MORRISTOWN, N.J., Oct. 29, 2020 /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 nine months ended
September 30, 2020.
|
Three Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
|
|
|
|
(Unaudited, $ in
millions)
|
Revenue
|
$491
|
|
$465
|
Net income
|
$5
|
|
$14
|
Adjusted
EBITDA
|
$128
|
|
$125
|
Net cash provided by
operating activities
|
$36
|
|
$25
|
Free Cash
Flow
|
$3
|
|
$22
|
|
Reconciliations of
non-GAAP measures can be found in the exhibits to this press
release.
|
Key Highlights
- Strong Q3 results, with year-over-year growth in Adjusted
EBITDA
- Waste markets returning to near pre-pandemic levels
- Effectively navigating challenging operating environment
- UK project development progressing on schedule
"During the third quarter we saw continued recovery from the
initial months of the pandemic, most notably in the waste market,
with tip fees up 3% year-over-year," said Covanta's CFO
Bradford J. Helgeson. "While the
operating environment remains challenging, our team has performed
at a very high level, as our facilities matched last year's strong
availability. We will continue to focus on operating safely and
reliably, while progressing our growth initiatives, particularly in
the UK."
More detail on our third quarter results can be found in the
exhibits to this release and in our third quarter 2020 earnings
presentation found in the Investor Relations section of the Covanta
website at www.covanta.com.
Conference Call Information
Covanta will host a
conference call at 8:30 AM (Eastern)
on Friday, October 30, 2020 to discuss its third quarter
results.
The conference call will begin with prepared remarks, which will
be followed by a question and answer session. To participate
on the live call, please dial 1-888-317-6003 (US) or
1-412-317-6061 (international) approximately 15 minutes
prior to the scheduled start of the call and enter the passcode
0066556. 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 Waste-to-Energy ("WtE") facilities safely convert
approximately 21 million tons of waste from municipalities and
businesses into clean, renewable electricity to power one million
homes and recycle 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, 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
Consolidated
Statements of Operations
|
|
|
|
Exhibit 1
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
(In millions, except per
share amounts)
|
OPERATING
REVENUE:
|
|
|
|
|
|
|
|
|
Waste and service
revenue
|
|
$
|
366
|
|
|
$
|
353
|
|
|
$
|
1,056
|
|
|
$
|
1,039
|
|
Energy
revenue
|
|
93
|
|
|
81
|
|
|
264
|
|
|
247
|
|
Recycled metals
revenue
|
|
20
|
|
|
19
|
|
|
57
|
|
|
61
|
|
Other operating
revenue
|
|
12
|
|
|
12
|
|
|
36
|
|
|
38
|
|
Total operating
revenue
|
|
491
|
|
|
465
|
|
|
1,413
|
|
|
1,385
|
|
OPERATING
EXPENSE:
|
|
|
|
|
|
|
|
|
Plant operating
expense
|
|
349
|
|
|
325
|
|
|
1,050
|
|
|
1,038
|
|
Other operating
expense, net
|
|
11
|
|
|
10
|
|
|
37
|
|
|
43
|
|
General and
administrative expense
|
|
27
|
|
|
29
|
|
|
83
|
|
|
90
|
|
Depreciation and
amortization expense
|
|
54
|
|
|
55
|
|
|
168
|
|
|
165
|
|
Impairment
charges (a)
|
|
—
|
|
|
2
|
|
|
19
|
|
|
3
|
|
Total operating
expense
|
|
441
|
|
|
421
|
|
|
1,357
|
|
|
1,339
|
|
Operating
income
|
|
50
|
|
|
44
|
|
|
56
|
|
|
46
|
|
OTHER (EXPENSE)
INCOME:
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(32)
|
|
|
(36)
|
|
|
(100)
|
|
|
(108)
|
|
Net gain on sale of
business and investments (a)
|
|
—
|
|
|
1
|
|
|
9
|
|
|
49
|
|
Loss on extinguishment
of debt (a)
|
|
(12)
|
|
|
—
|
|
|
(12)
|
|
|
—
|
|
Other (expense)
income, net
|
|
—
|
|
|
(1)
|
|
|
(2)
|
|
|
1
|
|
Total other
expense
|
|
(44)
|
|
|
(36)
|
|
|
(105)
|
|
|
(58)
|
|
Income (loss)
before income tax (expense) benefit and equity in net
income from unconsolidated investments
|
|
6
|
|
|
8
|
|
|
(49)
|
|
|
(12)
|
|
Income tax (expense)
benefit
|
|
(3)
|
|
|
5
|
|
|
6
|
|
|
6
|
|
Equity in net income
from unconsolidated investments
|
|
2
|
|
|
1
|
|
|
3
|
|
|
4
|
|
Net income
(loss)
|
|
$
|
5
|
|
|
$
|
14
|
|
|
$
|
(40)
|
|
|
$
|
(2)
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
132
|
|
|
131
|
|
|
132
|
|
|
131
|
|
Diluted
|
|
134
|
|
|
133
|
|
|
132
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss)
Per Share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.04
|
|
|
$
|
0.11
|
|
|
$
|
(0.30)
|
|
|
$
|
(0.02)
|
|
Diluted
|
|
$
|
0.04
|
|
|
$
|
0.10
|
|
|
$
|
(0.30)
|
|
|
$
|
(0.02)
|
|
|
|
|
|
|
|
|
|
|
Cash Dividend
Declared Per Share
|
|
$
|
0.08
|
|
|
$
|
0.25
|
|
|
$
|
0.41
|
|
|
$
|
0.75
|
|
|
(a) For additional
information, see Exhibit 4 of this Press Release.
|
Covanta Holding
Corporation
Consolidated
Balance Sheets
|
|
|
Exhibit 2
|
|
|
|
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
|
|
|
(Unaudited)
|
|
|
ASSETS
|
(In millions, except per share amounts)
|
Current:
|
|
|
|
Cash and cash
equivalents
|
$
|
34
|
|
|
$
|
37
|
|
Restricted funds held
in trust
|
11
|
|
|
18
|
|
Receivables (less
allowances of $6 and $9, respectively)
|
247
|
|
|
240
|
|
Prepaid expenses and
other current assets
|
94
|
|
|
105
|
|
Total Current
Assets
|
386
|
|
|
400
|
|
Property, plant and
equipment, net
|
2,420
|
|
|
2,451
|
|
Restricted funds held
in trust
|
6
|
|
|
8
|
|
Intangible assets,
net
|
242
|
|
|
258
|
|
Goodwill
|
302
|
|
|
321
|
|
Other
assets
|
300
|
|
|
277
|
|
Total
Assets
|
$
|
3,656
|
|
|
$
|
3,715
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current:
|
|
|
|
Current portion of
long-term debt
|
$
|
18
|
|
|
$
|
17
|
|
Current portion of
project debt
|
9
|
|
|
8
|
|
Accounts
payable
|
66
|
|
|
36
|
|
Accrued expenses and
other current liabilities
|
254
|
|
|
292
|
|
Total Current
Liabilities
|
347
|
|
|
353
|
|
Long-term
debt
|
2,417
|
|
|
2,366
|
|
Project
debt
|
118
|
|
|
125
|
|
Deferred income
taxes
|
360
|
|
|
372
|
|
Other
liabilities
|
130
|
|
|
123
|
|
Total
Liabilities
|
3,372
|
|
|
3,339
|
|
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 132 shares)
|
14
|
|
|
14
|
|
Additional paid-in
capital
|
871
|
|
|
857
|
|
Accumulated other
comprehensive loss
|
(45)
|
|
|
(35)
|
|
Accumulated
deficit
|
(556)
|
|
|
(460)
|
|
Treasury stock, at
par
|
—
|
|
|
—
|
|
Total
Equity
|
284
|
|
|
376
|
|
Total Liabilities
and Equity
|
$
|
3,656
|
|
|
$
|
3,715
|
|
Covanta Holding
Corporation
|
Exhibit 3
|
Consolidated
Statements of Cash Flow
|
|
|
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
|
|
|
|
(Unaudited, in
millions)
|
OPERATING
ACTIVITIES:
|
|
|
|
Net loss
|
$
|
(40)
|
|
|
$
|
(2)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization expense
|
168
|
|
|
165
|
|
Amortization of
deferred debt financing costs
|
3
|
|
|
3
|
|
Net gain on sale of
business and investments (a)
|
(9)
|
|
|
(49)
|
|
Impairment charges
(a)
|
19
|
|
|
3
|
|
Loss on extinguishment
of debt (a)
|
12
|
|
|
—
|
|
Provision for expected
credit losses
|
1
|
|
|
2
|
|
Stock-based
compensation expense
|
19
|
|
|
20
|
|
Equity in net income
from unconsolidated investments
|
(3)
|
|
|
(4)
|
|
Deferred income
taxes
|
(7)
|
|
|
(9)
|
|
Dividends from
unconsolidated investments
|
3
|
|
|
5
|
|
Other, net
|
4
|
|
|
3
|
|
Change in working
capital, net of effects of acquisitions and dispositions
|
18
|
|
|
(33)
|
|
Changes in noncurrent
assets and liabilities, net
|
3
|
|
|
8
|
|
Net cash provided by
operating activities
|
191
|
|
|
112
|
|
INVESTING
ACTIVITIES:
|
|
|
|
Purchase of property,
plant and equipment
|
(117)
|
|
|
(121)
|
|
Acquisition of
businesses, net of cash acquired
|
—
|
|
|
2
|
|
Proceeds from the sale
of assets, net of restricted cash
|
3
|
|
|
28
|
|
Investment in equity
affiliates
|
(11)
|
|
|
(9)
|
|
Other, net
|
(10)
|
|
|
(1)
|
|
Net cash used in
investing activities
|
(135)
|
|
|
(101)
|
|
FINANCING
ACTIVITIES:
|
|
|
|
Proceeds from
borrowings on long-term debt
|
538
|
|
|
75
|
|
Proceeds from
borrowings on revolving credit facility
|
631
|
|
|
441
|
|
Payments on long-term
debt
|
(551)
|
|
|
(12)
|
|
Payments on revolving
credit facility
|
(574)
|
|
|
(375)
|
|
Payments on project
debt
|
(6)
|
|
|
(16)
|
|
Payment of deferred
financing costs
|
(8)
|
|
|
(1)
|
|
Cash dividends paid to
stockholders
|
(78)
|
|
|
(100)
|
|
Payment of insurance
premium financing
|
(24)
|
|
|
(20)
|
|
Proceeds from related
party note
|
9
|
|
|
—
|
|
Other, net
|
(5)
|
|
|
(8)
|
|
Net cash used in
financing activities
|
(68)
|
|
|
(16)
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
—
|
|
|
(2)
|
|
Net decrease in cash,
cash equivalents and restricted cash
|
(12)
|
|
|
(7)
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
63
|
|
|
105
|
|
Cash, cash
equivalents and restricted cash at end of period
|
$
|
51
|
|
|
$
|
98
|
|
|
|
|
|
|
(a) For additional
information, see Exhibit 4 of this Press Release.
|
Covanta Holding
Corporation
|
|
Exhibit 4
|
Consolidated
Reconciliation of Net Loss and Net Cash Provided by Operating
Activities to Adjusted EBITDA
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited, in millions)
|
Net income
(loss)
|
|
$
|
5
|
|
|
$
|
14
|
|
|
$
|
(40)
|
|
|
$
|
(2)
|
|
Depreciation and
amortization expense
|
|
54
|
|
|
55
|
|
|
168
|
|
|
165
|
|
Interest
expense
|
|
32
|
|
|
36
|
|
|
100
|
|
|
108
|
|
Income tax expense
(benefit)
|
|
3
|
|
|
(5)
|
|
|
(6)
|
|
|
(6)
|
|
Impairment charges
(a)
|
|
—
|
|
|
2
|
|
|
19
|
|
|
3
|
|
Net gain on sale of
businesses and investments (b)
|
|
—
|
|
|
(1)
|
|
|
(9)
|
|
|
(49)
|
|
Loss on extinguishment
of debt(c)
|
|
12
|
|
|
—
|
|
|
12
|
|
|
—
|
|
Loss on asset
sales
|
|
—
|
|
|
1
|
|
|
2
|
|
|
3
|
|
Accretion
expense
|
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
Business development
and transaction costs
|
|
1
|
|
|
1
|
|
|
1
|
|
|
2
|
|
Severance and
reorganization costs (d)
|
|
1
|
|
|
3
|
|
|
2
|
|
|
11
|
|
Stock-based
compensation expense
|
|
5
|
|
|
5
|
|
|
19
|
|
|
20
|
|
Adjustments to reflect
Adjusted EBITDA from unconsolidated
investments
|
|
6
|
|
|
6
|
|
|
18
|
|
|
18
|
|
Capital type
expenditures at client owned facilities (e)
|
|
5
|
|
|
8
|
|
|
24
|
|
|
28
|
|
Other
(f)
|
|
3
|
|
|
(1)
|
|
|
9
|
|
|
—
|
|
Adjusted
EBITDA
|
|
$
|
128
|
|
|
$
|
125
|
|
|
$
|
321
|
|
|
$
|
303
|
|
|
|
(a)
|
During the nine
months ended September 30, 2020, we recorded a $19 million non-cash
impairment charge related to our Covanta Environmental Solutions
reporting unit.
|
|
|
(b)
|
During the nine
months ended September 30, 2020, we recorded a $9 million gain
related to the Newhurst Energy Recovery Facility development
project.
|
|
|
|
During the nine
months ended September 30, 2019, we recorded a $57 million gain
related to the Rookery South Energy Recovery Facility development
project and a $11 million loss related to the divestiture of our
Springfield and Pittsfield WtE facilities.
|
|
|
(c)
|
During the three
and nine months ended September 30, 2020, we recorded a
$12 million loss on extinguishment of debt comprised of
approximately $10 million related to the redemption of our
5.875% Senior Notes due 2024 and approximately $1 million
related to the refinancing of our tax-exempt bonds.
|
|
|
(d)
|
During the nine
months ended September 30, 2019, we recorded $11
million of costs related to our ongoing asset rationalization
and portfolio optimization efforts, early retirement program, and
certain organizational restructuring activities.
|
|
|
(e)
|
Adjustment for
capital equipment related expenditures at our service fee operated
facilities which are capitalized at facilities that we
own.
|
|
|
(f)
|
Includes certain
other items that are added back under the definition of Adjusted
EBITDA in Covanta Energy, LLC's credit agreement.
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited, in millions)
|
Net cash provided
by operating activities
|
|
$
|
36
|
|
|
$
|
25
|
|
|
$
|
191
|
|
|
$
|
112
|
|
Capital type
expenditures at client owned facilities (a)
|
|
5
|
|
|
8
|
|
|
24
|
|
|
28
|
|
Cash paid for
interest
|
|
56
|
|
|
64
|
|
|
104
|
|
|
123
|
|
Cash paid for taxes,
net
|
|
2
|
|
|
1
|
|
|
3
|
|
|
5
|
|
Equity in net income
from unconsolidated investments
|
|
2
|
|
|
1
|
|
|
3
|
|
|
4
|
|
Adjustments to reflect
Adjusted EBITDA from unconsolidated
investments
|
|
6
|
|
|
6
|
|
|
18
|
|
|
18
|
|
Dividends from
unconsolidated investments
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
(5)
|
|
Adjustment for working
capital and other
|
|
21
|
|
|
20
|
|
|
(19)
|
|
|
18
|
|
Adjusted
EBITDA
|
|
$
|
128
|
|
|
$
|
125
|
|
|
$
|
321
|
|
|
$
|
303
|
|
|
(a) See Adjusted
EBITDA reconciliation above - Note (e).
|
Covanta Holding
Corporation
|
|
Exhibit 5
|
Reconciliation of
Net Cash Provided by Operating Activities to Free Cash
Flow
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
(Unaudited, in millions)
|
Net cash provided
by operating activities
|
$
|
36
|
|
|
$
|
25
|
|
|
$
|
191
|
|
|
$
|
112
|
|
Add: Changes in
restricted funds - operating (a)
|
2
|
|
|
13
|
|
|
—
|
|
|
18
|
|
Less: Maintenance
capital expenditures (b)
|
(35)
|
|
|
(16)
|
|
|
(107)
|
|
|
(81)
|
|
Free Cash
Flow
|
$
|
3
|
|
|
$
|
22
|
|
|
$
|
84
|
|
|
$
|
49
|
|
|
(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
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
(Unaudited, in millions)
|
Maintenance capital
expenditures
|
$
|
(35)
|
|
|
$
|
(16)
|
|
|
$
|
(107)
|
|
|
$
|
(81)
|
|
Net maintenance
capital expenditures paid but incurred in prior periods
|
—
|
|
|
(1)
|
|
|
2
|
|
|
(7)
|
|
Total ash processing
system
|
(3)
|
|
|
(3)
|
|
|
(11)
|
|
|
(4)
|
|
Capital expenditures
associated with the New York City MTS contract
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(19)
|
|
Capital expenditures
associated with organic growth initiatives
|
—
|
|
|
(6)
|
|
|
(1)
|
|
|
(10)
|
|
Total capital
expenditures associated with growth investments
(c)
|
(3)
|
|
|
(11)
|
|
|
(12)
|
|
|
(33)
|
|
Total purchases of
property, plant and equipment
|
$
|
(38)
|
|
|
$
|
(28)
|
|
|
$
|
(117)
|
|
|
$
|
(121)
|
|
|
|
|
|
|
|
|
|
(c) Total growth
investments represents investments in growth opportunities,
including organic growth initiatives, technology, business
development, and other similar expenditures, net of third party
loans collateralized by unconsolidated project equity.
|
Capital expenditures
associated with growth investments
|
$
|
(3)
|
|
|
$
|
(11)
|
|
|
$
|
(12)
|
|
|
$
|
(33)
|
|
UK business
development projects
|
—
|
|
|
—
|
|
|
(9)
|
|
|
(1)
|
|
Investment in equity
affiliate
|
(1)
|
|
|
(1)
|
|
|
(11)
|
|
|
(9)
|
|
Asset and business
acquisitions, net of cash acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Less: third party
project loan proceeds collateralized by project equity
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
Total growth
investments
|
$
|
(4)
|
|
|
$
|
(12)
|
|
|
$
|
(23)
|
|
|
$
|
(41)
|
|
Covanta Holding
Corporation
|
|
|
|
Exhibit
6
|
Supplemental
Information
|
|
|
|
|
(Unaudited, $ in
millions)
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
2020
|
|
2019
|
REVENUE:
|
|
|
|
|
Waste and service
revenue:
|
|
|
|
|
WtE tip
fees
|
|
$
|
168
|
|
|
$
|
163
|
|
WtE service
fees
|
|
118
|
|
|
114
|
|
Environmental services
(a)
|
|
36
|
|
|
36
|
|
Municipal services
(b)
|
|
66
|
|
|
64
|
|
Other
(c)
|
|
10
|
|
|
8
|
|
Intercompany
(d)
|
|
(32)
|
|
|
(34)
|
|
Total waste and
service
|
|
366
|
|
|
353
|
|
Energy
revenue:
|
|
|
|
|
Energy
sales
|
|
63
|
|
|
66
|
|
Capacity
|
|
10
|
|
|
9
|
|
Other
(e)
|
|
20
|
|
|
6
|
|
Total
energy
|
|
93
|
|
|
81
|
|
Recycled metals
revenue:
|
|
|
|
|
Ferrous
|
|
12
|
|
|
11
|
|
Non-ferrous
|
|
9
|
|
|
8
|
|
Total recycled
metals
|
|
20
|
|
|
19
|
|
Other revenue
(f)
|
|
12
|
|
|
12
|
|
Total
revenue
|
|
$
|
491
|
|
|
$
|
465
|
|
|
|
|
|
|
OPERATING
EXPENSE:
|
|
|
|
|
Plant operating
expense:
|
|
|
|
|
Plant
maintenance
|
|
$
|
66
|
|
|
$
|
62
|
|
Other plant operating
expense
|
|
283
|
|
|
262
|
|
Total plant operating
expense
|
|
349
|
|
|
325
|
|
Other operating
expense
|
|
11
|
|
|
10
|
|
General and
administrative
|
|
27
|
|
|
29
|
|
Depreciation and
amortization
|
|
54
|
|
|
55
|
|
Impairment
charges
|
|
—
|
|
|
2
|
|
Total operating
expense
|
|
$
|
441
|
|
|
$
|
421
|
|
|
|
|
|
|
Operating
income
|
|
$
|
50
|
|
|
$
|
44
|
|
|
|
|
|
|
Plus: impairment
charges
|
|
—
|
|
|
2
|
|
Operating
income excluding impairment charges
|
|
$
|
50
|
|
|
$
|
46
|
|
|
(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
WtE 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 - Q3 2019 to Q3 2020
|
|
|
|
|
|
|
(Unaudited, $ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3
2019
|
|
Organic
Growth (a)
|
|
%
|
|
Contract
Transitions (b)
|
|
Transactions
(c)
|
|
Total
Changes
|
|
Q3
2020
|
REVENUE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Waste and
service:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WtE tip
fees
|
$
|
163
|
|
|
$
|
4
|
|
|
2.7
|
%
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
168
|
|
WtE service
fees
|
114
|
|
|
2
|
|
|
1.6
|
%
|
|
2
|
|
|
—
|
|
|
4
|
|
|
118
|
|
Environmental
services
|
36
|
|
|
—
|
|
|
(1.3)
|
%
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
36
|
|
Municipal
services
|
64
|
|
|
3
|
|
|
5.3
|
%
|
|
—
|
|
|
(1)
|
|
|
2
|
|
|
66
|
|
Other
revenue
|
8
|
|
|
1
|
|
|
14.2
|
%
|
|
—
|
|
|
—
|
|
|
1
|
|
|
10
|
|
Intercompany
|
(34)
|
|
|
2
|
|
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
(32)
|
|
Total waste and
service
|
353
|
|
|
12
|
|
|
3.4
|
%
|
|
2
|
|
|
(1)
|
|
|
12
|
|
|
366
|
|
Energy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
sales
|
66
|
|
|
(3)
|
|
|
(4.0)
|
%
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
63
|
|
Capacity
|
9
|
|
|
1
|
|
|
10.6
|
%
|
|
—
|
|
|
—
|
|
|
1
|
|
|
10
|
|
Other
|
6
|
|
|
14
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
14
|
|
|
20
|
|
Total
energy
|
81
|
|
|
13
|
|
|
15.4
|
%
|
|
—
|
|
|
—
|
|
|
12
|
|
|
93
|
|
Recycled
metals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ferrous
|
11
|
|
|
—
|
|
|
1.1
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
Non-ferrous
|
8
|
|
|
1
|
|
|
12.4
|
%
|
|
—
|
|
|
—
|
|
|
1
|
|
|
9
|
|
Total recycled
metals
|
19
|
|
|
1
|
|
|
5.8
|
%
|
|
—
|
|
|
—
|
|
|
1
|
|
|
20
|
|
Other
revenue
|
12
|
|
|
1
|
|
|
9.9
|
%
|
|
—
|
|
|
—
|
|
|
1
|
|
|
12
|
|
Total
revenue
|
$
|
465
|
|
|
$
|
27
|
|
|
5.7
|
%
|
|
$
|
2
|
|
|
$
|
(1)
|
|
|
$
|
27
|
|
|
$
|
491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant operating
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant
maintenance
|
$
|
62
|
|
|
$
|
3
|
|
|
5.3
|
%
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
66
|
|
Other plant operating
expense
|
262
|
|
|
21
|
|
|
8.0
|
%
|
|
1
|
|
|
(1)
|
|
|
21
|
|
|
283
|
|
Total plant
operating expense
|
325
|
|
|
24
|
|
|
7.5
|
%
|
|
1
|
|
|
(1)
|
|
|
25
|
|
|
349
|
|
Other operating
expense
|
10
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
General and
administrative
|
29
|
|
|
(3)
|
|
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
27
|
|
Depreciation and
amortization
|
55
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54
|
|
Total operating
expense
|
$
|
419
|
|
|
$
|
21
|
|
|
|
|
$
|
1
|
|
|
$
|
(1)
|
|
|
$
|
22
|
|
|
$
|
441
|
|
Operating income
excluding impairment charges
|
$
|
46
|
|
|
$
|
5
|
|
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
50
|
|
|
(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.
|
Covanta Holding
Corporation
|
|
|
Exhibit
8
|
Operating
Metrics
|
|
|
|
(Unaudited)
|
|
|
|
|
Three Months
Ended
September 30,
|
|
2020
|
|
2019
|
WtE
Waste
|
|
|
|
Tons: (in
millions)
|
|
|
|
Tip fee-
contracted
|
2.28
|
|
|
2.28
|
|
Tip fee-
uncontracted
|
0.46
|
|
|
0.48
|
|
Service fee
|
2.74
|
|
|
2.74
|
|
Total tons
|
5.48
|
|
|
5.49
|
|
Tip Fee revenue
per ton:
|
|
|
|
Tip fee-
contracted
|
$
|
55.45
|
|
|
$
|
53.93
|
|
Tip fee-
uncontracted
|
$
|
89.89
|
|
|
$
|
85.22
|
|
Average tip
fee
|
$
|
61.23
|
|
|
$
|
59.36
|
|
WtE
Energy
|
|
|
|
Energy sales: (MWh
in millions)
|
|
|
|
Contracted
|
0.51
|
|
|
0.55
|
|
Hedged
|
1.13
|
|
|
0.76
|
|
Market
|
NM
|
|
|
0.38
|
|
Total
energy
|
1.65
|
|
|
1.69
|
|
Market sales by
geography: (MWh in millions)
|
|
|
|
PJM East
|
—
|
|
|
0.2
|
|
NEPOOL
|
—
|
|
|
0.1
|
|
NYISO
|
—
|
|
|
—
|
|
Other
|
—
|
|
|
0.1
|
|
Revenue per MWh
(excludes capacity and other energy revenue):
|
|
|
|
Contracted
|
$
|
65.89
|
|
|
$
|
62.77
|
|
Hedged
|
$
|
26.31
|
|
|
$
|
28.69
|
|
Market
|
NM
|
|
|
$
|
25.36
|
|
Average revenue per
MWh
|
$
|
38.24
|
|
|
$
|
39.08
|
|
Metals
|
|
|
|
Tons Recovered:
(in thousands)
|
|
|
|
Ferrous
|
118.2
|
|
|
111.9
|
|
Non-ferrous
|
12.2
|
|
|
12.8
|
|
Tons Sold: (in
thousands)
|
|
|
|
Ferrous
|
101.3
|
|
|
96.4
|
|
Non-ferrous
|
9.1
|
|
|
8.2
|
|
Revenue per
ton:
|
|
|
|
Ferrous
|
$
|
115
|
|
|
$
|
118
|
|
Non-ferrous
|
$
|
1,003
|
|
|
$
|
984
|
|
WtE plant
operating expense: ($ in millions)
|
|
|
|
Plant operating
expense - gross
|
$
|
270
|
|
|
$
|
256
|
|
Less: Client
pass-through costs
|
(13)
|
|
|
(12)
|
|
Less: REC sales -
contra-expense
|
(3)
|
|
|
(4)
|
|
Plant operating
expense, net
|
$
|
255
|
|
|
$
|
240
|
|
|
|
|
|
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, we adjust EBITDA for our proportionate
share of the entity's depreciation and amortization, interest
expense, tax expense and other adjustments to exclude significant
unusual or non-recurring items that are not directly related to the
entity's operating performance. in order to improve
comparability to the Adjusted EBITDA of our wholly owned entities.
We do not have control, nor have any legal claim to the portion of
our unconsolidated investees' revenues and expenses allocable to
our joint venture partners. As we do not control, but do exercise
significant influence, we account for these unconsolidated
investments in accordance with the equity method of accounting. Net
income (losses) from these investments are reflected within our
consolidated statements of operations in Equity in net income from
unconsolidated investments. In order to provide a meaningful basis
for comparison, we are providing information with respect to our
Adjusted EBITDA for the three and nine months ended September 30, 2020 and 2019, 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 2020
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 nine months ended September 30,
2020 and 2019, 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;
- the ongoing effects from the recent COVID-19 outbreak, and the
recent significant drop in oil price;
- 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.
In addition, the current COVID-19 pandemic is significantly
impacting the national and global economy and commodity and
financial markets. The full extent and impact of the pandemic is
unknown and to date has included extreme volatility in financial
and commodity markets, a significant slowdown in economic activity,
and has raised the prospect of a global recession. The public and
private sector response has led to significant restrictions on
travel, temporary business closures, quarantines, global stock
market volatility and a general reduction in consumer and
construction activity globally. Matters outside our control have
affected our business and operations and may or may continue to:
limit travel of Company representatives to our business units
domestically and internationally; adversely affect the health and
welfare of our personnel; reduce the volume of waste materials into
our facilities and/or the price at which we are able to attract
such materials; or prevent important vendors and contractors from
performing normal and contracted activities. If significant
portions of our workforce are unable to work effectively, including
because of illness, quarantines, government actions, travel
restrictions, facility closures, social distancing requirements or
other restrictions in connection with the pandemic, our operations
could be materially impacted. It is possible that the continued
spread of COVID-19 could also further cause disruption in our
supply chains, adversely affect our business partners, delay our
construction activities or cause other unpredictable events.
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