MORRISTOWN, N.J.,
April 26, 2018 /PRNewswire/ -- Covanta Holding
Corporation (NYSE: CVA) ("Covanta" or the "Company"), a world
leader in sustainable waste and energy solutions, reported
financial results today for the three months ended March 31,
2018.
|
Three Months
Ended
March 31,
|
|
2017
|
|
2018
|
|
(Unaudited, $ in
millions, except per
share amounts)
|
Revenue
|
$404
|
|
$458
|
Net (loss)
income
|
$(52)
|
|
$201
|
Adjusted
EBITDA
|
$51
|
|
$100
|
Net cash provided by
operating activities
|
$9
|
|
$3
|
Free Cash Flow Before
Working Capital
|
$(22)
|
|
$(8)
|
Free Cash
Flow
|
$(17)
|
|
$(52)
|
Diluted
EPS
|
$(0.41)
|
|
$1.53
|
Adjusted
EPS
|
$(0.37)
|
|
$(0.09)
|
Reconciliations of
non-GAAP measures can be found in the exhibits to this press
release.
|
|
Key Highlights
- Affirming 2018 guidance
- Strong plant operations, including record performance at
Fairfax
- Received Notice to Proceed for the NYC 91st St. Marine Transfer Station
- Closed Dublin transaction with
GIG and progressing on UK development
"We are off to a strong start in 2018, with improved year over
year performance across our portfolio that supports our full year
guidance," said Stephen J. Jones,
Covanta's President and CEO. "We are proud of the recovery of our
Fairfax facility, where our previous investments are now resulting
in record performance. Concurrently, our international development
efforts continue, and we expect to reach financial close on the
Rookery project in the coming months. I am pleased by our
performance during the year thus far as well as the progress on our
growth initiatives and remain enthusiastic about our opportunities
to grow over the long-term."
More detail on our first quarter results can be found in the
exhibits to this release and in our first quarter 2018 earnings
presentation found in the Investor Relations section of the Covanta
website at www.covanta.com.
2018 Guidance
The Company reaffirmed guidance for 2018
for the following key metrics:
(In
millions)
|
Metric
|
2017
Actual
|
2018
Guidance Range (1)
|
Adjusted
EBITDA
|
$408
|
$425 -
$455
|
Free Cash Flow Before
Working Capital
|
$88
|
$100 -
$130
|
Free Cash
Flow
|
$132
|
$70 - $100
|
|
(1)
For additional information on the reconciliation of Free Cash Flow
and Free Cash Flow Before Working Capital to Net cash provided by
operating
activities, see Exhibit 5 of this press release. Guidance as of
April 26, 2018.
|
Conference Call Information
Covanta will host a
conference call at 8:30 AM (Eastern)
on Friday, April 27, 2018 to discuss its first quarter
results.
The conference call will begin with prepared remarks, which will
be followed by a question and answer session. To participate,
please dial 1-866-393-4306 approximately 10 minutes prior to
the scheduled start of the call. If calling outside of
the United States, please dial
1-734-385-2616. 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 in 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
over 550,000 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, as amended (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. For additional information see
the Cautionary Note Regarding Forward-Looking Statements at the end
of the Exhibits.
Covanta Holding
Corporation
|
Exhibit 1
|
Consolidated
Statements of Operations
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
|
(Unaudited)
(In millions, except per share amounts)
|
OPERATING
REVENUE:
|
|
|
|
Waste and service
revenue
|
$
|
312
|
|
|
$
|
286
|
|
Energy
revenue
|
100
|
|
|
86
|
|
Recycled metals
revenue
|
24
|
|
|
16
|
|
Other operating
revenue
|
22
|
|
|
16
|
|
Total operating
revenue
|
458
|
|
|
404
|
|
OPERATING
EXPENSE:
|
|
|
|
Plant operating
expense
|
345
|
|
|
332
|
|
Other operating
expense, net
|
8
|
|
|
15
|
|
General and
administrative expense
|
31
|
|
|
28
|
|
Depreciation and
amortization expense
|
54
|
|
|
52
|
|
Total operating
expense
|
438
|
|
|
427
|
|
Operating income
(loss)
|
20
|
|
|
(23)
|
|
OTHER INCOME
(EXPENSE):
|
|
|
|
Interest
expense
|
(38)
|
|
|
(36)
|
|
Gain (loss) on sale
of assets (a)
|
210
|
|
|
(4)
|
|
Total other income
(expense)
|
172
|
|
|
(40)
|
|
Income (loss)
before income tax benefit
|
192
|
|
|
(63)
|
|
Income tax
benefit
|
9
|
|
|
11
|
|
Net income
(loss)
|
$
|
201
|
|
|
$
|
(52)
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding:
|
|
|
|
Basic
|
130
|
|
|
129
|
|
Diluted
|
132
|
|
|
129
|
|
|
|
|
|
Earnings (Loss)
Per Share:
|
|
|
|
Basic
|
$
|
1.55
|
|
|
$
|
(0.41)
|
|
Diluted
|
$
|
1.53
|
|
|
$
|
(0.41)
|
|
|
|
|
|
Cash Dividend
Declared Per Share
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
|
|
|
(a) For additional
information, see Exhibit 4 of this Press Release
|
Covanta Holding
Corporation
|
Exhibit 2
|
Consolidated
Balance Sheets
|
|
|
As
of
|
|
March 31,
2018
|
|
December 31,
2017
|
|
(Unaudited)
|
|
|
ASSETS
|
(In millions, except per share amounts)
|
Current:
|
|
|
|
Cash and cash
equivalents
|
$
|
51
|
|
|
$
|
46
|
|
Restricted funds held
in trust
|
42
|
|
|
43
|
|
Receivables (less
allowances of $11 million and $14 million, respectively)
|
318
|
|
|
341
|
|
Prepaid expenses and
other current assets
|
61
|
|
|
73
|
|
Assets held for sale
(a)
|
3
|
|
|
653
|
|
Total Current
Assets
|
475
|
|
|
1,156
|
|
Property, plant and
equipment, net
|
2,609
|
|
|
2,606
|
|
Restricted funds held
in trust
|
23
|
|
|
28
|
|
Waste, service and
energy contract intangibles, net
|
248
|
|
|
251
|
|
Other intangible
assets, net
|
35
|
|
|
36
|
|
Goodwill
|
313
|
|
|
313
|
|
Other
assets
|
219
|
|
|
51
|
|
Total
Assets
|
$
|
3,922
|
|
|
$
|
4,441
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current:
|
|
|
|
Current portion of
long-term debt
|
$
|
10
|
|
|
$
|
10
|
|
Current portion of
project debt
|
24
|
|
|
23
|
|
Accounts
payable
|
75
|
|
|
151
|
|
Accrued expenses and
other current liabilities
|
261
|
|
|
313
|
|
Liabilities held for
sale (a)
|
—
|
|
|
540
|
|
Total Current
Liabilities
|
370
|
|
|
1,037
|
|
Long-term
debt
|
2,279
|
|
|
2,339
|
|
Project
debt
|
141
|
|
|
151
|
|
Deferred income
taxes
|
412
|
|
|
412
|
|
Other
liabilities
|
75
|
|
|
75
|
|
Total
Liabilities
|
3,277
|
|
|
4,014
|
|
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 131 and 131,
respectively)
|
14
|
|
|
14
|
|
Additional paid-in
capital
|
828
|
|
|
822
|
|
Accumulated other
comprehensive loss
|
(11)
|
|
|
(55)
|
|
Accumulated
deficit
|
(185)
|
|
|
(353)
|
|
Treasury stock, at
par
|
(1)
|
|
|
(1)
|
|
Total
Stockholders' Equity
|
645
|
|
|
427
|
|
Total Liabilities
and Equity
|
$
|
3,922
|
|
|
$
|
4,441
|
|
|
|
|
|
(a) During the
fourth quarter of 2017, our EfW facility in Dublin, Ireland met the
criteria to be classified as held for sale
|
Covanta Holding
Corporation
|
Exhibit 3
|
Consolidated
Statements of Cash Flow
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
(a)
|
|
(Unaudited, in
millions)
|
OPERATING
ACTIVITIES:
|
|
|
|
Net income
(loss)
|
$
|
201
|
|
|
$
|
(52)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization expense
|
54
|
|
|
52
|
|
Amortization of
deferred debt financing costs
|
2
|
|
|
2
|
|
(Gain) loss on asset
sales (b)
|
(210)
|
|
|
4
|
|
Stock-based
compensation expense
|
9
|
|
|
5
|
|
Deferred income
taxes
|
(3)
|
|
|
(14)
|
|
Other, net
|
(12)
|
|
|
2
|
|
Change in working
capital, net of effects of acquisitions and dispositions
|
(44)
|
|
|
5
|
|
Changes in noncurrent
assets and liabilities, net
|
6
|
|
|
5
|
|
Net cash provided by
operating activities
|
3
|
|
|
9
|
|
INVESTING
ACTIVITIES:
|
|
|
|
Purchase of property,
plant and equipment
|
(81)
|
|
|
(62)
|
|
Acquisition of
businesses, net of cash acquired
|
(4)
|
|
|
(16)
|
|
Proceeds from the
sale of assets, net of restricted cash
|
111
|
|
|
—
|
|
Property insurance
proceeds
|
7
|
|
|
2
|
|
Payment of
indemnification claim from sale of asset
|
(7)
|
|
|
—
|
|
Other, net
|
—
|
|
|
(1)
|
|
Net cash provided by
(used in) investing activities
|
26
|
|
|
(77)
|
|
FINANCING
ACTIVITIES:
|
|
|
|
Proceeds from
borrowings on long-term debt
|
—
|
|
|
400
|
|
Proceeds from
borrowings on revolving credit facility
|
170
|
|
|
331
|
|
Proceeds from
borrowings on project debt
|
—
|
|
|
33
|
|
Payments on long-term
debt
|
(1)
|
|
|
(1)
|
|
Payment on revolving
credit facility
|
(228)
|
|
|
(288)
|
|
Payments on equipment
financing capital leases
|
(1)
|
|
|
(1)
|
|
Principal payments on
project debt
|
(10)
|
|
|
(9)
|
|
Payment of deferred
financing costs
|
—
|
|
|
(8)
|
|
Cash dividends paid
to stockholders
|
(33)
|
|
|
(33)
|
|
Financing of
insurance premiums, net
|
(7)
|
|
|
—
|
|
Other, net
|
—
|
|
|
(3)
|
|
Net cash (used in)
provided by financing activities
|
(110)
|
|
|
421
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
3
|
|
|
1
|
|
Net (decrease)
increase in cash, cash equivalents and restricted cash
|
(78)
|
|
|
354
|
|
Cash, cash
equivalents and restricted cash at beginning of period
(c)
|
194
|
|
|
194
|
|
Cash, cash
equivalents and restricted cash at end of period
|
$
|
116
|
|
|
$
|
548
|
|
|
(a) As adjusted
to reflect the adoption of ASU 2016-18 effective January 1, 2018.
As a result of adoption, the statement of cash flows
explains
the change during the
period in the total of cash, cash equivalents, and amounts
generally described as restricted cash or restricted cash
equivalents.
|
(b) For additional
information, see Exhibit 4 of this Press Release.
|
(c) For the three
months ended March 31, 2018, includes $77 million of restricted
cash classified as held for sale as of December 31,
2017.
|
Covanta Holding
Corporation
|
Exhibit 4
|
Consolidated
Reconciliation of Net Income (Loss) and Net Cash Provided by
Operating Activities
to Adjusted EBITDA
|
|
|
|
Three Months Ended
March 31,
|
|
|
2018
|
|
2017
|
|
(Unaudited, in millions)
|
Net income
(loss)
|
|
$
|
201
|
|
|
$
|
(52)
|
|
Depreciation and
amortization expense
|
|
54
|
|
|
52
|
|
Interest
expense
|
|
38
|
|
|
36
|
|
Income tax
benefit
|
|
(9)
|
|
|
(11)
|
|
(Gain) loss on sale
of assets (a)
|
|
(210)
|
|
|
4
|
|
Property insurance
recoveries, net
|
|
(7)
|
|
|
—
|
|
Capital type
expenditures at client owned facilities (b)
|
|
12
|
|
|
14
|
|
Debt service billings
in excess of revenue recognized
|
|
1
|
|
|
1
|
|
Business development
and transaction costs
|
|
2
|
|
|
—
|
|
Severance and
reorganization costs
|
|
2
|
|
|
—
|
|
Stock-based
compensation expense
|
|
9
|
|
|
5
|
|
Adjustments to
reflect Adjusted EBITDA from unconsolidated investments
|
|
4
|
|
|
—
|
|
Other
(c)
|
|
3
|
|
|
2
|
|
Adjusted
EBITDA
|
|
$
|
100
|
|
|
$
|
51
|
|
Capital type
expenditures at client owned facilities (b)
|
|
(12)
|
|
|
(14)
|
|
Cash paid for
interest, net of capitalized interest
|
|
(33)
|
|
|
(26)
|
|
Cash paid for taxes,
net
|
|
—
|
|
|
1
|
|
Adjustments to
reflect Adjusted EBITDA from unconsolidated investments
|
|
(4)
|
|
|
—
|
|
Adjustment for
working capital and other
|
|
(48)
|
|
|
(3)
|
|
Net cash provided
by operating activities
|
|
$
|
3
|
|
|
$
|
9
|
|
|
(a)
During the three months ended March 31, 2018, we recorded a $204
million gain on the sale of 50% of our Dublin project to our
joint
venture with GIG
and $6 million gain on the sale of our remaining interests in
China.
|
(b)
Adjustment for impact of adoption of FASB ASC 853 - Service
Concession Arrangements. These types of capital equipment
related
expenditures at our
service fee operated facilities were historically capitalized prior
to adoption of this new accounting standard effective
January 1, 2015 and
are capitalized at facilities that we own.
|
(c)
Includes certain other items that are added back under the
definition of Adjusted EBITDA in Covanta Energy, LLC's credit
agreement.
|
Covanta Holding
Corporation
|
Exhibit 5
|
Reconciliation of
Net Cash Provided by Operating Activities to Free Cash Flow and
Free Cash Flow
Before Working Capital
|
|
|
Three Months Ended
March 31,
|
|
Full
Year
Estimated 2018
|
|
2018
|
|
2017
|
|
|
(Unaudited, in millions)
|
|
|
Net cash provided
by operating activities
|
$
|
3
|
|
|
$
|
9
|
|
|
$195 -
$225
|
Add: Changes in
restricted funds - operating (a)
|
(10)
|
|
|
1
|
|
|
10
|
Less: Maintenance
capital expenditures (b)
|
(45)
|
|
|
(27)
|
|
|
(140 -
130)
|
Free Cash
Flow
|
$
|
(52)
|
|
|
$
|
(17)
|
|
|
$70 -
$100
|
Less: Changes in
working capital
|
44
|
|
|
(5)
|
|
|
20 - 40
|
Free Cash Flow
Before Working Capital
|
$
|
(8)
|
|
|
$
|
(22)
|
|
|
$100 -
$130
|
|
|
|
(a)
Adjustment for the impact of the adoption of ASU 2016-18 effective
January 1, 2018. As a result of adoption, the
statement of cash
flows explains the change during the period in the total of cash,
cash equivalents, and amounts
generally described
as restricted cash or restricted cash equivalents. Therefore,
changes in restricted funds are
eliminated in
arriving at net cash, cash equivalents and restricted funds
provided by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
(b)
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
March 31,
|
|
|
|
2018
|
|
2017
|
|
|
Maintenance capital
expenditures
|
$
|
(45)
|
|
|
$
|
(27)
|
|
|
|
Maintenance capital
expenditures paid but incurred in prior periods
|
(7)
|
|
|
—
|
|
|
|
Capital expenditures
associated with construction of Dublin EfW facility
|
(17)
|
|
|
(20)
|
|
|
|
Capital expenditures
associated with organic growth initiatives
|
(8)
|
|
|
(11)
|
|
|
|
Capital expenditures
associated with Essex County EfW emissions control
system
|
—
|
|
|
(3)
|
|
|
|
Total capital
expenditures associated with growth investments
|
(25)
|
|
|
(34)
|
|
|
|
Capital expenditures
associated with property insurance events
|
(4)
|
|
|
(1)
|
|
|
|
Total purchases of
property, plant and equipment
|
$
|
(81)
|
|
|
$
|
(62)
|
|
|
|
Covanta Holding
Corporation
|
Exhibit
6
|
Reconciliation of
Diluted Earnings (Loss) Per Share to Adjusted EPS
|
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
|
(Unaudited)
|
Diluted Earnings
(Loss) Per Share:
|
$
|
1.53
|
|
|
$
|
(0.41)
|
|
Reconciling Items
(a)
|
(1.62)
|
|
|
0.04
|
|
Adjusted
EPS
|
$
|
(0.09)
|
|
|
$
|
(0.37)
|
|
|
|
|
|
(a) For details
related to the Reconciling Items, see Exhibit 6A of this Press
Release
|
|
Covanta Holding
Corporation
|
Exhibit 6A
|
Reconciling
Items
|
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
|
(Unaudited)
(In millions, except per share amounts)
|
Reconciling
Items
|
|
|
|
(Gain) loss on sale
of assets⁽ᵃ⁾
|
$
|
(210)
|
|
|
$
|
4
|
|
Property insurance
recoveries, net
|
(7)
|
|
|
—
|
|
Severance and
reorganization costs
|
2
|
|
|
—
|
|
Effect of foreign
exchange loss on indebtedness
|
1
|
|
|
—
|
|
Other
|
(1)
|
|
|
—
|
|
Total Reconciling
Items, pre-tax
|
(215)
|
|
|
4
|
|
Pro forma income tax
impact (b)
|
2
|
|
|
—
|
|
Grantor trust
activity
|
—
|
|
|
1
|
|
Total Reconciling
Items, net of tax
|
$
|
(213)
|
|
|
$
|
5
|
|
Diluted Per Share
Impact
|
$
|
(1.62)
|
|
|
$
|
0.04
|
|
Weighted Average
Diluted Shares Outstanding
|
132
|
|
|
129
|
|
|
|
|
|
(a) For additional
information, see Exhibit 4 of this Press Release
|
(b) 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)
|
|
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
REVENUE
|
|
|
|
Waste and service
revenue:
|
|
|
|
EfW tip
fees
|
$
|
153
|
|
|
$
|
131
|
|
EfW service
fees
|
99
|
|
|
98
|
|
Environmental
services (a)
|
32
|
|
|
29
|
|
Municipal services
(b)
|
45
|
|
|
44
|
|
Other
(c)
|
8
|
|
|
8
|
|
Intercompany
(d)
|
(26)
|
|
|
(23)
|
|
Total waste and
service
|
312
|
|
|
286
|
|
Energy
Revenue:
|
|
|
|
Energy
sales
|
87
|
|
|
76
|
|
Capacity
|
13
|
|
|
9
|
|
Total energy
revenue
|
100
|
|
|
86
|
|
Recycled metals
revenue:
|
|
|
|
Ferrous
|
15
|
|
|
10
|
|
Non-ferrous
|
9
|
|
|
6
|
|
Total recycled
metals
|
24
|
|
|
16
|
|
Other revenue
(e)
|
22
|
|
|
16
|
|
Total
revenue
|
$
|
458
|
|
|
$
|
404
|
|
|
|
|
|
OPERATING
EXPENSE
|
|
|
|
Plant operating
expense:
|
|
|
|
Plant
maintenance
|
$
|
90
|
|
|
$
|
98
|
|
Other plant operating
expense
|
255
|
|
|
234
|
|
Total plant operating
expense
|
345
|
|
|
332
|
|
Other operating
expense
|
8
|
|
|
15
|
|
General and
administrative
|
31
|
|
|
28
|
|
Depreciation and
amortization
|
54
|
|
|
52
|
|
Total operating
expense
|
$
|
438
|
|
|
$
|
427
|
|
|
|
|
|
Operating income
(loss)
|
$
|
20
|
|
|
$
|
(23)
|
|
|
|
|
|
(a) Includes the
operation of material processing facilities and related services
provided by our CES business
|
(b) Consists of
transfer stations and transportation component of NYC MTS
contract
|
(c) Includes waste
brokerage, debt service and other revenue not directly related to
EfW waste processing activities
|
(d) Consists of
elimination of intercompany transactions primarily relating to
transfer stations
|
Note: Certain amounts
may not total due to rounding
|
Covanta Holding
Corporation
|
|
|
|
|
|
|
|
|
|
|
Exhibit
8
|
Revenue and
Operating Income Changes - Q1 2017 to Q1 2018
|
|
|
|
|
|
|
|
|
(Unaudited, $ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic Growth
(a)
|
|
Contract
Transitions (b)
|
|
|
|
|
|
|
|
Q1
2017
|
|
Total
|
|
%
|
|
Waste
|
|
PPA
|
|
Trans-
actions (c)
|
|
Total
Changes
|
|
Q1
2018
|
REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Waste and
service:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EfW tip
fees
|
$
|
131
|
|
|
$
|
10
|
|
|
7.9
|
%
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
22
|
|
|
$
|
153
|
|
EfW service
fees
|
98
|
|
|
1
|
|
|
1.4
|
%
|
|
(3)
|
|
|
—
|
|
|
3
|
|
|
1
|
|
|
99
|
|
Environmental
services
|
29
|
|
|
1
|
|
|
3.2
|
%
|
|
—
|
|
|
—
|
|
|
2
|
|
|
3
|
|
|
32
|
|
Municipal
services
|
44
|
|
|
1
|
|
|
2.7
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
45
|
|
Other
revenue
|
8
|
|
|
(1)
|
|
|
(13.1)%
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
Intercompany
|
(23)
|
|
|
(2)
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
(26)
|
|
Total waste and
service
|
286
|
|
|
11
|
|
|
3.7
|
%
|
|
1
|
|
|
—
|
|
|
15
|
|
|
25
|
|
|
312
|
|
Energy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
Sales
|
76
|
|
|
7
|
|
|
9.3
|
%
|
|
1
|
|
|
(1)
|
|
|
4
|
|
|
11
|
|
|
87
|
|
Capacity
|
9
|
|
|
1
|
|
|
13.2
|
%
|
|
—
|
|
|
2
|
|
|
1
|
|
|
4
|
|
|
13
|
|
Total energy
revenue
|
86
|
|
|
8
|
|
|
9.6
|
%
|
|
1
|
|
|
1
|
|
|
5
|
|
|
15
|
|
|
100
|
|
Recycled
metals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ferrous
|
10
|
|
|
5
|
|
|
46.3
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
15
|
|
Non-ferrous
|
6
|
|
|
3
|
|
|
55.8
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
9
|
|
Total recycled
metals
|
16
|
|
|
8
|
|
|
49.7
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
24
|
|
Other
revenue
|
16
|
|
|
5
|
|
|
31.9
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
22
|
|
Total
revenue
|
$
|
404
|
|
|
$
|
32
|
|
|
7.9
|
%
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
19
|
|
|
$
|
53
|
|
|
$
|
458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant operating
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant
maintenance
|
$
|
98
|
|
|
$
|
(9)
|
|
|
(8.9)%
|
|
|
$
|
(1)
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(9)
|
|
|
$
|
90
|
|
Other plant operating
expense
|
234
|
|
|
13
|
|
|
5.8
|
%
|
|
—
|
|
|
—
|
|
|
8
|
|
|
21
|
|
|
255
|
|
Total plant
operating expense
|
332
|
|
|
5
|
|
|
1.4
|
%
|
|
(2)
|
|
|
—
|
|
|
9
|
|
|
12
|
|
|
345
|
|
Other operating
expense (income)
|
15
|
|
|
(8)
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8)
|
|
|
8
|
|
General and
administrative
|
28
|
|
|
4
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
31
|
|
Depreciation and
amortization
|
52
|
|
|
2
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
54
|
|
Total operating
expense (income)
|
$
|
427
|
|
|
$
|
2
|
|
|
|
|
$
|
(1)
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
11
|
|
|
$
|
438
|
|
Operating (Loss)
Income
|
$
|
(23)
|
|
|
$
|
30
|
|
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
9
|
|
|
$
|
43
|
|
|
$
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
Note: Certain amounts
may not total due to rounding.
|
Operating
Metrics
|
|
|
Exhibit
9
|
(Unaudited)
|
|
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
EfW
Waste
|
|
|
|
Tons: (in
millions)
|
|
|
|
Tip fee-
contracted
|
2.1
|
|
|
1.9
|
|
Tip fee-
uncontracted
|
0.7
|
|
|
0.6
|
|
Service
fee
|
2.1
|
|
|
2.1
|
|
Total tons
|
4.8
|
|
|
4.6
|
|
Revenue per
ton:
|
|
|
|
Contracted
|
$
|
53.33
|
|
|
$
|
48.68
|
|
Uncontracted
|
$
|
65.38
|
|
|
$
|
68.45
|
|
Average revenue per
ton
|
$
|
56.20
|
|
|
$
|
54.11
|
|
EfW
Energy
|
|
|
|
Energy sales: (MWh
in millions)
|
|
|
|
Contracted
|
0.5
|
|
|
0.6
|
|
Hedged
|
0.8
|
|
|
0.6
|
|
Market
|
0.3
|
|
|
0.2
|
|
Total energy
sales
|
1.6
|
|
|
1.4
|
|
Market sales by
geography:
|
|
|
|
PJM East
|
0.2
|
|
|
0.1
|
|
NEPOOL
|
—
|
|
|
—
|
|
NYISO
|
—
|
|
|
—
|
|
Other
|
0.1
|
|
|
0.1
|
|
Revenue per MWh
(excludes capacity):
|
|
|
|
Contracted
|
$
|
67.86
|
|
|
$
|
70.85
|
|
Hedged
|
$
|
50.07
|
|
|
$
|
47.76
|
|
Market
|
$
|
44.08
|
|
|
$
|
24.44
|
|
Average revenue per
MWh
|
$
|
54.56
|
|
|
$
|
53.76
|
|
Metals
|
|
|
|
Tons Recovered:
(in thousands)
|
|
|
|
Ferrous
|
102
|
|
|
95
|
|
Non-ferrous
|
11
|
|
|
9
|
|
Tons Sold: (in
thousands)
|
|
|
|
Ferrous
|
77
|
|
|
60
|
|
Non-ferrous
|
7
|
|
|
9
|
|
Revenue per
ton:
|
|
|
|
Ferrous
|
$
|
193
|
|
|
$
|
169
|
|
Non-ferrous
|
$
|
1,192
|
|
|
$
|
615
|
|
EfW plant
operating expense: ($ in millions)
|
|
|
|
Plant operating
expense - gross
|
$
|
282
|
|
|
$
|
275
|
|
Less: Client
pass-through costs
|
(14)
|
|
|
(10)
|
|
Less: REC sales -
contra-expense
|
(3)
|
|
|
(3)
|
|
Plant operating
expense, net
|
$
|
266
|
|
|
$
|
262
|
|
Client pass-throughs
as % of gross costs
|
4.9
|
%
|
|
3.6
|
%
|
|
|
|
|
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.
|
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, Free Cash Flow Before
Working Capital, and Adjusted EPS, which are non-GAAP financial
measures as defined by the Securities and Exchange
Commission. The non-GAAP financial measures of Adjusted
EBITDA, Free Cash Flow, Free Cash Flow Before Working Capital, 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, Free Cash
Flow Before Working Capital, 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 additional ways of viewing
aspects of operations that, when viewed with the GAAP results
provide a more complete understanding of our core business. As we
define it, Adjusted EBITDA represents earnings before interest,
taxes, depreciation and amortization, as adjusted for additional
items subtracted from or added to net income including the effects
of impairment losses, gains or losses on sales, dispositions or
retirements of assets, adjustments to reflect the Adjusted EBITDA
from our unconsolidated investments, adjustments to exclude
significant unusual or non-recurring items that are not directly
related to our operating performance plus adjustments to capital
type expenses for our service fee facilities in line with our
credit agreements. We adjust for these items in our Adjusted EBITDA
as our management believes that these items would distort their
ability to efficiently view and assess our core operating trends.
As larger parts of our business are conducted through
unconsolidated entities that we do not control, we adjust for our
proportionate share of the entities depreciation and amortization,
interest expense and taxes in order to improve comparability to the
Adjusted EBITDA of our wholly owned entities.
In order to provide a meaningful basis for comparison, we are
providing information with respect to our Adjusted EBITDA for the
three months ended March 31, 2018 and 2017, 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 projections of the proportional contribution of our
interests in the JV to our Adjusted EBITDA and Free Cash Flow are
not based on GAAP net income/loss or Cash flow provided by
operating activities, respectively, and are anticipated to be
adjusted to exclude the effects of events or circumstances in 2018
that are not representative or indicative of our results of
operations and that are not currently determinable. Due to the
uncertainty of the likelihood, amount and timing of any such
adjusting items, we do not have information available to provide a
quantitative reconciliation of projected net income/loss to an
Adjusted EBITDA projection.
Free Cash Flow and Free Cash Flow Before Working
Capital
Free Cash Flow is defined as cash flow provided by operating
activities, plus changes in operating restricted funds, less
maintenance capital expenditures, which are capital expenditures
primarily to maintain our existing facilities. Free Cash Flow
Before Working Capital is defined as Free Cash Flow excluding
changes in working capital.
We use the non-GAAP measures of Free Cash Flow and Free Cash
Flow Before Working Capital as criteria of liquidity and
performance-based components of employee compensation. We use
Free Cash Flow and Free Cash Flow Before Working Capital as
measures 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 and Free
Cash Flow Before Working Capital for the three months ended
March 31, 2018 and 2017, 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 months ended March 31, 2018 and 2017, 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 may constitute
"forward-looking" statements as defined in Section 27A of the
Securities Act of 1933, as amended (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 of Covanta and
the JV 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 Covanta's ability
to renew or replace expiring contracts at comparable prices and
with other acceptable terms;
- adoption of new laws and regulations in the United States and abroad, including energy
laws, tax laws, environmental laws, labor laws and healthcare
laws;
- 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 Covanta's
facilities and Covanta's ability to retain the rights to operate
facilities Covanta does not own;
- Covanta's and the joint ventures ability to avoid adverse
publicity or reputational damage relating to its business;
- difficulties in the financing, development and construction of
new projects and expansions, including increased construction costs
and delays;
- Covanta's ability to realize the benefits of long-term business
development and bear the costs of business development over
time;
- Covanta's ability to utilize net operating loss
carryforwards;
- limits of insurance coverage;
- Covanta's ability to avoid defaults under its long-term
contracts;
- performance of third parties under its 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 Covanta's existing indebtedness and its
ability to perform its financial obligations and guarantees and to
refinance its existing indebtedness;
- exposure to counterparty credit risk and instability of
financial institutions in connection with financing
transactions;
- the scalability of its business;
- restrictions in its certificate of incorporation and debt
documents regarding strategic alternatives;
- failures of disclosure controls and procedures and internal
controls over financial reporting;
- Covanta's and the joint ventures 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 Covanta's businesses
described periodic securities filings by Covanta with the SEC.
Although Covanta believes that its plans, cost estimates,
returns on investments, 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 forward-looking statements. Covanta's and the joint ventures
future financial condition and results of operations, as well as
any forward-looking statements, are subject to change and to
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.
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SOURCE Covanta Holding Corporation