http://media.marketwire.com/attachments/201203/24280_CovantaLogo.jpghttp://at.marketwire.com/accesstracking/AccessTrackingLogServlet?PrId=982248&ProfileId=051205&sourceType=1MORRISTOWN, NJ -- (Marketwire) -- 02/06/13 -- Covanta Holding Corporation (NYSE: CVA) ("Covanta" or the "Company"), a leading global owner and operator of Energy-from-Waste ("EfW") projects, reported financial results today for the three and twelve months ended December 31, 2012.
Full Year
---------------------------------------
2012
Continuing Operations 2011 2012 Guidance(1)
----------- ----------- ---------------
(Unaudited, $ in millions, except per
share amounts)
Revenue $ 1,650 $ 1,644 N/A
Income from Continuing Operations $ 84 $ 118 N/A
Adjusted EBITDA $ 494 $ 492 $ 490 - $ 500
Free Cash Flow $ 282 $ 262 $ 250 - $ 265
Adjusted EPS $ 0.54 $ 0.52 $ 0.50 - $ 0.55
(1) As of November 7, 2012.
Key Full Year 2012 Highlights:
- Record year in terms of EfW Boiler availability;
- Signed $2.5 billion of waste and energy contracts with average term of 12 years -- secured two million tons of waste and 750,000 MWh of generation per year;
- Acquired ~2,700 ton per day Delaware Valley EfW facility; immediately accretive to key metrics;
- Successfully refinanced $1.9 billion in debt, creating substantial financial flexibility;
- Honolulu EfW project expansion successfully commenced commercial operation; and
- Doubled dividend to $0.60/share annually; shareholder returns totaled $169 million.
Commenting on Covanta's 2012 results, Anthony Orlando, Covanta's President and CEO stated, "I'm pleased with both our 2012 operating performance and the execution of organic growth initiatives. This good work enabled us to offset the drop in energy and metals markets, as well as the impact of Hurricane Sandy. We also had a great year extending long-term waste and energy contracts. Our contracted revenue base, combined with our continued investment in organic growth initiatives, positions us to grow in the coming year. Our guidance calls for 5% Adjusted EBITDA growth in 2013, and maintaining our strong Free Cash Flow. Our focus is on investing in the business for the long-term, and we see a number of exciting opportunities that will allow us to grow this year and beyond."
Full Year 2012 Results
For the twelve months ended December 31, 2012, total operating revenues declined slightly to $1,644 million from $1,650 million in 2011. This was primarily due to the negative impacts of:
- Lower revenues earned explicitly to service project debt;
- Lower pricing for energy at EfW facilities and recycled metals; and
- Hurricane Sandy impact, as certain facilities were briefly forced off-line.
These impacts were substantially offset by:
- Organic growth initiatives in special waste, recycled metals and other;
- Escalations in service fee contracts; and
- New units coming online.
Excluding certain items(2), operating expenses were $1,420 million for 2012 compared to $1,427 million for 2011. The $7 million decrease was primarily due to:
- The benefits from various operational improvements.
Offset by:
- Expenses related to Hurricane Sandy for repairs at facilities; and
- Lower alternative fuel tax credits.
Excluding the items noted above, and the net operating income negative effect of Hurricane Sandy of $9 million in 2012, operating income was $233 million for the year ended December 31, 2012, or an increase of $10 million compared to the prior year period. Operating income improved due to:
- Organic growth initiatives; and
- New units coming online.
Partially offset by:
- Lower debt service pass through revenue;
- Lower pricing for EfW energy and recycled metal; and
- Lower alternative fuel tax credits.
Adjusted EBITDA declined $2 million to $492 million primarily due to lower debt service pass through revenue, lower EfW energy and lower recycled metal pricing, lower alternative fuel tax credits, and the impact of Hurricane Sandy, mostly offset by organic growth initiatives, and new units coming online.
Free Cash Flow was $262 million, down $20 million versus 2011. The decline was primarily due to net effect of Hurricane Sandy, increased maintenance capital expenditures and higher interest expense.
Adjusted EPS of $0.52 declined by $0.02 compared to $0.54 in 2011, due to a higher effective tax rate, increased interest expense and the negative impact of Hurricane Sandy. These factors were partially offset by higher pre-tax income, increased equity income, and a lower number of shares outstanding due to the Company's stock buyback program.
(2) Includes pension plan settlement expense, net (gains) write-offs and impact of adverse loss development and transition to run-off of our insurance business. For additional information, see Exhibit 4A - Note (a) - (f) of this press release.
Shareholder Returns and Liquidity
In 2012, the Company doubled its annual cash dividend to $0.60 per share and returned $169 million to shareholders, consisting of $81 million in cash dividends and $88 million in share repurchases (3.9% of common stock outstanding). Since the inception of its buyback program the Company has repurchased 25.8 million shares, or 16.7% of shares outstanding, at a weighted average cost of $16.00. As of December 31, 2012, Covanta had $87 million of share repurchase authorization remaining.
Sanjiv Khattri, Covanta's Chief Financial Officer, commented, "2012 was a solid year for us. We were very active in returning capital to shareholders through our dividend and stock repurchase program. We also took advantage of strong debt markets, financing over $1.9 billion of capital. We have a strong balance sheet with flexibility and ample liquidity. As a result of the financing, as well as increased depreciation associated with our Delaware Valley facility acquisition, our 2013 net income and EPS will be negatively impacted by higher interest expense and depreciation. Our other key financial metrics, Adjusted EBITDA and Free Cash Flow, remain strong and we have some nice growth prospects for 2013 and beyond."
Fourth Quarter Results
Operating revenues of $430 million were flat with the prior year period. Significant factors included the positive impacts of:
- Organic growth initiatives in special waste, recycled metals and other; and
- Escalations in service fee contracts.
Negative impacts were:
- Hurricane Sandy as certain facilities were briefly forced off-line;
- Lower revenues earned explicitly to service project debt;
- Lower recycled metals pricing; and
- Lower revenues from our insurance business.
Excluding the items noted above, operating expenses were $351 million in 2012 compared to $345 million for 2011, an increase of $6 million. Benefits from various operational improvements were more than offset by the negative impact of Hurricane Sandy and normal cost escalations.
Excluding the items noted above and the net operating income effects of Hurricane Sandy, operating income was $88 million for the year ended December 31, 2012, or an increase of $3 million compared to the prior year period.
Adjusted EBITDA declined $4 million to $143 million in 2012, primarily due to the negative impact of Hurricane Sandy, lower recycled metals pricing, lower alternative fuel tax credits, partially offset by the benefits of organic growth initiatives.
Free Cash Flow of $57 million in 2012 declined $6 million versus 2011 primarily due to higher interest expense, which was partially offset by the timing of other working capital.
Adjusted EPS of $0.20 declined by $0.07 from the prior year period due to a higher effective tax rate, increased interest expense and the negative impact of Hurricane Sandy. These declines were partially offset by a lower number of shares outstanding due to the Company's common stock buyback program.
2013 Guidance
The Company is establishing guidance for 2013 for the following key metrics:
(In millions, except per share amounts)
----------------------------------------------------------------------------
2012 2013
Metric Actual Guidance Range % Change At Midpoint
----------------------------------------------------------------------------
Adjusted EBITDA $ 492 $ 500 - $ 530 +5%
----------------------------------------------------------------------------
Free Cash Flow $ 262 $ 250 - $ 280 +1%
----------------------------------------------------------------------------
Adjusted EPS $ 0.52 $ 0.40 - $ 0.50 -13%
----------------------------------------------------------------------------
Conference Call Information
Covanta will host a conference call at 8:30 am (Eastern) on Thursday, February 7, 2013 to discuss its fourth quarter results. The conference call will begin with prepared remarks, which will be followed by a question and answer session. To participate, please dial 800-860-2442 approximately 10 minutes prior to the scheduled start of the call. If calling from Canada, please dial 866-605-3852. If calling outside of the United States and Canada, please dial 412-858-4600. Please request the "Covanta Holding Corporation call" when prompted by the conference call operator. The conference call will also be webcast live from the Investor Relations section of the Company's website. A presentation will be made available during the call and will be found on the Investor Relations section of the Covanta website at www.covantaenergy.com.
A replay will be available one hour after the end of the conference call through 9:00 AM (Eastern) Friday, February 15, 2013. To access the replay, please dial 877-344-7529, or from outside of the United States 412-317-0088 and use the replay conference ID number 10023855. The webcast will also be archived on www.covantaenergy.com.
10-K Filing Update
The Company expects its 2012 Annual Report on Form 10-K to be filed the week of February 11, 2013.
About Covanta
Covanta Holding Corporation (NYSE: CVA) is an internationally recognized owner and operator of large-scale Energy-from-Waste and renewable energy projects and a recipient of the Energy Innovator Award from the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy. Covanta's 44 Energy-from-Waste facilities provide communities with an environmentally sound solution to their solid waste disposal needs by using that municipal solid waste to generate clean, renewable energy. Annually, Covanta's modern Energy-from-Waste facilities safely and securely convert approximately 20 million tons of waste into 9 million megawatt hours of clean renewable electricity and approximately 9 billion pounds of steam that are sold to a variety of industries. For more information, visit www.covantaenergy.com.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this press release may constitute "forward-looking" statements as defined in Section 27A of the Securities Act of 1933 (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), the Private Securities Litigation Reform Act of 1995 (the "PSLRA") or in releases made by the Securities and Exchange Commission ("SEC"), all as may be amended from time to time. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Covanta Holding Corporation and its subsidiaries ("Covanta") or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward-looking statements. For additional information see the Cautionary Note Regarding Forward-Looking Statements at the end of the Exhibits.
Exhibit 1
Covanta Holding Corporation
Consolidated Statements of Income
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2012 2011 2012 2011
--------- --------- --------- ---------
(Unaudited)
(In millions, except per share amounts)
Operating revenues
Waste and service revenues $ 264 $ 263 $ 1,011 $ 1,008
Recycled metals revenues 17 19 72 74
Electricity and steam sales 97 99 394 400
Other operating revenues 52 49 167 168
--------- --------- --------- ---------
Total operating revenues 430 430 1,644 1,650
--------- --------- --------- ---------
Operating expenses
Plant operating expenses 228 222 963 962
Other operating expenses (a) 56 36 156 138
General and administrative
expenses 23 29 97 103
Depreciation and amortization
expense 50 51 195 193
Net interest expense on
project debt 5 7 27 31
Net (gains) write-offs (b) (44) 5 (46) 5
--------- --------- --------- ---------
Total operating expenses 318 350 1,392 1,432
--------- --------- --------- ---------
Operating income 112 80 252 218
--------- --------- --------- ---------
Other income (expense)
Investment income 1 -- 1 1
Interest expense (27) (17) (94) (67)
Non-cash convertible debt
related expense (6) (5) (25) (25)
Loss on extinguishment of debt
(c) (1) -- (3) (1)
Other (expense) income, net
(d) -- (6) 3 (19)
--------- --------- --------- ---------
Total other expenses (33) (28) (118) (111)
--------- --------- --------- ---------
Income from continuing
operations before income tax
expense and equity in net
income from unconsolidated
investments 79 52 134 107
Income tax benefit (expense) (d) 4 (25) (26) (28)
Equity in net income from
unconsolidated investments -- 2 10 5
--------- --------- --------- ---------
Income from continuing
operations 83 29 118 84
--------- --------- --------- ---------
(Loss) income from discontinued
operations, net of income tax
expense of $0, $0, $1 and $3,
respectively -- (1) (2) 143
--------- --------- --------- ---------
Net Income 83 28 116 227
--------- --------- --------- ---------
Noncontrolling interests:
Less: Net income from continuing
operations attributable to
noncontrolling interests in
subsidiaries (1) (2) (2) (5)
Less: Net income from
discontinued operations
attributable to noncontrolling
interests in subsidiaries -- -- -- (3)
--------- --------- --------- ---------
Total net income attributable to
noncontrolling interests in
subsidiaries (1) (2) (2) (8)
--------- --------- --------- ---------
Net Income Attributable to
Covanta Holding Corporation $ 82 $ 26 $ 114 $ 219
========= ========= ========= =========
Covanta Holding Corporation
Consolidated Statements of Income (continued)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- ---------------------
2012 2011 2012 2011
---------- --------- --------- ----------
(Unaudited)
(In millions, except per share amounts)
Amounts Attributable to Covanta
Holding Corporation
stockholders:
Continuing operations $ 82 $ 27 $ 116 $ 79
Discontinued operations -- (1) (2) 140
---------- --------- --------- ----------
Net Income Attributable to
Covanta Holding Corporation $ 82 $ 26 $ 114 $ 219
========== ========= ========= ==========
Earnings Per Share Attributable
to Covanta Holding Corporation
stockholders:
Basic
Continuing operations $ 0.63 $ 0.20 $ 0.88 $ 0.56
Discontinued operations -- (0.01) (0.01) 0.99
---------- --------- --------- ----------
Covanta Holding Corporation $ 0.63 $ 0.19 $ 0.87 $ 1.55
========== ========= ========= ==========
Weighted Average Shares 130 136 132 141
========== ========= ========= ==========
Diluted
Continuing operations $ 0.62 $ 0.20 $ 0.87 $ 0.56
Discontinued operations -- (0.01) (0.01) 0.98
---------- --------- --------- ----------
Covanta Holding Corporation $ 0.62 $ 0.19 $ 0.86 $ 1.54
========== ========= ========= ==========
Weighted Average Shares 132 137 133 142
========== ========= ========= ==========
Cash Dividend Declared Per
Share: $ 0.15 $ 0.075 $ 0.60 $ 0.30
========== ========= ========= ==========
Supplemental Information - Non-
GAAP
Adjusted EPS (e) $ 0.20 $ 0.27 $ 0.52 $ 0.54
(a) For additional information, see Exhibit 4A - Note (a) and (f) of this
Press Release.
(b) For additional information, see Exhibit 4A - Note (b) - (e) of this
Press Release.
(c) For additional information, see Exhibit 7A - Note (a) and (b) of this
Press Release.
(d) For additional information, see Exhibit 4A - Note (i) - (j) of this
Press Release.
(e) For additional information, see Exhibit 4 of this Press Release.
Exhibit 1A
Covanta Holding Corporation
Consolidated Statements of Comprehensive Income
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2012 2011 2012 2011
--------- --------- --------- ---------
(Unaudited, in millions)
Net income $ 83 $ 28 $ 116 $ 227
--------- --------- --------- ---------
Foreign currency translation 3 11 1 --
Adjustment for pension plan
settlement, net of tax
expense (a) 6 -- 7 --
Pension plan and
postretirement plan
unrecognized benefits, net of
tax benefit -- (8) -- (8)
Net unrealized gain (loss) on
derivative instruments, net
of tax benefit -- 2 (2) 2
Net unrealized loss on
available for sale
securities, net of tax (1) -- -- --
--------- --------- --------- ---------
Other comprehensive income
(loss) attributable to Covanta
Holding Corporation 8 5 6 (6)
--------- --------- --------- ---------
Comprehensive income 91 33 122 221
--------- --------- --------- ---------
Less:
Net income attributable to
noncontrolling interests in
subsidiaries (1) (2) (2) (8)
Foreign currency translation
attributable to
noncontrolling interests in
subsidiaries -- 1 -- 2
--------- --------- --------- ---------
Comprehensive income
attributable to noncontrolling
interests in subsidiaries (1) (1) (2) (6)
--------- --------- --------- ---------
Comprehensive income
attributable to Covanta Holding
Corporation $ 90 $ 32 $ 120 $ 215
========= ========= ========= =========
(a) For additional information, see Exhibit 4A - Note (f) of this Press
Release.
Exhibit 2
Covanta Holding Corporation
Consolidated Balance Sheets
As of December 31,
------------------------
2012 2011
----------- -----------
(Unaudited)
(In millions, except per
ASSETS share amounts)
Current:
Cash and cash equivalents $ 246 $ 232
Restricted funds held in trust 53 101
Receivables (less allowances of $6 and $5,
respectively) 256 260
Unbilled service receivables 18 20
Deferred income taxes 18 28
Prepaid expenses and other current assets 97 105
Assets held for sale -- 18
----------- -----------
Total Current Assets 688 764
Property, plant and equipment, net 2,561 2,423
Investments in fixed maturities at market (cost:
$36 and $31, respectively) 36 31
Restricted funds held in trust 161 90
Unbilled service receivables 17 25
Waste, service and energy contracts, net 399 434
Other intangible assets, net 23 78
Goodwill 249 232
Investments in investees and joint ventures 49 43
Other assets 343 265
----------- -----------
Total Assets $ 4,526 $ 4,385
=========== ===========
LIABILITIES AND EQUITY
Current:
Current portion of long-term debt $ 3 $ 32
Current portion of project debt 80 147
Accounts payable 41 25
Deferred revenue 31 61
Accrued expenses and other current liabilities 205 211
Liabilities held for sale -- 3
----------- -----------
Total Current Liabilities 360 479
Long-term debt 2,012 1,454
Project debt 237 533
Deferred income taxes 691 633
Waste and service contracts 35 76
Other liabilities 136 122
----------- -----------
Total Liabilities 3,471 3,297
----------- -----------
Equity:
Covanta Holding Corporation stockholders' equity:
Preferred stock ($0.10 par value; authorized 10
shares; none issued and outstanding) -- --
Common stock ($0.10 par value; authorized 250
shares; issued 159 and 158 shares; outstanding
132 and 136 shares) 16 16
Additional paid-in capital 806 824
Accumulated other comprehensive income 7 1
Accumulated earnings 222 244
Treasury stock, at par (3) (2)
----------- -----------
Total Covanta Holding Corporation stockholders
equity 1,048 1,083
Noncontrolling interests in subsidiaries 7 5
----------- -----------
Total Equity 1,055 1,088
----------- -----------
Total Liabilities and Equity $ 4,526 $ 4,385
=========== ===========
Exhibit 3
Covanta Holding Corporation
Consolidated Statements of Cash Flow
Twelve Months Ended
December 31,
------------------------
2012 2011
----------- -----------
(Unaudited, in millions)
OPERATING ACTIVITIES:
Net income $ 116 $ 227
Less: (Loss) income from discontinued
operations, net of tax expense (2) 143
----------- -----------
Income from continuing operations 118 84
Adjustments to reconcile net income from
continuing operations to net cash provided by
operating activities from continuing operations:
Depreciation and amortization expense 195 193
Net (gains) write-offs (a) (46) 5
Loss on extinguishment of debt (b) 3 1
Non-cash convertible debt related expense 25 25
Stock-based compensation expense 17 18
Deferred income taxes 15 30
Pension plan settlement expense (c) 11 --
Other, net (3) (1)
Reversal of uncertain tax positions related to
pre-emergence tax matters (d) -- (24)
Contractual liability to pre-petition creditors
(d) -- 15
Change in restricted funds-other related to
contractual liability to pre-petition creditors
(d) -- 5
Change in restricted funds held in trust 34 4
Change in working capital, net of effects of
acquisitions (27) 5
----------- -----------
Net cash provided by operating activities from
continuing operations 342 360
Net cash provided by operating activities from
discontinued operations -- 1
----------- -----------
Net cash provided by operating activities 342 361
----------- -----------
INVESTING ACTIVITIES:
Proceeds from assets sales -- 12
Purchase of property, plant and equipment (126) (118)
Acquisition of businesses, net of cash acquired (94) (10)
Acquisition of land use rights (1) (8)
Property insurance proceeds 8 1
Other, net (11) (13)
----------- -----------
Net cash used in investing activities from
continuing operations (224) (136)
Net cash provided by investing activities from
discontinued operations 11 243
----------- -----------
Net cash (used in) provided by investing
activities (213) 107
----------- -----------
FINANCING ACTIVITIES:
Proceeds from borrowing on long-term debt (b) 1,034 --
Payment of deferred financing costs (b) (33) --
Principal payments on long-term debt (b) (622) (7)
Principal payments on project debt (424) (137)
Convertible debenture repurchases (25) (32)
Payments of borrowings on revolving credit
facility (191) --
Proceeds from borrowings on revolving credit
facility 251 --
Proceeds from borrowings on project debt -- 15
Change in restricted funds held in trust 65 38
Cash dividends paid to stockholders (90) (32)
Common stock repurchased (88) (229)
Financing of insurance premiums, net (10) 10
Payments to pre-petition creditors -- (12)
Decrease in restricted funds to pre-petition
creditors -- 12
Distributions to partners of noncontrolling
interests in subsidiaries (1) (6)
Other financing, net 19 (1)
----------- -----------
Net cash used in financing activities from
continuing operations (115) (381)
Net cash (used in) provided by financing
activities from discontinued operations (2) 8
----------- -----------
Net cash used in financing activities (117) (373)
----------- -----------
Effect of exchange rate changes on cash and cash
equivalents -- (1)
----------- -----------
Net increase in cash and cash equivalents 12 94
Cash and cash equivalents at beginning of period 234 140
----------- -----------
Cash and cash equivalents at end of period 246 234
Less: Cash and cash equivalents of discontinued
operations at end of period -- 2
----------- -----------
Cash and cash equivalents of continuing operations
at end of period $ 246 $ 232
=========== ===========
(a) For additional information, see Exhibit 4A - Note (b) - (e) of this
Press Release.
(b) For additional information, see Exhibit 7A - Note (a) - (b) of this
Press Release.
(c) For additional information, see Exhibit 4A - Note (f) of this Press
Release.
(d) For additional information, see Exhibit 4A - Note (i) of this Press
Release.
Exhibit 4
Covanta Holding Corporation
Reconciliation of Diluted Earnings Per Share to Adjusted EPS
Three Months Twelve Months
Ended Ended
December 31, December 31,
----------------- ----------------
Full Year
2012 2011 2012 2011 Estimated 2013
------- -------- ------- ------- ----------------
(Unaudited)
Continuing Operations -
Diluted Earnings Per
Share $ 0.62 $ 0.20 $ 0.87 $ 0.56 $0.40 - $0.50
Reconciling Items (a) (0.42) 0.07 (0.35) (0.02) --
------- -------- ------- ------- ----------------
Adjusted EPS $ 0.20 $ 0.27 $ 0.52 $ 0.54 $0.40 - $0.50
======= ======== ======= ======= ================
(a) For details related to the Reconciling Items, see Exhibit 4A of this
Press Release.
Exhibit 4A
Covanta Holding Corporation
Reconciling Items
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2012 2011 2012 2011
--------- --------- --------- ---------
(Unaudited)
(In millions, except per share amounts)
Reconciling Items
Operating loss related to
insurance subsidiaries (a) $ 1 $ 1 $ 10 $ 2
Write-off of intangible
liability (b) -- -- (29) --
Write-off of renewable fuels
project (c) -- -- 16 --
Development costs (d) -- 5 11 5
Net gain related to lease
termination (e) (44) -- (44) --
Gain on sales of business -- (8) -- (9)
Pension plan settlement expense
(f) 11 -- 11 --
Loss on extinguishment of debt
(g) 1 -- 3 1
Effect on income of derivative
instruments not designated as
hedging instruments -- (2) (1) (2)
Effect of foreign exchange loss
(gain) on indebtedness (h) -- 6 (3) 4
Contractual liability to pre-
petition creditors (i) -- -- -- 15
Other (1) 1 -- 1
--------- --------- --------- ---------
Total Reconciling Items, pre-
tax (32) 3 (26) 17
Proforma income tax impact (j) (24) 8 (22) 4
Grantor trust activity 1 -- 1 1
Reversal of uncertain tax
positions related to pre-
emergence tax matters (i) -- -- -- (24)
--------- --------- --------- ---------
Total Reconciling Items, net
of tax $ (55) $ 11 $ (47) $ (2)
========= ========= ========= =========
Diluted (Loss) Earnings Per
Share Impact $ (0.42) $ 0.07 $ (0.35) $ (0.02)
========= ========= ========= =========
Weighted Average Diluted Shares
Outstanding 132 137 133 142
========= ========= ========= =========
(a) During the year ended December 31, 2012, we transitioned our remaining
insurance business to run-off and recorded additional losses and reserve
increases of $7 million primarily relating to adverse loss development.
(b) During the year ended December 31, 2012, our service contract for the
Essex EfW facility was amended and we recorded a non-cash write-off of
an intangible liability of $29 million related to the below-market
service contract which was recorded at fair value upon acquisition of
the facility.
(c) During the year ended December 31, 2012, we suspended the construction
of a facility that transformed waste materials into renewable liquid
fuels. We recorded a non-cash write-off of $16 million representing the
capitalized costs related to this project.
(d) During the year ended December 31, 2012, we recorded a non-cash write-
off of $11 million comprised of capitalized development costs related to
a development project which we ceased to pursue in the United Kingdom.
During the year ended December 31, 2011, we recorded a non-cash write-
off of $5 million comprised of capitalized development costs and land
related to a development project which we ceased to pursue in the United
Kingdom.
(e) During the year ended December 31, 2012, we recorded a net gain related
to the termination of the pre-existing lease in connection with the
acquisition of the Delaware Valley energy-from-waste facility.
(f) During the three months ended December 31, 2012, we recorded a pension
settlement charge of $11 million.
(g) For additional information, see Exhibit 7A - Note (a) - (b) of this
Press Release.
(h) During the year ended December 31, 2012 and 2011, we recorded a foreign
exchange (gain) loss related to intercompany loans, respectively.
(i) For additional information, see Item 8. Financial Statements and
Supplementary Data - Note 16. Income Taxes of Covanta's Annual Report on
Form 10-K for the year ended December 31, 2011.
(i) The expiration of the statute of limitations in 2011 triggered a
contractual liability to pay restricted funds to third party claimants
and resulted in other non-operating expense for the year ended
December 31, 2011 of $15 million with no related income tax benefit.
These payments related to tax liabilities set up in connection with
Covanta Energy's emergence from bankruptcy.
(ii) For the year ended December 31, 2011, the income tax provision
includes a $24 million benefit due to the reversal of uncertain tax
positions, following the expiration of applicable statutes of
limitations related to pre-emergence tax matters in the Covanta Energy
bankruptcy.
(j) We are presenting this proforma calculation of the income tax effect on
all reconciling items for each period to illustrate the proforma impact
on income tax expense and net income. The proforma income tax impact
represents the tax provision amount related to the overall tax provision
calculated without the reconciling items when compared to the tax
provision reported under GAAP in the condensed consolidated statement of
income.
Exhibit 4B
Covanta Holding Corporation
Effective Tax Rate "ETR"
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------- --------------------
2012 2011 2012 2011
--------- --------- --------- ---------
(Unaudited)
Effective Tax Rate (a) (5.2)% 48.7% 19.3% 26.8%
(a) The ETR decrease during 2012 was primarily due to the impact of no tax
expense on the gain on settlement of the pre-existing lease recorded in
connection with the Delaware Valley energy-from-waste facility
acquisition (see Exhibit 4A - Note (e) above). In 2011, the ETR included
the impact of the reversal of uncertain tax positions in 2011 (see
Exhibit 4A - Note (i) above). There is no tax benefit from the
contractual liability to pre-petition creditors and as a result, this
item had an impact on the effective tax rate in 2011.
Exhibit 5
Covanta Holding Corporation
Reconciliation of Net Income to Adjusted EBITDA
Three Months Twelve Months
Ended Ended
December 31, December 31,
---------------- ----------------
Full Year
2012 2011 2012 2011 Estimated 2013
------- ------- ------- ------- ----------------
(Unaudited, in millions)
Net Income from
Continuing Operations
Attributable to
Covanta Holding
Corporation $ 82 $ 27 $ 116 $ 79 $53 - $66
Operating loss related
to insurance
subsidiaries (a) 1 1 10 2 (5) - 0
Depreciation and
amortization expense 50 51 195 193 220 - 210
Debt service:
Net interest expense
on project debt 5 7 27 31
Interest expense 27 17 94 67
Non-cash convertible
debt related expense 6 5 25 25
Investment income (1) -- (1) (1)
------- ------- ------- -------
Subtotal debt service 37 29 145 122 171 - 155
Income tax expense (b) (4) 25 26 52 40 - 65
Reversal of uncertain
tax positions related
to pre-emergence tax
matters(b) -- -- -- (24)
Contractual liability
to pre-petition
creditors (b) -- -- -- 15
Write-off of intangible
liability (c) -- -- (29) --
Write-off of renewable
fuels project (d) -- -- 16 --
Development costs (e) -- 5 11 5
Net gain related to
lease termination (f) (44) -- (44) --
Pension plan settlement
expense (g) 11 -- 11 --
Loss on extinguishment
of debt (h) 1 -- 3 1
Gain on the sale of
business -- (8) -- (9)
Net income loss
attributable to
noncontrolling
interests in
subsidiaries 1 2 2 5 3 - 8
Other adjustments:
Debt service billings
in excess of revenue
recognized 3 1 9 22
Non-cash compensation
expense 4 5 17 18
Other non-cash items
(i) 1 9 4 13
------- ------- ------- -------
Subtotal other
adjustments 8 15 30 53 18 - 26
------- ------- ------- -------
Total adjustments 61 120 376 415
------- ------- ------- ------- ----------------
Adjusted EBITDA $ 143 $ 147 $ 492 $ 494 $500 - $530
======= ======= ======= ======= ================
(a) For additional information, see Exhibit 4A - Note (a) of this Press
Release.
(b) Income tax expense for 2011 is adjusted for the reversal of uncertain
tax positions related to pre-emergence tax matters. For additional
information, see Exhibit 4A - Note (i) of this Press Release.
(c) For additional information, see Exhibit 4A - Note (b) of this Press
Release.
(d) For additional information, see Exhibit 4A - Note (c) of this Press
Release.
(e) For additional information, see Exhibit 4A - Note (d) of this Press
Release.
(f) For additional information, see Exhibit 4A - Note (e) of this Press
Release.
(g) For additional information, see Exhibit 4A - Note (f) of this Press
Release.
(h) For additional information, see Exhibit 7A - Note (a) - (b) of this
Press Release.
(i) Includes certain non-cash items that are added back under the definition
of Adjusted EBITDA in Covanta Energy Corporation's credit agreement.
Exhibit 6
Covanta Holding Corporation
Reconciliation of Cash Flow Provided by Operating Activities to Free Cash
Flow
Three Months Twelve Months
Ended Ended
December 31, December 31,
---------------- ----------------
Full Year
2012 2011 2012 2011 Estimated 2013
------- ------- ------- ------- ----------------
(Unaudited, in millions)
Cash flow provided by
operating activities
from continuing
operations $ 74 $ 84 $ 342 $ 360 $325 - $360
Plus: Cash flow used in
(provided by)
operating activities
from insurance
subsidiaries 1 (2) 5 2 5 - 10
Less: Maintenance
capital expenditures
(a) (18) (19) (85) (80) (80) - (90)
------- ------- ------- ------- ----------------
Free Cash Flow $ 57 $ 63 $ 262 $ 282 $250 - $280
======= ======= ======= ======= ================
Weighted Average
Diluted Shares
Outstanding 132 137 133 142
Uses of Free Cash Flow
Investments:
Acquisition of
businesses, net of
cash acquired $ (94) $ -- $ (94) $ (10)
Property insurance
proceeds 8 1 8 1
Non-maintenance
capital expenditures
(b) (14) (8) (41) (38)
Acquisition of land
use rights (b) -- -- (1) (8)
Other growth
investments (b) (2) -- (2) (14)
Other investing
activities, net (c) (6) 7 (9) 1
------- ------- ------- -------
Total investments $ (108) $ -- $ (139) $ (68)
------- ------- ------- -------
Return of capital to
stockholders:
Cash dividends paid
to stockholders $ (39) $ (10) $ (90) $ (32)
Common stock
repurchased (5) (26) (88) (229)
------- ------- ------- -------
Total return of capital
to stockholders $ (44) $ (36) $ (178) $ (261)
------- ------- ------- -------
Capital raising
activities:
Net proceeds from
issuance of
corporate debt (d) $ 328 $ -- $ 1,001 $ --
Net proceeds from
issuance of project
debt -- -- -- 15
Net proceeds from
asset sales -- 12 -- 12
Other financing
activities, net 16 2 19 (1)
------- ------- ------- -------
Net proceeds from
capital raising
activities $ 344 $ 14 $ 1,020 $ 26
------- ------- ------- -------
Debt repayments:
Net cash used for
scheduled principal
payments on
corporate debt $ (1) $ (2) $ (26) $ (7)
Net cash used for
scheduled principal
payments on project
debt (e) (64) (23) (121) (99)
Optional repayment of
corporate debt
(f)(g) -- -- (621) (32)
Net cash used for
optional repayment
of project debt (h) (238) -- (238) --
------- ------- ------- -------
Total debt repayments $ (303) $ (25) $(1,006) $ (138)
------- ------- ------- -------
Borrowing activities -
Revolving credit
facility, net $ 40 $ -- $ 60 $ --
Short-term borrowing
activities - Financing
of insurance premiums,
net $ -- $ 10 $ (10) $ 10
Distributions to
partners of
noncontrolling
interests in
subsidiaries $ -- $ (1) $ (1) $ (6)
Effect of exchange rate
changes on cash and
cash equivalents $ (1) $ 3 $ -- $ 1
------- ------- ------- -------
Net change in cash and
cash equivalents from
continuing operations $ (15) $ 28 $ 8 $ (154)
======= ======= ======= =======
(a) Purchases of property, plant and equipment are also referred to as
capital expenditures. Capital expenditures that primarily maintain
existing facilities are classified as maintenance capital expenditures.
The following table provides the components of total purchases of
property, plant and equipment:
Three Months Twelve Months
Ended Ended
December 31, December 31,
---------------- ----------------
2012 2011 2012 2011
------- ------- ------- -------
Maintenance capital
expenditures $ (18) $ (19) $ (85) $ (80)
Capital expenditures
associated with
construction -- (1) -- (16)
Capital expenditures
associated with
technology development
and organic growth
initiatives (9) (4) (27) (10)
Capital expenditures -
other (5) (3) (14) (12)
------- ------- ------- -------
Total purchases of
property, plant and
equipment $ (32) $ (27) $ (126) $ (118)
======= ======= ======= =======
(b) Investments in our various growth opportunity areas, including organic
growth initiatives, technology, business development, and other similar
expenditures, excluding acquisitions of businesses. Non maintenance
capital expenditures also includes amounts associated with insurable
events. These expenditures are not considered growth investments. These
expenditures were $4 million and $1 million for the three months ended
December 31, 2012 and 2011, respectively, and $13 million and $1 million
for the twelve months ended December 31, 2012 and 2011, respectively.
(c) Other investing activities is primarily comprised of net payments from
the purchase/sale of investment securities and business development
expenses.
(d) For additional information, see Exhibit 7A - Note (a) of this Press
Release. Excludes borrowings under Revolving Credit Facility. Calculated
as follows:
Proceeds from
borrowings on long-
term debt $ 335 $ -- $ 1,034 $ --
Less: Financing costs
related to issuance of
long-term debt (7) -- (33) --
------- -------- ------- --------
Net proceeds from
issuance of corporate
debt. $ 328 $ -- $ 1,001 $ --
======= ======== ======= ========
(e) Calculated as follows:
Total scheduled
principal payments on
project debt $ (100) $ (54) $ (146) $ (137)
Decrease in related
restricted funds held
in trust 36 31 25 38
------- ------- ------- -------
Net cash used for
principal payments on
project debt $ (64) $ (23) $ (121) $ (99)
======= ======= ======= =======
(f) For additional information, see Exhibit 7A - Note (a) of this Press
Release. Calculated as follows:
Redemption of Term Loan
due 2014 $ -- $ -- $ (619) $ --
Redemption of
Convertible Debentures
(g) -- -- (2) (32)
-------- -------- ------- -------
Total optional
repayment of corporate
debt $ -- $ -- $ (621) $ (32)
======== ======== ======= =======
(g) As of December 31, 2011, there were $25 million aggregate principal
amount of the Debentures outstanding. On February 1, 2012, holders of
$23 million of outstanding Debentures exercised their option for us to
redeem the Debentures at par. The Debentures were also subject to
redemption at our option at any time on or after February 1, 2012, and
we subsequently redeemed the remaining $2 million of outstanding
Debentures on March 23, 2012.
(h) Calculated as follows:
Total optional
principal payments on
project debt $ (278) $ -- $ (278) $ --
Decrease in related
restricted funds held
in trust 40 -- 40 --
------- -------- ------- --------
Net cash used for
optional repayment of
project debt $ (238) $ -- $ (238) $ --
======= ======== ======= ========
Exhibit 7
Covanta Holding Corporation
Capitalization Information
As of December 31,
-------------------------
2012 2011
------------ ------------
(Unaudited, in millions)
Cash and Cash Equivalents:
Domestic $ 12 $ 49
International 215 174
Insurance Subsidiary 19 9
------------ ------------
Total Cash and Cash Equivalents $ 246 $ 232
============ ============
Restricted Funds Held in Trust: (a)(b)
Debt Service - Principal $ 72 $ 113
Debt Service - Interest 6 8
------------ ------------
Debt Service Funds - Total 78 121
Revenue Funds 9 16
Other Funds 127 54
------------ ------------
Total Restricted Funds Held in Trust $ 214 $ 191
============ ============
(a) Restricted funds held in trust are primarily amounts received by third-
party trustees relating to certain projects we own which may be used
only for specified purposes. We generally do not control these accounts.
They primarily include debt service reserves for payment of principal
and interest on project debt. Revenue funds are comprised of deposits of
revenues received with respect to projects prior to their disbursement.
Other funds are primarily amounts held in trust for operations,
maintenance, environmental obligations, operating lease reserves in
accordance with agreements with our clients and amounts held for future
scheduled distributions.
(b) During the three months ended December 31, 2012, we completed a Project
Debt Refinancing. For additional information, see Exhibit 7A - Note (a)
of this Press Release.
Exhibit 7A
As of December 31, As of December 31,
2012 2011
--------------------- ---------------------
Face Book Face Book
Value Value Value Value
---------- ---------- ---------- ----------
(Unaudited, in millions)
Corporate Debt:
Revolving Credit Facility (a) $ 60 $ 60 $ -- $ --
Term Loan due 2014 (a) -- -- 619 619
New Term Loan due 2019 (a) 298 297 -- --
7.25% Senior Notes due 2020 400 400 400 400
6.375% Senior Notes due 2022 (a) 400 400 -- --
3.25% Cash Convertible Senior
Notes due 2014 460 523 460 442
1.00% Senior Convertible
Debentures due 2027 (b) -- -- 25 25
---------- ---------- ---------- ----------
Sub-total $ 1,618 $ 1,680 $ 1,504 $ 1,486
---------- ---------- ---------- ----------
Tax-Exempt Bonds (a)
4.875% Massachusetts Series
2012A due 2027 $ 20 $ 20 $ -- $ --
4.875% Massachusetts Series
2012B due 2042 67 67 -- --
5.25% Massachusetts Series
2012C due 2042 83 83 -- --
5.25% Niagara Series 2012A due
2042 130 130 -- --
4.00% Niagara Series 2012B due
2024 35 35 -- --
---------- ---------- ---------- ----------
Sub-total Tax-Exempt Bonds $ 335 $ 335 $ -- $ --
---------- ---------- ---------- ----------
Total corporate debt (including
current portion) $ 1,953 $ 2,015 $ 1,504 $ 1,486
---------- ---------- ---------- ----------
Project Debt:
Domestic project debt - service
fee facilities (a) $ 223 $ 226 $ 291 $ 295
Domestic project debt - tip fee
facilities (a) 68 68 355 359
International project debt 23 23 26 26
---------- ---------- ---------- ----------
Total project debt (including
current portion) $ 314 $ 317 $ 672 $ 680
---------- ---------- ---------- ----------
Total Debt Outstanding $ 2,267 $ 2,332 $ 2,176 $ 2,166
========== ========== ========== ==========
Net Debt (c) $ 1,949 $ 1,831
========== ==========
Availability for Borrowings
under the Revolving Credit
Facility (a) $ 584 $ 300
========== ==========
(a) During the first quarter of 2012, we completed a refinancing of our
previously existing senior secured credit facilities, issued by our
subsidiary, Covanta Energy, which consisted of a $300 million revolving
credit facility, a $320 million funded letter of credit facility and a
$619 million term loan, by entering into $1.2 billion in new senior
secured credit facilities (the "2012 Credit Facilities") issued by our
subsidiary, Covanta Energy, comprised of a $900 million revolving credit
facility that expires in 2017 (the "Revolving Credit Facility") and a
$300 million term loan due 2019 (the "Term Loan"), and by issuing $400
million aggregate principal amount of 6.375% senior notes due 2022 (the
"6.375% Notes"). The proceeds from the Term Loan and a portion of the
proceeds from the 6.375% Notes were used to repay the previously
existing term loan, as well as to pay transaction expenses, while the
Revolving Credit Facility replaced the previously existing $300 million
revolving credit facility and $320 million funded letter of credit
facility. The Revolving Credit Facility is available for both the
issuance of letters of credit ($256 million outstanding as of December
31, 2012) and for cash borrowings for general corporate purposes ($60
million outstanding cash borrowings as of December 31, 2012). As a
result of the refinancing, we recognized a loss on extinguishment of
debt of approximately $2 million, pre-tax, which was comprised of the
write-off of deferred financing costs in connection with previously
existing financing arrangements. We incurred $26 million in offering
costs related to the refinancing which has been paid as of December 31,
2012.
In November 2012, we issued new tax-exempt corporate bonds totaling $335
million. Proceeds from the offerings were utilized to refinance tax-
exempt project debt at our Haverhill, Niagara and SEMASS facilities, as
well as to fund certain capital expenditures in Massachusetts. As a
result of the refinancing, we recognized a loss on extinguishment of
debt of approximately $1 million, pre-tax, which was primarily comprised
of the write-off of financing costs in connection with this transaction,
offset by the write-off of unamortized premiums on previously existing
financing arrangements. We incurred $7 million in offering costs related
to the refinancing which has been paid as of December 31, 2012.
Corporate Project
Debt Debt
Debt Refinancing Details (Unaudited, in millions) Refinancing Refinancing
----------- -----------
Offering - 6.375% Senior Notes due 2022 $ 400 $ --
New Term Loan due 2019 300 --
New Tax-Exempt Bonds -- 335
Release of financing restricted funds -- 40
Offering Costs (26) (7)
----------- -----------
Net Proceeds 674 368
Redemption of Term Loan due 2014 (619) --
Redemption of Project Debt -- (328)
----------- -----------
Net Offering funds available for general corporate
purposes $ 55 $ 40
=========== ===========
(b) As a result of the purchase of outstanding Debentures, we recorded a
loss on extinguishment of debt which is comprised of the difference
between the fair value and carrying value of the liability component of
the Debentures tendered, the write-off of deferred financing costs and
fees incurred in conjunction with the tender offer.
(c) Net Debt is calculated as total principal amount of debt outstanding
less cash and cash equivalents and debt service principal restricted
funds.
Exhibit 8
Covanta Holding Corporation
Return to Stockholders
(Unaudited, in millions, except per share amounts and percentages)
During years ended December 31, 2010, 2011 and 2012, the following amounts
were returned to stockholders:
Weighted % of Common
Average Stock
Shares Cost Per Outstanding
Amount Repurchased Share Repurchased
-------- ----------- ---------- ------------
Common Stock Repurchased(a)
FY 2010 $ 95 6.1 $ 15.56 3.9%
-------- -----------
FY 2011 $ 230 14.4 $ 15.99 9.6%
-------- -----------
Q1 2012 $ 30 1.8 $ 16.45 1.3%
Q2 2012 30 1.9 $ 16.04 1.4%
Q3 2012 25 1.5 $ 17.22 1.1%
Q4 2012 3 0.1 $ 17.41 0.1%
-------- -----------
FY 2012 sub-total: $ 88 5.3 $ 16.55 3.9%
-------- -----------
Total Common Stock Repurchased $ 413 25.8 $ 16.00 16.7%
-------- -----------
Cash Dividends Declared to
Stockholders
FY 2010 $ 233
--------
FY 2011 $ 42
--------
Q1 2012 $ 21
Q2 2012 20
Q3 2012 20
Q4 2012 (b) 20
--------
FY 2012 sub-total: $ 81
--------
Total Cash Dividends Declared
to Stockholders $ 356
--------
--------
Total Return to Stockholders $ 769
========
(a) As of December 31, 2012, the amount remaining under our currently
authorized share repurchase program was $87 million.
(b) On November 27, 2012, the Board of Directors authorized a quarterly cash
dividend of $0.15 per share. The Q4 2012 payment was made on December
26, 2012 to stockholders of record as of the close of business on
December 18, 2012.
Exhibit 9
Covanta Holding Corporation
Consolidated Reconciliation of Cash Flow Provided by Operating Activities to
Adjusted EBITDA
Three Months Twelve Months
Ended Ended
December 31, December 31,
---------------- ----------------
Full Year
2012 2011 2012 2011 Estimated 2013
------- ------- ------- ------- ----------------
(Unaudited, in millions)
Cash flow provided by
operating activities
from continuing
operations $ 74 $ 84 $ 342 $ 360 $325 - $360
Cash flow used in
operating activities
from insurance
activities (a) (1) 2 (5) (2) 5 - 10
Debt service 37 29 145 122 171 - 155
Change in working
capital 79 72 27 (5)
Change in restricted
funds held in trust (44) (39) (34) (4)
Non-cash convertible
debt related expense (6) (5) (25) (25)
Equity in net income
from unconsolidated
investments -- 2 10 5
Dividends from
unconsolidated
investments (1) (3) (8) (8)
Current tax provision 4 18 11 (2)
Reversal of uncertain
tax positions related
to pre-emergence tax
matters (b) -- -- -- 24
Contractual liability
to pre-petition
creditors(b) -- (15) -- (15)
Change in restricted
funds-other related to
contractual liability
to pre-petition
creditors (b) -- -- -- (5)
Other 1 2 29 49
------- ------- ------- ------- ----------------
Sub-total 33 32 10 14 (1) - 5
------- ------- ------- ------- ----------------
Adjusted EBITDA $ 143 $ 147 $ 492 $ 494 $500 - $530
======= ======= ======= ======= ================
(a) For additional information, see Exhibit 4A - Note (a) of this Press
Release.
(b) For additional information, see Exhibit 4A - Note (i) of this Press
Release.
Exhibit 10
Covanta Holding Corporation
Plant Operating Expenses Detail - Americas
The Americas segment quarterly plant operating expenses typically differs
substantially as a result of the timing of scheduled plant maintenance. We
typically conduct scheduled maintenance periodically each year, which
requires that individual boiler units temporarily cease operations. During
these scheduled maintenance periods, we incur material repair and
maintenance expenses and receive less revenue until the boiler and/or
turbine units resume operations. This scheduled maintenance typically occurs
during periods of off-peak electric demand and/or lower waste volumes, which
are our first, second and fourth fiscal quarters. The first half of the year
scheduled maintenance period is typically the most extensive. The third
quarter scheduled maintenance period is typically the least extensive. Given
these factors, we typically experience our lowest operating income from our
projects during the first half of each year. The aggregate of all other
components of plant operating expense is relatively consistent each quarter
of the year.
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------- ---------------------
2012 2011 2012 2011
---------- ---------- ---------- ----------
(Unaudited, in millions)
Plant Operating Expenses:
Plant maintenance (a) $ 47 $ 44 $ 226 $ 231
All other 172 171 705 703
---------- ---------- ---------- ----------
Plant operating expenses $ 219 $ 215 $ 931 $ 934
========== ========== ========== ==========
(a) Plant maintenance costs include our internal maintenance team and non-
facility employee costs for facility scheduled and unscheduled
maintenance and repair expenses.
Exhibit 11A
Covanta Holding Corporation - Americas Segment
Statistics - (Unaudited, in millions, except percentages)
Boiler Availability
Twelve Months
Ended December 31,
-------------------------
2012 2011
------------ ------------
EfW Facilities 92.3% 91.7%
Waste and Service Revenue
Twelve Months Ended
December 31,
-------------------------
2012 2011
------------ ------------
Waste and service revenue unrelated to project
debt $ 961 $ 953
Revenue earned explicitly to service project debt
- principal 39 42
Revenue earned explicitly to service project debt
- interest 8 11
------------ ------------
Total waste and service revenue $ 1,008 $ 1,006
============ ============
Energy Revenue and Megawatt hours (MWh) At Market and Contracted by
Facility Type
Twelve Months Ended December 31,
----------------------------------------------------
2012 2011
------------------------- -------------------------
% of % of
Revenue Volume Total Revenue Volume Total
(a) (a),(b) Volume (a) (a),(b) Volume
-------- -------- ------- -------- -------- -------
EfW
At Market $ 36 0.83 15% $ 79 1.30 23%
Contracted & Hedged 270 3.96 71% 227 3.39 61%
-------- -------- ------- -------- -------- -------
Total EfW $ 306 4.79 86% $ 306 4.69 84%
Biomass
At Market $ 13 0.37 7% $ 12 0.25 5%
Contracted 48 0.36 7% 58 0.60 11%
-------- -------- ------- -------- -------- -------
Total Biomass $ 61 0.73 14% $ 70 0.85 16%
-------- -------- ------- -------- -------- -------
Total $ 367 5.52 100% $ 376 5.54 100%
======== ======== ======= ======== ======== =======
(a) Covanta share only
(b) Steam converted to MWh (0.7M MWh for both 2012 and 2011)
Projected Energy Megawatt hours (MWh) At Market and Contracted by Facility
Type (a)
Full Year 2013E
As of January 1,
2013
----------------
EfW
At Market 1.0
Contracted & Hedged 4.5
----------------
Total EfW 5.5
Biomass(b)
At Market 0.3
Contracted 0.4
----------------
Total Biomass 0.7
----------------
Total 6.2
================
(a) Covanta share only
(b) Additional 0.4 million MWh of Biomass energy is economically dispatched,
but available to run
Exhibit 11B
Covanta Holding Corporation - Americas Segment
Statistics - (Unaudited, in millions, except percentages, metal tons (in
thousands), and pricing data in Economic Drivers Section)
Recycled Metal Net Revenue by Type (a)
Twelve Months
Ended December 31,
-------------------------
2012 2011
------------ ------------
Ferrous Metal $ 58 $ 60
Non-Ferrous Metal 14 14
------------ ------------
Total $ 72 $ 74
============ ============
(a) Covanta share only
Recycled Metal Net Tons Recovered by Type (a),(b)
Twelve Months
Ended December 31,
-------------------------
2012 2011
------------ ------------
Ferrous Metal 309.0 312.0
Non-Ferrous Metal 14.7 14.0
------------ ------------
Total 323.7 326.0
============ ============
(a) Net volume: Covanta share only
(b) Tons in thousands
Recycled Metal Gross Tons Recovered by Type (a),(b)
Twelve Months
Ended December 31,
-------------------------
2012 2011
------------ ------------
Ferrous Metal 415.0 414.0
Non-Ferrous Metal 16.8 15.9
------------ ------------
Total 431.8 429.9
============ ============
(a) Gross volume: Both Covanta and client share
(b) Tons in thousands
Published Industry U.S. Economic Drivers (a)
As of December 31,
------------------------
2012 2011
----------- -----------
Consumer Price Index (b) 1.7% 3.0%
PJM Pricing (Electricity)(c) $ 34.76 $ 48.31
Henry Hub Pricing (Natural Gas) (d) $ 2.75 $ 4.04
#1 HMS Pricing (Ferrous Metals) (e) $ 368 $ 410
Scrap Metals - Old Sheet & Old Cast (f) $ 0.72 $ 0.77
(a) While these drivers impact our business, there is not an exact
correlation between our results and changes in these metrics.
(b) Represents the year-over-year percent change in the Headline CPI number.
The Consumer Price Index (CPI-U) data is provided by the U.S. Department
of Labor Bureau of Labor Statistics.
(c) Average price per MWh for full year 2012 and 2011. Pricing for the PJM
PSEG Zone is provided by the PJM ISO.
(d) Average price per MMBtu for full year 2012 and 2011. The Henry Hub
Pricing data is provided by the Natural Gas Weekly Update, Energy
Information Administration, Washington, DC. Nebraska Energy Office,
Lincoln, NE.
(e) Average price per gross ton for full year 2012 and 2011. The #1 Heavy
Melt Steel (HMS) composite index ($/gross ton) price is published by
American Metal Market.
(f) Average price per pound for full year 2012 and 2011. Calculated using
high and low prices for Old Sheet & Old Cast Scrap Metals ($/lb)
published by American Metal Market.
Discussion of Non-GAAP Financial Measures
We use a number of different financial measures, both United States generally accepted accounting principles ("GAAP") and non-GAAP, in assessing the overall performance of our business. To supplement our assessment of results prepared in accordance with GAAP, we use the measures of Adjusted EBITDA, Free Cash Flow, and Adjusted EPS, which are non-GAAP measures as defined by the Securities and Exchange Commission. The non-GAAP financial measures of Adjusted EBITDA, Free Cash Flow, and Adjusted EPS as described below, and used in the tables above, are not intended as a substitute or as an alternative to net income, cash flow provided by operating activities or diluted earnings per share as indicators of our performance or liquidity or any other measures of performance or liquidity derived in accordance with GAAP. In addition, our non-GAAP financial measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes.
The presentations of Adjusted EBITDA, Free Cash Flow and Adjusted EPS are intended to enhance the usefulness of our financial information by providing measures which management internally use to assess and evaluate the overall performance of its business and those of possible acquisition candidates, and highlight trends in the overall business.
Adjusted EBITDA
We use Adjusted EBITDA to provide further information that is useful to an understanding of the financial covenants contained in the credit facilities as of December 31, 2012 of our most significant subsidiary, Covanta Energy, through which we conduct our core waste and energy services business, and as additional ways of viewing aspects of its operations that, when viewed with the GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of our core business. The calculation of Adjusted EBITDA is based on the definition in Covanta Energy's credit facilities as of December 31, 2012, which we have guaranteed. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, as adjusted for additional items subtracted from or added to net income. Because our business is substantially comprised of that of Covanta Energy, our financial performance is substantially similar to that of Covanta Energy. For this reason, and in order to avoid use of multiple financial measures which are not all from the same entity, the calculation of Adjusted EBITDA and other financial measures presented herein are ours, measured on a consolidated basis for continuing operations, less the results of operations of our insurance subsidiaries.
Under the credit facilities as of December 31, 2012, Covanta Energy is required to satisfy certain financial covenants, including certain ratios of which Adjusted EBITDA is an important component. Compliance with such financial covenants is expected to be the principal limiting factor which will affect our ability to engage in a broad range of activities in furtherance of our business, including making certain investments, acquiring businesses and incurring additional debt. Covanta Energy was in compliance with these covenants as of December 31, 2012. Failure to comply with such financial covenants could result in a default under these credit facilities, which default would have a material adverse affect on our financial condition and liquidity.
These financial covenants are measured on a trailing four quarter period basis and the material covenants are as follows:
- maximum Covanta Energy leverage ratio of 4.00 to 1.00, which measures Covanta Energy's Consolidated Adjusted Debt (which is the principal amount of its consolidated debt less certain restricted funds dedicated to repayment of project debt principal and construction costs) to its Adjusted EBITDA (which for purposes of calculating the leverage ratio and interest coverage ratio, is adjusted on a pro forma basis for acquisitions and dispositions made during the relevant period); and
- minimum Covanta Energy interest coverage ratio of 3.00 to 1.00, which measures Covanta Energy's Adjusted EBITDA to its consolidated interest expense plus certain interest expense of ours, to the extent paid by Covanta Energy.
In order to provide a meaningful basis for comparison, we are providing information with respect to our Adjusted EBITDA for the three and twelve months ended December 31, 2012 and 2011, reconciled for each such periods to net income from continuing operations and cash flow provided by operating activities from continuing operations, which are believed to be the most directly comparable measures under GAAP.
Free Cash Flow
Free Cash Flow is defined as cash flow provided by operating activities from continuing operations, excluding the cash flow provided by or used in our insurance subsidiaries, less maintenance capital expenditures, which are capital expenditures primarily to maintain our existing facilities. We use the non-GAAP measure of Free Cash Flow as a criterion of liquidity and performance-based components of employee compensation. We use Free Cash Flow as a measure of liquidity to determine amounts we can reinvest in our core businesses, such as amounts available to make acquisitions, invest in construction of new projects, make principal payments on debt, or amounts we can return to our stockholders through dividends and/or stock repurchases.
In order to provide a meaningful basis for comparison, we are providing information with respect to our Free Cash Flow for the three and twelve months ended December 31, 2012 and 2011, reconciled for each such periods to cash flow provided by operating activities from continuing operations, 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 the results of operations of our insurance subsidiaries, write-off of assets and liabilities, the effect of derivative instruments not designated as hedging instruments, significant gains or losses from the disposition or restructuring of businesses, gains and losses on assets held for sale, transaction-related costs, income and loss on the extinguishment of debt and other significant items that would not be representative of our ongoing business.
We will use the non-GAAP measure of Adjusted EPS to enhance the usefulness of our financial information by providing a measure which management internally uses to assess and evaluate the overall performance and highlight trends in the ongoing business.
In order to provide a meaningful basis for comparison, we are providing information with respect to our Adjusted EPS for the three and twelve months ended December 31, 2012 and 2011, reconciled for each such periods to diluted earnings per share from continuing operations, which is believed to be the most directly comparable measure under GAAP.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K may constitute "forward-looking" statements as defined in Section 27A of the Securities Act of 1933 (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), the Private Securities Litigation Reform Act of 1995 (the "PSLRA") or in releases made by the Securities and Exchange Commission ("SEC"), all as may be amended from time to time. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Covanta Holding Corporation and its subsidiaries ("Covanta") or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward-looking statements. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words "plan," "believe," "expect," "anticipate," "intend," "estimate," "project," "may," "will," "would," "could," "should," "seeks," or "scheduled to," or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the "safe harbor" provisions of such laws. Covanta cautions investors that any forward-looking statements made by us are not guarantees or indicative of future performance. Important factors, risks and uncertainties that could cause actual results to differ materially from those forward-looking statements include, but are not limited to:
- fluctuations in the prices of energy, waste disposal, scrap metal and commodities;
- adoption of new laws and regulations in the United States and abroad, including energy laws, environmental laws, labor laws and healthcare laws;
- the fee structures of our contracts;
- our ability to avoid adverse publicity relating to our business expansion efforts;
- advances in technology;
- difficulties in the operation of our facilities, including fuel supply and energy delivery interruptions, failure to obtain regulatory approvals, equipment failures, labor disputes and work stoppages, and weather interference and catastrophic events;
- failure to maintain historical performance levels at our facilities and our ability to retain the rights to operate facilities we do not own;
- difficulties in the financing, development and construction of new projects and expansions, including increased construction costs and delays;
- our ability to realize the benefits of long-term business development and bear the costs of business development over time;
- the scalability of our business;
- limits of insurance coverage;
- our ability to avoid defaults under our long-term contracts;
- performance of third parties under our contractual arrangements and such third parties' observance of laws and regulations;
- concentration of suppliers and customers;
- geographic concentration of facilities;
- increased competitiveness in the energy and waste industries;
- changes in foreign currency exchange rates;
- limitations imposed by our existing indebtedness and our ability to perform our financial obligations and guarantees and to refinance our existing indebtedness;
- exposure to counterparty credit risk and instability of financial institutions in connection with financing transactions;
- our ability to utilize net operating loss carryforwards;
- restrictions in our certificate of incorporation and debt documents regarding strategic alternatives;
- failures of disclosure controls and procedures and internal controls over financial reporting;
- our ability to attract and retain talented people;
- general economic conditions in the United States and abroad, including the availability of credit and debt financing and market conditions at the time our contracts expire; and
- other risks and uncertainties affecting our businesses described in Item 1A. Risk Factors of this Annual Report on Form 10-K and in other filings by Covanta with the SEC.
Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, actual results could differ materially from a projection or assumption in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The forward-looking statements contained in this Annual Report on Form 10-K are made only as of the date hereof and we do not have, or undertake, any obligation to update or revise any forward-looking statements whether as a result of new information, subsequent events or otherwise, unless otherwise required by law.