MORRISTOWN, N.J., Oct. 25, 2018 /PRNewswire/ -- Covanta
Holding Corporation (NYSE: CVA) ("Covanta" or the "Company"), a world leader in sustainable waste and energy solutions, reported
financial results today for the three and nine months ended September 30, 2018.
|
Three Months Ended
September 30,
|
|
2018
|
|
2017
|
|
|
|
|
|
(Unaudited, $ in millions, except
per share amounts)
|
|
Revenue
|
$456
|
|
$429
|
|
Net (loss) income
|
$(27)
|
|
$15
|
|
Adjusted EBITDA
|
$122
|
|
$117
|
|
Net cash provided by operating activities
|
$84
|
|
$69
|
|
Free Cash Flow before Working Capital
|
$78
|
|
$78
|
|
Free Cash Flow
|
$85
|
|
$68
|
|
Diluted EPS
|
$(0.21)
|
|
$0.11
|
|
Adjusted EPS
|
$(0.04)
|
|
$0.12
|
|
Reconciliations of non-GAAP measures can be found in the exhibits to
this press release.
|
Key Highlights
- Reaffirming 2018 guidance, with Adjusted EBITDA expected in the upper end of the range
- Strong plant operations driving increased 2018 production outlook
- Acquired highly complementary Palm Beach EfW operations
- Amended Long Beach contract as part of fleet optimization efforts
- Refinanced $2 billion in debt to extend maturities and reduce cost
"As we've seen all year, consistent operations and a strong waste market drove improved year-over-year results," said
Stephen J. Jones, Covanta's President and CEO. "At the same time, we took meaningful steps in
optimizing our portfolio through both an acquisition and a contract amendment, while continuing to advance our long-term
strategic initiatives."
More detail on our third quarter results can be found in the exhibits to this release and in our third quarter 2018 earnings
presentation found in the Investor Relations section of the Covanta website at www.covanta.com.
2018 Guidance
The Company reaffirmed guidance for 2018 for the following key metrics:
(In millions)
|
Metric
|
2018
Guidance Range (1)
|
2017
Actual
|
|
Adjusted EBITDA
|
$425 - $455
|
$408
|
|
Free Cash Flow Before Working Capital
|
$100 - $130
|
$88
|
|
Free Cash Flow
|
$70 - $100
|
$132
|
|
|
(1) For additional information on the reconciliation of
Free Cash Flow and Free Cash Flow Before Working Capital to Net cash provided by operating activities, see Exhibit 5 of
this press release. Guidance as of October 25, 2018.
|
Conference Call Information
Covanta will host a conference call at 8:30 AM (Eastern) on Friday, October 26,
2018 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, please dial 1-833-238-7947 approximately 10 minutes prior to the scheduled start of the call. If
calling outside of the United States, please dial 1-647-689-4195. Please request the
"Covanta Holding Corporation Earnings Conference Call" when prompted by the conference call operator. The conference call will
also be webcast live from the Investor Relations section of the Company's website. A presentation will be made available
during the call and will be found in the Investor Relations section of the Covanta website at www.covanta.com.
An archived webcast will be available two hours after the end of the conference call and can be accessed through the Investor
Relations section of the Covanta website at www.covanta.com.
About Covanta
Covanta is a world leader in providing sustainable waste and energy solutions. Annually, Covanta's modern
Energy-from-Waste facilities safely convert approximately 22 million tons of waste from municipalities and businesses into clean,
renewable electricity to power one million homes and recycle over 600,000 tons of metal. Through a vast network of
treatment and recycling facilities, Covanta also provides comprehensive industrial material management services to companies
seeking solutions to some of today's most complex environmental challenges. For more information, visit www.covanta.com.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this press release may constitute "forward-looking" statements as defined in Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934 (the "Exchange
Act"), the Private Securities Litigation Reform Act of 1995 (the "PSLRA") or in releases made by the Securities and Exchange
Commission ("SEC"), all as may be amended from time to time. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results, performance or achievements of Covanta Holding
Corporation and its subsidiaries ("Covanta") or industry results, to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are
forward-looking statements. For additional information see the Cautionary Note Regarding Forward-Looking Statements at the
end of the Exhibits.
|
Covanta Holding Corporation
|
Exhibit 1
|
|
Consolidated Statements of Operations
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
(In millions, except per share amounts)
|
|
OPERATING REVENUE:
|
|
|
|
|
|
|
|
|
|
Waste and service revenue
|
|
$
|
332
|
|
$
|
306
|
|
$
|
977
|
|
$
|
902
|
|
Energy revenue
|
|
81
|
|
80
|
|
257
|
|
241
|
|
Recycled metals revenue
|
|
23
|
|
23
|
|
72
|
|
54
|
|
Other operating revenue
|
|
20
|
|
20
|
|
62
|
|
60
|
|
Total operating revenue
|
|
456
|
|
429
|
|
1,368
|
|
1,257
|
|
OPERATING EXPENSE:
|
|
|
|
|
|
|
|
|
|
Plant operating expense
|
|
308
|
|
301
|
|
987
|
|
952
|
|
Other operating expense, net
|
|
17
|
|
7
|
|
44
|
|
24
|
|
General and administrative expense
|
|
27
|
|
24
|
|
85
|
|
82
|
|
Depreciation and amortization expense
|
|
53
|
|
51
|
|
162
|
|
155
|
|
Impairment charges (a)
|
|
49
|
|
—
|
|
86
|
|
1
|
|
Total operating expense
|
|
454
|
|
383
|
|
1,364
|
|
1,214
|
|
Operating income
|
|
2
|
|
46
|
|
4
|
|
43
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(37)
|
|
(35)
|
|
(111)
|
|
(106)
|
|
Gain (loss) on sale of assets (a)
|
|
7
|
|
—
|
|
217
|
|
(6)
|
|
Loss on extinguishment of debt (a)
|
|
(3)
|
|
—
|
|
(3)
|
|
(13)
|
|
Other income (expense), net
|
|
—
|
|
2
|
|
(1)
|
|
2
|
|
Total (expense) income
|
|
(33)
|
|
(33)
|
|
102
|
|
(123)
|
|
(Loss) income before income tax benefit and equity in net
income from unconsolidated investments
|
|
(31)
|
|
13
|
|
106
|
|
(80)
|
|
Income tax benefit
|
|
3
|
|
2
|
|
34
|
|
5
|
|
Equity in net income from unconsolidated investments
|
|
1
|
|
—
|
|
3
|
|
1
|
|
Net (loss) income
|
|
$
|
(27)
|
|
$
|
15
|
|
$
|
143
|
|
$
|
(74)
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
130
|
|
130
|
|
130
|
|
129
|
|
Diluted
|
|
130
|
|
131
|
|
132
|
|
129
|
|
|
|
|
|
|
|
|
|
|
(Loss) Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.21)
|
|
$
|
0.11
|
|
$
|
1.10
|
|
$
|
(0.58)
|
|
Diluted
|
|
$
|
(0.21)
|
|
$
|
0.11
|
|
$
|
1.09
|
|
$
|
(0.58)
|
|
|
|
|
|
|
|
|
|
|
Cash Dividend Declared Per Share
|
|
$
|
0.25
|
|
$
|
0.25
|
|
$
|
0.75
|
|
$
|
0.75
|
|
|
|
|
|
|
|
|
|
|
(a) For additional information, see Exhibit 4 of this Press
Release.
|
|
Covanta Holding Corporation
|
Exhibit 2
|
|
Consolidated Balance Sheets
|
|
|
As of
|
|
September 30,
2018
|
|
December 31,
2017
|
|
(Unaudited)
|
|
|
|
ASSETS
|
(In millions, except per
share amounts)
|
|
Current:
|
|
|
|
|
Cash and cash equivalents
|
$
|
51
|
|
$
|
46
|
|
Restricted funds held in trust
|
39
|
|
43
|
|
Receivables (less allowances of $9 and $14, respectively)
|
316
|
|
341
|
|
Prepaid expenses and other current assets
|
61
|
|
73
|
|
Assets held for sale (a)
|
2
|
|
653
|
|
Total Current Assets
|
469
|
|
1,156
|
|
Property, plant and equipment, net
|
2,513
|
|
2,606
|
|
Restricted funds held in trust
|
8
|
|
28
|
|
Intangible assets, net
|
286
|
|
287
|
|
Goodwill
|
321
|
|
313
|
|
Other assets
|
213
|
|
51
|
|
Total Assets
|
$
|
3,810
|
|
$
|
4,441
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Current:
|
|
|
|
|
Current portion of long-term debt
|
$
|
15
|
|
$
|
10
|
|
Current portion of project debt
|
18
|
|
23
|
|
Accounts payable
|
54
|
|
151
|
|
Accrued expenses and other current liabilities
|
303
|
|
313
|
|
Liabilities held for sale (a)
|
—
|
|
540
|
|
Total Current Liabilities
|
390
|
|
1,037
|
|
Long-term debt
|
2,327
|
|
2,339
|
|
Project debt
|
134
|
|
151
|
|
Deferred income taxes
|
378
|
|
412
|
|
Other liabilities
|
76
|
|
75
|
|
Total Liabilities
|
3,305
|
|
4,014
|
|
Equity:
|
|
|
|
|
Preferred stock ($0.10 par value; authorized 10 shares; none issued
and
outstanding)
|
—
|
|
—
|
|
Common stock ($0.10 par value; authorized 250 shares; issued 136
shares,
outstanding 131 shares)
|
14
|
|
14
|
|
Additional paid-in capital
|
837
|
|
822
|
|
Accumulated other comprehensive loss
|
(35)
|
|
(55)
|
|
Accumulated deficit
|
(310)
|
|
(353)
|
|
Treasury stock, at par
|
(1)
|
|
(1)
|
|
Total Stockholders' Equity
|
505
|
|
427
|
|
Total Liabilities and Equity
|
$
|
3,810
|
|
$
|
4,441
|
|
|
|
|
|
(a) During the fourth quarter of 2017, our EfW facility in Dublin,
Ireland met the criteria to be classified as held for sale
|
|
Covanta Holding Corporation
|
Exhibit 3
|
|
Consolidated Statements of Cash Flow
|
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017 (a)
|
|
|
|
|
|
(Unaudited, in millions)
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
Net income (loss)
|
$
|
143
|
|
$
|
(74)
|
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
|
|
|
|
|
Depreciation and amortization expense
|
162
|
|
155
|
|
Amortization of deferred debt financing costs
|
4
|
|
5
|
|
(Gain) loss on asset sales (b)
|
(217)
|
|
6
|
|
Impairment charges (b)
|
86
|
|
1
|
|
Loss on extinguishment of debt (b)
|
3
|
|
13
|
|
Stock-based compensation expense
|
18
|
|
16
|
|
Provision for doubtful accounts
|
1
|
|
5
|
|
Equity in net (income) from unconsolidated investments
|
(3)
|
|
(1)
|
|
Deferred income taxes
|
(32)
|
|
(7)
|
|
Dividends from unconsolidated investments
|
1
|
|
1
|
|
Other, net
|
(6)
|
|
(6)
|
|
Change in working capital, net of effects of acquisitions and
dispositions
|
(14)
|
|
(30)
|
|
Changes in noncurrent assets and liabilities, net
|
1
|
|
12
|
|
Net cash provided by operating activities
|
147
|
|
96
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
Purchase of property, plant and equipment
|
(158)
|
|
(218)
|
|
Acquisition of businesses, net of cash acquired
|
(50)
|
|
(16)
|
|
Proceeds from the sale of assets, net of restricted cash
|
125
|
|
—
|
|
Property insurance proceeds
|
7
|
|
5
|
|
Payment of indemnification claim from sale of asset
|
(7)
|
|
—
|
|
Other, net
|
(4)
|
|
(6)
|
|
Net cash used in investing activities
|
(87)
|
|
(235)
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
Proceeds from borrowings on long-term debt
|
765
|
|
400
|
|
Proceeds from borrowings on revolving credit facility
|
474
|
|
806
|
|
Proceeds from borrowing on Dublin project financing
|
—
|
|
71
|
|
Payments on long-term debt
|
(528)
|
|
(413)
|
|
Payment on revolving credit facility
|
(713)
|
|
(676)
|
|
Payments on equipment financing capital leases
|
(4)
|
|
(4)
|
|
Principal payments on project debt
|
(21)
|
|
(20)
|
|
Payment of deferred financing costs
|
(9)
|
|
(9)
|
|
Cash dividends paid to stockholders
|
(98)
|
|
(98)
|
|
Financing of insurance premiums, net
|
(20)
|
|
—
|
|
Other, net
|
(4)
|
|
9
|
|
Net cash (used in) provided by financing activities
|
(158)
|
|
66
|
|
Effect of exchange rate changes on cash and cash equivalents
|
2
|
|
4
|
|
Net decrease in cash, cash equivalents and restricted cash
|
(96)
|
|
(69)
|
|
Cash, cash equivalents and restricted cash at beginning of period
(c)
|
194
|
|
194
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
98
|
|
$
|
125
|
|
|
(a)
|
As adjusted to reflect the adoption of ASU 2016-18 effective January 1,
2018. As a result of adoption, the statement of cash flows explains the change during the period in the total of cash,
cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.
|
|
(b)
|
For additional information, see Exhibit 4 of this Press Release.
|
|
(c)
|
For the nine months ended September 30, 2018, includes $77 million of
restricted cash classified as held for sale as of December 31, 2017.
|
|
Covanta Holding Corporation
|
Exhibit 4
|
|
Consolidated Reconciliation of Net (Loss) Income and Net Cash Provided
by Operating Activities
|
|
to Adjusted EBITDA
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited, in millions)
|
|
Net (loss) income
|
|
$
|
(27)
|
|
$
|
15
|
|
$
|
143
|
|
$
|
(74)
|
|
Depreciation and amortization expense
|
|
53
|
|
51
|
|
162
|
|
155
|
|
Interest expense
|
|
37
|
|
35
|
|
111
|
|
106
|
|
Income tax benefit
|
|
(3)
|
|
(2)
|
|
(34)
|
|
(5)
|
|
Impairment charges (a)
|
|
49
|
|
—
|
|
86
|
|
1
|
|
(Gain) loss on sale of assets (b)
|
|
(7)
|
|
—
|
|
(217)
|
|
6
|
|
Loss on extinguishment of debt (c)
|
|
3
|
|
—
|
|
3
|
|
13
|
|
Property insurance recoveries, net
|
|
—
|
|
1
|
|
(7)
|
|
(2)
|
|
Capital type expenditures at client owned
facilities (d)
|
|
5
|
|
10
|
|
28
|
|
36
|
|
Debt service billings (less than) in excess of revenue
recognized
|
|
(1)
|
|
2
|
|
—
|
|
4
|
|
Business development and transaction costs
|
|
1
|
|
—
|
|
4
|
|
1
|
|
Severance and reorganization costs
|
|
1
|
|
—
|
|
5
|
|
1
|
|
Stock-based compensation expense
|
|
4
|
|
5
|
|
18
|
|
16
|
|
Adjustments to reflect Adjusted EBITDA from unconsolidated
investments
|
|
5
|
|
—
|
|
16
|
|
—
|
|
Other (e)
|
|
2
|
|
—
|
|
7
|
|
3
|
|
Adjusted EBITDA
|
|
$
|
122
|
|
$
|
117
|
|
$
|
325
|
|
$
|
261
|
|
Capital type expenditures at client owned facilities
(d)
|
|
(5)
|
|
(10)
|
|
(28)
|
|
(36)
|
|
Cash paid for interest, net of capitalized interest
|
|
(42)
|
|
(33)
|
|
(115)
|
|
(100)
|
|
Cash paid for taxes, net
|
|
—
|
|
1
|
|
(2)
|
|
—
|
|
Equity in net (income) from unconsolidated investments
|
|
(1)
|
|
—
|
|
(3)
|
|
(1)
|
|
Adjustments to reflect Adjusted EBITDA from unconsolidated
investments
|
|
(5)
|
|
—
|
|
(16)
|
|
—
|
|
Dividends from unconsolidated investments
|
|
—
|
|
1
|
|
1
|
|
1
|
|
Adjustment for working capital and other
|
|
15
|
|
(7)
|
|
(15)
|
|
(29)
|
|
Net cash provided by operating activities
|
|
$
|
84
|
|
$
|
69
|
|
$
|
147
|
|
$
|
96
|
|
|
|
(a)
|
During the three and nine months ended September 30, 2018, we identified
indicators of impairment associated with certain of our EfW facilities and recorded a
non-cash impairment charge of $49 million and $86 million, respectively, to reduce the carrying value of
the facilities to their estimated fair value.
|
|
|
|
(b)
|
During the three and nine months ended September 30, 2018, we recorded a $7
million gain on the sale of our equity interests in a hydroelectric facility. During the nine months ended September
30, 2018 we recorded a $204 million gain on the sale of 50% of our Dublin project to our joint venture with the
Green Investment Group Limited and a $6 million gain on the sale of our remaining interests in China.
|
|
|
|
During the nine months ended September 30, 2017, we recorded
a $6 million charge for indemnification claims related to the sale of our interests in China, which was
completed in 2016.
|
|
|
|
(c)
|
During the three and nine months ended September 30, 2018,
we recorded a $3 million loss related to the refinancing of our tax-exempt bonds.
|
|
|
|
As a result of the redemption of our 7.25% Senior Notes due 2020, during
the nine months ended September 30, 2017, we recorded a prepayment charge of approximately $9 million and a write-off of
the remaining deferred financing costs of approximately $4 million.
|
|
|
|
(d)
|
Adjustment for impact of adoption of FASB ASC 853 - Service Concession
Arrangements. These types of capital equipment related expenditures at our service fee operated facilities were
historically capitalized prior to adoption of this new accounting standard effective January 1, 2015 and are capitalized
at facilities that we own.
|
|
|
|
(e)
|
Includes certain other items that are added back under the definition of
Adjusted EBITDA in Covanta Energy, LLC's credit agreement.
|
|
Covanta Holding Corporation
|
Exhibit 5
|
|
Reconciliation of Net Cash Provided by Operating Activities to Free Cash
Flow and Free Cash Flow
|
|
Before Working Capital
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
Full Year
Estimated
2018
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited, in millions)
|
|
|
|
Net cash provided by operating activities
|
$
|
84
|
|
$
|
69
|
|
$
|
147
|
|
$
|
96
|
|
$195 - $225
|
|
Add: Changes in restricted funds - operating (a)
|
18
|
|
19
|
|
7
|
|
18
|
|
10
|
|
Less: Maintenance capital expenditures (b)
|
(17)
|
|
(20)
|
|
(95)
|
|
(84)
|
|
(140 - 130)
|
|
Free Cash Flow
|
$
|
85
|
|
$
|
68
|
|
$
|
59
|
|
$
|
30
|
|
$70 - $100
|
|
Less: Changes in working capital
|
(7)
|
|
10
|
|
14
|
|
30
|
|
20 - 40
|
|
Free Cash Flow Before Working Capital
|
$
|
78
|
|
$
|
78
|
|
$
|
73
|
|
$
|
60
|
|
$100 - $130
|
|
|
(a) Adjustment for the impact of the adoption of ASU
2016-18 effective January 1, 2018. As a result of adoption,
the statement of cash flows explains the change during the period in the total
of cash, cash equivalents, and
amounts generally described as restricted cash or restricted cash equivalents.
Therefore, changes in restricted
funds are eliminated in arriving at net cash, cash equivalents and restricted
funds provided by operating
activities
|
|
|
(b) Purchases of property, plant and equipment are also
referred to as capital expenditures. Capital expenditures
that primarily maintain existing facilities are classified as maintenance
capital expenditures. The following
table provides the components of total purchases of property, plant and
equipment:
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
Maintenance capital expenditures
|
$
|
(17)
|
|
$
|
(20)
|
|
$
|
(95)
|
|
$
|
(84)
|
|
|
|
Net maintenance capital expenditures paid but incurred in
prior periods
|
2
|
|
—
|
|
(10)
|
|
—
|
|
|
|
Capital expenditures associated with construction
of Dublin EfW facility
|
(1)
|
|
(35)
|
|
(22)
|
|
(91)
|
|
|
|
Capital expenditures associated with the New York
City MTS contract
|
(9)
|
|
—
|
|
(9)
|
|
—
|
|
|
|
Capital expenditures associated with organic
growth initiatives
|
(3)
|
|
(7)
|
|
(18)
|
|
(30)
|
|
|
|
Total capital expenditures associated with growth
investments (c)
|
(13)
|
|
(42)
|
|
(49)
|
|
(121)
|
|
|
|
Capital expenditures associated with property
insurance events
|
—
|
|
(4)
|
|
(4)
|
|
(13)
|
|
|
|
Total purchases of property, plant and equipment
|
$
|
(28)
|
|
$
|
(66)
|
|
$
|
(158)
|
|
$
|
(218)
|
|
|
|
|
(c) Total growth investments include investments in
growth opportunities, including organic growth
|
|
initiatives, technology, business
development, and other similar expenditures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures associated with growth
investments
|
$
|
(13)
|
|
$
|
(42)
|
|
$
|
(49)
|
|
$
|
(121)
|
|
|
|
UK business development projects
|
(3)
|
|
(2)
|
|
(4)
|
|
(2)
|
|
|
|
Asset and business acquisitions, net of cash acquired
|
(46)
|
|
(1)
|
|
(50)
|
|
(17)
|
|
|
|
Total growth investments
|
$
|
(62)
|
|
$
|
(45)
|
|
$
|
(103)
|
|
$
|
(140)
|
|
|
|
Covanta Holding Corporation
|
Exhibit 6
|
|
Reconciliation of Diluted (Loss) Earnings Per Share to Adjusted
EPS
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Diluted (Loss) Earnings Per Share:
|
|
$
|
(0.21)
|
|
$
|
0.11
|
|
$
|
1.09
|
|
$
|
(0.58)
|
|
Reconciling Items (a)
|
|
0.17
|
|
0.01
|
|
(1.22)
|
|
0.11
|
|
Adjusted EPS
|
|
$
|
(0.04)
|
|
$
|
0.12
|
|
$
|
(0.13)
|
|
$
|
(0.47)
|
|
|
|
|
|
|
|
|
|
|
(a) For details related to the Reconciling Items, see Exhibit 6A of this
Press Release.
|
|
|
|
Covanta Holding Corporation
|
Exhibit 6A
|
|
Reconciling Items
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
(In millions, except per share amounts)
|
|
Reconciling Items
|
|
|
|
|
|
|
|
|
|
Impairment charges (a)
|
|
$
|
49
|
|
$
|
—
|
|
$
|
86
|
|
$
|
1
|
|
(Gain) loss on sale of assets (a)
|
|
(7)
|
|
|
—
|
|
(217)
|
|
6
|
|
Property insurance recoveries, net
|
|
—
|
|
1
|
|
(7)
|
|
(2)
|
|
Severance and reorganization costs
|
|
1
|
|
—
|
|
5
|
|
1
|
|
Loss on extinguishment of debt (a)
|
|
3
|
|
—
|
|
3
|
|
13
|
|
Effect of foreign exchange loss on indebtedness
|
|
—
|
|
(1)
|
|
1
|
|
(2)
|
|
Other
|
|
1
|
|
—
|
|
—
|
|
—
|
|
Total Reconciling Items, pre-tax
|
|
47
|
|
—
|
|
(129)
|
|
17
|
|
Pro forma income tax impact (b)
|
|
(10)
|
|
—
|
|
(18)
|
|
(5)
|
|
Impact of New Jersey state tax law change
|
|
(14)
|
|
—
|
|
(14)
|
|
—
|
|
Grantor trust activity
|
|
—
|
|
1
|
|
—
|
|
2
|
|
Total Reconciling Items, net of tax
|
|
$
|
23
|
|
$
|
1
|
|
$
|
(161)
|
|
$
|
14
|
|
Diluted Per Share Impact
|
|
$
|
0.17
|
|
$
|
0.01
|
|
$
|
(1.22)
|
|
$
|
0.11
|
|
Weighted Average Diluted Shares Outstanding
|
|
130
|
|
131
|
|
132
|
|
129
|
|
|
|
|
|
|
|
|
|
|
(a) For additional information, see Exhibit 4 of this Press
Release.
|
|
(b) We calculate the federal and state tax impact of each item using the
statutory federal tax rate of 21% for 2018 and 35% for 2017 and
applicable state rates.
|
|
Covanta Holding Corporation
|
|
|
|
Exhibit 7
|
|
Supplemental Information
|
|
|
|
|
|
(Unaudited, $ in millions)
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
2018
|
|
2017
|
|
REVENUE:
|
|
|
|
|
|
Waste and service revenue:
|
|
|
|
|
|
EfW tip fees
|
|
$
|
155
|
|
$
|
142
|
|
EfW service fees
|
|
104
|
|
95
|
|
Environmental services (a)
|
|
36
|
|
34
|
|
Municipal services (b)
|
|
55
|
|
50
|
|
Other (c)
|
|
9
|
|
12
|
|
Intercompany (d)
|
|
(27)
|
|
(26)
|
|
Total waste and service
|
|
332
|
|
306
|
|
Energy Revenue:
|
|
|
|
|
|
Energy sales
|
|
67
|
|
68
|
|
Capacity
|
|
13
|
|
12
|
|
Total energy
|
|
81
|
|
80
|
|
Recycled metals revenue:
|
|
|
|
|
|
Ferrous
|
|
14
|
|
13
|
|
Non-ferrous
|
|
9
|
|
10
|
|
Total recycled metals
|
|
23
|
|
23
|
|
Other revenue (e)
|
|
20
|
|
20
|
|
Total revenue
|
|
$
|
456
|
|
$
|
429
|
|
|
|
|
|
|
OPERATING EXPENSE:
|
|
|
|
|
|
Plant operating expense:
|
|
|
|
|
|
Plant maintenance
|
|
$
|
55
|
|
$
|
57
|
|
Other plant operating expense
|
|
253
|
|
243
|
|
Total plant operating expense
|
|
308
|
|
301
|
|
Other operating expense
|
|
17
|
|
7
|
|
General and administrative
|
|
27
|
|
24
|
|
Depreciation and amortization
|
|
53
|
|
51
|
|
Impairment charges
|
|
49
|
|
—
|
|
Total operating expense
|
|
$
|
454
|
|
$
|
383
|
|
|
|
|
|
|
Operating income
|
|
$
|
2
|
|
$
|
46
|
|
|
|
|
|
|
Plus: Impairment charges
|
|
49
|
|
—
|
|
Operating income excluding impairment charges
|
|
$
|
51
|
|
$
|
46
|
|
|
|
|
|
|
(a) Includes the operation of material processing facilities and related
services provided by our Covanta Environmental Services business.
|
|
(b) Consists of transfer stations and the transportation component of our
NYC MTS contract.
|
|
(c) Includes waste brokerage, debt service and other revenue not directly
related to EfW waste processing activities.
|
|
(d) Consists of elimination of intercompany transactions primarily relating
to transfer stations.
|
|
(e) Consists primarily of construction revenue.
|
|
Note: Certain amounts may not total due to rounding.
|
|
Covanta Holding Corporation
|
Exhibit 8
|
|
Revenue and Operating Income Changes - Q3 2017 to Q3 2018
|
|
(Unaudited, $ in millions)
|
|
|
|
|
|
|
|
|
Contract Transitions (b)
|
|
|
|
|
|
|
|
Q3 2017
|
|
Organic
Growth (a)
|
|
%
|
|
Waste
|
|
Energy
|
|
Transactions (c)
|
|
Total
Changes
|
|
Q3 2018
|
|
REVENUE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Waste and service:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EfW tip fees
|
$
|
142
|
|
$
|
13
|
|
9.4%
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
13
|
|
$
|
155
|
|
EfW service fees
|
95
|
|
4
|
|
4.7%
|
|
(3)
|
|
—
|
|
9
|
|
10
|
|
104
|
|
Environmental services
|
34
|
|
3
|
|
9.1%
|
|
—
|
|
—
|
|
(1)
|
|
2
|
|
36
|
|
Municipal services
|
50
|
|
5
|
|
9.2%
|
|
—
|
|
—
|
|
—
|
|
5
|
|
55
|
|
Other revenue
|
12
|
|
(3)
|
|
(23.7)%
|
|
—
|
|
—
|
|
—
|
|
(3)
|
|
9
|
|
Intercompany
|
(26)
|
|
(1)
|
|
|
|
—
|
|
—
|
|
—
|
|
(1)
|
|
(27)
|
|
Total waste and service
|
306
|
|
21
|
|
7.0%
|
|
(3)
|
|
—
|
|
8
|
|
26
|
|
332
|
|
Energy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy Sales
|
68
|
|
3
|
|
4.5%
|
|
—
|
|
(4)
|
|
—
|
|
(1)
|
|
67
|
|
Capacity
|
12
|
|
—
|
|
1.9%
|
|
(1)
|
|
2
|
|
—
|
|
2
|
|
13
|
|
Total energy
|
80
|
|
3
|
|
3.4%
|
|
(1)
|
|
(2)
|
|
—
|
|
—
|
|
81
|
|
Recycled metals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ferrous
|
13
|
|
2
|
|
11.8%
|
|
—
|
|
—
|
|
—
|
|
1
|
|
14
|
|
Non-ferrous
|
10
|
|
(1)
|
|
(7.8)%
|
|
—
|
|
—
|
|
—
|
|
(1)
|
|
9
|
|
Total recycled metals
|
23
|
|
1
|
|
3.2%
|
|
—
|
|
—
|
|
—
|
|
1
|
|
23
|
|
Other revenue
|
20
|
|
1
|
|
4.4%
|
|
(1)
|
|
—
|
|
—
|
|
—
|
|
20
|
|
Total revenue
|
$
|
429
|
|
$
|
26
|
|
6.0%
|
|
$
|
(5)
|
|
$
|
(2)
|
|
$
|
8
|
|
$
|
27
|
|
$
|
456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant maintenance
|
$
|
57
|
|
$
|
(3)
|
|
(5.1)%
|
|
$
|
(1)
|
|
$
|
—
|
|
$
|
2
|
|
$
|
(2)
|
|
$
|
55
|
|
Other plant operating expense
|
243
|
|
6
|
|
2.4%
|
|
(3)
|
|
—
|
|
7
|
|
10
|
|
253
|
|
Total plant operating expense
|
301
|
|
3
|
|
1.0%
|
|
(4)
|
|
—
|
|
9
|
|
8
|
|
308
|
|
Other operating expense
|
7
|
|
3
|
|
|
|
7
|
|
—
|
|
—
|
|
11
|
|
17
|
|
General and administrative
|
24
|
|
3
|
|
|
|
—
|
|
—
|
|
—
|
|
3
|
|
27
|
|
Depreciation and amortization
|
51
|
|
1
|
|
|
|
—
|
|
—
|
|
—
|
|
1
|
|
53
|
|
Total operating expense
|
$
|
383
|
|
$
|
10
|
|
|
|
$
|
4
|
|
$
|
—
|
|
$
|
9
|
|
$
|
23
|
|
$
|
406
|
|
Operating Income excluding Impairment Charges
|
$
|
46
|
|
$
|
16
|
|
|
|
$
|
(9)
|
|
$
|
(2)
|
|
$
|
(1)
|
|
$
|
4
|
|
$
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Reflects performance on a comparable period-over-period basis,
excluding the impacts of transitions and transactions.
|
|
(b) Includes the impact of the expiration of: (1) long-term major waste and
service contracts, most typically representing the transition to a new contract structure, and (2) long-term energy
contracts.
|
|
(c) Includes the impacts of acquisitions, divestitures, new projects and
the addition or loss of operating contracts.
|
|
|
Note: Excludes impairment charges.
|
|
Note: Certain amounts may not total due to rounding.
|
|
Operating Metrics
|
Exhibit 9
|
|
(Unaudited)
|
|
|
Three Months Ended
September 30,
|
|
2018
|
|
2017
|
|
EfW Waste
|
|
|
|
|
Tons: (in millions)
|
|
|
|
|
Tip fee- contracted
|
2.3
|
|
2.0
|
|
Tip fee- uncontracted
|
0.5
|
|
0.5
|
|
Service fee
|
2.4
|
|
2.2
|
|
Total tons
|
5.1
|
|
4.7
|
|
Tip Fee revenue per ton:
|
|
|
|
|
Tip fee- contracted
|
$
|
52.36
|
|
$
|
52.75
|
|
Tip fee- uncontracted
|
$
|
80.27
|
|
$
|
73.98
|
|
Average tip fee
|
$
|
57.13
|
|
$
|
57.03
|
|
EfW Energy
|
|
|
|
|
Energy sales: (MWh in millions)
|
|
|
|
|
Contracted
|
0.5
|
|
0.6
|
|
Hedged
|
0.8
|
|
0.7
|
|
Market
|
0.3
|
|
0.2
|
|
Total energy
|
1.6
|
|
1.5
|
|
Market sales by geography: (MWh in millions)
|
|
|
|
|
PJM East
|
0.1
|
|
—
|
|
NEPOOL
|
0.1
|
|
0.1
|
|
NYISO
|
—
|
|
—
|
|
Other
|
0.1
|
|
0.1
|
|
Revenue per MWh (excludes capacity):
|
|
|
|
|
Contracted
|
$
|
65.41
|
|
$
|
66.58
|
|
Hedged
|
$
|
28.24
|
|
$
|
32.25
|
|
Market
|
$
|
33.66
|
|
$
|
25.79
|
|
Average revenue per MWh
|
$
|
41.48
|
|
$
|
45.83
|
|
Metals
|
|
|
|
|
Tons Recovered: (in thousands)
|
|
|
|
|
Ferrous
|
111
|
|
98
|
|
Non-ferrous
|
13
|
|
10
|
|
Tons Sold: (in thousands)
|
|
|
|
|
Ferrous
|
90
|
|
81
|
|
Non-ferrous
|
7
|
|
8
|
|
Revenue per ton:
|
|
|
|
|
Ferrous
|
$
|
159
|
|
$
|
158
|
|
Non-ferrous
|
$
|
1,360
|
|
$
|
1,201
|
|
EfW plant operating expense: ($ in millions)
|
|
|
|
|
Plant operating expense - gross
|
$
|
240
|
|
$
|
232
|
|
Less: Client pass-through costs
|
(12)
|
|
(14)
|
|
Less: REC sales - contra-expense
|
(4)
|
|
(3)
|
|
Plant operating expense, net
|
$
|
224
|
|
$
|
215
|
|
|
Note: Waste volume includes solid tons only. Metals and energy volume are
presented net of client
revenue sharing. Steam sales are converted to MWh equivalent at an assumed average rate of
11 klbs of steam / MWh. Uncontracted energy sales include sales under PPAs that are based on market prices.
|
|
Note: Certain amounts may not total due to rounding.
|
Discussion of Non-GAAP Financial Measures
We use a number of different financial measures, both United States generally
accepted accounting principles ("GAAP") and non-GAAP, in assessing the overall performance of our business. To supplement
our assessment of results prepared in accordance with GAAP, we use the measures of Adjusted EBITDA, Free Cash Flow, Free Cash
Flow Before Working Capital, and Adjusted EPS, which are non-GAAP financial measures as defined by the Securities and Exchange
Commission. The non-GAAP financial measures of Adjusted EBITDA, Free Cash Flow, Free Cash Flow Before Working Capital, and
Adjusted EPS as described below, and used in the tables above, are not intended as a substitute or as an alternative to net
income, cash flow provided by operating activities or diluted earnings per share as indicators of our performance or liquidity or
any other measures of performance or liquidity derived in accordance with GAAP. In addition, our non-GAAP financial
measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes.
The presentations of Adjusted EBITDA, Free Cash Flow, Free Cash Flow Before Working Capital, and Adjusted EPS are intended to
enhance the usefulness of our financial information by providing measures which management internally use to assess and evaluate
the overall performance of its business and those of possible acquisition candidates, and highlight trends in the overall
business.
Adjusted EBITDA
We use Adjusted EBITDA to provide additional ways of viewing aspects of operations that, when viewed with the GAAP
results provide a more complete understanding of our core business. As we define it, Adjusted EBITDA represents earnings before
interest, taxes, depreciation and amortization, as adjusted for additional items subtracted from or added to net income including
the effects of impairment losses, gains or losses on sales, dispositions or retirements of assets, adjustments to reflect the
Adjusted EBITDA from our unconsolidated investments, adjustments to exclude significant unusual or non-recurring items that are
not directly related to our operating performance plus adjustments to capital type expenses for our service fee facilities in
line with our credit agreements. We adjust for these items in our Adjusted EBITDA as our management believes that these items
would distort their ability to efficiently view and assess our core operating trends. As larger parts of our business are
conducted through unconsolidated entities that we do not control, we adjust for our proportionate share of the entities
depreciation and amortization, interest expense and taxes in order to improve comparability to the Adjusted EBITDA of our wholly
owned entities.
In order to provide a meaningful basis for comparison, we are providing information with respect to our Adjusted EBITDA for
the three and nine months ended September 30, 2018 and 2017, reconciled for each such period to net income and cash flow
provided by operating activities, which are believed to be the most directly comparable measures under GAAP.
Our projections of the proportional contribution of our interests in the JV to our Adjusted EBITDA and Free Cash Flow are not
based on GAAP net income/loss or Cash flow provided by operating activities, respectively, and are anticipated to be adjusted to
exclude the effects of events or circumstances in 2018 that are not representative or indicative of our results of operations and
that are not currently determinable. Due to the uncertainty of the likelihood, amount and timing of any such adjusting items, we
do not have information available to provide a quantitative reconciliation of projected net income/loss to an Adjusted EBITDA
projection.
Free Cash Flow and Free Cash Flow Before Working Capital
Free Cash Flow is defined as cash flow provided by operating activities, plus changes in operating restricted funds,
less maintenance capital expenditures, which are capital expenditures primarily to maintain our existing facilities. Free
Cash Flow Before Working Capital is defined as Free Cash Flow excluding changes in working capital.
We use the non-GAAP measures of Free Cash Flow and Free Cash Flow Before Working Capital as criteria of liquidity and
performance-based components of employee compensation. We use Free Cash Flow and Free Cash Flow Before Working Capital as
measures of liquidity to determine amounts we can reinvest in our core businesses, such as amounts available to make
acquisitions, invest in construction of new projects, make principal payments on debt, or amounts we can return to our
stockholders through dividends and/or stock repurchases.
In order to provide a meaningful basis for comparison, we are providing information with respect to our Free Cash Flow and
Free Cash Flow Before Working Capital for the three and nine months ended September 30, 2018 and 2017, reconciled for each
such period to cash flow provided by operating activities, which we believe to be the most directly comparable measure under
GAAP.
Adjusted EPS
Adjusted EPS excludes certain income and expense items that are not representative of our ongoing business and
operations, which are included in the calculation of Diluted Earnings Per Share in accordance with GAAP. The following
items are not all-inclusive, but are examples of reconciling items in prior comparative and future periods. They would
include impairment charges, the effect of derivative instruments not designated as hedging instruments, significant gains or
losses from the disposition or restructuring of businesses, gains and losses on assets held for sale, transaction-related costs,
income and loss on the extinguishment of debt and other significant items that would not be representative of our ongoing
business.
We will use the non-GAAP measure of Adjusted EPS to enhance the usefulness of our financial information by providing a measure
which management internally uses to assess and evaluate the overall performance and highlight trends in the ongoing business.
In order to provide a meaningful basis for comparison, we are providing information with respect to our Adjusted EPS for the
three and nine months ended September 30, 2018 and 2017, reconciled for each such period to diluted income per share, which
is believed to be the most directly comparable measure under GAAP.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this press release may constitute "forward-looking" statements as defined in Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934 (the "Exchange
Act"), the Private Securities Litigation Reform Act of 1995 (the "PSLRA") or in releases made by the Securities and Exchange
Commission ("SEC"), all as may be amended from time to time. Such forward-looking statements involve known and unknown
risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Covanta
Holding Corporation and its subsidiaries ("Covanta") or industry results, to differ materially from any future results,
performance or achievements expressed or implied by such forward-looking statements. Statements that are not historical
fact are forward-looking statements. Forward-looking statements can be identified by, among other things, the use of
forward-looking language, such as the words "plan," "believe," "expect," "anticipate," "intend," "estimate," "project," "may,"
"will," "would," "could," "should," "seeks," or "scheduled to," or other similar words, or the negative of these terms or other
variations of these terms or comparable language, or by discussion of strategy or intentions. These cautionary statements
are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the
"safe harbor" provisions of such laws. Covanta cautions investors that any forward-looking statements made by Covanta are
not guarantees or indicative of future performance. Important factors, risks, and uncertainties that could cause actual
results of Covanta and the JV to differ materially from those forward-looking statements include, but are not limited to:
- seasonal or long-term fluctuations in the prices of energy, waste disposal, scrap metal and commodities, and Covanta's
ability to renew or replace expiring contracts at comparable prices and with other acceptable terms;
- adoption of new laws and regulations in the United States and abroad, including energy
laws, tax laws, environmental laws, labor laws and healthcare laws;
- advances in technology;
- difficulties in the operation of our facilities, including fuel supply and energy delivery interruptions, failure to obtain
regulatory approvals, equipment failures, labor disputes and work stoppages, and weather interference and catastrophic
events;
- failure to maintain historical performance levels at Covanta's facilities and Covanta's ability to retain the rights to
operate facilities Covanta does not own;
- Covanta's and the joint ventures ability to avoid adverse publicity or reputational damage relating to its business;
- difficulties in the financing, development and construction of new projects and expansions, including increased
construction costs and delays;
- Covanta's ability to realize the benefits of long-term business development and bear the costs of business development over
time;
- Covanta's ability to utilize net operating loss carryforwards;
- limits of insurance coverage;
- Covanta's ability to avoid defaults under its long-term contracts;
- performance of third parties under its contracts and such third parties' observance of laws and regulations;
- concentration of suppliers and customers;
- geographic concentration of facilities;
- increased competitiveness in the energy and waste industries;
- changes in foreign currency exchange rates;
- limitations imposed by Covanta's existing indebtedness and its ability to perform its financial obligations and guarantees
and to refinance its existing indebtedness;
- exposure to counterparty credit risk and instability of financial institutions in connection with financing
transactions;
- the scalability of its business;
- restrictions in its certificate of incorporation and debt documents regarding strategic alternatives;
- failures of disclosure controls and procedures and internal controls over financial reporting;
- Covanta's and the joint ventures ability to attract and retain talented people;
- general economic conditions in the United States and abroad, including the availability of
credit and debt financing; and
- other risks and uncertainties affecting Covanta's businesses described periodic securities filings by Covanta with the
SEC.
Although Covanta believes that its plans, cost estimates, returns on investments, intentions and expectations reflected in or
suggested by such forward-looking statements are reasonable, actual results could differ materially from a projection or
assumption in any forward-looking statements. Covanta's and the joint ventures future financial condition and results of
operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties. The
forward-looking statements contained in this press release are made only as of the date hereof and Covanta does not have, or
undertake, any obligation to update or revise any forward-looking statements whether as a result of new information, subsequent
events or otherwise, unless otherwise required by law.
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SOURCE Covanta Holding Corporation