MORRISTOWN, N.J., July 25, 2019 /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 and six months ended
June 30, 2019.
|
Three Months
Ended
June 30,
|
|
2019
|
|
2018
|
|
|
|
|
|
(Unaudited, $ in
millions)
|
Revenue
|
$467
|
|
$454
|
Net loss
|
$(21)
|
|
$(31)
|
Adjusted
EBITDA
|
$94
|
|
$103
|
Net cash provided by
operating activities
|
$50
|
|
$60
|
Free Cash
Flow
|
$21
|
|
$26
|
Reconciliations of
non-GAAP measures can be found in the exhibits to this press
release.
|
"During the second quarter, our team focused on
executing our operating and strategic plans, with solid results,"
said Covanta's President and CEO Stephen J.
Jones. "Our plants are on track for another year of record
production, we capitalized on a strong waste market to drive tip
fee prices over 5%, and we advanced towards our goal of having four
new plants in construction in the UK. While recent volatility in
commodity prices is causing us to revise our 2019 financial
guidance, our longer term targets are unchanged as they are not
predicated on short-term commodity price movements. Rather,
these targets reflect our ability to continue driving underlying
organic growth while expanding our business through project
development in both new and existing markets."
More detail on our second quarter results can be
found in the exhibits to this release and in our second quarter
2019 earnings presentation found in the Investor Relations section
of the Covanta website at www.covanta.com.
2019 Guidance
The Company revised 2019 Adjusted EBITDA guidance and reaffirmed
2019 Free Cash Flow guidance:
(In millions)
|
2019 Guidance
Range
|
|
Metric
|
Current
|
Initial
|
2018
Actual
|
Adjusted
EBITDA
|
$420 -
$445
|
$440 -
$465
|
$457
|
Free Cash
Flow
|
$120 -
$145
|
$120 -
$145
|
$100
|
Reconciliations of
non-GAAP measures can be found in the exhibits to this press
release
Guidance as of July 25, 2019.
|
Conference Call Information
Covanta will host a
conference call at 8:30 AM (Eastern)
on Friday, July 26, 2019 to discuss its second quarter
results.
The conference call will begin with prepared remarks, which will
be followed by a question and answer session. To participate,
please dial 1-833-238-7947 approximately 10 minutes prior to
the scheduled start of the call. If calling outside of
the United States, please dial
1-647-689-4195. 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 ("EfW") facilities safely convert
approximately 21 million tons of waste from municipalities and
businesses into clean, renewable electricity to power one million
homes and recycle over 600,000 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
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
(In millions, except per share amounts)
|
OPERATING
REVENUE:
|
|
|
|
|
|
|
|
|
Waste and service
revenue
|
|
$
|
359
|
|
|
$
|
333
|
|
|
$
|
686
|
|
|
$
|
645
|
|
Energy
revenue
|
|
72
|
|
|
76
|
|
|
166
|
|
|
176
|
|
Recycled metals
revenue
|
|
21
|
|
|
25
|
|
|
42
|
|
|
49
|
|
Other operating
revenue
|
|
15
|
|
|
20
|
|
|
26
|
|
|
42
|
|
Total operating
revenue
|
|
467
|
|
|
454
|
|
|
920
|
|
|
912
|
|
OPERATING
EXPENSE:
|
|
|
|
|
|
|
|
|
Plant operating
expense
|
|
354
|
|
|
334
|
|
|
713
|
|
|
679
|
|
Other operating
expense, net
|
|
16
|
|
|
19
|
|
|
33
|
|
|
27
|
|
General and
administrative expense
|
|
31
|
|
|
27
|
|
|
61
|
|
|
58
|
|
Depreciation and
amortization expense
|
|
55
|
|
|
55
|
|
|
110
|
|
|
109
|
|
Impairment charges
(a)
|
|
1
|
|
|
37
|
|
|
1
|
|
|
37
|
|
Total operating
expense
|
|
457
|
|
|
472
|
|
|
918
|
|
|
910
|
|
Operating income
(loss)
|
|
10
|
|
|
(18)
|
|
|
2
|
|
|
2
|
|
OTHER (EXPENSE)
INCOME:
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(36)
|
|
|
(36)
|
|
|
(72)
|
|
|
(74)
|
|
Net (loss) gain on
sale of business and investments (a)
|
|
(2)
|
|
|
—
|
|
|
48
|
|
|
210
|
|
Other income
(expense), net
|
|
1
|
|
|
(1)
|
|
|
2
|
|
|
(1)
|
|
Total other (expense)
income
|
|
(37)
|
|
|
(37)
|
|
|
(22)
|
|
|
135
|
|
(Loss) income
before income tax benefit and equity in net income
from unconsolidated
investments
|
|
(27)
|
|
|
(55)
|
|
|
(20)
|
|
|
137
|
|
Income tax
benefit
|
|
3
|
|
|
22
|
|
|
1
|
|
|
31
|
|
Equity in net income
from unconsolidated investments
|
|
3
|
|
|
2
|
|
|
3
|
|
|
2
|
|
Net (loss)
income
|
|
$
|
(21)
|
|
|
$
|
(31)
|
|
|
$
|
(16)
|
|
|
$
|
170
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
131
|
|
|
130
|
|
|
131
|
|
|
130
|
|
Diluted
|
|
131
|
|
|
130
|
|
|
131
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
(Loss) Earnings
Per Share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.16)
|
|
|
$
|
(0.24)
|
|
|
$
|
(0.12)
|
|
|
$
|
1.31
|
|
Diluted
|
|
$
|
(0.16)
|
|
|
$
|
(0.24)
|
|
|
$
|
(0.12)
|
|
|
$
|
1.29
|
|
|
|
|
|
|
|
|
|
|
Cash Dividend
Declared Per Share
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
(a) For additional
information, see Exhibit 4 of this Press Release.
|
Covanta Holding
Corporation
|
Exhibit 2
|
Consolidated
Balance Sheets
|
|
|
|
|
As
of
|
|
June 30,
2019
|
|
December 31,
2018
|
|
|
|
|
|
(Unaudited)
|
|
|
ASSETS
|
(In millions, except per share amounts)
|
Current:
|
|
|
|
Cash and cash
equivalents
|
$
|
102
|
|
|
$
|
58
|
|
Restricted funds held
in trust
|
22
|
|
|
39
|
|
Receivables (less
allowances of $8 and $8, respectively)
|
318
|
|
|
338
|
|
Prepaid expenses and
other current assets
|
84
|
|
|
64
|
|
Total Current
Assets
|
526
|
|
|
499
|
|
Property, plant and
equipment, net
|
2,492
|
|
|
2,514
|
|
Restricted funds held
in trust
|
8
|
|
|
8
|
|
Intangible assets,
net
|
269
|
|
|
279
|
|
Goodwill
|
321
|
|
|
321
|
|
Other
assets
|
286
|
|
|
222
|
|
Total
Assets
|
$
|
3,902
|
|
|
$
|
3,843
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current:
|
|
|
|
Current portion of
long-term debt
|
$
|
16
|
|
|
$
|
15
|
|
Current portion of
project debt
|
10
|
|
|
19
|
|
Accounts
payable
|
61
|
|
|
76
|
|
Accrued expenses and
other current liabilities
|
318
|
|
|
333
|
|
Total Current
Liabilities
|
405
|
|
|
443
|
|
Long-term
debt
|
2,446
|
|
|
2,327
|
|
Project
debt
|
128
|
|
|
133
|
|
Deferred income
taxes
|
378
|
|
|
378
|
|
Other
liabilities
|
129
|
|
|
75
|
|
Total
Liabilities
|
3,486
|
|
|
3,356
|
|
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 shares)
|
14
|
|
|
14
|
|
Additional paid-in
capital
|
848
|
|
|
841
|
|
Accumulated other
comprehensive loss
|
(27)
|
|
|
(33)
|
|
Accumulated
deficit
|
(419)
|
|
|
(334)
|
|
Treasury stock, at
par
|
—
|
|
|
(1)
|
|
Total
Equity
|
416
|
|
|
487
|
|
Total Liabilities
and Equity
|
$
|
3,902
|
|
|
$
|
3,843
|
|
Covanta Holding
Corporation
|
Exhibit
3
|
Consolidated
Statements of Cash Flow
|
|
|
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
|
|
|
|
(Unaudited, in
millions)
|
OPERATING
ACTIVITIES:
|
|
|
|
Net (loss)
income
|
$
|
(16)
|
|
|
$
|
170
|
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization expense
|
110
|
|
|
109
|
|
Amortization of
deferred debt financing costs
|
2
|
|
|
3
|
|
Net gain on sale of
business and investments (a)
|
(48)
|
|
|
(210)
|
|
Impairment charges
(a)
|
1
|
|
|
37
|
|
Stock-based
compensation expense
|
15
|
|
|
14
|
|
Equity in net income
from unconsolidated investments
|
(3)
|
|
|
(2)
|
|
Deferred income
taxes
|
(4)
|
|
|
(28)
|
|
Dividends from
unconsolidated investments
|
5
|
|
|
1
|
|
Other, net
|
5
|
|
|
(8)
|
|
Change in working
capital, net of effects of acquisitions and dispositions
|
18
|
|
|
(21)
|
|
Changes in noncurrent
assets and liabilities, net
|
2
|
|
|
(2)
|
|
Net cash provided by
operating activities
|
87
|
|
|
63
|
|
INVESTING
ACTIVITIES:
|
|
|
|
Purchase of property,
plant and equipment
|
(93)
|
|
|
(130)
|
|
Acquisition of
businesses, net of cash acquired
|
2
|
|
|
(4)
|
|
Proceeds from the
sale of assets, net of restricted cash
|
26
|
|
|
112
|
|
Property insurance
proceeds
|
—
|
|
|
7
|
|
Payment of
indemnification claim related to sale of asset
|
—
|
|
|
(7)
|
|
Investment in equity
affiliate
|
(8)
|
|
|
—
|
|
Other, net
|
(1)
|
|
|
(1)
|
|
Net cash used in
investing activities
|
(74)
|
|
|
(23)
|
|
FINANCING
ACTIVITIES:
|
|
|
|
Proceeds from
borrowings on long-term debt
|
14
|
|
|
30
|
|
Proceeds from
borrowings on revolving credit facility
|
359
|
|
|
317
|
|
Payments on long-term
debt
|
(8)
|
|
|
(6)
|
|
Payments on revolving
credit facility
|
(248)
|
|
|
(387)
|
|
Payments on project
debt
|
(13)
|
|
|
(13)
|
|
Cash dividends paid
to stockholders
|
(68)
|
|
|
(66)
|
|
Payment of insurance
premium financing
|
(14)
|
|
|
(13)
|
|
Other, net
|
(8)
|
|
|
2
|
|
Net cash provided by
(used in) financing activities
|
14
|
|
|
(136)
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
—
|
|
|
2
|
|
Net increase
(decrease) in cash, cash equivalents and restricted cash
|
27
|
|
|
(94)
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
105
|
|
|
194
|
|
Cash, cash
equivalents and restricted cash at end of period
|
$
|
132
|
|
|
$
|
100
|
|
|
|
|
|
(a) For additional
information, see Exhibit 4 of this Press Release.
|
|
|
|
Covanta Holding
Corporation
|
|
|
|
Exhibit
4
|
Consolidated
Reconciliation of Net (Loss) Income and Net Cash Provided by
Operating Activities
|
to Adjusted
EBITDA
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited, in millions)
|
Net (loss)
income
|
|
$
|
(21)
|
|
|
$
|
(31)
|
|
|
$
|
(16)
|
|
|
$
|
170
|
|
Depreciation and
amortization expense
|
|
55
|
|
|
55
|
|
|
110
|
|
|
109
|
|
Interest
expense
|
|
36
|
|
|
36
|
|
|
72
|
|
|
74
|
|
Income tax
benefit
|
|
(3)
|
|
|
(22)
|
|
|
(1)
|
|
|
(31)
|
|
Impairment charges
(a)
|
|
1
|
|
|
37
|
|
|
1
|
|
|
37
|
|
Net loss (gain) on
sale of businesses and investments (b)
|
|
2
|
|
|
—
|
|
|
(48)
|
|
|
(210)
|
|
Property insurance
recoveries, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7)
|
|
Capital type
expenditures at client owned facilities (c)
|
|
7
|
|
|
11
|
|
|
20
|
|
|
23
|
|
Debt service billings
in excess of revenue recognized
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Business development
and transaction costs
|
|
1
|
|
|
1
|
|
|
1
|
|
|
3
|
|
Severance and
reorganization costs
|
|
1
|
|
|
2
|
|
|
4
|
|
|
4
|
|
Stock-based
compensation expense
|
|
7
|
|
|
5
|
|
|
15
|
|
|
14
|
|
Adjustments to
reflect Adjusted EBITDA from unconsolidated
investments
|
|
6
|
|
|
7
|
|
|
12
|
|
|
11
|
|
Other
(d)
|
|
2
|
|
|
2
|
|
|
8
|
|
|
5
|
|
Adjusted
EBITDA
|
|
$
|
94
|
|
|
$
|
103
|
|
|
$
|
178
|
|
|
$
|
203
|
|
Capital type
expenditures at client owned facilities (c)
|
|
(7)
|
|
|
(11)
|
|
|
(20)
|
|
|
(23)
|
|
Cash paid for
interest
|
|
(12)
|
|
|
(40)
|
|
|
(59)
|
|
|
(73)
|
|
Cash paid for taxes,
net
|
|
(3)
|
|
|
(2)
|
|
|
(4)
|
|
|
(2)
|
|
Equity in net income
from unconsolidated investments
|
|
(3)
|
|
|
(2)
|
|
|
(3)
|
|
|
(2)
|
|
Adjustments to
reflect Adjusted EBITDA from unconsolidated
investments
|
|
(6)
|
|
|
(7)
|
|
|
(12)
|
|
|
(11)
|
|
Dividends from
unconsolidated investments
|
|
5
|
|
|
1
|
|
|
5
|
|
|
1
|
|
Adjustment for
working capital and other
|
|
(18)
|
|
|
18
|
|
|
2
|
|
|
(30)
|
|
Net cash provided
by operating activities
|
|
$
|
50
|
|
|
$
|
60
|
|
|
$
|
87
|
|
|
$
|
63
|
|
|
|
|
|
(a)
|
During
the six months ended June 30, 2018, we identified an
indicator of impairment associated with certain of our
EfW facilities and recorded a non-cash impairment charge
of $37 million to reduce the carrying value of the
facilities to their estimated fair value.
|
(b)
|
During the six months
ended June 30, 2019, we recorded a $57 million gain related to the
Rookery South Energy Recovery Facility development project and a
$12 million loss related to the divestiture of our Springfield and
Pittsfield EfW facilities.
|
|
During the six months
ended June 30, 2018, we recorded a $204 million gain on the sale of
50% of our Dublin project to our joint venture with Green
Investment Group and $6 million gain on the sale of our remaining
interests in China.
|
(c)
|
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.
|
(d)
|
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
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
Full Year
Estimated 2019
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited, in millions)
|
|
|
Net cash provided
by operating activities
|
$
|
50
|
|
|
$
|
60
|
|
|
$
|
87
|
|
|
$
|
63
|
|
|
$230 -
$260
|
Add: Changes in
restricted funds - operating (a)
|
5
|
|
|
(1)
|
|
|
5
|
|
|
(11)
|
|
|
10
|
Less: Maintenance
capital expenditures (b)
|
(34)
|
|
|
(33)
|
|
|
(65)
|
|
|
(78)
|
|
|
(130 -
120)
|
Free Cash
Flow
|
$
|
21
|
|
|
$
|
26
|
|
|
$
|
27
|
|
|
$
|
(26)
|
|
|
$120 -
$145
|
|
|
|
(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
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Maintenance capital
expenditures
|
$
|
(34)
|
|
|
$
|
(33)
|
|
|
$
|
(65)
|
|
|
$
|
(78)
|
|
|
|
Net maintenance
capital expenditures paid but
incurred in prior periods
|
—
|
|
|
(5)
|
|
|
(6)
|
|
|
(12)
|
|
|
|
Capital expenditures
associated with construction
of Dublin EfW
facility
|
—
|
|
|
(4)
|
|
|
—
|
|
|
(21)
|
|
|
|
Capital expenditures
associated with the New York
City MTS contract
|
(6)
|
|
|
—
|
|
|
(17)
|
|
|
—
|
|
|
|
Capital expenditures
associated with organic
growth initiatives
|
(1)
|
|
|
(7)
|
|
|
(5)
|
|
|
(15)
|
|
|
|
Total capital
expenditures associated with
growth investments
(c)
|
(7)
|
|
|
(11)
|
|
|
(22)
|
|
|
(36)
|
|
|
|
Capital expenditures
associated with property
insurance events
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
|
Total purchases of
property, plant and equipment
|
$
|
(41)
|
|
|
$
|
(49)
|
|
|
$
|
(93)
|
|
|
$
|
(130)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) Total
growth investments represents investments in growth opportunities,
including organic growth
initiatives, technology,
business development, and other similar expenditures.
|
|
|
Capital expenditures
associated with growth
investments
|
$
|
(7)
|
|
|
$
|
(11)
|
|
|
$
|
(22)
|
|
|
$
|
(36)
|
|
|
|
UK business
development projects
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
|
Investment in equity
affiliate
|
(5)
|
|
|
—
|
|
|
(8)
|
|
|
—
|
|
|
|
Asset and business
acquisitions, net of cash acquired
|
—
|
|
|
—
|
|
|
2
|
|
|
(5)
|
|
|
|
Total growth
investments
|
$
|
(12)
|
|
|
$
|
(11)
|
|
|
$
|
(29)
|
|
|
$
|
(41)
|
|
|
|
Covanta Holding
Corporation
|
|
|
|
Exhibit
6
|
Supplemental
Information
|
|
|
|
|
(Unaudited, $ in
millions)
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
|
2019
|
|
2018
|
REVENUE:
|
|
|
|
|
Waste and service
revenue:
|
|
|
|
|
EfW tip
fees
|
|
$
|
162
|
|
|
$
|
156
|
|
EfW service
fees
|
|
116
|
|
|
100
|
|
Environmental
services (a)
|
|
37
|
|
|
37
|
|
Municipal services
(b)
|
|
62
|
|
|
54
|
|
Other (c)
|
|
10
|
|
|
12
|
|
Intercompany
(d)
|
|
(28)
|
|
|
(27)
|
|
Total waste and
service
|
|
359
|
|
|
333
|
|
Energy
revenue:
|
|
|
|
|
Energy
sales
|
|
58
|
|
|
64
|
|
Capacity
|
|
12
|
|
|
13
|
|
Other
(e)
|
|
2
|
|
|
—
|
|
Total
energy
|
|
72
|
|
|
76
|
|
Recycled metals
revenue:
|
|
|
|
|
Ferrous
|
|
13
|
|
|
15
|
|
Non-ferrous
|
|
8
|
|
|
10
|
|
Total recycled
metals
|
|
21
|
|
|
25
|
|
Other revenue
(f)
|
|
15
|
|
|
20
|
|
Total
revenue
|
|
$
|
467
|
|
|
$
|
454
|
|
|
|
|
|
|
OPERATING
EXPENSE:
|
|
|
|
|
Plant operating
expense:
|
|
|
|
|
Plant
maintenance
|
|
$
|
83
|
|
|
$
|
79
|
|
Other plant operating
expense
|
|
272
|
|
|
255
|
|
Total plant operating
expense
|
|
354
|
|
|
334
|
|
Other operating
expense
|
|
16
|
|
|
19
|
|
General and
administrative
|
|
31
|
|
|
27
|
|
Depreciation and
amortization
|
|
55
|
|
|
55
|
|
Impairment
charges
|
|
1
|
|
|
37
|
|
Total operating
expense
|
|
$
|
457
|
|
|
$
|
472
|
|
|
|
|
|
|
Operating income
(loss)
|
|
$
|
10
|
|
|
$
|
(18)
|
|
|
|
|
|
|
Plus: impairment
charges
|
|
1
|
|
|
37
|
|
Operating
income excluding impairment charges
|
|
$
|
11
|
|
|
$
|
19
|
|
|
|
|
|
|
(a) Includes the
operation of material processing facilities and related services
provided by our Covanta Environmental Solutions
business.
|
(b) Consists of
transfer stations and the transportation component of our NYC
Marine Transfer Station 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.
|
(e) Primarily
components of wholesale load serving revenue not included in Energy
sales line, such as transmission and ancillaries.
|
(f) Consists
primarily of construction revenue.
|
Note: Certain amounts
may not total due to rounding.
|
Covanta Holding
Corporation
|
|
|
|
|
|
|
|
|
Exhibit
7
|
Revenue and
Operating Income Changes - Q2 2018 to Q2 2019
|
|
|
|
|
|
|
(Unaudited, $ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
Transitions (b)
|
|
|
|
|
|
|
|
Q2
2018
|
|
Organic
Growth (a)
|
|
%
|
|
Waste
|
|
Transactions
(c)
|
|
Total
Changes
|
|
Q2
2019
|
REVENUE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Waste and
service:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EfW tip
fees
|
$
|
156
|
|
|
$
|
5
|
|
|
3.5
|
%
|
|
$
|
5
|
|
|
$
|
(5)
|
|
|
$
|
5
|
|
|
$
|
162
|
|
EfW service
fees
|
100
|
|
|
7
|
|
|
6.6
|
%
|
|
(5)
|
|
|
14
|
|
|
16
|
|
|
116
|
|
Environmental
services
|
37
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37
|
|
Municipal
services
|
54
|
|
|
3
|
|
|
5.6
|
%
|
|
—
|
|
|
5
|
|
|
8
|
|
|
62
|
|
Other
revenue
|
12
|
|
|
(2)
|
|
|
(12.5)
|
%
|
|
(1)
|
|
|
—
|
|
|
(3)
|
|
|
10
|
|
Intercompany
|
(27)
|
|
|
1
|
|
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
|
(28)
|
|
Total waste and
service
|
333
|
|
|
14
|
|
|
4.3
|
%
|
|
(1)
|
|
|
13
|
|
|
27
|
|
|
359
|
|
Energy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
sales
|
64
|
|
|
(7)
|
|
|
(10.6)
|
%
|
|
2
|
|
|
(1)
|
|
|
(6)
|
|
|
58
|
|
Capacity
|
13
|
|
|
(1)
|
|
|
(6.6)
|
%
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
12
|
|
Other
|
—
|
|
|
2
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
Total
energy
|
76
|
|
|
(5)
|
|
|
(7.1)
|
%
|
|
2
|
|
|
(1)
|
|
|
(4)
|
|
|
72
|
|
Recycled
metals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ferrous
|
15
|
|
|
(3)
|
|
|
(18.2)
|
%
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
13
|
|
Non-ferrous
|
10
|
|
|
(2)
|
|
|
(19.9)
|
%
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
8
|
|
Total recycled
metals
|
25
|
|
|
(5)
|
|
|
(18.9)
|
%
|
|
—
|
|
|
1
|
|
|
(4)
|
|
|
21
|
|
Other
revenue
|
20
|
|
|
(5)
|
|
|
(25.7)
|
%
|
|
—
|
|
|
—
|
|
|
(5)
|
|
|
15
|
|
Total
revenue
|
$
|
454
|
|
|
$
|
(1)
|
|
|
(0.2)
|
%
|
|
$
|
1
|
|
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant operating
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant
maintenance
|
$
|
79
|
|
|
$
|
3
|
|
|
3.2
|
%
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
83
|
|
Other plant operating
expense
|
255
|
|
|
8
|
|
|
2.9
|
%
|
|
1
|
|
|
8
|
|
|
17
|
|
|
272
|
|
Total plant
operating expense
|
334
|
|
|
10
|
|
|
3.0
|
%
|
|
1
|
|
|
10
|
|
|
21
|
|
|
354
|
|
Other operating
expense
|
19
|
|
|
(3)
|
|
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
16
|
|
General and
administrative
|
27
|
|
|
3
|
|
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
31
|
|
Depreciation and
amortization
|
55
|
|
|
(1)
|
|
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
55
|
|
Total operating
expense
|
$
|
435
|
|
|
$
|
8
|
|
|
|
|
$
|
1
|
|
|
$
|
11
|
|
|
$
|
21
|
|
|
$
|
456
|
|
Operating income
(loss) excluding impairment charges
|
$
|
19
|
|
|
$
|
(10)
|
|
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
(8)
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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: Certain amounts
may not total due to rounding.
|
Operating
Metrics
|
|
|
Exhibit
8
|
(Unaudited)
|
|
|
|
|
Three Months
Ended
June 30,
|
|
2019
|
|
2018
|
EfW
Waste
|
|
|
|
Tons: (in
millions)
|
|
|
|
Tip fee-
contracted
|
2.29
|
|
|
2.32
|
|
Tip fee-
uncontracted
|
0.43
|
|
|
0.44
|
|
Service
fee
|
2.70
|
|
|
2.31
|
|
Total tons
|
5.41
|
|
|
5.07
|
|
Tip Fee revenue
per ton:
|
|
|
|
Tip fee-
contracted
|
$
|
54.16
|
|
|
$
|
51.52
|
|
Tip fee-
uncontracted
|
$
|
89.06
|
|
|
$
|
84.05
|
|
Average tip
fee
|
$
|
59.66
|
|
|
$
|
56.68
|
|
EfW
Energy
|
|
|
|
Energy sales: (MWh
in millions)
|
|
|
|
Contracted
|
0.47
|
|
|
0.52
|
|
Hedged
|
0.73
|
|
|
0.81
|
|
Market
|
0.37
|
|
|
0.30
|
|
Total
energy
|
1.57
|
|
|
1.62
|
|
Market sales by
geography: (MWh in millions)
|
|
|
|
PJM East
|
0.2
|
|
|
0.1
|
|
NEPOOL
|
0.1
|
|
|
0.1
|
|
NYISO
|
—
|
|
|
—
|
|
Other
|
0.1
|
|
|
0.1
|
|
Revenue per MWh
(excludes capacity and other energy revenue):
|
|
|
|
Contracted
|
$
|
66.00
|
|
|
$
|
64.81
|
|
Hedged
|
$
|
26.42
|
|
|
$
|
25.99
|
|
Market
|
$
|
21.69
|
|
|
$
|
30.86
|
|
Average revenue per
MWh
|
$
|
37.19
|
|
|
$
|
39.28
|
|
Metals
|
|
|
|
Tons Recovered:
(in thousands)
|
|
|
|
Ferrous
|
110.8
|
|
|
106.6
|
|
Non-ferrous
|
12.5
|
|
|
11.7
|
|
Tons Sold: (in
thousands)
|
|
|
|
Ferrous
|
94.9
|
|
|
81.4
|
|
Non-ferrous
|
6.7
|
|
|
7.0
|
|
Revenue per
ton:
|
|
|
|
Ferrous
|
$
|
132
|
|
|
$
|
182
|
|
Non-ferrous
|
$
|
1,255
|
|
|
$
|
1,432
|
|
EfW plant
operating expense: ($ in millions)
|
|
|
|
Plant operating
expense - gross
|
$
|
279
|
|
|
$
|
264
|
|
Less: Client
pass-through costs
|
(12)
|
|
|
(12)
|
|
Less: REC sales -
contra-expense
|
(2)
|
|
|
(3)
|
|
Plant operating
expense, net
|
$
|
265
|
|
|
$
|
250
|
|
|
|
|
|
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. Hedged energy sales includes the energy component
of wholesale load serving. 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 and Free Cash Flow, which are non-GAAP
financial measures as defined by the Securities and Exchange
Commission. The non-GAAP financial measures of Adjusted
EBITDA and Free Cash Flow 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 and Free Cash Flow 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 investments that we do not control, we adjust EBITDA
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 and six months ended June 30, 2019 and 2018, 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 joint ventures 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 2019
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
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.
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 six months ended June 30, 2019 and 2018, reconciled
for each such period to cash flow provided by operating activities,
which we believe 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
our joint ventures 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