"I am very pleased with our performance in the fourth quarter,
which led to solid full year results," said Stephen J. Jones, Covanta's President and CEO.
"Record profiled waste and strong markets helped drive our
performance on the waste revenue line, and the team continues to
execute on our other organic growth initiatives, including metal
recovery, which also hit a record in 2016, and Continuous
Improvement. While we expect modest Adjusted EBITDA growth in
2017, the significant progress on the construction of our
Dublin facility, which is
scheduled for commercial operations by the start of the fourth
quarter, coupled with the benefits from our ongoing organic growth
initiatives, position us for stronger results and more meaningful
Free Cash Flow growth in 2018 and beyond."
Full Year 2016
For the twelve months ended
December 31, 2016, total revenue
increased by $54 million to
$1.699 billion from $1.645 billion in 2015. Overall, higher
waste and service revenue more than offset a decline in energy
revenue.
Organic growth drove revenue increases of $51 million as follows:
- Waste and service revenue grew by $35
million, with increases including:
- EfW waste processing of $26
million (2.8%), with price and volume improvements of
$24 million and $2 million, respectively;
- Environmental services revenue of $12
million as a result of increased activity at previously
acquired businesses; and
- Higher municipal services revenue, primarily relating to the
NYC MTS contract and transfer
station volumes;
- Energy revenue decreased by $5
million, resulting from lower production volume at EfW
facilities (primarily related to turbine generator downtime at our
Plymouth facility);
- Recycled metals revenue decreased by $1
million, driven by lower market prices, partially offset by
higher volume; and
- Other revenue increased by $21
million due to higher construction revenue.
Contract transitions increased revenue by $16 million, with increased share of energy
revenue following service fee to tip fee contract transitions
partially offset by the expiration of certain long-term energy
contracts.
Transactions resulted in a decrease of $13 million in revenue year-over-year, with
$52 million in higher waste and
service revenue across business lines more than offset by a
$66 million reduction resulting from
the shut-down of biomass facilities and the sale of assets in
China.
Excluding impairment charges (1), operating
expense increased by $77 million to
$1.570 billion. The year-over-year
increase was primarily due to:
- a $17 million increase in same
store plant maintenance, driven by the timing and scope of
scheduled maintenance;
- a $49 million increase in same
store other plant operating expenses due to higher employee
incentive compensation, same store cost escalation, and higher
expenses relating to the commencement of operations at our
centralized metals processing facility;
- a $14 million increase in same
store other operating expense resulting from increased construction
activities;
- a $9 million increase in same
store general and administrative costs driven primarily by higher
employee incentive compensation; and
- a $7 million increase in
operating expense resulting from contract transitions, namely the
Fairfax EfW facility transition from a service fee to tip fee
contract structure;
- offset by a $22 million decrease
in plant operating expense related to the transactions described
above.
(1) 2016 and 2015 include impairment charges of
$20 million and $43 million, respectively.
Adjusted EBITDA declined by $18
million on a year-over-year basis to $410 million, as year-over-year organic growth,
primarily from improved waste pricing and profiled waste, was more
than offset by increased employee incentive compensation and a
modest headwind from commodity prices. Contract transitions
increased Adjusted EBITDA by $15
million, while transactions resulted in a net negative
$4 million, with the impact of the
China asset sale exceeding the
benefits of the environmental services acquisitions and
NYC MTS contract in the year.
Free Cash Flow increased by $25
million to $172 million,
primarily as a result of a meaningful working capital benefit.
Adjusted EPS decreased by $0.22 to
$(0.15). The decrease was
driven primarily by increased tax expense.
Shareholder Returns
During the quarter, the Company
declared a regular cash dividend of $0.25 per share. In 2016, the Company paid
a total of $131 million in dividends
at its annualized rate of $1.00 per
share.
Fourth Quarter Results
For the three months ended
December 31, 2016 compared to the same period last year:
- Total revenue increased $25
million to $457 million;
- Adjusted EBITDA increased $1
million to $128 million;
- Cash flow provided by operating activities increased
$41 million to $136 million;
- Free Cash Flow increased $44
million to $108 million;
- Diluted EPS decreased $0.50
to $0.08; and
- Adjusted EPS increased $0.05 to
$0.08.
2017 Guidance
The Company established guidance for
2017 for the following key metrics:
(In
millions)
|
Metric
|
2016
Actual
|
2017
Guidance Range
(1)
|
Adjusted
EBITDA
|
$410
|
$400 -
$440
|
Free Cash
Flow
|
$172
|
$100 -
$150
|
|
(1) For
additional information on the reconciliation of Free Cash Flow to
Cash flow provided by operating activities, see Exhibit 5 of this
press release. Guidance as of February 15, 2017.
|
Conference Call Information
Covanta Holding
Corporation (NYSE: CVA) ("Covanta" or the "Company") will host a
conference call at 8:30 AM (Eastern)
on Thursday, February 16, 2017 to
discuss its fourth quarter and full year results.
The conference call will begin with prepared remarks, which will
be followed by a question and answer session. To participate,
please dial 1-877-201-0168 approximately 10 minutes prior to the
scheduled start of the call. If calling outside of
the United States, please dial
1-647-788-4901. Please request the "Covanta Holding
Corporation Earnings Conference Call" when prompted by the
conference call operator. The conference call will also be
webcast live from the Investor Relations section of the Company's
website. A presentation will be made available during the
call and will be found on the Investor Relations section of the
Covanta website at www.covanta.com.
An archived webcast will be available two hours after the end of
the conference call and can be accessed through the Investor
Relations section of the Covanta website at www.covanta.com.
About Covanta
Covanta is a world leader in providing
sustainable waste and energy solutions. Annually, Covanta's
modern Energy-from-Waste facilities safely convert approximately 20
million tons of waste from municipalities and businesses into
clean, renewable electricity to power one million homes and recycle
approximately 500,000 tons of metal. Through a vast network
of treatment and recycling facilities, Covanta also provides
comprehensive industrial material management services to companies
seeking solutions to some of today's most complex environmental
challenges. For more information, visit www.covanta.com.
Cautionary Note Regarding Forward-Looking
Statements
Certain statements in this press release may
constitute "forward-looking" statements as defined in Section 27A
of the Securities Act of 1933 (the "Securities Act"), Section 21E
of the Securities Exchange Act of 1934 (the "Exchange Act"), the
Private Securities Litigation Reform Act of 1995 (the "PSLRA") or
in releases made by the Securities and Exchange Commission ("SEC"),
all as may be amended from time to time. Such forward-looking
statements involve known and unknown risks, uncertainties and other
important factors that could cause the actual results, performance
or achievements of Covanta Holding Corporation and its subsidiaries
("Covanta") or industry results, to differ materially from any
future results, performance or achievements expressed or implied by
such forward-looking statements. Statements that are not
historical fact are forward-looking statements.
Forward-looking statements can be identified by, among other
things, the use of forward-looking language, such as the words
"plan," "believe," "expect," "anticipate," "intend," "estimate,"
"project," "may," "will," "would," "could," "should," "seeks," or
"scheduled to," or other similar words, or the negative of these
terms or other variations of these terms or comparable language, or
by discussion of strategy or intentions. These cautionary
statements are being made pursuant to the Securities Act, the
Exchange Act and the PSLRA with the intention of obtaining the
benefits of the "safe harbor" provisions of such laws.
Covanta cautions investors that any forward-looking statements made
by Covanta are not guarantees or indicative of future
performance. Important factors, risks and uncertainties that
could cause actual results to differ materially from those
forward-looking statements with respect to Covanta include, but are
not limited to: fluctuations in the prices of energy, waste
disposal, scrap metal and commodities; adoption of new laws and
regulations in the United States
and abroad; the fee structures of our contracts; difficulties in
the operation of our facilities, including fuel supply and energy
transfer interruptions, failure to obtain regulatory approvals,
equipment failures, labor disputes and work stoppages, weather
interference and catastrophic events; difficulties in the
financing, development and construction of new projects and
expansions, including increased construction costs and delays;
limits of insurance coverage; our ability to avoid defaults under
our long-term service contracts; performance of third parties under
our contractual arrangements; concentration of suppliers and
customers; increased competitiveness in the energy industry;
changes in foreign currency exchange rates; limitations imposed by
our existing indebtedness; exposure to counterparty credit risk and
instability of financial institutions in connection with financing
transactions; our ability to utilize our net operating losses;
failures of disclosure controls and procedures; general economic
conditions in the United States
and abroad, including the availability of credit and debt financing
and market conditions at the time our contracts expire; and other
risks and uncertainties affecting our businesses described in Item
1A. Risk Factors of our Annual Report on Form 10-K and in other
filings by Covanta with the SEC.
Although Covanta believes that its plans, intentions and
expectations reflected in or suggested by such forward-looking
statements are reasonable, actual results could differ materially
from a projection or assumption in any of its forward-looking
statements. Covanta's future financial condition and results
of operations, as well as any forward-looking statements, are
subject to change and inherent risks and uncertainties. The
forward-looking statements contained in this press release are made
only as of the date hereof and Covanta does not have, or undertake,
any obligation to update or revise any forward-looking statements
whether as a result of new information, subsequent events or
otherwise, unless otherwise required by law.
Exhibit
1
|
Covanta Holding
Corporation
|
Consolidated
Statements of Operations
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(Unaudited)
(In millions, except per share amounts)
|
Operating
revenue
|
|
|
|
|
|
|
|
Waste and service
revenue
|
$
|
312
|
|
|
$
|
299
|
|
|
$
|
1,187
|
|
|
$
|
1,104
|
|
Energy
revenue
|
91
|
|
|
102
|
|
|
370
|
|
|
421
|
|
Recycled metals
revenue
|
17
|
|
|
12
|
|
|
61
|
|
|
61
|
|
Other operating
revenue
|
37
|
|
|
19
|
|
|
81
|
|
|
59
|
|
Total operating
revenue
|
457
|
|
|
432
|
|
|
1,699
|
|
|
1,645
|
|
Operating
expense
|
|
|
|
|
|
|
|
Plant operating
expense
|
276
|
|
|
280
|
|
|
1,177
|
|
|
1,129
|
|
Other operating
expense
|
41
|
|
|
18
|
|
|
86
|
|
|
73
|
|
General and
administrative expense
|
29
|
|
|
22
|
|
|
100
|
|
|
93
|
|
Depreciation and
amortization expense
|
52
|
|
|
50
|
|
|
207
|
|
|
198
|
|
Impairment charges
(a)
|
1
|
|
|
19
|
|
|
20
|
|
|
43
|
|
Total operating
expense
|
399
|
|
|
389
|
|
|
1,590
|
|
|
1,536
|
|
Operating
income
|
58
|
|
|
43
|
|
|
109
|
|
|
109
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
Investment
income
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Interest
expense
|
(35)
|
|
|
(32)
|
|
|
(139)
|
|
|
(134)
|
|
Gain on asset sales
(a)
|
1
|
|
|
—
|
|
|
44
|
|
|
—
|
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
Other expense,
net
|
—
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
Total other
expense
|
(34)
|
|
|
(32)
|
|
|
(95)
|
|
|
(137)
|
|
Income (loss)
before income tax benefit (expense) and equity in net income from
unconsolidated investments
|
24
|
|
|
11
|
|
|
14
|
|
|
(28)
|
|
Income tax (expense)
benefit
|
(14)
|
|
|
65
|
|
|
(19)
|
|
|
84
|
|
Equity in net income
from unconsolidated investments
|
1
|
|
|
2
|
|
|
4
|
|
|
13
|
|
Net Income
(Loss)
|
11
|
|
|
78
|
|
|
(1)
|
|
|
69
|
|
Less: Net income
attributable to noncontrolling interests in subsidiaries
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Net Income
(Loss) Attributable to Covanta Holding
Corporation
|
$
|
11
|
|
|
$
|
77
|
|
|
$
|
(1)
|
|
|
$
|
68
|
|
|
|
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding:
|
|
|
|
|
|
|
|
Basic
|
129
|
|
|
131
|
|
|
129
|
|
|
132
|
|
Diluted
|
131
|
|
|
133
|
|
|
129
|
|
|
133
|
|
|
|
|
|
|
|
|
|
Earnings Per
Share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.10
|
|
|
$
|
0.59
|
|
|
$
|
(0.01)
|
|
|
$
|
0.52
|
|
Diluted
|
$
|
0.08
|
|
|
$
|
0.58
|
|
|
$
|
(0.01)
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
Cash Dividend
Declared Per Share
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
|
|
|
|
|
|
|
(a) For additional
information, see Exhibit 4 of this Press Release.
|
Exhibit
2
|
Covanta Holding
Corporation
|
Consolidated
Balance Sheets
|
|
|
As of December
31,
|
|
2016
|
|
2015
|
|
(Unaudited)
|
ASSETS
|
(In millions, except per share amounts)
|
Current:
|
|
|
|
Cash and cash
equivalents
|
$
|
84
|
|
|
$
|
94
|
|
Restricted funds held
in trust
|
56
|
|
|
77
|
|
Receivables (less
allowances of $9 million and $7 million, respectively)
|
332
|
|
|
312
|
|
Prepaid expenses and
other current assets
|
72
|
|
|
117
|
|
Assets held for
sale
|
—
|
|
|
97
|
|
Total Current
Assets
|
544
|
|
|
697
|
|
Property, plant and
equipment, net
|
3,024
|
|
|
2,690
|
|
Restricted funds held
in trust
|
54
|
|
|
83
|
|
Waste, service and
energy contract intangibles, net
|
263
|
|
|
284
|
|
Other intangible
assets, net
|
34
|
|
|
38
|
|
Goodwill
|
302
|
|
|
301
|
|
Other
assets
|
63
|
|
|
141
|
|
Total
Assets
|
$
|
4,284
|
|
|
$
|
4,234
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current:
|
|
|
|
Current portion of
long-term debt
|
$
|
9
|
|
|
$
|
8
|
|
Current portion of
project debt
|
22
|
|
|
16
|
|
Accounts
payable
|
98
|
|
|
90
|
|
Accrued expenses and
other current liabilities
|
289
|
|
|
234
|
|
Liabilities held for
sale
|
—
|
|
|
23
|
|
Total Current
Liabilities
|
418
|
|
|
371
|
|
Long-term
debt
|
2,243
|
|
|
2,255
|
|
Project
debt
|
361
|
|
|
182
|
|
Deferred income
taxes
|
615
|
|
|
595
|
|
Waste, service and
other contract intangibles, net
|
7
|
|
|
13
|
|
Other
liabilities
|
168
|
|
|
178
|
|
Total
Liabilities
|
3,812
|
|
|
3,594
|
|
Equity:
|
|
|
|
Covanta Holding
Corporation stockholders' equity:
|
|
|
|
Preferred stock
($0.10 par value; authorized 10 shares; none issued and
outstanding)
|
—
|
|
|
—
|
|
Common stock ($0.10
par value; authorized 250 shares; issued 136 shares, outstanding
130 and 131, respectively)
|
14
|
|
|
14
|
|
Additional paid-in
capital
|
807
|
|
|
801
|
|
Accumulated other
comprehensive loss
|
(62)
|
|
|
(34)
|
|
Accumulated
deficit
|
(286)
|
|
|
(143)
|
|
Treasury stock, at
par
|
(1)
|
|
|
—
|
|
Total Covanta Holding
Corporation stockholders' equity
|
472
|
|
|
638
|
|
Noncontrolling
interests in subsidiaries
|
—
|
|
|
2
|
|
Total
Equity
|
472
|
|
|
640
|
|
Total Liabilities
and Equity
|
$
|
4,284
|
|
|
$
|
4,234
|
|
|
|
|
|
Exhibit
3
|
Covanta Holding
Corporation
|
Consolidated
Statements of Cash Flow
|
|
|
Twelve Months
Ended December 31,
|
|
2016
|
|
2015
|
|
(Unaudited, in millions)
|
OPERATING
ACTIVITIES:
|
|
|
|
Net
(loss) income
|
$
|
(1)
|
|
|
$
|
69
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization expense
|
207
|
|
|
198
|
|
Impairment charges
(a)
|
20
|
|
|
43
|
|
Gain on asset sales
(a)
|
(44)
|
|
|
—
|
|
Loss on
extinguishment of debt
|
—
|
|
|
2
|
|
Stock-based
compensation expense
|
16
|
|
|
18
|
|
Deferred income
taxes
|
18
|
|
|
(11)
|
|
IRS audit
settlement
|
—
|
|
|
(93)
|
|
Other, net
|
1
|
|
|
17
|
|
Change in restricted
funds held in trust
|
22
|
|
|
28
|
|
Change in working
capital, net of effects of acquisitions
|
43
|
|
|
(22)
|
|
Net cash provided by
operating activities
|
282
|
|
|
249
|
|
INVESTING
ACTIVITIES:
|
|
|
|
Proceeds from asset
sales
|
109
|
|
|
—
|
|
Purchase of property,
plant and equipment
|
(359)
|
|
|
(376)
|
|
Acquisition of
business, net of cash acquired
|
(9)
|
|
|
(72)
|
|
Property insurance
proceeds
|
3
|
|
|
1
|
|
Other, net
|
2
|
|
|
(1)
|
|
Net cash used in
investing activities
|
(254)
|
|
|
(448)
|
|
FINANCING
ACTIVITIES:
|
|
|
|
Proceeds from
borrowings on long-term debt
|
—
|
|
|
294
|
|
Proceeds from
borrowings on revolving credit facility
|
744
|
|
|
895
|
|
Proceeds from
equipment financing capital leases
|
—
|
|
|
15
|
|
Proceeds from
borrowings on project debt
|
—
|
|
|
59
|
|
Proceeds from Dublin
financing
|
159
|
|
|
86
|
|
Payments on long-term
debt
|
(4)
|
|
|
(196)
|
|
Payments of
borrowings on revolving credit facility
|
(749)
|
|
|
(692)
|
|
Payments of equipment
financing capital leases
|
(4)
|
|
|
(4)
|
|
Payments on project
debt
|
(51)
|
|
|
(85)
|
|
Payments of deferred
financing costs
|
(6)
|
|
|
(11)
|
|
Cash dividends paid
to stockholders
|
(131)
|
|
|
(133)
|
|
Change in restricted
funds held in trust
|
28
|
|
|
5
|
|
Common stock
repurchased
|
(20)
|
|
|
(30)
|
|
Other, net
|
(6)
|
|
|
5
|
|
Net cash (used in)
provided by financing activities
|
(40)
|
|
|
208
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
—
|
|
|
(4)
|
|
Net (decrease)
increase in cash and cash equivalents
|
(12)
|
|
|
5
|
|
Cash and cash
equivalents at beginning of period
|
96
|
|
|
91
|
|
Cash and cash
equivalents at end of period
|
84
|
|
|
96
|
|
Less: Cash and cash
equivalents of assets held for sale at end of period
|
—
|
|
|
2
|
|
Cash and cash
equivalents of continuing operations at end of period
|
$
|
84
|
|
|
$
|
94
|
|
|
|
|
|
(a) For additional
information, see Exhibit 4 of this Press Release
|
|
|
|
|
Exhibit
4
|
Covanta Holding
Corporation
|
Consolidated
Reconciliation of Net Income and Net Cash Provided by Operating
Activities to Adjusted EBITDA
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(Unaudited, in millions)
|
Net Income
(Loss) Attributable to Covanta Holding
Corporation
|
$
|
11
|
|
|
$
|
77
|
|
|
$
|
(1)
|
|
|
$
|
68
|
|
Depreciation and
amortization expense
|
52
|
|
|
50
|
|
|
207
|
|
|
198
|
|
Interest expense,
net
|
35
|
|
|
32
|
|
|
138
|
|
|
134
|
|
Income
tax expense (benefit)
|
14
|
|
|
(65)
|
|
|
19
|
|
|
(84)
|
|
Impairment charges
(a)
|
1
|
|
|
19
|
|
|
20
|
|
|
43
|
|
Gain on asset sales
(b)
|
(1)
|
|
|
—
|
|
|
(44)
|
|
|
—
|
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Net income
attributable to noncontrolling interests in subsidiaries
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Other
adjustments:
|
|
|
|
|
|
|
|
Capital type
expenditures at service fee operated facilities
(c)
|
10
|
|
|
6
|
|
|
39
|
|
|
31
|
|
Debt service billings
in excess of revenue recognized
|
1
|
|
|
—
|
|
|
4
|
|
|
1
|
|
Severance and
reorganization costs
|
—
|
|
|
1
|
|
|
3
|
|
|
4
|
|
Non-cash compensation
expense (d)
|
3
|
|
|
3
|
|
|
16
|
|
|
18
|
|
Other non-cash
items
|
1
|
|
|
—
|
|
|
6
|
|
|
6
|
|
Other
(e)
|
1
|
|
|
3
|
|
|
3
|
|
|
6
|
|
Adjusted
EBITDA
|
$
|
128
|
|
|
$
|
127
|
|
|
$
|
410
|
|
|
$
|
428
|
|
Cash paid for
interest, net of capitalized interest
|
(44)
|
|
|
(48)
|
|
|
(135)
|
|
|
(131)
|
|
Cash paid for taxes,
net
|
1
|
|
|
4
|
|
|
(6)
|
|
|
(2)
|
|
Capital type
expenditures at service fee operated facilities
(c)
|
(10)
|
|
|
(6)
|
|
|
(39)
|
|
|
(31)
|
|
Adjustment for
working capital and other
|
61
|
|
|
18
|
|
|
52
|
|
|
(15)
|
|
Net cash provided
by operating activities
|
$
|
136
|
|
|
$
|
95
|
|
|
$
|
282
|
|
|
$
|
249
|
|
|
|
|
|
|
|
|
|
(a)
During the twelve months ended December 31, 2016, we recorded
non-cash impairment charges totaling $20 million, of which $13
million
related to
the planned closure of our Pittsfield EfW facility in March 2017
which is now expected to continue operating and $3 million related
to an investment in a joint venture to
recover and
recycle metals.
During
the three and twelve months ended December 31, 2015, we recorded
non-cash impairments of our biomass facility assets of
$19 million
and $43 million respectively.
|
(b)
During the twelve months ended December 31, 2016, we recorded a $41
million gain on the sale of our interests in China.
|
(c)
Adjustment for impact of adoption of FASB ASC 853 - Service
Concession Arrangements. These types of expenditures at
our service
fee operated
facilities were historically capitalized prior to adoption of this
new accounting standard effective January 1, 2015.
|
(d) The
twelve months ended December 31, 2015 includes $4 million of costs
incurred in connection with separation agreements related
to
the departure
of two executive officers.
|
(e)
Includes certain other items that are added back under the
definition of Adjusted EBITDA in Covanta Energy, LLC's credit
agreement.
|
Exhibit
5
|
Covanta Holding
Corporation
|
Reconciliation of
Cash Flow Provided by Operating Activities to Free Cash
Flow
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
Full
Year
Estimated 2017
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(Unaudited, in millions)
|
|
|
Cash flow provided by
operating activities
|
$
|
136
|
|
|
$
|
95
|
|
|
$
|
282
|
|
|
$
|
249
|
|
|
$210 -
$270
|
Less: Maintenance
capital expenditures (a)
|
(28)
|
|
|
(31)
|
|
|
(110)
|
|
|
(102)
|
|
|
(110) -
(120)
|
Free Cash
Flow
|
$
|
108
|
|
|
$
|
64
|
|
|
$
|
172
|
|
|
$
|
147
|
|
|
$100 -
$150
|
|
|
|
|
|
|
|
|
|
|
Uses of Free Cash
Flow
|
|
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
Growth investments
(b)
|
$
|
(44)
|
|
|
$
|
(80)
|
|
|
$
|
(253)
|
|
|
$
|
(346)
|
|
|
|
Other investing
activities, net
|
(4)
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
|
Total
investments
|
$
|
(48)
|
|
|
$
|
(80)
|
|
|
$
|
(249)
|
|
|
$
|
(346)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of capital to
stockholders:
|
|
|
|
|
|
|
|
|
|
Cash dividends paid
to stockholders
|
$
|
(33)
|
|
|
$
|
(33)
|
|
|
$
|
(131)
|
|
|
$
|
(133)
|
|
|
|
Common stock
repurchased
|
—
|
|
|
(30)
|
|
|
(20)
|
|
|
(30)
|
|
|
|
Total return of
capital to stockholders
|
$
|
(33)
|
|
|
$
|
(63)
|
|
|
$
|
(151)
|
|
|
$
|
(163)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital raising
activities:
|
|
|
|
|
|
|
|
|
|
Net proceeds from
issuance of corporate debt (c)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
98
|
|
|
|
Net proceeds from
issuance of project debt (d)
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
|
Proceeds from Dublin
financing
|
20
|
|
|
—
|
|
|
159
|
|
|
85
|
|
|
|
Proceeds from
equipment financing capital leases (e)
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
|
Change in restricted
funds held in trust
|
12
|
|
|
64
|
|
|
29
|
|
|
—
|
|
|
|
Other financing
activities, net
|
(6)
|
|
|
5
|
|
|
(6)
|
|
|
5
|
|
|
|
Deferred financing
costs
|
(1)
|
|
|
(2)
|
|
|
(6)
|
|
|
(7)
|
|
|
|
Proceeds from sale of
China assets
|
—
|
|
|
—
|
|
|
105
|
|
|
—
|
|
|
|
Net proceeds from
capital raising activities
|
$
|
25
|
|
|
$
|
67
|
|
|
$
|
281
|
|
|
$
|
211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
repayments:
|
|
|
|
|
|
|
|
|
|
Net cash used for
scheduled principal payments on corporate debt
|
$
|
(2)
|
|
|
$
|
—
|
|
|
$
|
(4)
|
|
|
$
|
(1)
|
|
|
|
Net cash used for
principal payments on project debt (f)
|
(37)
|
|
|
(19)
|
|
|
(52)
|
|
|
(38)
|
|
|
|
Payments of equipment
financing capital leases (e)
|
(1)
|
|
|
(1)
|
|
|
(4)
|
|
|
(4)
|
|
|
|
Total debt
repayments
|
$
|
(40)
|
|
|
$
|
(20)
|
|
|
$
|
(60)
|
|
|
$
|
(43)
|
|
|
|
Borrowing
activities - Revolving credit facility, net
|
$
|
(40)
|
|
|
$
|
57
|
|
|
$
|
(5)
|
|
|
$
|
203
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
$
|
(1)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(4)
|
|
|
|
Net change in cash
and cash equivalents
|
$
|
(29)
|
|
|
$
|
25
|
|
|
$
|
(12)
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Purchases of property, plant and
equipment are also referred to as capital expenditures.
Capital expenditures
that primarily maintain
existing facilities are classified as maintenance capital
expenditures. The following table
provides the components of
total purchases of property, plant and equipment:
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
Maintenance capital
expenditures
|
$
|
(28)
|
|
|
$
|
(31)
|
|
|
$
|
(110)
|
|
|
$
|
(102)
|
|
|
|
Capital expenditures
associated with construction of Dublin EfW facility
|
(30)
|
|
|
(61)
|
|
|
(162)
|
|
|
(184)
|
|
|
|
Capital expenditures
associated with organic growth initiatives
|
(8)
|
|
|
(7)
|
|
|
(46)
|
|
|
(34)
|
|
|
|
Capital expenditures
associated with the New York City MTS contract
|
—
|
|
|
(2)
|
|
|
(3)
|
|
|
(30)
|
|
|
|
Capital expenditures
associated with Essex County EfW emissions control
system
|
(6)
|
|
|
(8)
|
|
|
(33)
|
|
|
(26)
|
|
|
|
Total capital
expenditures associated with growth investments
|
(44)
|
|
|
(78)
|
|
|
(244)
|
|
|
(274)
|
|
|
|
Capital expenditures
associated with property insurance events
|
(5)
|
|
|
—
|
|
|
(5)
|
|
|
—
|
|
|
|
Total purchases of
property, plant and equipment
|
$
|
(77)
|
|
|
$
|
(109)
|
|
|
$
|
(359)
|
|
|
$
|
(376)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Growth
investments include investments in growth opportunities, including
organic growth initiatives,
technology, business
development, and other similar expenditures
|
|
|
|
|
|
Capital expenditures
associated with growth investments
|
$
|
(44)
|
|
|
$
|
(78)
|
|
|
$
|
(244)
|
|
|
$
|
(274)
|
|
|
|
Acquisition of
business, net of cash acquired
|
—
|
|
|
(2)
|
|
|
(9)
|
|
|
(72)
|
|
|
|
Total growth
investments
|
$
|
(44)
|
|
|
$
|
(80)
|
|
|
$
|
(253)
|
|
|
$
|
(346)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) Excludes borrowings under Revolving
Credit Facility. Calculated as follows:
|
|
|
Proceeds from
borrowings on long-term debt
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
294
|
|
|
|
Refinanced long-term
debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(195)
|
|
|
|
Less: Financing costs
related to issuance of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
|
Net proceeds from
issuance of corporate debt
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) Calculated as
follows:
|
|
|
Proceeds from
borrowings on project debt
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
59
|
|
|
|
Refinanced project
debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(42)
|
|
|
|
Less: Financing costs
related to the issuance of project debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
|
Net proceeds from
issuance of project debt
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e) During
the twelve months ended December 31, 2015, we financed $15
million for transportation equipment
related to our contract with
New York City
|
|
|
|
|
|
|
|
|
|
|
|
|
(f) Calculated
as follows:
|
|
|
|
|
|
|
|
|
|
Total principal
payments on project debt
|
$
|
(34)
|
|
|
$
|
(22)
|
|
|
$
|
(51)
|
|
|
$
|
(43)
|
|
|
|
Change in related
restricted funds held in trust
|
(3)
|
|
|
3
|
|
|
(1)
|
|
|
5
|
|
|
|
Net cash used for
principal payments on project debt
|
$
|
(37)
|
|
|
$
|
(19)
|
|
|
$
|
(52)
|
|
|
$
|
(38)
|
|
|
|
Exhibit
6
|
Covanta Holding
Corporation
|
Reconciliation of
Diluted Earnings Per Share to Adjusted EPS
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(Unaudited)
|
Diluted Earnings Per
Share
|
$
|
0.08
|
|
|
$
|
0.58
|
|
|
$
|
(0.01)
|
|
|
$
|
0.51
|
|
Reconciling Items
(a)
|
—
|
|
|
(0.55)
|
|
|
(0.14)
|
|
|
(0.44)
|
|
Adjusted
EPS
|
$
|
0.08
|
|
|
$
|
0.03
|
|
|
$
|
(0.15)
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
(a) For details
related to the Reconciling Items, see Exhibit 6A of this Press
Release.
|
|
|
Exhibit
6A
|
Covanta Holding
Corporation
|
Reconciling
Items
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(Unaudited)
(In millions, except per share amounts)
|
Reconciling
Items
|
|
|
|
|
|
|
|
Impairment charges
(a)
|
$
|
1
|
|
|
$
|
19
|
|
|
$
|
20
|
|
|
$
|
43
|
|
Gain on asset sales
(a)
|
(1)
|
|
|
—
|
|
|
(44)
|
|
|
—
|
|
Severance and
reorganization costs (b)
|
—
|
|
|
—
|
|
|
2
|
|
|
7
|
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Effect on income of
derivative instruments not designated as hedging
instruments
|
—
|
|
|
(3)
|
|
|
2
|
|
|
(6)
|
|
Effect of foreign
exchange loss on indebtedness
|
—
|
|
|
1
|
|
|
(1)
|
|
|
3
|
|
Other
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Total Reconciling
Items, pre-tax
|
—
|
|
|
18
|
|
|
(21)
|
|
|
50
|
|
Pro forma income tax
impact (c)
|
—
|
|
|
(2)
|
|
|
2
|
|
|
(20)
|
|
Impact of IRS audit
settlement
|
—
|
|
|
(93)
|
|
|
—
|
|
|
(93)
|
|
Tax liability related
to expected gain on sale of China assets
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
Grantor trust
activity
|
—
|
|
|
(1)
|
|
|
1
|
|
|
—
|
|
Total Reconciling
Items, net of tax
|
$
|
—
|
|
|
$
|
(74)
|
|
|
$
|
(18)
|
|
|
$
|
(59)
|
|
Diluted Earnings
Per Share Impact
|
$
|
—
|
|
|
$
|
(0.55)
|
|
|
$
|
(0.14)
|
|
|
$
|
(0.44)
|
|
Weighted Average
Diluted Shares Outstanding
|
131
|
|
|
133
|
|
|
129
|
|
|
133
|
|
|
|
|
|
|
|
|
|
(a) For additional
information, see Exhibit 4 of this Press Release.
|
(b) The twelve months
ended December 31, 2015, includes $6 million of costs incurred in
connection with separation
agreements related to the departure
of two executive officers, of which $4 million related to non-cash
compensation.
|
(c) We calculate the
federal and state tax impact of each item using the statutory
federal tax rate and applicable blended state rate.
|
Covanta Holding
Corporation
|
|
|
Exhibit
7
|
Supplemental
Information
|
|
|
|
(Unaudited, $ in
millions)
|
|
|
|
|
Twelve Months
Ended December 31,
|
|
2016
|
|
2015
|
Revenue:
|
|
|
|
Waste and service:
(a)
|
|
|
|
EfW waste
processing
|
$
|
962
|
|
|
$
|
929
|
|
Environmental
services(b)
|
99
|
|
|
56
|
|
Municipal services
(c)
|
186
|
|
|
159
|
|
Other revenue
(d)
|
36
|
|
|
38
|
|
Intercompany
(e)
|
(96)
|
|
|
(78)
|
|
Total waste and
service
|
1,187
|
|
|
1,104
|
|
Energy:
|
|
|
|
EfW energy
sales
|
321
|
|
|
308
|
|
EfW
capacity
|
40
|
|
|
38
|
|
Other revenue
(f)
|
9
|
|
|
75
|
|
Total energy
revenue
|
370
|
|
|
421
|
|
Recycled
metals:
|
|
|
|
Ferrous
|
38
|
|
|
38
|
|
Non-ferrous
|
23
|
|
|
23
|
|
Total recycled
metals
|
61
|
|
|
61
|
|
Other
revenue
|
81
|
|
|
59
|
|
Total
revenue
|
$
|
1,699
|
|
|
$
|
1,645
|
|
|
|
|
|
Operating
expense:
|
|
|
|
Plant operating
expense:
|
|
|
|
Plant
maintenance
|
$
|
279
|
|
|
$
|
270
|
|
Other plant operating
expense
|
898
|
|
|
859
|
|
Total plant operating
expense
|
1,177
|
|
|
1,129
|
|
Other operating
expense
|
86
|
|
|
73
|
|
General and
administrative
|
100
|
|
|
93
|
|
Depreciation and
amortization
|
207
|
|
|
198
|
|
Impairment
charges
|
20
|
|
|
43
|
|
Total operating
expense
|
$
|
1,590
|
|
|
$
|
1,536
|
|
|
|
|
|
Operating
Income
|
$
|
109
|
|
|
$
|
109
|
|
|
|
|
|
Operating
Income excluding Impairment charges:
|
$
|
129
|
|
|
$
|
152
|
|
|
|
|
|
(a) For Waste and
service revenue detail by quarter for 2016 and 2015, see Exhibit 10
of this Press Release.
|
(b) Includes the
operation of material processing facilities and related
services.
|
(c) Consists of
transfer stations and transportation component of NYC MTS
contract.
|
(d) Includes waste
brokerage, debt service and other revenue unrelated to EfW waste
processing.
|
(e) Consists of
elimination of intercompany transactions primarily relating to
transfer stations.
|
(f) Includes biomass
and China operations.
|
Note: Certain amounts
may not total due to rounding.
|
Covanta Holding
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
8
|
Revenue and
Operating Income Changes - FY 2015 to FY 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited, $ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic Growth
(a)
|
|
Contract
Transitions (b)
|
|
|
|
|
|
|
|
FY
2015
|
|
Price
|
|
%
|
|
Volume
|
|
%
|
|
Total
|
|
%
|
|
Waste
|
|
PPA
|
|
Trans-
actions (c)
|
|
Total
Changes
|
|
FY
2016
|
Waste and
service:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EfW waste
processing
|
$
|
929
|
|
|
$
|
24
|
|
|
2.5
|
%
|
|
$
|
2
|
|
|
0.2
|
%
|
|
$
|
26
|
|
|
2.8
|
%
|
|
$
|
(2)
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
33
|
|
|
$
|
962
|
|
Environmental
services
|
56
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
43
|
|
|
99
|
|
Municipal
services
|
159
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
27
|
|
|
186
|
|
Other
revenue
|
38
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
(3)
|
|
|
—
|
|
|
(2)
|
|
|
(2)
|
|
|
36
|
|
Intercompany
|
(78)
|
|
|
|
|
|
|
|
|
|
|
(12)
|
|
|
|
|
—
|
|
|
—
|
|
|
(6)
|
|
|
(18)
|
|
|
(96)
|
|
Total waste and
service
|
1,104
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
3.2
|
%
|
|
(5)
|
|
|
—
|
|
|
52
|
|
|
83
|
|
|
1,187
|
|
Energy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EfW energy
sales
|
308
|
|
|
—
|
|
|
—
|
%
|
|
(5)
|
|
|
-1.6
|
%
|
|
(5)
|
|
|
-1.6
|
%
|
|
24
|
|
|
(4)
|
|
|
(1)
|
|
|
13
|
|
|
321
|
|
EfW
capacity
|
38
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
3.7
|
%
|
|
2
|
|
|
(1)
|
|
|
—
|
|
|
2
|
|
|
40
|
|
Other
revenue
|
75
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
|
|
—
|
|
|
—
|
|
|
(65)
|
|
|
(66)
|
|
|
9
|
|
Total energy
revenue
|
421
|
|
|
|
|
|
|
|
|
|
|
(5)
|
|
|
-1.2
|
%
|
|
26
|
|
|
(6)
|
|
|
(66)
|
|
|
(51)
|
|
|
370
|
|
Recycled
metals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ferrous
|
38
|
|
|
(1)
|
|
|
-2.8
|
%
|
|
1
|
|
|
1.5
|
%
|
|
—
|
|
|
-1.2
|
%
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38
|
|
Non-ferrous
|
23
|
|
|
(3)
|
|
|
-12.4
|
%
|
|
3
|
|
|
11.0
|
%
|
|
—
|
|
|
-1.5
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
Total recycled
metals
|
61
|
|
|
(4)
|
|
|
-6.4
|
%
|
|
3
|
|
|
5.1
|
%
|
|
(1)
|
|
|
-1.3
|
%
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
61
|
|
Other
revenue
|
59
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
36.0
|
%
|
|
—
|
|
|
—
|
|
|
1
|
|
|
22
|
|
|
81
|
|
Total
revenue
|
$
|
1,645
|
|
|
|
|
|
|
|
|
|
|
$
|
51
|
|
|
3.1
|
%
|
|
$
|
22
|
|
|
$
|
(6)
|
|
|
$
|
(13)
|
|
|
$
|
54
|
|
|
$1,699
|
|
Operating
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant operating
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant
maintenance
|
$
|
270
|
|
|
|
|
|
|
|
|
|
|
$
|
17
|
|
|
6.2
|
%
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(8)
|
|
|
$
|
9
|
|
|
$
|
279
|
|
Other plant operating
expense
|
859
|
|
|
|
|
|
|
|
|
|
|
49
|
|
|
5.7
|
%
|
|
4
|
|
|
—
|
|
|
(14)
|
|
|
39
|
|
|
898
|
|
Total plant
operating expense
|
1,129
|
|
|
|
|
|
|
|
|
|
|
66
|
|
|
5.8
|
%
|
|
4
|
|
|
—
|
|
|
(22)
|
|
|
48
|
|
|
1,177
|
|
Other operating
expense
|
73
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
13
|
|
|
86
|
|
General and
administrative
|
93
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
7
|
|
|
100
|
|
Depreciation and
amortization
|
198
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
3
|
|
|
—
|
|
|
2
|
|
|
9
|
|
|
207
|
|
Total operating
expense
|
$
|
1,493
|
|
|
|
|
|
|
|
|
|
|
$
|
92
|
|
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
(22)
|
|
|
$
|
77
|
|
|
$
|
1,570
|
|
Operating Income
(Loss)
|
$
|
152
|
|
|
|
|
|
|
|
|
|
|
$
|
(41)
|
|
|
|
|
$
|
15
|
|
|
$
|
(6)
|
|
|
$
|
9
|
|
|
$
|
(23)
|
|
|
$
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Reflects
performance on a comparable period-over-period basis, excluding the
impacts of transitions and transactions.
|
(b) Includes the
impact of the expiration of: (1) long-term major waste and service
contracts, most typically representing the transition to a new
contract structure, and (2) long-term energy contracts.
|
(c) Includes the
impacts of acquisitions, divestitures, new projects and the
addition or loss of operating contracts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Excludes
impairment charges. Certain amounts may not total due to
rounding.
|
North
America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit 9
|
Operating Metrics
(Unaudited) - Summary of 2015 and 2016 by Quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve
Months
Ended
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
Mar.
31,
|
|
June
30,
|
|
Sept.
30,
|
|
Dec.
31,
|
|
Dec.
31,
|
|
Mar.
31,
|
|
June
30,
|
|
Sept.
30,
|
|
Dec.
31,
|
|
Dec.
31,
|
|
2015
|
|
2015
|
|
2015
|
|
2015
|
|
2015
|
|
2016
|
|
2016
|
|
2016
|
2016
|
|
2016
|
EfW
Waste
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons: (in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracted
|
3.9
|
|
4.4
|
|
4.4
|
|
4.5
|
|
17.2
|
|
4.1
|
|
4.4
|
|
4.6
|
|
4.3
|
|
17.4
|
Uncontracted
|
0.7
|
|
0.5
|
|
0.5
|
|
0.5
|
|
2.2
|
|
0.6
|
|
0.5
|
|
0.5
|
|
0.6
|
|
2.2
|
Total tons
|
4.6
|
|
4.9
|
|
4.9
|
|
5.0
|
|
19.4
|
|
4.6
|
|
4.9
|
|
5.1
|
|
4.9
|
|
19.5
|
Revenue per
ton:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracted
|
$46.65
|
|
$44.72
|
|
$44.57
|
|
$46.56
|
|
$45.60
|
|
$46.75
|
|
$45.87
|
|
$44.21
|
|
$49.24
|
|
$46.48
|
Uncontracted
|
$56.20
|
|
$70.10
|
|
$69.21
|
|
$69.29
|
|
$65.26
|
|
$64.61
|
|
$74.94
|
|
$76.76
|
|
$71.41
|
|
$71.63
|
Average revenue per
ton
|
$48.11
|
|
$47.29
|
|
$47.01
|
|
$48.91
|
|
$47.83
|
|
$48.97
|
|
$48.71
|
|
$47.45
|
|
$51.94
|
|
$49.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EfW
Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy sales: (MWh in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracted
|
0.7
|
|
0.8
|
|
0.8
|
|
0.8
|
|
3.0
|
|
0.7
|
|
0.9
|
|
0.8
|
|
0.7
|
|
3.1
|
Hedged
|
0.4
|
|
0.3
|
|
0.3
|
|
0.3
|
|
1.4
|
|
0.4
|
|
0.4
|
|
0.5
|
|
0.6
|
|
1.9
|
Market
|
0.3
|
|
0.4
|
|
0.4
|
|
0.4
|
|
1.4
|
|
0.2
|
|
0.2
|
|
0.2
|
|
0.3
|
|
1.0
|
Total energy
sales
|
1.4
|
|
1.4
|
|
1.5
|
|
1.5
|
|
5.8
|
|
1.4
|
|
1.5
|
|
1.5
|
|
1.6
|
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market sales by
geography:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PJM East
|
—
|
|
0.1
|
|
0.1
|
|
0.2
|
|
0.5
|
|
0.1
|
|
0.1
|
|
0.1
|
|
0.1
|
|
0.3
|
NEPOOL
|
0.1
|
|
0.1
|
|
0.1
|
|
0.1
|
|
0.3
|
|
—
|
|
0.1
|
|
0.1
|
|
0.1
|
|
0.2
|
NYISO
|
—
|
|
—
|
|
—
|
|
—
|
|
0.1
|
|
—
|
|
—
|
|
—
|
|
—
|
|
0.1
|
Other
|
0.1
|
|
0.1
|
|
0.1
|
|
0.1
|
|
0.4
|
|
0.1
|
|
0.1
|
|
0.1
|
|
0.1
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue per MWh
(excludes capacity):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracted
|
$67.21
|
|
$63.69
|
|
$63.69
|
|
$67.70
|
|
$65.56
|
|
$67.65
|
|
$62.06
|
|
$65.82
|
|
$69.23
|
|
$65.98
|
Hedged
|
$53.20
|
|
$42.07
|
|
$44.05
|
|
$42.75
|
|
$45.64
|
|
$62.64
|
|
$37.19
|
|
$37.98
|
|
$36.64
|
|
$42.77
|
Market
|
$47.12
|
|
$31.43
|
|
$30.86
|
|
$27.07
|
|
$33.18
|
|
$27.91
|
|
$26.02
|
|
$37.32
|
|
$34.44
|
|
$31.35
|
Average revenue per
MWh
|
$59.54
|
|
$50.81
|
|
$50.78
|
|
$52.09
|
|
$53.17
|
|
$59.30
|
|
$49.25
|
|
$52.63
|
|
$50.33
|
|
$52.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons Recovered: (in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ferrous
|
74
|
|
87
|
|
93
|
|
99
|
|
353
|
|
95
|
|
102
|
|
101
|
|
103
|
|
401
|
Non-ferrous
|
7
|
|
8
|
|
9
|
|
8
|
|
32
|
|
8
|
|
9
|
|
10
|
|
9
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons Sold: (in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ferrous
|
76
|
|
85
|
|
90
|
|
79
|
|
330
|
|
86
|
|
77
|
|
72
|
|
110
|
|
345
|
Non-ferrous
|
7
|
|
8
|
|
9
|
|
8
|
|
32
|
|
8
|
|
9
|
|
10
|
|
9
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue per
ton:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ferrous
|
$139
|
|
$127
|
|
$113
|
|
$86
|
|
$116
|
|
$91
|
|
$138
|
|
$117
|
|
$105
|
|
$111
|
Non-ferrous
|
$799
|
|
$741
|
|
$716
|
|
$639
|
|
$721
|
|
$624
|
|
$650
|
|
$581
|
|
$675
|
|
$632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EfW plant
operating expense ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant operating
expense - gross
|
$
|
246
|
|
$
|
248
|
|
$
|
211
|
|
$
|
224
|
|
$
|
929
|
|
$
|
257
|
|
$
|
255
|
|
$
|
217
|
|
$
|
225
|
|
$
|
953
|
Less: Client
pass-through costs
|
(12)
|
|
(11)
|
|
(14)
|
|
(16)
|
|
(53)
|
|
(10)
|
|
(9)
|
|
(9)
|
|
(13)
|
|
(41)
|
Less: REC sales -
contra-expense
|
(1)
|
|
(1)
|
|
(3)
|
|
(3)
|
|
(8)
|
|
(3)
|
|
(1)
|
|
(2)
|
|
(3)
|
|
(9)
|
Plant operating
expense - reported
|
$
|
233
|
|
$
|
236
|
|
$
|
194
|
|
$
|
205
|
|
$
|
868
|
|
$
|
244
|
|
$
|
245
|
|
$
|
205
|
|
$
|
210
|
|
$
|
904
|
Client pass-throughs
as % of gross costs
|
4.9%
|
|
4.4%
|
|
6.5%
|
|
7.3%
|
|
5.7%
|
|
3.8%
|
|
3.6%
|
|
4.3%
|
|
5.6%
|
|
4.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Waste volume
includes solid tons only. Metals and energy volume are
presented net of client revenue sharing. Steam sales are
converted to MWh equivalent at an assumed average rate of 11 klbs
of steam / MWh. Uncontracted energy sales include sales under
PPAs that are based on market prices.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Certain amounts
may not total due to rounding.
|
Covanta Holding
Corporation
|
|
|
|
|
|
|
|
|
|
Exhibit
10
|
Waste and Service
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited, $ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Mar.
31,
|
|
June
30,
|
|
Sept.
30,
|
|
Dec.
31,
|
|
Mar.
31,
|
|
June
30,
|
|
Sept.
30,
|
|
Dec.
31,
|
|
2016
|
|
2016
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
|
2015
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EfW waste
processing
|
$
|
227
|
|
|
$
|
238
|
|
|
$
|
241
|
|
|
$
|
256
|
|
|
$
|
223
|
|
|
$
|
231
|
|
|
$
|
230
|
|
|
$
|
244
|
|
Environmental
services
|
21
|
|
|
25
|
|
|
26
|
|
|
26
|
|
|
5
|
|
|
11
|
|
|
19
|
|
|
22
|
|
Municipal services
(a)
|
43
|
|
|
49
|
|
|
48
|
|
|
46
|
|
|
25
|
|
|
42
|
|
|
46
|
|
|
47
|
|
Other revenue
(b)
|
8
|
|
|
9
|
|
|
9
|
|
|
9
|
|
|
8
|
|
|
11
|
|
|
9
|
|
|
9
|
|
Intercompany
(c)
|
(21)
|
|
|
(24)
|
|
|
(26)
|
|
|
(25)
|
|
|
(15)
|
|
|
(18)
|
|
|
(21)
|
|
|
(23)
|
|
Total waste and
service revenue
|
$
|
279
|
|
|
$
|
297
|
|
|
$
|
299
|
|
|
$
|
312
|
|
|
$
|
246
|
|
|
$
|
276
|
|
|
$
|
283
|
|
|
$
|
299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Consists of
transfer stations and transportation component of NYC MTS
contract.
|
(b) Includes
landfill, waste brokerage, debt service and other EfW revenue not
directly related to waste processing.
|
(c) Consists of
elimination of intercompany transactions primarily relating to
transfer stations.
|
Note: Certain amounts
may not total due to rounding.
|
|
|
|
|
Discussion of Non-GAAP Financial Measures
We use a number of different financial measures, both
United States generally accepted
accounting principles ("GAAP") and non-GAAP, in assessing the
overall performance of our business. To supplement our
assessment of results prepared in accordance with GAAP, we use the
measures of Adjusted EBITDA, Free Cash Flow, and Adjusted EPS,
which are non-GAAP measures as defined by the Securities and
Exchange Commission. The non-GAAP financial measures of
Adjusted EBITDA, Free Cash Flow, and Adjusted EPS as described
below, and used in the tables above, are not intended as a
substitute or as an alternative to net income, cash flow provided
by operating activities or diluted earnings per share as indicators
of our performance or liquidity or any other measures of
performance or liquidity derived in accordance with GAAP. In
addition, our non-GAAP financial measures may be different from
non-GAAP measures used by other companies, limiting their
usefulness for comparison purposes.
The presentations of Adjusted EBITDA, Free Cash Flow and
Adjusted EPS are intended to enhance the usefulness of our
financial information by providing measures which management
internally use to assess and evaluate the overall performance of
its business and those of possible acquisition candidates, and
highlight trends in the overall business.
Adjusted EBITDA
We use Adjusted EBITDA to provide further information that is
useful to an understanding of the financial covenants contained in
the credit facilities as of December 31, 2016 of our most
significant subsidiary, Covanta Energy, LLC, ("Covanta Energy"),
through which we conduct our core waste and energy services
business, and as additional ways of viewing aspects of its
operations that, when viewed with the GAAP results and the
accompanying reconciliations to corresponding GAAP financial
measures, provide a more complete understanding of our core
business. The calculation of Adjusted EBITDA is based on the
definition in Covanta Energy's credit facilities as of
December 31, 2016, which we have guaranteed. Adjusted
EBITDA is defined as earnings before interest, taxes, depreciation
and amortization, as adjusted for additional items subtracted from
or added to net income. Because our business is substantially
comprised of that of Covanta Energy, our financial performance is
substantially similar to that of Covanta Energy. For this
reason, and in order to avoid use of multiple financial measures
which are not all from the same entity, the calculation of Adjusted
EBITDA and other financial measures presented herein are ours,
measured on a consolidated basis.
Under the credit facilities as of December 31, 2016,
Covanta Energy is required to satisfy certain financial covenants,
including certain ratios of which Adjusted EBITDA is an important
component. Compliance with such financial covenants is
expected to be the principal limiting factor which will affect our
ability to engage in a broad range of activities in furtherance of
our business, including making certain investments, acquiring
businesses and incurring additional debt. Covanta Energy was
in compliance with these covenants as of December 31,
2016. Failure to comply with such financial covenants could
result in a default under these credit facilities, which default
would have a material adverse effect on our financial condition and
liquidity.
These financial covenants are measured on a trailing four
quarter period basis and the material covenants are as follows:
- maximum Covanta Energy leverage ratio of 4.00 to 1.00, which
measures Covanta Energy's Consolidated Adjusted Debt (which is the
principal amount of its consolidated debt less certain restricted
funds dedicated to repayment of project debt principal and
construction costs) to its Adjusted EBITDA (which for purposes of
calculating the leverage ratio and interest coverage ratio, is
adjusted on a pro forma basis for acquisitions and dispositions
made during the relevant period); and
- minimum Covanta Energy interest coverage ratio of 3.00 to 1.00,
which measures Covanta Energy's Adjusted EBITDA to its consolidated
interest expense plus certain interest expense of ours, to the
extent paid by Covanta Energy.
In order to provide a meaningful basis for comparison, we are
providing information with respect to our Adjusted EBITDA for the
three and twelve months ended December 31, 2016 and 2015,
reconciled for each such period to net income and cash flow
provided by operating activities, which are believed to be the most
directly comparable measures under GAAP.
Our projected full year 2016 Adjusted EBITDA is not based on
GAAP net income/loss and is anticipated to be adjusted to exclude
the effects of events or circumstances in 2016 that are not
representative or indicative of our results of operations.
Projected GAAP net income/loss for the full year would require
inclusion of the projected impact of future excluded items,
including items that are not currently determinable, but may be
significant, such as asset impairments and one-time items, charges,
gains or losses from divestitures, or other items. Due to the
uncertainty of the likelihood, amount and timing of any such items,
we do not have information available to provide a quantitative
reconciliation of full year 2016 projected net income/loss to an
Adjusted EBITDA projection.
Free Cash Flow
Free Cash Flow is defined as cash flow provided by operating
activities, less maintenance capital expenditures, which are
capital expenditures primarily to maintain our existing
facilities. We use the non-GAAP measure of Free Cash Flow as
a criterion of liquidity and performance-based components of
employee compensation. We use Free Cash Flow as a measure of
liquidity to determine amounts we can reinvest in our core
businesses, such as amounts available to make acquisitions, invest
in construction of new projects, make principal payments on debt,
or amounts we can return to our stockholders through dividends
and/or stock repurchases.
In order to provide a meaningful basis for comparison, we are
providing information with respect to our Free Cash Flow for the
three and twelve months ended December 31, 2016 and 2015,
reconciled for each such period to cash flow provided by operating
activities, which we believe to be the most directly comparable
measure under GAAP.
Adjusted EPS
Adjusted EPS excludes certain income and expense items that are
not representative of our ongoing business and operations, which
are included in the calculation of Diluted Earnings Per Share in
accordance with GAAP. The following items are not
all-inclusive, but are examples of reconciling items in prior
comparative and future periods. They would include impairment
charges, the effect of derivative instruments not designated as
hedging instruments, significant gains or losses from the
disposition or restructuring of businesses, gains and losses on
assets held for sale, transaction-related costs, income and loss on
the extinguishment of debt and other significant items that would
not be representative of our ongoing business.
We will use the non-GAAP measure of Adjusted EPS to enhance the
usefulness of our financial information by providing a measure
which management internally uses to assess and evaluate the overall
performance and highlight trends in the ongoing business.
In order to provide a meaningful basis for comparison, we are
providing information with respect to our Adjusted EPS for the
three and twelve months ended December 31, 2016 and 2015,
reconciled for each such period to diluted income per share, which
is believed to be the most directly comparable measure under
GAAP.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
Certain statements in this press release constitute
"forward-looking" statements as defined in Section 27A of the
Securities Act of 1933 (the "Securities Act"), Section 21E of the
Securities Exchange Act of 1934 (the "Exchange Act"), the Private
Securities Litigation Reform Act of 1995 (the "PSLRA") or in
releases made by the Securities and Exchange Commission ("SEC"),
all as may be amended from time to time. Such forward-looking
statements involve known and unknown risks, uncertainties and other
important factors that could cause the actual results, performance
or achievements of Covanta Holding Corporation and its subsidiaries
("Covanta") or industry results, to differ materially from any
future results, performance or achievements expressed or implied by
such forward-looking statements. Statements that are not
historical fact are forward-looking statements.
Forward-looking statements can be identified by, among other
things, the use of forward-looking language, such as the words
"plan," "believe," "expect," "anticipate," "intend," "estimate,"
"project," "may," "will," "would," "could," "should," "seeks," or
"scheduled to," or other similar words, or the negative of these
terms or other variations of these terms or comparable language, or
by discussion of strategy or intentions. These cautionary
statements are being made pursuant to the Securities Act, the
Exchange Act and the PSLRA with the intention of obtaining the
benefits of the "safe harbor" provisions of such laws.
Covanta cautions investors that any forward-looking statements made
by us are not guarantees or indicative of future performance.
Important factors, risks and uncertainties that could cause actual
results to differ materially from those forward-looking statements
include, but are not limited to:
- seasonal or long-term fluctuations in the prices of energy,
waste disposal, scrap metal and commodities, and our ability to
renew or replace expiring contracts at comparable pricing;
- adoption of new laws and regulations in the United States and abroad, including energy
laws, environmental laws, labor laws and healthcare laws;
- our ability to avoid adverse publicity relating to our business
expansion efforts;
- advances in technology;
- difficulties in the operation of our facilities, including fuel
supply and energy delivery interruptions, failure to obtain
regulatory approvals, equipment failures, labor disputes and work
stoppages, and weather interference and catastrophic events;
- failure to maintain historical performance levels at our
facilities and our ability to retain the rights to operate
facilities we do not own;
- difficulties in the financing, development and construction of
new projects and expansions, including increased construction costs
and delays;
- our ability to realize the benefits of long-term business
development and bear the costs of business development over
time;
- our ability to utilize net operating loss carryforwards;
- limits of insurance coverage;
- our ability to avoid defaults under our long-term
contracts;
- performance of third parties under our contracts and such third
parties' observance of laws and regulations;
- concentration of suppliers and customers;
- geographic concentration of facilities;
- increased competitiveness in the energy and waste
industries;
- changes in foreign currency exchange rates;
- limitations imposed by our existing indebtedness and our
ability to perform our financial obligations and guarantees and to
refinance our existing indebtedness;
- exposure to counterparty credit risk and instability of
financial institutions in connection with financing
transactions;
- the scalability of our business;
- restrictions in our certificate of incorporation and debt
documents regarding strategic alternatives;
- failures of disclosure controls and procedures and internal
controls over financial reporting;
- our ability to attract and retain talented people;
- general economic conditions in the
United States and abroad, including the availability of
credit and debt financing; and
- other risks and uncertainties affecting our businesses
described in Item 1A. Risk Factors of Covanta's Annual Report on
Form 10-K for the year ended December 31,
2015 and in other filings by Covanta with the SEC.
Although we believe that our plans, intentions and expectations
reflected in or suggested by such forward-looking statements are
reasonable, actual results could differ materially from a
projection or assumption in any of our forward-looking statements.
Our future financial condition and results of operations, as well
as any forward-looking statements, are subject to change and
inherent risks and uncertainties. The forward-looking
statements contained in this press release are made only as of the
date hereof and we do not have, or undertake, any obligation to
update or revise any forward-looking statements whether as a result
of new information, subsequent events or otherwise, unless
otherwise required by law.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/covanta-holding-corporation-reports-2016-fourth-quarter-and-full-year-results-and-provides-2017-guidance-300408582.html
SOURCE Covanta Holding Corporation