Harsco Corporation (HSC) on Q3 2021 Results - Earnings Call Transcript
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Operator: 00:03 Good morning. My name is Polly and I will be your conference facilitator. At this time, I would like to welcome everyone to the Harsco Corporation's Third Quarter Release Conference Call. All lines have been placed on mute to avoid any background noise. After the speakers' remarks, there will be a question-and-answer period. 00:37 Also, this telephone conference presentation and accompanying webcast made on behalf of Harsco Corporation are subject to copyright by Harsco Corporation and all rights are reserved. No recordings or redistribution of this telephone conference by any other parties are permitted without the express written consent of Harsco Corporation. Your participation indicates your agreement. 01:03 I would now like to introduce Dave Martin of Harsco Corporation. Mr. Martin? Sir, you may begin your call.
David Martin: 01:11 Thank you, Polly and welcome to everyone joining us today. I'm Dave Martin of Harsco. With me today is Nick Grasberger, our Chairman and Chief Executive Officer; and Anshooman Aga, Harsco's Senior Vice President and CFO. This morning, we will discuss our results for the third quarter of twenty twenty one and our outlook for the remainder of the year. We'll then take your questions. 01:34 Before our presentation, let me mention a few items, first our quarterly earnings release as well as the slide presentation for the call are available on our website. Secondly, we will make statements today that are considered forward-looking within the meaning of the federal securities laws. 01:50 These statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially from those forward-looking statements. For a discussion of such risks and uncertainties, see the Risk Factors section in our most recent 10-K and 10-Q. The company undertakes no obligation to revise or update any forward-looking statement. 02:12 Lastly, on this call, we may refer to adjusted financial results that are considered non-GAAP for SEC reporting purposes. A reconciliation to GAAP results is included in the earnings release as well as the slide presentation. 02:24 With that said, I'll turn it over to Nick.
Nick Grasberger: 02:28 Good morning, everyone and thanks for joining us. I would like to further acknowledge that our new CFO, Anshooman Aga is with us today. As previously noted, we’re very fortunate to have recruited Anshooman to Harsco and he has held significant financial and operational roles at Siemens, AECOM and Cubic, and he is already adding tremendous value to our company. 02:54 Turning to our results, the third quarter was characterized by healthy underlying demand in our two core businesses, Harsco Environmental and Clean Earth. It also reflected cost inflation and supply chain disruptions across all three business units. 03:12 Overall, Harsco consolidated revenue was up seven percent versus Q3 of twenty twenty while adjusted EBITDA was up twenty two percent on the same basis. Demand in our Rail segment was dampened by continued weakness in-transit ridership, a slowdown in domestic freight traffic and uncertainty as customers wait for the passage of the U.S. infrastructure bill. 03:38 Another headline from this morning's announcement is our intent to divest our Rail segment during the first half of next year. As we have indicated in the past, Harsco Rail is not aligned with our long term strategy to focus on and drive growth in businesses that provide environmental solutions to a broad mix than markets. 03:58 However, Harsco Rail is a unique business with innovative solutions and a global reach with meaningful growth opportunities ahead. We have received solicited expressions of interest from many parties over the past several months and expect a very competitive sale process. 04:18 I'll comment on each of our segments beginning with Harsco Environmental. Harsco Environmental continued to perform in line with our expectations and we are pleased with its momentum. Capacity utilization of the steel mills we support remains lower than the levels of the first half of twenty nineteen and analysts expect low to mid-single digit LST growth through next year. 04:44 Commodity prices along with the contributions from our so called echo products, previously referred to as applied products, remains strong. Looking ahead to twenty twenty two, against a continued positive outlook for the global steel industry and a decline to normalized levels of capital spending in our business, we expect the Environmental business to deliver the highest EBITDA and free cash flow in many years. 05:11 Clean Earth experienced a moderate impact in the third quarter from cost inflation and an excess of backlog of material requiring incineration, which negatively affected volume. The recovery and contaminated soil continues to be a bit slower than anticipated due to delays in certain infrastructure projects. 05:33 Nonetheless, Clean Earths EBITDA in Q3 was close to our expectations, and these pressures should abate throughout Q4 and become de minimis by Q1 of twenty twenty two. Similar to Harsco Environmental, we believe the Clean Earth has set up to deliver another strong year of growth in twenty twenty two. Underlying market demand, new business and yet higher benefits from the ESOL turnaround and integration will be the primary drivers. 06:03 As noted, our Rail business had a challenging quarter due to cost inflation and the timing of equipment orders and shipments. Many of our customers have been affected by their own supply chain issues and as a result, maintenance programs are being put on hold. 06:21 While, we expect to see some continued impact from these inflationary and supply chain issues in Q4, we expect the situation to improve as we move through the first half of next year. The passage of the U.S. infrastructure bill and the introduction of new products aimed at improving the efficiency of rail maintenance activities should also support growth. 06:43 The other components of our business those being after-market, technology and contracted services are performing in line with expectations and the outlook is encouraging. Therefore, we believe the timing of the divestiture of the rail business should coincide with improving market fundamentals and deliver the value we expect for our shareholders. 07:05 I'll now turn the call over to Anshooman.
Anshooman Aga: 07:09 Thanks, Nick and good morning, everyone. Let me start by saying I’m very excited to be here and a part of the Harsco team. I joined Harsco because I thought the promise of the company's ongoing transformation to a single investment thesis environmental solutions company, and the value creation opportunities. 07:29 I've enjoyed getting to know and working with the Harsco team over the past three months and my time with Harsco so far has strengthened my optimism. Harsco's strategy is well defined and our financial priorities are unchanged. Strengthening of free cash flow and reducing our leverage remain paramount to Harsco and the key priorities for me as CFO. There is strong underlying momentum within our businesses and the opportunities to grow both organically and inorganically are significant. 08:02 Now let me turn to our results for the quarter and our outlook for Q4. Harsco consolidated revenues in the third quarter increased seven percent compared with the prior year quarter to five hundred forty four million dollars and adjusted EBITDA increased twenty twenty two percent to seventy two million dollars. The year-on-year improvement can be attributed to steady operational execution, strong performance in our Harsco Environmental segment as well as growth and improvements within the hazardous waste line of business of Clean Earth. 08:38 Harsco's adjusted EBITDA margin as a result reached thirteen point two percent in the third quarter versus eleven point six percent in the comparable quarter of twenty twenty. Despite strong year-on-year improvement, our adjusted EBITDA was below guidance driven by new project delays from rail customers, cost inflation and supply chain constraints. 09:02 Transit ridership remains weak, freight traffic has slowed and uncertainty related to the infrastructure bill has put pressure on customer capital and operating budgets. The majority of the deferred sales for Rail in the third quarter and now expected to be realized in Q4 and early twenty twenty two. Material cost inflation and supply chain pressures had a mid-single digit EBITDA impact in the quarter relative to prior expectations. 09:32 Harsco's adjusted earnings per share from continuing operations for the third quarter was zero point twenty dollars. This figure compares favorably to adjusted EPS of zero point zero eight dollars in the prior year quarter. Lastly, our free cash flow for the quarter was nominal. This outcome was lower than anticipated for the quarter with Rail and related delayed projects as the primary driver. 9:58 Please turn to slide five and our Environmental segment. Our Environmental segment performed very well in the quarter. Revenues totaled two hundred seventy million dollars and adjusted EBITDA was fifty six million dollars. 10:16 Revenues were twenty one percent higher than the prior year quarter and EBITDA increased forty percent year-on-year. These details illustrate the positive operating leverage in this business. Compared with Q3 of twenty twenty, the EBITDA improvement is primarily attributable to increased demand for environmental services and applied products on a global basis. 10:41 Steel market fundamentals remain strong. Liquid Steel Tonnage or LST increased roughly twenty percent versus the prior year. The outlook for steel consumption remains positive. We expect to see some modest disruptions in the fourth quarter due to normal seasonality, but the industry and market observers are predicting another year of growth in twenty twenty two. 11:06 Next, please turn to slide six to discuss our Clean Earth segment. Compared to the second quarter of twenty twenty, revenues increased three percent to two hundred million dollars with hazardous materials business driving this growth. With hazardous materials retail and healthcare activity was strong while volumes from the industrial sector were modestly lower than the prior year quarter due to disposal market constraints. 11:36 Also activity within our soil dredged materials business was modestly lower year-on-year, however, we did see sequential improvement. With that said the improvement has been slow and recall that soil remediation is a late cycle business, that then trough until the fourth quarter of twenty twenty. 11:56 Segment EBITDA increased to twenty one million dollars in Q3 of this year supported by higher -- hazardous material volumes and ESOL integration benefits. These positive impacts were offset by investments to support Clean Earth and inflation related to containers and transportation. We have seen a significant increase in the cost of steel containers and transportation and have taken action already, which I will discuss in more details later. 12:27 Lastly on Clean Earth, I'd highlight that our year-to-date free cash flow now totals thirty nine million dollars. This total represents more than seventy percent of segment EBITDA. 12:39 Now please turn to slide seven and our Rail business. Rail revenues totaled seventy four million dollars and its EBITDA totaled three million dollars in the second quarter. These figures are below those realized in Q3 of twenty twenty. The change in EBITDA can be attributed to lower equipment sales volume and higher costs. 13:02 I have mentioned earlier most of the deferred sales are expected to be realized in the next few quarters. Also higher material costs impacted results. We incurred a negative LIFO adjustment in the quarter of approximately two million dollars, which had not been anticipated. These impacts were partially offset by higher contributions from after-market parts and contracted services both in U.S. and Asia. 13:29 Turning to slide eight, which is our consolidated twenty twenty one outlook. As noted earlier by Nick and in our press release, these figures now exclude Rail, which we will report as discontinued operations beginning in the fourth quarter. Our adjusted EBITDA guidance is now two hundred and forty eight million dollars to two hundred and fifty six million dollars for the year, while adjusted EPS is anticipated to be within a range of zero point fifty one dollars to zero point fifty four dollars. 14:03 These figures consider four million dollars of stranded corporate costs that were previously allocated to Rail. This outlook also includes one hundred percent of Harsco's interest costs and a pro forma estimated tax rate. 14:17 A detailed segment outlook is included in the appendix of the slide deck. And from a business segment point of view, our adjusted EBITDA outlook for environmental is essentially unchanged. Meanwhile, our outlook for Clean Earth's adjusted EBITDA is lowered by five million dollars at the midpoint. This change reflects the impact of higher container and transportation costs as well as a volume impact from end disposal constraints. 14:43 Last quarter, we noted certain risk related to Clean Earth including the impacts related to incineration and inflation. These impacts, however, are larger than what we previously anticipated for the second half of the year. 14:59 Looking forward, we do expect these pressures to abate. There are a number of disposal assets that have restarted or are increasing output. Also we have been pushing through price increases to offset the inflation. Price initiatives take time as you have aware driven by timing of contractual annual price increases in many cases and we expect to fully offset the cost increases we've seen year-to-date during the first quarter of twenty twenty two. 15:31 Also, we remain very diligent on our cost structure, including corporate costs and the need for continuous improvement. In this regard, we recently launched a cost improvement program which includes targeted reductions at both Clean Earth and Rail. 15:49 These efforts are anticipated to provide annual run rate benefits of ten million dollars to fifteen million dollars when fully realized in the second half of twenty twenty two. Any non-recurring costs related to this program as well as our recently announced decision to move our corporate office to Philadelphia are excluded from this outlook. 16:11 Let me conclude on slide nine with our fourth quarter guidance. Q4 adjusted EBITDA is expected to range from fifty five million dollars to sixty two million dollars. Again, this range excludes Rail. 16:26 Clean Earth is expected to see a nice improvement year-on-year as a result of integration benefits and higher volumes, including in the soil dredged materials business line. These impacts are expected to be partially offset by inflation and investments. 16:42 Environmental EBITDA is anticipated to be similar or slightly below the prior year quarter. This guidance contemplates a negative FX impact, some contract exit costs and the less favorable services mix compared to Q4 of twenty twenty. Sequentially, we anticipate that some seasonality will reemerge across our businesses. 17:06 And before opening the call to questions, let me again reiterate, our focus on reducing leverage and strengthening free cash flow. We ended the quarter with a leverage ratio of four point four eight times. Importantly, we are targeting a leverage ratio of approximately three times at the end of twenty twenty two. This outcome would be consistent with our long-term targets and reflects our optimism about our businesses and ability to sell Rail. 17:37 Thanks, and I will now hand the call back to the operator for Q&A.
Operator: 17:42 Thank you. And your first question comes from the line of Larry Solow with CJS Securities.
Larry Solow: 18:07 Good morning, guys and thanks for taking the questions. Just a quick clarification, Anshooman. So essentially the guidance for the year from a continued operations basis essentially is the two hundred and forty eight dollars to two hundred fifty six dollars is that comparative to like a two hundred and fifty five dollars to two hundred and sixty five dollars number or somewhere around there, Am I in the right ballpark, if we sort of add back what your original guidance was for Rail?
Anshooman Aga: 18:32 Good morning. Yeah. Just if you take the three segments, essentially environmental is unchanged, Clean Earth as I mentioned at the midpoint is five million dollars lower, corporate cost when you add back the stranded cost is a couple of million better. So overall relatively close to our previous guidance when you exclude Rail.
Larry Solow: 18:53 Okay. And you mentioned, Environmental sounds like there is no real change there. Obviously, cost pressures are sure hitting that segment as well, though it seems more focused on the Clean Earth piece. But has there been any real change in terms of your outlook in terms of demand on the Environmental side, perhaps demand a little bit better than you expected, but impact to offset by cost pressures. Is that a fair statement?
Nick Grasberger: 19:24 Yeah. Hi, Larry. It's Nick. Yeah. I think that's a fair statement. The market continues to develop largely as we expected it to. The cost pressures in that business are not as acute as they are in Clean Earth or Rail and we do have some ability to escalation clauses to recapture that inflation.
Larry Solow: 19:51 Okay. And the question on uncertainity and disposal bottlenecks and I realize that that's sort of the incinerator piece or the inability to incinerate some of your waste. Have you – if you’ve seen any improvement over the last ninety days. I believe some of this waste that you guys are referring to was actually being off, was also not only being center incinerators, but all sorts of cement kilns who can use this waste as fuel and essentially incinerated. So if I'm not mistaken, there was particular customer, that there was a hold up there, has that started to improve in Q4?
Nick Grasberger: 20:27 It has, in fact it's gotten a good bit better. I'd say, the biggest negative impact was realized in July and August. Since then it's improved a good bit. And I think there's a lot of optimism that, if not in Q4, certainly by Q1 that supply chain, if you will, should be back to its normal function.
Larry Solow: 20:53 Okay. And on the project side is that -- I thought you weren't building a much on the dredging side, right, on the wet soil towards more delays and we're hopeful that the dredge piece does pick up as well, but I assumed sort of a little bit of a push out is more early relative to your guidance was more on the drier soil, the infrastructure piece projects and stuff. Is that what you're more referring to?
Nick Grasberger: 21:16 Yes. That's correct as well. The dredged business actually is performing quite well. As you know, as you call a dry soil projects for us that’s generally focused in the Mid-Atlantic, New England area and there are few large projects that we're tracking and have good reason to believe that will be significant processor of that material, but they've been delayed.
Operator: 21:42 And your next question comes from the line of Jeff Hammond with KeyBanc Capital Markets.
Jeffrey Hammond: 21:48 Hey. Good morning, guys.
Nick Grasberger: 21:51 Hey, Jeff.
Jeffrey Hammond: 21:54 Just on Rail, I wanted to get a sense of, I know you're selling that, but just to get a sense of kind of run rate. Are you -- is the growth rate and EBITDA growth about the same as what you thought before or is there a substantial amount push into twenty twenty two?
Nick Grasberger: 22:17 Yeah. I guess, how I would characterize it, Jeff is that the, the near-term kind of earnings potential of that business really has not changed. But as you know, on the equipment side, it can vary from quarter-to-quarter. And I think currently, we are seeing some delays. So our view is by the time, we begin to market the business that the trailing twelve-month EBITDA at that time should approximate what we had been thinking.
Jeffrey Hammond: 22:56 Okay. That's helpful. And then just on cleaners, can you just talk about what you're doing from a pricing standpoint to kind of deal with some of the added costs and inflationary pressures.
Anshooman Aga: 23:14 Yeah. So from a Clean Earth perspective, for the piece of business that doesn't have annual contracts or long-term contracts in place, we have pushed through price increases. These do depend on the category code, but we push through price increases and are definitely recovering our cost for the contracts, which have annual escalations built in. As these contracts come up for the renewal, we are pushing through price increases and those will get priced in, and as I mentioned, we expect in Q1 to have recovered from any inflation headwinds through the passing the price increases.
Jeffrey Hammond: 23:52 Okay. And then just last one, you took down your free cash flow fairly substantially. Just talk through the moving pieces to the new free cash flow guidance.
Anshooman Aga: 24:07 Yeah. So keep in mind the previous free cash flow guidance was including Rail, the new free cash flow guidance is pro forma without Rail and the new guidance also includes one hundred percent off the interest cost for Harsco. Having said that, in Q3, we did see some delays in projects and milestones related to Rail payments, but again the two guidance isn't comparable. Our Environmental business and our Clean Earth business continue to generate good cash flow.
Jeffrey Hammond: 24:44 Okay. So the vast majority of the decline is Rail, either the shortfall in three Q or what you're pulling out for four Q?
Anshooman Aga: 24:55 That's correct. It’s some slowdown in payments that are on our balance sheet as working capital and then also stripping out Rail for the year.
Jeffrey Hammond: 25:04 Okay. Thanks so much.
Operator: 25:07 And your next question comes from the line of Rob Brown with Lake Street Capital.
Robert Brown: 25:12 Good morning.
Nick Grasberger: 25:15 Hi.
Robert Brown: 25:16 On the Environmental business, just wanted to get your view on kind of the growth rate that, that business should see over the next year or two, and I think you mentioned pretty positive guidance. How do you view the margin in that business getting to in terms of EBITDA margin?
Nick Grasberger: 25:34 Yeah. So from a topline perspective, let's really focus on volume. We're looking at three percent to five percent top line growth in that business, balanced between the mill services contracts, and our ability to continue to expand the volume growth in our eco products. The EBITDA margins, I think are pretty close to being all-time highs, but we would expect to continue to see margin expansion in that business through twenty twenty two. 26:19 The mix should improve as we saw more eco products relative to the mill service business. But again, I think the -- as I've indicated before and I think you're aware, the best way to look at the business is really EBITDA minus kind of maintenance CapEx in terms of the margin. So if you look at the capital, it will spend next year for maintenance as well as for renewal of existing contracts, subtract that out from EBITDA and look at the margin that should expand one to two points next year.
Robert Brown: 27:04 Okay, great. Thank you. And then, on the Clean Earth business, maybe just a little bit more about the constraints in hazardous waste processing. Is that something that you have control over, is it really just something that you're waiting for the market to loosen which you've indicated it is, but just help me understand the things you can do there or is it just waiting for the supply chain to open up.
Nick Grasberger: 27:32 Well, the vast majority, eighty percent to ninety percent of the material that we process in Clean Earth hazardous waste is either recycled or repurposed. The remainder does need to go to either a landfill or incinerator. For that portion that goes to incineration there have been capacity constraints at those facilities where we ship our material now. 28:02 Now that was a combination of a number of different factors that led to that situation. And as I indicated, that constraint was really at its peak in July and August, and it's getting better. Facilities are reopening that were closed for maintenance, new capacity is coming online and so forth. So, we really do believe that situation to get better here in Q4 and certainly be behind us in Q1. And we estimate that on the industrial hazardous waste that we process that incineration capacity challenge affected revenue by about two percentage points or one million dollars to two million dollars of EBITDA.
Robert Brown: 28:58 Okay. Thank you. I’ll turn it over.
Operator: 29:02 And your next question comes from the line of Brian Butler with Stifel.
Brian Butler: 29:06 Hi. Good morning. How you guys doing?
Anshooman Aga: 29:12 Good morning.
Brian Butler: 29:14 Just kind of on that disposal you said it was about one million dollar to two million dollars of EBITDA, when you think of the other issues being the labor, could you maybe give us some quantification on kind of what the labor headwind was in three Q and how to think about that into four Q into and then into twenty twenty two?
Anshooman Aga: 29:36 Our bigger headwind from a cost perspective was the containers and transportation. Labor as such, we have had some issues as the whole industry in terms of drivers. We've made some positive progress over the third quarter in that, but the big cost issue for us was the steel containers where we've seen the cost of the containers go up significantly over the last few months.
Brian Butler: 30:02 And how much the headwind was that, maybe on EBITDA margin in the quarter?
Anshooman Aga: 30:08 Two million dollar to three million dollar on the containers and some of the transportation stuff.
Brian Butler: 30:15 And is that improving in the fourth quarter, like some of the other items like disposal or is that continuing?
Anshooman Aga: 30:21 The price is continuing, but keep in mind, we are pushing through price increases to our customers to offset the higher inflation.
Brian Butler: 30:30 Okay. And then follow-up question, just on, can you talk maybe about some of the possible potential impact from China’s rolling blackouts on the steel business and-or how that kind of maybe trickle down to other parts of your business.
Nick Grasberger: 30:47 Yeah. Hi, Brian. We're fortunate and that the -- the few mills that we service in China where we have quite sizable long term contracts have achieved what's called in China AAAs certification from an environmental standpoint. And what that means is that they will be much less subject to some of those closure of the temporary risks that other mills will be subject to. So we really do not expect there to be a significant issue in our China business through the winter months by these rolling blackouts.
Brian Butler: 31:39 Okay. And then one last one, just on the financials, do you have a year-to-date free cash flow excluding the Rail business?
Anshooman Aga: 31:47 Yes. It is six million dollars and that includes one hundred percent of costs.
Brian Butler: 31:55 So six million dollars, so your forecast for the third quarter is negative one million dollars to a positive fourteen million dollars, is that the right way to think it?
Anshooman Aga: 32:06 That's correct. That’s basically zero million to nine million dollars positive to get to the five to fifteen.
Brian Butler: 32:16 Okay, great. Thank you very much.
Operator: 32:18 Your next question comes from the line of Chris Howe with Barrington Research.
Christopher Howe: 32:33 Good morning, Nick. Good morning, Anshooman.
Nick Grasberger: 32:37 Good morning.
Anshooman Aga: 32:38 Good morning.
Christopher Howe: 32:37 Good morning. I wanted to first off, talk about the Applied Products your expectations as we head into fiscal year twenty twenty two. I was thinking of this in the context of some of your recent announcements surrounding sustainable asphalt products, what you've been doing, your work in the UK, and what your thoughts are in Applied Products overall and what the potential is for the steel business?
Nick Grasberger: 33:09 Well, it's a very good question and I'm glad you raised it because it's a component of our business that we're very excited about, both in terms of its revenue and profit potential, as well as of course, the benefits that such products provide to the environment, which as you know, is what we're primarily focused on. 33:30 You're correct with respect to the Asphalt business in the UK, for years, we had a single facility that really generated the benefits that I just mentioned, as well as quite good margins. And we're now one of our many initiatives in eco products is to understand other geographies where the requirements would be satisfied to build new facilities. 34:05 And so there are three that we've identified that we will be getting the permits and beginning construction of in twenty twenty two. But that's a part of the business that if you look at the return on capital and the consistency of that product with our environmental goals is aligned very, very nicely. 34:34 There are other similar initiatives around self-cakes in the aluminum industry and the ability of our AluSalt salt technology to process those salt cakes. Our new full scale facility in Bahrain is up and running and achieving all of our milestones and now potential customers are able to visit a full scale operation that's performing quite well as opposed to what had been just a single pilot plant in the UK. 35:12 So, there's a lot of optimism around our AluSalt technology as well. So those are just two, but I really do believe that over the next year or two or three you will see, from a revenue mix standpoint that shifting for us more and more towards eco products relative to core mill services, although of course they are closely linked.
Christopher Howe: 35:45 Thank you for that color. And one follow-up, it seems like over the course of fiscal year twenty twenty two, there is going to be room for additional capital priorities as we consider the formal process that's undergoing for Rail, not talking about that specifically, but can you kind of outline how you see capital priorities for the business if we think about the growth opportunities here in Applied Products or other opportunities that you see across the business.
Nick Grasberger: 36:21 Well, as Anshooman mentioned and of course, we're very aligned on this that the priority in twenty twenty two will be free cash flow generation and reducing our leverage. And at the same time, we expect the operational performance of both Harsco Environmental and Clean Earth to be quite strong. So we're really looking forward to a strong cash flow year and together with the proceeds from the divestiture of Rail getting our balance sheet where we'd like it to be at around three times levered. Now there are, I am happy to say, very attractive capital opportunities, investment opportunities for growth in both HE and in Clean Earth, but those in twenty twenty two will likely be secondary to the balance sheet.
Christopher Howe: 37:27 Okay. And if I may squeeze one more in here really quickly, apologies. The infrastructure program as it relates to Rail with the sale process undergoing, how should we think about the inclusion or exclusion of that program as we consider the timing of that formal process?
Nick Grasberger: 37:48 Well, in the short term, there are a handful of projects with customers that are somewhat dependent upon clarity around the infrastructure bill, both in terms of what's included and also kind of the timing. And that's part of our commentary around the some of the push outs in revenue and profit on the equipment side of that business. 38:18 Clearly, in the medium to longer term, there are components of the infrastructure bill that will be very attractive to many of our customers and we believe will ultimately flow to higher revenue between us and those customers. But between now and when the sale process commences and the phase is completed. We expect with the passage of the bill that handful of related projects to be realized in revenue.
Christopher Howe: 39:01 Okay. Thank you.
Operator: 39:05 And you do have a follow-up question from the line of Larry Solow with CJS Securities.
Larry Solow: 39:11 Actually most of my questions were answered there along the lines of the sort of sustainable stuff, I think you also now for a little JV with Magsort, I guess on sort of a new process for steel slag, is that something that over time could move the needle?
Nick Grasberger: 39:32 Yeah. We think so, of course, it's a one billion dollars business or so moving the needle, it's a technology that allows us to improve the metal recovery from the slag that we process for our customers, and it's a technology that provides a much better return on investments. It's probably more applicable to new contracts or contracts where existing technology needs to be replaced. So with significant in that it's a very sound environmental solution with a good return, but I would expect its adoption and roll out to be over the next two or three years.
Larry Solow: 40:29 Gotcha. And then, Nick, just why how you -- just last question or thoughts, just on the timing of a potential sale of the Rail business. Do you think it could be a little bit of a challenge considering the business sort of underperformed the last couple of years, maybe perhaps it would be wiser just thinking aloud to have a couple of quarters under your belt where the business is performing more in line with expectations and its growth trajectory or, and obviously I'm not privy to your conversations, just don't expect to discuss them in a public forum, but I'm just curious if the recent performance in the Rail business could potentially push out or impact of inevitable sale of the business. Thanks.
Nick Grasberger: 41:15 Yeah. Well, it's a good question of course is something that we've thought a good bit about. We do believe that the under performance in the Rail business is really driven by the market challenges that much of those we expect to diminish here over the next few quarters. We also, of course, have to balance the outlook for the business and the expected proceeds of a divestiture against the need to bring our balance sheet to where we'd like it to be and also to move ahead with our corporate strategy that we adopted two years ago to become a single thesis environmental solutions company. So balancing all of those items we obviously have decided that we need to commit to divesting the business in the first half of next year and we do believe that we will get good value for the business.
Larry Solow: 42:23 Fair enough. Great. I appreciate the call I. Thanks, Nick.
Nick Grasberger: 42:28 Thank you.
Operator: 42:29 And at this time, there are no more audio questions. We will now turn the call back over to Mr. Martin for closing remarks.
David Martin: 42:38 Thank you for joining the call. Please feel free to contact me with any follow-up questions you may have. As always, we appreciate your interest in Harsco and look forward to speaking with you in the near future. Have a great day.
Operator: 42:53 Thank you. This concludes today's conference call. Thank you for your participating. You may now disconnect.
