. Also, projections February 24, 2011 Report of Independent Registered Public Accounting Firm To The Stockholders of Harsco Corporation: In our opinion, the information set forth in the accompanying We have audited, in accordance with the standards of the Public condensed consolidated financial statements is fairly stated, in all Company Accounting Oversight Board (United States), the consolidated material respects, in relation to the consolidated financial statements balance sheets of Harsco Corporation and its subsidiaries as of from which it has been derived. December 31, 2010 and 2009 and the related consolidated statements of income, changes in equity, cash flows and comprehensive income for each of the three years in the period ended December 31, 2010 (not presented herein) appearing in Harsco’s annual report on Form 10-K for the year ended December 31, 2010; and in our report dated February 24, 2011, we expressed an unqualified opinion on those consolidated PricewaterhouseCoopers LLP financial statements. February 24, 2011 26 Harsco Corporation 2010 Summary Annual Report Condensed Consolidated Balance Sheets (In thousands, except share amounts) ASSETS Current assets: Cash and cash equivalents Trade accounts receivable, net Other receivables Inventories Other current assets Total current assets Property, plant and equipment, net Goodwill Intangible assets, net Other assets Total assets LIABILITIES Current liabilities: Short-term borrowings Current maturities of long-term debt Accounts payable Accrued compensation Income taxes payable Dividends payable Insurance liabilities Advances on contracts Other current liabilities Total current liabilities Long-term debt Deferred income taxes Insurance liabilities Retirement plan liabilities Other liabilities Total liabilities COMMITMENTS AND CONTINGENCIES HARSCO CORPORATION STOCKHOLDERS’ EQUITY Preferred stock, Series A junior participating cumulative preferred stock Common stock, par value $1.25, issued 111,611,102 and 111,387,185 shares at December 31, 2010 and 2009, respectively Additional paid-in capital Accumulated other comprehensive loss Retained earnings Treasury stock, at cost (31,097,043 and 31,034,126 shares at December 31, 2010 and 2009, respectively) Total Harsco Corporation stockholders’ equity Noncontrolling interests Total equity Total liabilities and equity December 31, 2010 December 31, 2009 ÷÷«$«««124,238 ÷««÷«$«««««94,184 585,301 29,299 271,617 144,491 1,154,946 1,366,973 690,787 120,959 135,555 «$3,469,220 598,318 30,865 291,174 154,797 1,169,338 1,510,801 699,041 150,746 109,314 $3,639,240 ÷««÷«$«««««31,197 ««««÷«$«««««57,380 4,011 261,509 83,928 9,718 16,505 25,844 128,794 206,358 767,864 849,724 35,642 62,202 223,777 61,866 25,813 215,504 67,652 5,931 16,473 25,533 149,413 187,403 751,102 901,734 90,993 61,660 250,075 73,842 2,001,075 2,129,406 – 139,514 141,298 (185,932) 2,073,920 (737,106) 1,431,694 36,451 1,468,145 «$3,469,220 – 139,234 137,746 (201,684) 2,133,297 (735,016) 1,473,577 36,257 1,509,834 ««$3,639,240 The complete financial statements for Harsco Corporation as of December 31, 2010 may be found in the Company’s Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on February 24, 2011. Harsco Corporation 2010 Summary Annual Report 27 Condensed Consolidated Statements of Income (In thousands, except per share amounts) Years ended December 31 Revenues from continuing operations: Service revenues Product revenues Total revenues Costs and expenses from continuing operations: Cost of services sold Cost of products sold Selling, general and administrative expenses Research and development expenses Other expenses Total costs and expenses Operating income from continuing operations Interest income Interest expense Income from continuing operations before income taxes and equity income Income tax expense Equity in income of unconsolidated entities, net Income from continuing operations Discontinued operations: Loss on disposal of discontinued business Income tax benefit (expense) related to discontinued business Loss from discontinued operations Net income Less: Net income attributable to noncontrolling interests Net income attributable to Harsco Corporation Amounts attributable to Harsco Corporation common stockholders: Income from continuing operations, net of tax Loss from discontinued operations, net of tax Net income attributable to Harsco Corporation common stockholders Weighted-average shares of common stock outstanding Basic earnings (loss) per common share attributable to Harsco Corporation common stockholders: Continuing operations Discontinued operations Basic earnings per share attributable to Harsco Corporation common stockholders Diluted weighted-average shares of common stock outstanding Diluted earnings (loss) per common share attributable to Harsco Corporation common stockholders: Continuing operations Discontinued operations Diluted earnings per share attributable to Harsco Corporation common stockholders (a) Does not total due to rounding. 2010 2009 2008 $2,511,505 527,173 3,038,678 1,994,637 342,242 532,624 4,271 86,473 2,960,247 78,431 2,668 (60,623) 20,476 (4,276) 390 16,590 (7,249) 3,118 (4,131) 12,459 (5,705) $2,442,198 548,379 2,990,577 1,897,408 354,730 509,071 3,151 7,561 2,771,921 218,656 2,928 (62,746) 158,838 (18,509) 504 140,833 (21,907) 6,846 (15,061) 125,772 (6,995) $3,340,456 627,366 3,967,822 2,484,975 441,445 602,169 5,295 21,950 3,555,834 411,988 3,608 (73,160) 342,436 (91,820) 901 251,517 (1,747) (2,931) (4,678) 246,839 (5,894) $÷«««««6,754 $÷«118,777 $÷«240,945 $÷«««10,885 (4,131) $««««÷«6,754 80,569 $÷÷÷÷«0.14 (0.05) ÷÷$÷÷«««««0.08 (a) 80,761 $÷÷÷÷«0.13 (0.05) $÷÷÷÷«0.08 $÷«133,838 (15,061) $÷«118,777 80,295 $÷÷÷÷«1.67 (0.19) $÷÷÷÷«1.48 80,586 $÷÷÷÷«1.66 (0.19) $÷÷÷÷«1.47 $÷«245,623 (4,678) $÷«240,945 83,599 $÷÷÷÷«2.94 (0.06) $÷÷÷÷«2.88 84,029 $÷÷÷÷«2.92 (0.06) $÷÷÷÷«2.87 (a) The complete financial statements for Harsco Corporation as of December 31, 2010 may be found in the Company’s Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on February 24, 2011. 28 Harsco Corporation 2010 Summary Annual Report Condensed Consolidated Statements of Cash Flows (In thousands) Years ended December 31 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation Amortization Equity in income of unconsolidated entities, net Dividends or distributions from unconsolidated entities Loss on disposal of discontinued business Harsco Infrastructure Segment restructuring plan Other, net Changes in assets and liabilities, net of acquisitions and dispositions of businesses: Accounts receivable Inventories Accounts payable Accrued interest payable Accrued compensation Income taxes Advances on contracts Other assets and liabilities Net cash provided by operating activities Cash flows from investing activities: Purchases of property, plant and equipment Purchase of businesses, net of cash acquired* Proceeds from sales of assets Other investing activities Net cash used by investing activities Cash flows from financing activities: Short-term borrowings, net Current maturities and long-term debt: Additions Reductions Cash dividends paid on common stock Dividends paid to noncontrolling interests Purchase of noncontrolling interests Contributions of equity from noncontrolling interest Common stock issued-options Common stock acquired for treasury Other financing activities Net cash used by financing activities Effect of exchange rate changes on cash Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period *Purchase of businesses, net of cash acquired Working capital, other than cash Property, plant and equipment Other noncurrent assets and liabilities, net Net cash used to acquire businesses The complete financial statements for Harsco Corporation as of December 31, 2010 may be found in the Company’s Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on February 24, 2011. 2010 2009 2008 $«««12,459 $«125,772 ««$«246,839 279,234 36,005 (390) 176 7,249 72,975 (20,629) 4,395 12,599 36,529 (2,615) 16,305 (18,480) (20,822) (13,563) 401,427 (192,348) (27,643) 22,663 (4,695) (202,023) (25,706) 747,213 (821,038) (65,976) (5,850) (1,159) 698 997 – (700) (171,521) 2,171 30,054 94,184 $«124,238 $««÷(1,918) (15,600) (10,125) $««(27,643) 282,976 28,555 (504) 410 21,907 – (15,762) 111,207 35,798 (54,701) (1,305) (23,402) (36,692) 4,242 (44,043) 434,458 (165,320) (103,241) 2,115 (2,914) (269,360) (79,670) 482,493 (487,171) (63,813) (3,487) (13,057) 5,332 995 – (5,705) (164,083) 1,833 2,848 91,336 $«««94,184 $÷««(2,399) (68,906) (31,936) «$(103,241) 307,847 30,102 (901) 484 1,747 – 61,244 34,198 (24,238) (22,144) 3,841 (15,843) (76,346) 92,580 (65,134) 574,276 (457,617) (15,539) 24,516 5,222 (443,418) 65,239 975,393 (996,173) (65,632) (5,595) – – 1,831 (128,577) (2,025) (155,539) (5,816) (30,497) 121,833 «$«««91,336 $«««««÷(263) (11,961) (3,315) $««(15,539) Harsco Corporation 2010 Summary Annual Report 29 Condensed Consolidated Statements of Changes in Equity Common Stock Issued Treasury Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest Total $138,665 $(603,169) $128,622 $1,903,049 $«««««««(129) $38,023 $1,605,061 240,945 (64,824) 5,894 246,839 (5,595) (2,026) (154,572) 20,812 (74,340) (70) (64,824 (5,595) (156,598) 20,812 (74,340) (70) 3,488 (1,457) (128,577) 5,233 152 108 (1,457) (128,577) 3,336 (108) 5,233 $138,925 $(733,203) $137,083 $2,079,170 $(208,299) $36,296 $1,449,972 118,777 (64,650) 6,995 125,772 (3,487) 262 (9,141) 5,332 96,802 (30,041) (60,150) 4 (64,650) (3,487) 97,064 (30,041) (13,046) 5,332 (60,150) 4 1,058 (1,880) 3,886 (3,905) 1,366 (684) 3,886 115 194 (423) (1,390) $139,234 $(735,016) $137,746 $2,133,297 $(201,684) $36,257 $1,509,834 6,754 (66,131) 5,705 12,459 (5,850) (203) (156) 698 (6,430) (700) 22,872 10 (66,131) (5,850) (6,633) (700) (1,159) 698 22,872 10 754 (1,306) 3,297 (1,003) 1,446 (188) 3,297 144 136 (836) (1,254) $139,514 $(737,106) $141,298 $2,073,920 $(185,932) $36,451 $1,468,145 (In thousands, except share and per share amounts) Balances, January 1, 2008 Net income Cash dividends declared: Common @ $0.78 per share Noncontrolling interests Translation adjustments, net of deferred income taxes of $85,526 Cash flow hedging instrument adjustments, net of deferred income taxes of $(7,655) Pension liability adjustments, net of deferred income taxes of $29,057 Marketable securities unrealized gains, net of deferred income taxes of $38 Stock options exercised, 121,176 shares Net issuance of stock – vesting of restricted stock units, 56,847 shares Treasury shares repurchased, 4,463,353 shares Amortization of unearned compensation on restricted stock units, net of forfeitures Balances, December 31, 2008 Net income Cash dividends declared: Common @ $0.805 per share Noncontrolling interests Translation adjustments, net of deferred income taxes of $(21,866) Cash flow hedging instrument adjustments, net of deferred income taxes of $10,849 Purchase of subsidiary shares from noncontrolling interests Contributions of equity from noncontrolling interest Pension liability adjustments, net of deferred income taxes of $26,012 Marketable securities unrealized loss, net of deferred income taxes of $(2) Stock options exercised, 92,250 shares Net issuance of stock – vesting of restricted stock units, 101,918 shares Amortization of unearned compensation on restricted stock units, net of forfeitures Balances, December 31, 2009 Net income Cash dividends declared: Common @ $0.82 per share Noncontrolling interests Translation adjustments, net of deferred income taxes of $7,612 Cash flow hedging instrument adjustments, net of deferred income taxes of $347 Purchase of subsidiary shares from noncontrolling interests Contributions of equity from noncontrolling interest Pension liability adjustments, net of deferred income taxes of $(9,727) Marketable securities unrealized loss, net of deferred income taxes of $(7) Stock options exercised, 115,493 shares Net issuance of stock – vesting of restricted stock units, 69,515 shares Amortization of unearned compensation on restricted stock units, net of forfeitures Balances, December 31, 2010 The complete financial statements for Harsco Corporation as of December 31, 2010 may be found in the Company’s Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on February 24, 2011. 30 Harsco Corporation 2010 Summary Annual Report ) ) Five-Year Statistical Summary (In thousands, except per share, employee information and percentages) 2010 2009 (a) 2008 2007(b) 2006 Income Statement Information attributable to Harsco Corporation common stockholders(c) Revenues from continuing operations Income from continuing operations Income (loss) from discontinued operations Net income attributable to Harsco Corporation Financial Position and Cash Flow Information Working capital Total assets Long-term debt Total debt Depreciation and amortization (including discontinued operations) Capital expenditures Cash provided by operating activities Cash used by investing activities Cash used by financing activities Ratios Return on sales(d) Return on average equity(e)(f) Current ratio Total debt to total capital(f)(g) Per Share Information attributable to Harsco Corporation common stockholders(h) Basic – Income from continuing operations – Income (loss) from discontinued operations – Net income Diluted – Income from continuing operations – Income (loss) from discontinued operations – Net income Book value (f) Cash dividends declared per share Other Information Diluted average number of shares outstanding (h) Number of employees Backlog from continuing operations (j) $3,038,678 $2,990,577 $3,967,822 $3,688,160 $3,025,613 10,885 (4,131) 6,754 133,838 (15,061) 118,777 $÷«387,082 3,469,220 $÷«418,237 3,639,240 849,724 884,932 315,239 192,348 401,427 (202,023) (171,521) 0.4% 0.7% 1.5:1 37.6% 901,734 984,927 311,531 165,320 434,458 (269,360) (164,083) 4.5% 9.1% 1.6:1 39.5% 245,623 (4,678) 240,945 $÷«317,062 3,562,970 891,817 1,012,883 337,949 457,617 574,276 (443,418) (155,539) 6.2% 14.6% 1.4:1 41.1% 255,115 44,377 299,492 $÷«471,367 3,905,430 1,012,087 1,080,794 306,413 443,583 471,740 (386,125) (77,687) 6.9% 18.9% 1.5:1 40.3% 186,402 9,996 196,398 $÷«320,847 3,326,423 864,817 1,063,021 252,982 340,173 409,239 (359,455) (84,196) 6.2% 16.4% 1.4:1 47.4% $÷÷÷÷«0.14 $÷÷÷÷«1.67 $÷÷÷÷«2.94 $÷÷÷÷«3.03 $÷÷÷÷«2.22 (0.05) $÷÷÷÷«0.08 (i) $÷÷÷÷«0.13 (0.05) $÷÷÷÷«0.08 $÷÷÷«18.23 $÷÷÷«««0.82 (0.19) $÷÷÷÷«1.48 $÷÷÷÷«1.66 (0.19) $÷÷÷÷«1.47 $÷÷÷«18.79 $÷÷÷÷«0.805 (0.06) $÷÷÷÷«2.88 $÷÷÷÷«2.92 (0.06) $÷÷÷÷«2.87 (i) $÷÷÷«18.09 $÷««««÷«0.78 0.53 $÷÷÷÷«3.56 $÷÷÷÷«3.01 0.52 $÷÷÷÷«3.53 $÷÷÷«18.99 0.12 $÷÷÷÷«2.34 $÷÷÷÷«2.21 0.12 $÷÷÷÷«2.33 $÷÷÷«14.01 $÷««÷÷«0.72 75 $÷««««÷«0.665 80,761 19,300 80,586 19,600 84,029 21,500 84,724 21,500 84,430 21,500 $÷«415,766 $÷«490,863 $÷«639,693 $÷«448,054 $÷«236,460 Includes ESCO Interamerica, Ltd. acquired November 10, 2009 (Harsco Infrastructure Segment). Includes Excell Minerals acquired February 1, 2007 (Harsco Metals & Minerals Segment). (a) (b) (c) 2006 income statement information is reclassified to reflect the Gas Technologies Segment as Discontinued Operations. This Segment was disposed on December 7, 2007. (d) Return on sales is calculated by dividing income from continuing operations by revenues from continuing operations. (e) Return on average equity is calculated by dividing income from continuing operations by average equity throughout the year. (f) 2006 through 2008 have been restated in order to include noncontrolling interests, previously referred to as minority interests, as a component of equity in accordance with the changes to consolidation accounting and reporting issued by the Financial Accounting Standards Board January 1, 2009. (g) “Total debt to total capital” is calculated by dividing total debt (short-term borrowings and long-term debt including current maturities) by the sum of equity and total debt. (h) 2006 per share information is restated to reflect the 2-for-1 stock split effective in the first quarter of 2007. (i) Does not total due to rounding. (j) Excludes the estimated amount of long-term mill service contracts, which had estimated future revenues of $3.5 billion, $3.6 billion and $4.1 billion at December 31, 2010, 2009 and 2008, respectively. Also excludes backlog of the Harsco Infrastructure Segment and the roofing granules and industrial abrasives business within the Harsco Metals & Minerals Segment. These amounts are generally not quantifiable due to the nature and timing of the products and services provided. Harsco Corporation 2010 Summary Annual Report 31 Board of Directors and Senior Management (As of March 10, 2011) Board of Directors Salvatore D. Fazzolari Chairman, President and Chief Executive Officer Harsco Corporation Director since 2002 Kathy G. Eddy 1C, 3 CPA and Founding Partner D. Howard Pierce 2 Retired President and Chief Executive Officer ABB Inc. Director since 2001 Andrew J. Sordoni, III 1, 3 Chairman Sordoni Construction Services, Inc. McDonough, Eddy, Parsons & Baylous, AC Director since 1988 Dr. Robert C. Wilburn 2 Principal The Wilburn Group Director since 1986 Senior Management Salvatore D. Fazzolari Chairman, President and Chief Executive Officer Galdino J. Claro Executive Vice President and Group CEO Harsco Metals and Harsco Minerals Ivor J. Harrington Executive Vice President and Group CEO Harsco Infrastructure Stephen J. Schnoor Sr. Vice President, Chief Financial Officer Director since 2004 David C. Everitt President, Agriculture and Turf Division– North America, Asia, Australia, Sub-Saharan and South Africa, and Global Tractor and Turf Products Deere & Company Director since 2010 Stuart E. Graham 1, 3C Retired Chief Executive Officer Skanska AB Chairman Skanska USA Director since 2009 Terry D. Growcock 2C, 3 Retired Chairman The Manitowoc Company Director since 2008 Henry W. Knueppel 1 Chairman and Chief Executive Officer Regal Beloit Corporation Director since 2008 James M. Loree Executive Vice President and Chief Operating Officer Stanley Black & Decker Director since 2010 Serves as Lead Director and Treasurer Board Committees 1 Audit Committee 2 Management Development and Mark E. Kimmel Sr. Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary Compensation Committee 3 Nominating and Corporate Governance Committee C Indicates Committee Chair Scott W. Jacoby Vice President and Group President Harsco Rail Scott H. Gerson Vice President and Group President Harsco Industrial Douglas Eubanks Vice President and Chief Information Officer Michael H. Kolinsky Vice President – Taxes Barry E. Malamud Vice President – Audit Richard A. Sullivan Vice President – Business Transformation and Chief Supply Chain Officer Eugene M. Truett Vice President – Investor Relations and Credit Richard M. Wagner Vice President and Controller 32 Harsco Corporation 2010 Summary Annual Report Shareholder Information Company News Company information, archived news releases and SEC filings are available free of charge 24 hours a day, seven days a week via Harsco’s website at www.harsco.com. Harsco’s quarterly earnings conference calls and other significant investor events are posted when they occur. Securities analysts, portfolio managers, other represen- tatives of institutional investors and other interested parties seeking information about Harsco should contact: Eugene M. Truett Vice President – Investor Relations and Credit Phone: 717.975.5677 Email: etruett@harsco.com Fax: 717.265.8152 Quarterly Share Price and Dividend Information Harsco Corporation common stock is listed on the New York Stock Exchange (NYSE) under ticker symbol HSC. At year-end 2010, there were 80,514,059 shares outstanding and approximately 18,260 stockholders. As shown below, during 2010, the Company’s common stock traded in a range of $19.89 to $35.31 and closed at $28.32 at year-end. High and low per share data are as quoted on the NYSE. Four quarterly cash dividends were paid in 2010 for an annual rate of $0.82, an increase of 3.1% from 2009. There are no significant restrictions on the payment of dividends. Annual Meeting April 26, 2011, 10:00 am Radisson Penn Harris Hotel and Convention Center Camp Hill, PA 17011 Transfer Agent and Registrar BNY Mellon 480 Washington Boulevard Jersey City, NJ 07310-1900 Phone: 800.850.3508 www.bnymellon.com/shareowner/equityaccess BNY Mellon maintains the records for our registered shareholders and can help you with a variety of shareholder-related services at no charge, including: • Change of name or address • Consolidation of accounts • Duplicate mailings • Dividend reinvestment enrollment • Lost stock certificates • Transfer of stock to another person • Additional administrative services You can also access your investor statements online 24 hours a day, seven days a week at www.bnymellon.com/ shareowner/equityaccess. Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP Philadelphia, PA 19103 First Quarter Second Quarter Third Quarter Fourth Quarter High Low Dividends Declared High Low Dividends Declared High Low Dividends Declared High Low Dividends Declared 2010 $ 35.31 27.96 0.205 35.14 23.47 0.205 27.50 19.89 0.205 28.93 22.71 0.205 2009 $ 31.65 16.90 0.200 32.07 21.39 0.200 36.33 26.69 0.200 37.65 29.38 0.205 Management’s Certifications The certifications of our Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes- Oxley Act of 2002 have been filed with the Securities and Exchange Commission as exhibits to our Annual Report on Form 10-K. In addition, in May 2010 our Chief Executive Officer provided to the New York Stock Exchange the annual Section 303A CEO certification regarding our compliance with the New York Stock Exchange’s corporate governance listing standards. Harsco Corporation World Headquarters 350 Poplar Church Road Camp Hill, PA 17011 USA Tel: 717.763.7064 www.harsco.com 

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