The following discussion should be read in conjunction with the accompanying unaudited financial statements as well as the Company's annual Form 10-K for the year ended December 31, 2008, which included additional information about the Company's critical accounting policies, contractual obligations, practices and the transactions that support the financial results, and provided a more comprehensive summary of the Company's outlook, trends and strategies for 2009 and beyond.

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 which, 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 (EVAŽ). These statements can be identified by the use of such terms as "may," "could," "expect," "anticipate," "intend," "believe," or other comparable terms.

Executive Overview
In the first quarter of 2009, the global financial and economic crisis significantly impacted the Company's results. The three most significant obstacles impacting the Company were: the continued strengthening of the U.S. dollar; unprecedented low global steel production; and a lack of available credit that continued to adversely impact non-residential construction projects worldwide. The Company does not anticipate any short-term improvement in these business drivers and expects to encounter these challenges for the remainder of 2009.

The Company's first quarter 2009 revenues from continuing operations totaled $696.9 million, a decrease of $290.9 million or 29% from the first quarter of 2008. The Company experienced lower volume levels resulting from a deterioration of global steel markets and weaker demand for infrastructure services, particularly in the United Kingdom. Foreign currency translation decreased sales by $140 million and accounted for almost half of the decline in sales. The Company's geographic expansion strategy was maintained as revenues from emerging markets were approximately 20% of total revenues in the first quarter of 2009, compared with 20% for the first quarter of 2008 and 21% for calendar year 2008. Operating income from continuing operations was $37.2 million compared with $99.4 million in 2008, a decrease of 63%. Diluted earnings per share from continuing operations were $0.25, a 63% decrease from 2008.

In response to further deterioration of global markets in the first quarter of 2009, the Company supplemented its 2008 restructuring initiatives with additional countermeasures targeting expense reduction, revenue enhancement and asset optimization. The combination of the 2008 and 2009 countermeasures will manifest themselves throughout 2009 and beyond. Annualized benefits are now expected to approximate $100 million in total cost reductions. Among the Company's actions to minimize its cost structure include the redeployment of its mobile asset base in the Harsco Infrastructure and Harsco Metals Segments to focus on market segments that remain strong and provide growth opportunities, such as the relocation of infrastructure rental assets from the United Kingdom to the Middle East and Asia Pacific; the LeanSigma continuous improvement initiative and prudent reductions in capital spending.

The Company continues to have significant available liquidity and remains well-positioned from a financial flexibility perspective. Cash flow from operations remained strong during the quarter, increasing by $7.6 million or 24% from the first quarter of 2008. Cash flow from operations for all of 2009 is expected to be approximately $400 million and total capital expenditures are expected to be approximately $150 million. This decreased level of capital expenditures compared with prior years will allow the Company to further enhance its balance sheet and maintain its dividend. The Company's cash flows are further discussed in the Liquidity and Capital Resources section.

Segment Overview
The Harsco Infrastructure Segment's revenues in the first quarter of 2009 were $283.7 million compared with $378.8 million in the first quarter of 2008, a 25% decrease. Operating income decreased by 50% to $18.8 million, from $37.8 million in the first quarter of 2008. Operating margins for the segment declined by 340 basis points to 6.6% from 10.0% in the first quarter of 2008. The lower revenue and operating income in the quarter were due principally to reduced end-market demand, particularly in the United Kingdom, and negative foreign currency translation effects. The lower demand is being driven by the continued lack of available credit that has resulted in cancelled and delayed construction projects, as well as a significant decline in export sales of infrastructure-related equipment. Harsco Infrastructure accounted for 41% of the Company's revenues and 51% of the operating income for the first quarter of 2009.

Revenues in the first quarter of 2009 for the All Other Category ("Harsco Minerals & Rail") were $174.7 million compared with $192.2 million in the first quarter of 2008, a decrease of 9%. Operating income decreased by 31% to $23.4 million, from $33.9 million in the first quarter of 2008 due principally to volume and commodity price declines in the reclamation and recycling services business. Operating margins for the Segment decreased by 430 basis points to 13.4% from 17.7% in the first quarter of 2008. The rail services and air-cooled heat exchanger businesses recorded increased revenues due to continued strong demand. All businesses except the air-cooled heat exchangers business recorded lower operating income in the first quarter of 2009 compared with the first quarter of 2008. The reclamation and recycling services business continued to be adversely impacted by a lack of metals production and depressed commodity prices. The All Other Category accounted for 25% of the Company's revenues and 63% of the operating income for the first quarter of 2009.

Outlook Overview
The Company's operations span several industries and products as more fully discussed in Part I, Item 1, "Business," of the Company's Form 10-K for the year-ended December 31, 2008. On a macro basis, the Company is affected by non-residential and infrastructure construction and infrastructure maintenance and capital improvement activities; worldwide steel mill production and capacity utilization; industrial production volume and maintenance activity; and the general business trend towards the outsourcing of services. The overall outlook for 2009 for most of these business drivers remains challenging due to the impact of the global recession. While some recovery may begin in 2009, it appears more substantial benefits of a general economic upswing and government stimulus packages may be delayed into 2010.

The substantial strengthening of the U.S. dollar in the fourth quarter of 2008, and its continued appreciation in the first quarter of 2009, is expected to have a significant adverse impact on the Company's performance in 2009. Additionally, the Company's pension plans' assets declined in value at December 31, 2008, consistent with the weakening economy and will result in significantly increased defined benefit pension expense of approximately $24 million during 2009.

In the fourth quarter of 2008, the Company implemented a restructuring program designed to improve organizational efficiency and enhance profitability and stockholder value. The restructuring program included exiting from certain underperforming contracts with customers, closing certain facilities and reducing the Company's global workforce. The actions taken in 2008 were supplemented by additional countermeasures targeting expense reduction, revenue enhancement and asset optimization in the first quarter of 2009. The combination of the 2008 and 2009 countermeasures will manifest themselves throughout 2009 and beyond. Annualized benefits are now expected to approximate $100 million in total cost reductions. Targeted reductions in capital spending, coupled with redeployment of equipment from slowing markets into strategically important, growing markets will also help control cash flow and contribute to liquidity. The Company is confident its strong balance sheet, available liquidity and ability to generate strong cash flows position it to take advantage of reversing economic trends as they occur. Current economic conditions may provide the Company with expansion opportunities to pursue its prudent acquisition strategy of seeking accretive, bolt-on acquisitions.

The long-term outlook across the global footprint of the Harsco Infrastructure business remains positive. The near-term outlook however, is challenging due to the global recession. This Segment will leverage its global breadth and mobile asset base to relocate equipment to focus on emerging markets as well as market segments that remain stable such as infrastructure maintenance services, and institutional services such as hospitals and education, and global infrastructure work. Operating performance for this Segment in the long term is expected to continue to benefit from the execution of numerous global government stimulus packages which are expected to fund much needed infrastructure projects; selective strategic investments and acquisitions in existing and new markets; and enterprise business optimization opportunities including new technology applications, consolidated procurement and logistics; and LeanSigma continuous improvement initiatives.

For the All Other Category (Harsco Minerals & Rail), the long-term outlook also remains positive, as recovery from the global recession will provide opportunity to expand activity in the businesses. The near-term outlook however, for the reclamation and recycling services business, which recovers and recycles high-value metals, is negatively impacted by a significant decline in production volume and metal prices that has carried over from 2008. The Company continues to experience strong bidding activity in its railway track maintenance services and equipment business and the large China order from 2007 will underpin its strength through 2011. Longer term, the Company also anticipates new contract opportunities for its minerals and recycling technologies business, and potential geographic expansion opportunities within its industrial products businesses.

                                     Revenues by Region
                             Total Revenues
                           Three Months Ended               Percentage Change From
                                March 31                         2008 to 2009
(In millions)               2009          2008       Volume        Currency        Total
Western Europe           $    289.5      $ 462.8       (16.4 )%        (21.0 )%     (37.4 )%
North America                 269.6        323.7       (15.1 )          (1.6 )      (16.7 )
Latin America (a)              39.1         61.1       (12.3 )         (23.7 )      (36.0 )
Middle East and Africa         55.0         60.3        (3.9 )          (4.9 )       (8.8 )
Eastern Europe                 22.8         44.4       (21.2 )         (27.5 )      (48.7 )
Asia/Pacific                   20.9         35.5       (17.7 )         (23.5 )      (41.2 )
Total                    $    696.9      $ 987.8       (15.3 )%        (14.2 )%     (29.5 )%

(a) Includes Mexico.

2009 Quarterly Highlights
The following significant items affected the Company overall during the first quarter of 2009 in comparison with the first quarter of 2008:

Company Wide:
ˇ Revenues and operating income were impacted by the economic turbulence of the global recession: the value of the U.S. dollar increased significantly, accounting for 48% of the sales decline and 23% of the decline in operating income; global steel production, which declined in the latter part of 2008, remained at unprecedentedly low levels; and lending and credit practices in response to the ongoing financial crisis continued to adversely affect non-residential construction projects world-wide.

ˇ During the first quarter of 2009, the Company's operating income benefitted from the restructuring actions implemented in the fourth quarter of 2008. Operational improvements were also recognized as a result of additional countermeasures enacted during the first quarter of 2009 targeting expense reduction, revenue enhancement and asset optimization. The combination of the 2008 and 2009 countermeasures will manifest themselves throughout 2009 and beyond with annualized benefits that are now expected to approximate $100 million in total cost reductions.

ˇ Defined benefit pension expense increased $6.0 million due to lower plan assets at the 2008 plan measurement date which resulted in a decrease in expected return on plan assets and an increase in recognized actuarial losses in 2009.

ˇ Major currency declines occurred in the British pound sterling (28%), the euro (15%) and Poland's zloty (35%), as well as most other significant currencies, reducing both revenues and operating income during the first quarter of 2009.

ˇ The Company's debt declined by $17.1 million during the first quarter of 2009, due to reductions in growth capital expenditures during the quarter and the effect of foreign currency translation.

ˇ Cash flow from operations remained strong during the quarter, increasing by $7.6 million or 24% from the first quarter of 2008.

                              Three Months
                             Ended March 31
(In millions)               2009        2008
Revenues                   $ 283.7     $ 378.8
Operating income              18.8        37.8
Operating margin percent       6.6 %      10.0 %



                                                                       Three Months
Harsco Infrastructure Segment - Significant Impacts on Revenues       Ended March 31
(In millions)
Revenues - 2008                                                      $          378.8
Impact of foreign currency translation                                          (59.2 )
Net decreased volume                                                            (37.6 )
Acquisitions                                                                      1.7
Revenues - 2009                                                      $          283.7

Harsco Infrastructure Segment - Significant Impacts on Operating Income:
ˇ In the first quarter of 2009, the Segment's operating results decreased due to reduced non-residential, commercial and infrastructure construction spending, particularly in the United Kingdom. This was partially offset by improvements in emerging economies in the Middle East and Latin America regions, as well as global industrial maintenance. The Company has benefited from its capital investments made in these markets and its ability to easily redeploy equipment throughout the globe.

ˇ Defined benefit pension expense increased $2.5 million in the first quarter of 2009 compared to the first quarter of 2008.

ˇ Foreign currency translation in the first quarter of 2009 decreased operating income for this Segment by $5.9 million, compared with the first quarter of 2008.

Harsco Metals Segment:
                               Three Months
                              Ended March 31
(In millions)               2009         2008
Revenues                   $ 238.4      $ 416.7
Operating income (loss)       (2.8 )       29.2
Operating margin percent      (1.2 )%       7.0 %



                                                                      Three Months
Harsco Metals Segment - Significant Impacts on Revenues              Ended March 31
(In millions)
Revenues - 2008                                                      $         416.7
Net decreased volume                                                          (104.7 )
Impact of foreign currency translation                                         (73.6 )
Revenues - 2009                                                      $         238.4

Harsco Metals Segment - Significant Effects on Operating Income:
ˇ Revenues, operating income and margins for the first quarter of 2009 were negatively affected by unprecedented declines in global steel production and the strong U.S. dollar.

ˇ Foreign currency translation in the first quarter of 2009 decreased operating income for this Segment by $7.0 million, compared with the first quarter of 2008.

ˇ During the first quarter of 2009, the Company's operating income benefitted from the restructuring actions implemented in the fourth quarter of 2008. Operational improvements were also recognized as a result of additional countermeasures implemented during the first quarter of 2009 targeting expense reduction, revenue enhancement and asset optimization.

                              Three Months
                             Ended March 31
(In millions)               2009        2008
Revenues                   $ 174.7     $ 192.2
Operating income              23.4        33.9
Operating margin percent      13.4 %      17.7 %

All Other Category - Harsco Minerals & Rail -        Three Months
Significant Impacts on Revenues                     Ended March 31
(In millions)
Revenues - 2008                                    $          192.2
Minerals and recycling technologies                           (13.0 )
Impact of foreign currency translation                         (7.6 )
Industrial grating products                                    (6.0 )
Air-cooled heat exchangers                                      5.1
Railway track maintenance services and equipment                4.8
Other changes not individually discussed                       (0.8 )
Revenues - 2009                                    $          174.7

All Other Category - Harsco Minerals & Rail - Significant Impacts on Operating Income:
ˇ The railway track maintenance services and equipment business operating income decreased from 2008 due principally to the timing of equipment sales.

ˇ Operating income for reclamation and recycling services was lower in 2009 due to significantly lower metal prices, continued steel mill production declines and product mix.

ˇ Strong demand in the natural gas market resulted in increased volume and operating income for the air-cooled heat exchangers business.

ˇ The economic downturn, customer decreases in inventory levels and increased steel prices compared to 2008 contributed to a reduction in operating income for the industrial grating products business.

ˇ Operating income for the boiler and process equipment business was below 2008 levels due principally to a gain on the sale of an asset in the first quarter of 2008 that was not repeated in 2009.

ˇ Operating income for the roofing granules and abrasives business was slightly below the first quarter of 2008 due to decreased sales volume.

ˇ Foreign currency translation in the first quarter of 2009 decreased operating income for the All Other Category by $0.9 million compared with the first quarter of 2008.

Outlook, Trends and Strategies

Company Wide:
The global recession has created uncertainty and anxiety throughout the world. A strengthened U.S. dollar compared to 2008; unprecedented reductions in global steel production; and the cancellation and deferral of certain construction projects and sales due to the tightening of credit have caused the Company's near-term prospects to become more difficult. The year 2009 is expected to be very challenging. The major challenges facing the Company include the following:

ˇ Continued strengthening of the U.S. dollar.

ˇ Tightened credit markets that limit the ability of the Company's customers to obtain financing.

ˇ Substantial and unprecedented reductions in global steel production.

ˇ Depressed commodity prices, particularly high-value metals.

In response to this global financial and economic crisis, the Company has and will continue to proactively and aggressively implement a number of countermeasures to reinforce 2009 and future performance, including:

ˇ In the fourth quarter of 2008, the Company implemented a restructuring program designed to improve organizational efficiency and enhance profitability and stockholder value. The restructuring program included exiting from certain underperforming contracts with customers, closing certain facilities and reducing the Company's global workforce. The actions taken in 2008 were supplemented by additional countermeasures targeting expense reduction, revenue enhancement and asset optimization in the first quarter of 2009. The combination of the 2008 and 2009 countermeasures will manifest themselves throughout 2009 and beyond. Additional countermeasures will be implemented as necessary. Annualized benefits are now expected to approximate $100 million in total cost reductions.

ˇ Cutting costs across the enterprise, including reducing or eliminating discretionary spending to match market conditions.

ˇ Prudently reducing growth capital expenditures in 2009 while redeploying equipment from slowing markets to new projects in strategically important and economically strong areas such as the Middle East and Africa, Asia-Pacific, and several other key regions.

ˇ Accelerating growth initiatives, particularly in emerging markets.

ˇ Targeted, bolt-on, prudent strategic acquisitions.

While the global economic conditions remain uncertain and turbulent, the Company believes it is well-positioned to capitalize on opportunities and execute strategic initiatives based upon its strong balance sheet, available liquidity and its ability to generate strong operating cash flows. The Company is confident that the previously mentioned actions along with its LeanSigma continuous improvement program will significantly reduce the Company's cost structure, further enhancing its financial strength. Additionally, the Company's global footprint; diversity of services and products; long-term mill services contracts; portability and mobility of infrastructure services equipment; and large infrastructure services customer base help mitigate its overall exposure to changes in any one single economy. However, further deterioration of the . . .