Item 1.      Business

(a)  General Development of Business.

Harsco Corporation (“the Company ” ) is a diversified, multinational provider of market-leading industrial services and engineered products.  The Company’s operations fall into two reportable segments: Access Services and Mill Services, plus an “all other” category labeled Minerals & Rail Services and Products.  The Company has locations in 50 countries, including the United States.  The Company was incorporated in 1956.

The Company’s executive offices are located at 350 Poplar Church Road, Camp Hill, Pennsylvania 17011.  The Company’s main telephone number is (717) 763-7064.  The Company’s Internet website address is www.harsco.com.  Through this Internet website (found in the “Investor Relations” link) the Company makes available, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and all amendments to those reports, as soon as reasonably practicable after these reports are electronically filed or furnished to the Securities and Exchange Commission.  Information contained on the Company’s website is not incorporated by reference into this Annual Report on Form 10-K, and should not be considered as part of this Annual Report on Form 10-K.

The Company’s principal lines of business and related principal business drivers are as follows:

The Company reports segment information using the “management approach” in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”).  This approach is based on the way management organizes and reports the segments within the enterprise for making operating decisions and assessing performance.  The Company’s reportable segments are identified based upon differences in products, services and markets served.  These segments and the types of products and services offered are more fully described in section (c) below.

In 2007, 2006 and 2005, the United States contributed sales of $1.2 billion, $1.0 billion and $0.8 billion, equal to 31%, 32% and 35% of total sales, respectively.  In 2007, 2006 and 2005, the United Kingdom contributed sales of $0.7 billion, $0.7 billion and $0.5 billion, respectively, equal to 20%, 22% and 23% of total sales, respectively.  One customer, ArcelorMittal, represented 10% or more of the Company’s sales during 2007 and 2006.  No customer represented 10% or more of the Company’s sales in 2005.  There were no significant inter-segment sales.

(b)  Financial Information about Segments

Financial information concerning industry segments is included in Note 14, Information by Segment and Geographic Area, to the Consolidated Financial Statements under Part II, Item 8, “Financial Statements and Supplementary Data.”

(c)  Narrative Description of Business

(1)           A narrative description of the businesses by reportable segment is as follows:

Access Services Segment – 39% of consolidated sales for 2007

Harsco’s Access Services Segment includes the Company’s brand names of SGB Group, Hünnebeck Group and Patent Construction Systems Divisions.  The Company’s Access Services Segment is a leader in the construction services industry as one of the world’s most complete providers of rental scaffolding, shoring, forming and other access solutions.  The U.K.-based SGB Group Division operates from a network of international branches throughout Europe, the Middle East and Asia/Pacific; the Germany-based Hünnebeck Division serves Europe, the Middle East and South America, while the U.S.-based Patent Construction Systems Division serves North America including Mexico, Central America and the Caribbean.  Major services include the rental of concrete shoring and forming systems, scaffolding and powered access equipment for non-residential and infrastructure projects; as well as a variety of other access services including project engineering and equipment erection and dismantling and, to a lesser extent, access equipment sales.

	Access Services Segment
		2007 Percentage
	Region	of Revenues
	Western Europe	65%
	North America	20%
	Middle East and Africa	7%
	Eastern Europe	6%
	Asia/Pacific	1%
	Latin America (a)	1%

(a) Including Mexico.

For 2007, 2006 and 2005, the Access Services Segment’s percentage of the Company’s consolidated sales was 39%, 36% and 33%, respectively.

Mill Services Segment – 41% of consolidated sales for 2007

The Mill Services Segment, which consists of the MultiServ Division, is the world’s largest provider of on-site, outsourced mill services to the global steel and metals industries.  MultiServ provides its services on a long-term contract basis, supporting each stage of the metal-making process from initial raw material handling to post-production by-product processing and on-site recycling.  Working as a specialized, high-value-added services provider, MultiServ rarely takes ownership of its customers’ raw materials or finished products.  Similar services are provided to the producers of non-ferrous metals, such as aluminum, copper and nickel.  The Company’s multi-year Mill Services contracts had estimated future revenues of $5.0 billion at December 31, 2007.  This provides the Company with a substantial base of long-term revenues.  Approximately 61% of these revenues are expected to be recognized by December 31, 2010.  The remaining revenues are expected to be recognized principally between January 1, 2011 and December 31, 2016.

MultiServ’s geographic reach to over 30 countries, and its increasing range of services, enhance the Company’s financial and operating balance.  In 2007, this Segment’s revenues were generated in the following regions:

	Mill Services Segment
		2007 Percentage
	Region	of Revenues
	Western Europe	53%
	North America	20%
	Latin America (a)	11%
	Asia/Pacific	7%
	Middle East and Africa	6%
	Eastern Europe	3%

(a) Including Mexico.

For 2007, 2006 and 2005, the Mill Services Segment’s percentage of the Company’s consolidated sales was 41%, 45% and 44%, respectively.

All Other Category - Minerals & Rail Services and Products – 20% of consolidated sales for 2007

The All Other Category includes the Excell Minerals, Reed Minerals, Harsco Track Technologies, IKG Industries, Patterson-Kelley and Air-X-Changers Divisions.  Approximately 84% of this category’s revenues originate in the United States.

Export sales for this Category totaled $57.1 million, $96.6 million and $116.6 million in 2007, 2006 and 2005, respectively.  In 2007, 2006 and 2005, export sales for the Harsco Track Technologies Division were $21.8 million, $51.5 million and $80.0 million, respectively, which included sales to Canada, Mexico, Europe, Asia, the Middle East and Africa.  A significant backlog exists at December 31, 2007 in the Harsco Track Technologies Division as a result of orders received in 2007 from the Chinese Ministry of Railways.

Excell Minerals is a multinational company that extracts high-value metallic content for production re-use on behalf of leading steelmakers and also specializes in the development of minerals technologies for commercial applications, including agriculture fertilizers and performance-enhancing additives for cement products.

Reed Minerals’ industrial abrasives and roofing granules are produced from power-plant utility coal slag at a number of locations throughout the United States.  The Company’s BLACK BEAUTY® abrasives are used for industrial surface preparation, such as rust removal and cleaning of bridges, ship hulls and various structures.  Roofing granules are sold to residential roofing shingle manufacturers, primarily for the replacement roofing market.  This Division is the United States’ largest producer of slag abrasives and third largest producer of residential roofing granules.

Harsco Track Technologies is a global provider of equipment and services to maintain, repair and construct railway track.  The Company’s railway track maintenance services support railroad customers worldwide.  The railway track maintenance equipment product class includes specialized track maintenance equipment used by private and government-owned railroads and urban transit systems worldwide.

IKG Industries manufactures a varied line of industrial grating products at several plants in North America.  These products include a full range of bar grating configurations, which are used mainly in industrial flooring, and safety and security applications in the power, paper, chemical, refining and processing industries.

Patterson-Kelley is a leading manufacturer of heat transfer products such as boilers and water heaters for commercial and institutional applications, and also powder processing equipment such as blenders, dryers and mixers for the chemical, pharmaceutical and food processing industries.

Air-X-Changers is a leading supplier of custom-designed and manufactured air-cooled heat exchangers for the natural gas industry.  The Company’s heat exchangers are the primary apparatus used to condition natural gas during recovery, compression and transportation from underground reserves through the major pipeline distribution channels.

For 2007, 2006 and 2005, the All Other Category’s percentage of the Company’s consolidated sales was 20%, 19% and 23%, respectively.

(1)

(i)

The products and services of the Company include a number of product groups.  These product groups are more fully discussed in Note 14, Information by Segment and Geographic Area, to the Consolidated Financial Statements under Part II, Item 8, “Financial Statements and Supplementary Data.”  The product groups that contributed 10% or more as a percentage of consolidated sales in any of the last three fiscal years are set forth in the following table:

		Percentage of Consolidated Sales
	Product Group	2007	2006	2005
	Access Services	39%	36%	33%
	Mill Services	41%	45%	44%

(1)

(ii)

New products and services are added from time to time; however, in 2007 none required the investment of a material amount of the Company’s assets.

(1)

(iii)

The manufacturing requirements of the Company’s operations are such that no unusual sources of supply for raw materials are required.  The raw materials used by the Company for its limited product manufacturing include principally steel and, to a lesser extent, aluminum, which are usually readily available.  The profitability of the Company’s manufactured products is affected by changing purchase prices of steel and other materials and commodities.  If steel or other material costs associated with the Company’s manufactured products increase and the costs cannot be passed on to the Company’s customers, operating income would be adversely impacted.  Additionally, decreased availability of steel or other materials could affect the Company’s ability to produce manufactured products in a timely manner.  If the Company cannot obtain the necessary raw materials for its manufactured products, then revenues, operating income and cash flows will be adversely affected.  Certain services performed by the Excell Minerals Division result in the recovery, processing and sale of specialty steel scrap concentrate and ferro alloys to its customers.  The selling price of the by-product material is principally market-based and varies based upon the current market value of its components.  Therefore, the revenue amounts recorded from the sale of such by-product material varies based upon the market value of the commodity components being sold.  The Company has executed hedging instruments designed to reduce the volatility of the revenue from the sale of the by-products material at varying market prices.  However, there can be no guarantee that such hedging strategies will be fully effective in reducing the variability of revenues from period to period.

(1)

(iv)

While the Company has a number of trademarks, patents and patent applications, it does not consider that any material part of its business is dependent upon them.

(1)

(v)

The Company furnishes products and materials and certain industrial services within the Access Services and the All Other Category that are seasonal in nature.  As a result, the Company’s sales and net income for the first quarter ending March 31 are normally lower than the second, third and fourth quarters.  Additionally, the Company has historically generated the majority of its cash flows in the second half of the year.  This is a direct result of normally higher sales and income during the latter part of the year.  The Company’s historical revenue patterns and cash provided by operating activities were as follows:

Historical Revenue from Continuing Operations Patterns

(1)

(vi)

The practices of the Company relating to working capital are similar to those practices of other industrial service providers or manufacturers servicing both domestic and international industrial services and commercial markets.  These practices include the following:

·	Standard accounts receivable payment terms of 30 days to 60 days, with progress payments required for certain long-lead-time or large orders.  Payment terms are longer in certain international markets.

·	Standard accounts payable payment terms of 30 days to 90 days.

·

Inventories are maintained in sufficient quantities to meet forecasted demand.  Due to the time required to manufacture certain railway maintenance equipment to customer specifications, inventory levels of this business tend to increase for an extended time during the production phase and then decline when the equipment is sold.

(1)

(vii)

One customer, ArcelorMittal, represented 10% or more of the Company’s sales in 2007 and 2006.  In 2005, no single customer represented 10% of its sales.  The Mill Services Segment is dependent largely on the global steel industry, and in 2007 and 2006 there were two customers that each provided in excess of 10% of this Segment’s revenues under multiple long-term contracts at several mill sites.  In 2005, there were three customers that each provided in excess of 10% of this Segment’s revenues.  ArcelorMittal was one of those customers in 2007, 2006 and 2005.  The loss of any one of the contracts would not have a material adverse effect upon the Company’s financial position or cash flows; however, it could have a material effect on quarterly or annual results of operations.  Additionally, these customers have significant accounts receivable balances.  Further consolidation in the global steel industry is possible.  Should transactions occur involving some of the Company’s larger steel industry customers, it would result in an increase in concentration of credit risk for the Company.  If a large customer were to experience financial difficulty, or file for bankruptcy protection, it could adversely impact the Company’s income, cash flows, and asset valuations.  As part of its credit risk management practices, the Company closely monitors the credit standing and accounts receivable position of its customer base.

(1)

(viii)

Backlog of manufacturing orders from continuing operations was $448.1 million and $236.5 million as of December 31, 2007 and 2006, respectively.  A significant backlog exists at December 31, 2007 in the Harsco Track Technologies Division as a result of orders received in 2007 from the Chinese Ministry of Railways.  It is expected that approximately 55% of the total backlog at December 31, 2007 will not be filled during 2008.  Exclusive of certain orders received by the Harsco Track Technologies Division such as the order from the Chinese Ministry of Railways, the Company’s backlog is seasonal in nature and tends to follow in the same pattern as sales and net income which is discussed in section (1) (v) above.  Order backlog for scaffolding, shoring and forming services of the Access Services Segment is excluded from the above amounts.  These amounts are generally not quantifiable due to short order lead times for certain services, the nature and timing of the products and services provided and equipment rentals with the ultimate length of the rental period often unknown.  Backlog for roofing granules and slag abrasives is not included in the total backlog because it is generally not quantifiable, due to the short order lead times of the products provided.  Backlog for minerals and recycling technologies is not included in the total backlog amount because it is generally not quantifiable due to short order lead times of the products and services provided.  Contracts for the Mill Services Segment are also excluded from the total backlog.  These contracts have estimated future revenues of $5.0 billion at December 31, 2007.  For additional information regarding backlog, see the Backlog section included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

(1)

(ix)

At December 31, 2007, the Company had no material contracts that were subject to renegotiation of profits or termination at the election of the U.S. Government.

(1)

(x)

The Company encounters active competition in all of its activities from both larger and smaller companies who produce the same or similar products or services, or who produce different products appropriate for the same uses.

(1)

(xi)

The expense for product development activities was $3.2 million, $2.8 million and $2.4 million in 2007, 2006 and 2005, respectively.  For additional information regarding product development activities, see the Research and Development section included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

(1)

(xii)

The Company has become subject, as have others, to stringent air and water quality control legislation.  In general, the Company has not experienced substantial difficulty complying with these environmental regulations in the past, and does not anticipate making any material capital expenditures for environmental control facilities.  While the Company expects that environmental regulations may expand, and that its expenditures for air and water quality control will continue, it cannot predict the effect on its business of such expanded regulations.  For additional information regarding environmental matters see Note 10, Commitments and Contingencies, to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data.”

(1)

(xiii)

As of December 31, 2007, the Company had approximately 21,500 employees.

(d)  Financial Information about Geographic Areas

Financial information concerning foreign and domestic operations is included in Note 14, Information by Segment and Geographic Area, to the Consolidated Financial Statements under Part II, Item 8, “Financial Statements and Supplementary Data.”  Export sales totaled $61.7 million, $99.6 million and $118.8 million in 2007, 2006 and 2005, respectively.

(e)  Available Information

Information is provided in Part I, Item 1 (a), “General Development of Business.”