MORRISTOWN, N.J.,
April 29, 2021 /PRNewswire/ -- Covanta Holding Corporation
(NYSE: CVA) ("Covanta" or the "Company"), a world leader in
sustainable waste and energy solutions, reported financial results
today for the three months ended March 31,
2021.
|
Three Months Ended
March 31,
|
|
2021
|
|
2020
|
|
|
|
|
|
(Unaudited, $ in
millions)
|
Revenue
|
$498
|
|
$468
|
Net income
(loss)
|
$2
|
|
$(32)
|
Adjusted
EBITDA
|
$106
|
|
$97
|
Net cash provided by
operating activities
|
$52
|
|
$61
|
Free Cash
Flow
|
$19
|
|
$18
|
|
Reconciliations of
non-GAAP measures can be found in the exhibits to this press
release.
|
Key Highlights
- Strong first quarter operating results including 4%
year-over-year WtE tip fee price growth
- Metals prices significantly higher year-over-year on improving
demand and tight market supply
- Increasing 2021 guidance for Adjusted EBITDA and Free Cash
Flow
- Initiating overhead cost rationalization program for
$30 million in annual savings by
2023
- Establishing long-term financial outlook:
-
- Adjusted EBITDA of $600 million
and Free Cash Flow of $250 million by
2024
- Leverage ratio below 5x by end of 2022
"Covanta is off to a great start operationally, and with strong
waste and metals markets, improved visibility on waste-to-energy
plant production for the balance of the year, and continued focus
on cost control, we are confidently raising our guidance for 2021,"
said Michael Ranger, President and
CEO. "I am also pleased to announce the first definitive steps in
our strategic review process. We are instituting a comprehensive
overhead cost rationalization program to rightsize the level of
support required for the business. In addition, we continue to
explore third party interest in discrete assets and develop plans
to address underperforming operations. With our new UK projects
coming online over the next three years, including Rookery in Q1
next year, and planned cost improvements, we have a high degree of
visibility to meaningful growth from drivers under our control,
which translates to a compelling outlook for cash generation."
More detail on our first quarter results can be found in the
exhibits to this release and in our first quarter 2021 earnings
presentation found in the Investor Relations section of the Covanta
website at www.covanta.com.
2021 Guidance
The Company increased its guidance for 2021 for the following
key metrics:
($ in
millions)
|
2021 Guidance
Range
|
|
Metric
|
New
|
Previous
|
2020
Actual
|
Adjusted
EBITDA
|
$460 -
$480
|
$435 -
$465
|
$424
|
Free Cash
Flow
|
$125 -
$155
|
$100 -
$140
|
$93
|
|
Reconciliations of
non-GAAP measures can be found in the exhibits to this press
release.
|
|
Guidance as of
April 30, 2021.
|
Conference Call Information
Covanta will host a conference call at 8:30 AM (Eastern) on Friday, April 30, 2021
to discuss its first quarter results.
The conference call will begin with prepared remarks, which will
be followed by a question and answer session. To participate
on the live call, please dial 1-888-317-6003 (US) or
1-412-317-6061 (international) approximately 15 minutes
prior to the scheduled start of the call and enter the passcode
9319047. The conference call will also be webcast live from the
Investor Relations section of the Company's website. A presentation
will be made available during the call and will be found in the
Investor Relations section of the Covanta website at
www.covanta.com.
An archived webcast will be available two hours after the end of
the conference call and can be accessed through the Investor
Relations section of the Covanta website at www.covanta.com.
About Covanta
Covanta is a world leader in providing sustainable waste and
energy solutions. Annually, Covanta's modern Waste-to-Energy
("WtE") facilities safely convert approximately 21 million tons of
waste from municipalities and businesses into clean, renewable
electricity to power one million homes and recycle 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
March 31,
|
|
|
2021
|
|
2020
(a)
|
|
|
|
|
|
|
(Unaudited)
(In millions, except per
share amounts)
|
OPERATING
REVENUE:
|
|
|
|
|
Waste
revenue
|
|
$
|
343
|
|
|
$
|
340
|
|
Energy
revenue
|
|
104
|
|
|
93
|
|
Materials sales
revenue
|
|
36
|
|
|
17
|
|
Services
revenue
|
|
15
|
|
|
18
|
|
Total operating
revenue
|
|
498
|
|
|
468
|
|
OPERATING
EXPENSE:
|
|
|
|
|
Cost of
operations
|
|
398
|
|
|
371
|
|
Other operating
expense, net
|
|
(4)
|
|
|
2
|
|
General and
administrative expense
|
|
33
|
|
|
30
|
|
Depreciation and
amortization expense
|
|
57
|
|
|
58
|
|
Impairment charges
(b)
|
|
—
|
|
|
19
|
|
Total operating
expense
|
|
484
|
|
|
480
|
|
Operating income
(loss)
|
|
14
|
|
|
(12)
|
|
OTHER INCOME
(EXPENSE):
|
|
|
|
|
Interest
expense
|
|
(31)
|
|
|
(34)
|
|
Net gain on sale of
business and investments (b)
|
|
—
|
|
|
9
|
|
Other
expense
|
|
—
|
|
|
(1)
|
|
Total other
expense
|
|
(31)
|
|
|
(26)
|
|
Loss before income
tax benefit and equity in net income from unconsolidated
investments
|
|
(17)
|
|
|
(38)
|
|
Income tax
benefit
|
|
18
|
|
|
5
|
|
Equity in net income
from unconsolidated investments
|
|
1
|
|
|
1
|
|
Net income
(loss)
|
|
$
|
2
|
|
|
$
|
(32)
|
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding:
|
|
|
|
|
Basic
|
|
132
|
|
|
131
|
|
Diluted
|
|
137
|
|
|
131
|
|
|
|
|
|
|
Income (Loss) Per
Share
|
|
|
|
|
Basic
|
|
$
|
0.02
|
|
|
$
|
(0.24)
|
|
Diluted
|
|
$
|
0.01
|
|
|
$
|
(0.24)
|
|
|
|
|
|
|
Cash Dividend
Declared Per Share
|
|
$
|
0.08
|
|
|
$
|
0.25
|
|
|
(a) As revised for
new financial statement presentation, see Exhibit 8 of this Press
Release for further information.
|
(b) For additional
information, see Exhibit 4 of this Press Release.
|
Covanta Holding
Corporation
|
|
|
Exhibit 2
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
2021
|
|
2020
|
|
|
|
|
|
(Unaudited)
|
|
|
ASSETS
|
(In millions, except per share amounts)
|
Current:
|
|
|
|
Cash and cash
equivalents
|
$
|
56
|
|
|
$
|
55
|
|
Restricted funds held
in trust
|
10
|
|
|
11
|
|
Receivables (less
allowances of $7 and $8, respectively)
|
233
|
|
|
260
|
|
Prepaid expenses and
other current assets
|
98
|
|
|
117
|
|
Total Current
Assets
|
397
|
|
|
443
|
|
Property, plant and
equipment, net
|
2,405
|
|
|
2,421
|
|
Restricted funds held
in trust
|
6
|
|
|
6
|
|
Intangible assets,
net
|
232
|
|
|
237
|
|
Goodwill
|
302
|
|
|
302
|
|
Other
assets
|
300
|
|
|
297
|
|
Total
Assets
|
$
|
3,642
|
|
|
$
|
3,706
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current:
|
|
|
|
Current portion of
long-term debt
|
$
|
27
|
|
|
$
|
18
|
|
Current portion of
project debt
|
9
|
|
|
9
|
|
Accounts
payable
|
68
|
|
|
75
|
|
Accrued expenses and
other current liabilities
|
270
|
|
|
303
|
|
Total Current
Liabilities
|
374
|
|
|
405
|
|
Long-term
debt
|
2,411
|
|
|
2,396
|
|
Project
debt
|
115
|
|
|
116
|
|
Deferred income
taxes
|
338
|
|
|
362
|
|
Other
liabilities
|
114
|
|
|
117
|
|
Total
Liabilities
|
3,352
|
|
|
3,396
|
|
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 133 shares)
|
14
|
|
|
14
|
|
Additional paid-in
capital
|
883
|
|
|
882
|
|
Accumulated other
comprehensive loss
|
(44)
|
|
|
(32)
|
|
Accumulated
deficit
|
(563)
|
|
|
(554)
|
|
Treasury stock, at
par
|
—
|
|
|
—
|
|
Total
Equity
|
290
|
|
|
310
|
|
Total Liabilities
and Equity
|
$
|
3,642
|
|
|
$
|
3,706
|
|
Covanta Holding
Corporation
|
Exhibit 3
|
Consolidated
Statements of Cash Flow
|
|
|
|
|
Three Months Ended
March 31,
|
|
2021
|
|
2020
|
|
|
|
|
|
(Unaudited, in
millions)
|
OPERATING
ACTIVITIES:
|
|
|
|
Net income
(loss)
|
$
|
2
|
|
|
$
|
(32)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization expense
|
57
|
|
|
58
|
|
Amortization of
deferred debt financing costs
|
1
|
|
|
1
|
|
Net gain on sale of
business and investments (a)
|
—
|
|
|
(9)
|
|
Impairment charges
(a)
|
—
|
|
|
19
|
|
Stock-based
compensation expense
|
9
|
|
|
8
|
|
Equity in net income
from unconsolidated investments
|
(1)
|
|
|
(1)
|
|
Deferred income
taxes
|
(20)
|
|
|
(6)
|
|
Other, net
|
(3)
|
|
|
3
|
|
Change in working
capital
|
7
|
|
|
20
|
|
Net cash provided by
operating activities
|
52
|
|
|
61
|
|
INVESTING
ACTIVITIES:
|
|
|
|
Purchase of property,
plant and equipment
|
(43)
|
|
|
(43)
|
|
Proceeds from asset
sales
|
—
|
|
|
3
|
|
Investment in equity
affiliates
|
(1)
|
|
|
(10)
|
|
Other, net
|
(1)
|
|
|
(1)
|
|
Net cash used in
investing activities
|
(45)
|
|
|
(51)
|
|
FINANCING
ACTIVITIES:
|
|
|
|
Proceeds from
borrowings on long-term debt
|
—
|
|
|
9
|
|
Proceeds from
borrowings on revolving credit facility
|
97
|
|
|
181
|
|
Payments on long-term
debt
|
(5)
|
|
|
(4)
|
|
Payments on revolving
credit facility
|
(69)
|
|
|
(146)
|
|
Payments on project
debt
|
(1)
|
|
|
(1)
|
|
Cash dividends paid to
stockholders
|
(11)
|
|
|
(34)
|
|
Payment of insurance
premium financing
|
(9)
|
|
|
(8)
|
|
Other, net
|
(8)
|
|
|
(5)
|
|
Net cash used in
financing activities
|
(6)
|
|
|
(8)
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
(1)
|
|
|
(1)
|
|
Net increase in cash,
cash equivalents and restricted cash
|
—
|
|
|
1
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
72
|
|
|
63
|
|
Cash, cash
equivalents and restricted cash at end of period
|
$
|
72
|
|
|
$
|
64
|
|
|
|
|
|
(a) For additional
information, see Exhibit 4 of this Press Release.
|
Covanta Holding
Corporation
|
|
Exhibit 4
|
Consolidated
Reconciliation of Net Income (Loss) and Net Cash Provided by
Operating Activities to
Adjusted EBITDA
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
(Unaudited, in millions)
|
Net income
(loss)
|
|
$
|
2
|
|
|
$
|
(32)
|
|
Depreciation and
amortization expense
|
|
57
|
|
|
58
|
|
Interest
expense
|
|
31
|
|
|
34
|
|
Income tax
benefit
|
|
(18)
|
|
|
(5)
|
|
Impairment charges
(a)
|
|
—
|
|
|
19
|
|
Net gain on sale of
businesses and investments (b)
|
|
—
|
|
|
(9)
|
|
Gain on sale of
assets
|
|
(1)
|
|
|
—
|
|
Accretion
expense
|
|
1
|
|
|
1
|
|
Business development
and transaction costs
|
|
2
|
|
|
—
|
|
Severance and
reorganization costs
|
|
4
|
|
|
—
|
|
Stock-based
compensation expense
|
|
9
|
|
|
8
|
|
Adjustments to reflect
Adjusted EBITDA from unconsolidated investments
|
|
7
|
|
|
6
|
|
Capital type
expenditures at client owned facilities (c)
|
|
14
|
|
|
14
|
|
Other
(d)
|
|
(2)
|
|
|
3
|
|
Adjusted
EBITDA
|
|
$
|
106
|
|
|
$
|
97
|
|
|
|
(a)
|
During the three
months ended March 31, 2020, we recorded a $19 million non-cash
impairment charge related to our Covanta Environmental Solutions
reporting unit.
|
(b)
|
During the three
months ended March 31, 2020, we recorded a $9 million gain related
to the Newhurst Energy Recovery Facility development
project.
|
(c)
|
Adjustment for
capital equipment related expenditures at our service fee operated
facilities which are capitalized at facilities that we
own.
|
(d)
|
Added back under the
definition of Adjusted EBITDA in Covanta Energy, LLC's credit
agreement.
|
|
|
Three Months
Ended
March 31,
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
(Unaudited, in millions)
|
Net cash provided
by operating activities
|
|
$
|
52
|
|
|
$
|
61
|
|
Capital type
expenditures at client owned facilities (a)
|
|
14
|
|
|
14
|
|
Cash paid for
interest
|
|
52
|
|
|
39
|
|
Cash paid for
taxes
|
|
1
|
|
|
1
|
|
Equity in net income
from unconsolidated investments
|
|
1
|
|
|
1
|
|
Adjustments to reflect
Adjusted EBITDA from unconsolidated investments
|
|
7
|
|
|
6
|
|
Adjustments for
working capital and other
|
|
(21)
|
|
|
(25)
|
|
Adjusted
EBITDA
|
|
$
|
106
|
|
|
$
|
97
|
|
|
(a) See Adjusted
EBITDA reconciliation above - Note (c).
|
Covanta Holding
Corporation
|
|
Exhibit 5
|
Reconciliation of
Net Cash Provided by Operating Activities to Free Cash
Flow
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
(Unaudited, in millions)
|
Net cash provided
by operating activities
|
|
$
|
52
|
|
|
$
|
61
|
|
Add: Changes in
restricted funds - operating (a)
|
|
—
|
|
|
(2)
|
|
Less: Software
implementation expenditures (b)
|
|
—
|
|
|
(1)
|
|
Less: Maintenance
capital expenditures (c)
|
|
(33)
|
|
|
(40)
|
|
Free Cash
Flow
|
|
$
|
19
|
|
|
$
|
18
|
|
|
(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) Due
to the adoption of ASU 2018-15 effective January 1, 2020, these
expenditures, previously included in Maintenance capital
expenditures above and Purchases of property, plant and equipment
on our consolidated statement of cash flows, are now included
in Other, net in the investing section of our consolidated
statement of cash flows.
|
|
|
|
|
|
(c)
Purchases of property, plant and equipment are also referred to as
capital expenditures. Capital expenditures that primarily
maintain existing facilities are classified as maintenance capital
expenditures. The following table provides the components
of total purchases of property, plant and equipment:
|
|
|
Three Months Ended
March 31,
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
(Unaudited, in millions)
|
Maintenance capital
expenditures
|
|
$
|
(33)
|
|
|
$
|
(40)
|
|
Net maintenance
capital expenditures paid but incurred in prior periods
|
|
(9)
|
|
|
5
|
|
|
|
|
|
|
Total ash processing
system
|
|
(1)
|
|
|
(8)
|
|
Total capital
expenditures associated with growth investments
(d)
|
|
(1)
|
|
|
(8)
|
|
Total purchases of
property, plant and equipment
|
|
$
|
(43)
|
|
|
$
|
(43)
|
|
|
|
|
|
|
(d) Total growth
investments represents investments in growth opportunities,
including organic growth initiatives, technology,
business development, and other similar expenditures, net of third
party loans collateralized by unconsolidated project
equity:
|
Capital expenditures
associated with growth investments
|
|
$
|
(1)
|
|
|
$
|
(8)
|
|
UK business
development projects
|
|
—
|
|
|
(1)
|
|
Investment in equity
affiliate
|
|
(1)
|
|
|
(10)
|
|
Less: Third party
project loan proceeds collateralized by project equity
|
|
—
|
|
|
9
|
|
Total growth
investments
|
|
$
|
(2)
|
|
|
$
|
(10)
|
|
|
Covanta Holding
Corporation
|
|
|
Exhibit
6
|
Supplemental
Information
|
(Unaudited, $ in
millions)
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2021
|
|
2020
|
REVENUE:
|
|
|
|
Waste:
|
|
|
|
Tip
fees
|
$
|
159
|
|
|
$
|
161
|
|
Service
fees
|
123
|
|
|
119
|
|
Waste to energy
processing
|
282
|
|
|
279
|
|
Materials processing
and recycling
|
25
|
|
|
22
|
|
Waste handling and
disposal
|
67
|
|
|
67
|
|
Intercompany
|
(30)
|
|
|
(28)
|
|
Total waste
revenue
|
343
|
|
|
340
|
|
Energy:
|
|
|
|
Energy
sales
|
76
|
|
|
77
|
|
Capacity
|
10
|
|
|
10
|
|
Wholesale load serving
(1)
|
11
|
|
|
4
|
|
Renewable energy
credits and other
|
7
|
|
|
2
|
|
Total energy
revenue
|
104
|
|
|
93
|
|
Materials
sales:
|
|
|
|
Ferrous
|
22
|
|
|
10
|
|
Non-ferrous
|
13
|
|
|
7
|
|
Other
Materials
|
—
|
|
|
—
|
|
Total materials
sales revenue
|
36
|
|
|
17
|
|
Services
revenue
|
15
|
|
|
18
|
|
Total
revenue
|
$
|
498
|
|
|
$
|
468
|
|
|
|
|
|
OPERATING
EXPENSE:
|
|
|
|
Cost of
operations:
|
|
|
|
Wages &
benefits
|
$
|
125
|
|
|
$
|
122
|
|
Maintenance
|
105
|
|
|
92
|
|
Other operating
costs
|
167
|
|
|
157
|
|
Cost of
operations
|
398
|
|
|
371
|
|
Other operating
expense, net
|
(4)
|
|
|
2
|
|
General and
administrative
|
33
|
|
|
30
|
|
Depreciation and
amortization
|
57
|
|
|
58
|
|
Impairments
|
—
|
|
|
19
|
|
Total operating
expense
|
$
|
484
|
|
|
480
|
|
|
|
|
|
Operating income
(loss)
|
$
|
14
|
|
|
$
|
(12)
|
|
|
|
|
|
Plus impairment
charges
|
—
|
|
|
19
|
|
Operating
income excluding impairment charges
|
$
|
14
|
|
|
$
|
7
|
|
|
|
|
|
(1)
|
Includes wholesale
energy load serving revenue not included in Energy sales line, such
as transmission and ancillaries.
|
|
Note: Certain amounts
may not total due to rounding.
|
Covanta Holding
Corporation
|
|
|
Exhibit
7
|
Operating
Metrics
|
|
|
|
(Unaudited)
|
|
|
|
|
Three Months Ended
March 31,
|
|
2021
|
|
2020
|
WtE
Waste
|
|
|
|
Tons: (in
millions)
|
|
|
|
Tip fees-
contracted
|
1.95
|
|
|
2.08
|
|
Tip fees-
uncontracted
|
0.59
|
|
|
0.58
|
|
Service
fees
|
2.52
|
|
|
2.62
|
|
Total tons
|
5.06
|
|
|
5.28
|
|
Tip Fee revenue
per ton:
|
|
|
|
Tip fees-
contracted
|
$
|
57.22
|
|
|
$
|
54.04
|
|
Tip fees-
uncontracted
|
$
|
80.24
|
|
|
$
|
82.87
|
|
Average tip
fees
|
$
|
62.54
|
|
|
$
|
60.36
|
|
WtE
Energy
|
|
|
|
Energy sales: (MWh
in millions)
|
|
|
|
Contracted
|
0.49
|
|
|
0.51
|
|
Hedged
|
0.82
|
|
|
0.82
|
|
Market
|
0.25
|
|
|
0.30
|
|
Total
energy
|
1.56
|
|
|
1.64
|
|
Market sales by
geography: (MWh in millions)
|
|
|
|
PJM East
|
0.1
|
|
|
0.1
|
|
NEPOOL
|
—
|
|
|
0.1
|
|
NYISO
|
0.1
|
|
|
—
|
|
Other
|
0.1
|
|
|
0.1
|
|
Revenue per MWh
(excludes capacity and other energy revenue):
|
|
|
|
Contracted
|
$
|
68.12
|
|
|
$
|
66.32
|
|
Hedged
|
$
|
43.37
|
|
|
$
|
45.68
|
|
Market
|
$
|
26.68
|
|
|
$
|
19.15
|
|
Average revenue per
MWh
|
$
|
48.52
|
|
|
$
|
47.27
|
|
Materials
sales
|
|
|
|
Tons Recovered:
(in thousands)
|
|
|
|
Ferrous
|
114.1
|
|
|
103.1
|
|
Non-ferrous
|
10.6
|
|
|
12.0
|
|
Tons Sold: (in
thousands)
|
|
|
|
Ferrous
|
104.2
|
|
|
90.6
|
|
Non-ferrous
|
8.0
|
|
|
7.5
|
|
Revenue per
ton:
|
|
|
|
Ferrous
|
$
|
213
|
|
|
$
|
115
|
|
Non-ferrous
|
$
|
1,656
|
|
|
$
|
900
|
|
|
|
|
|
Note: Waste volume
includes solid tons only. Materials and energy volume are presented
net of client revenue sharing. Steam sales are converted to MWh
equivalent at an assumed average rate of 11 klbs of steam /
MWh. Hedged energy sales includes the energy component of
wholesale load serving. Uncontracted energy sales include sales
under PPAs that are based on market prices.
|
|
|
|
|
Note: Certain amounts
may not total due to rounding.
|
|
|
|
Covanta Holding
Corporation
|
|
|
|
|
|
|
|
|
|
Exhibit
8
|
Supplemental
Information - Income (Loss) from Operations
|
(Unaudited, $ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Mar.
31,
|
|
June
30,
|
|
Sept.
30,
|
|
Dec.
31,
|
|
Mar.
31,
|
|
June
30,
|
|
Sept.
30,
|
|
Dec.
31,
|
|
2020
|
|
2020
|
|
2020
|
|
2020
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
REVENUE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Waste:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tip fees
|
$
|
161
|
|
|
$
|
158
|
|
|
$
|
168
|
|
|
$
|
164
|
|
|
$
|
149
|
|
|
$
|
162
|
|
|
$
|
163
|
|
|
$
|
164
|
|
Service
fees
|
119
|
|
|
115
|
|
|
119
|
|
|
117
|
|
|
118
|
|
|
117
|
|
|
116
|
|
|
119
|
|
Waste to energy
processing
|
279
|
|
|
273
|
|
|
287
|
|
|
282
|
|
|
267
|
|
|
279
|
|
|
279
|
|
|
283
|
|
Materials processing
and recycling
|
22
|
|
|
19
|
|
|
22
|
|
|
23
|
|
|
20
|
|
|
24
|
|
|
23
|
|
|
24
|
|
Waste handling and
disposal
|
67
|
|
|
72
|
|
|
81
|
|
|
73
|
|
|
57
|
|
|
75
|
|
|
77
|
|
|
69
|
|
Intercompany
|
(28)
|
|
|
(28)
|
|
|
(31)
|
|
|
(31)
|
|
|
(26)
|
|
|
(28)
|
|
|
(33)
|
|
|
(29)
|
|
Total waste
revenue (1) (3)
|
340
|
|
|
337
|
|
|
358
|
|
|
347
|
|
|
319
|
|
|
351
|
|
|
346
|
|
|
347
|
|
Energy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
sales
|
77
|
|
|
57
|
|
|
63
|
|
|
69
|
|
|
81
|
|
|
58
|
|
|
66
|
|
|
68
|
|
Capacity
|
10
|
|
|
10
|
|
|
10
|
|
|
10
|
|
|
13
|
|
|
12
|
|
|
9
|
|
|
9
|
|
Wholesale load
serving
|
4
|
|
|
9
|
|
|
17
|
|
|
12
|
|
|
—
|
|
|
2
|
|
|
6
|
|
|
4
|
|
Renewable energy
credits and other
|
2
|
|
|
2
|
|
|
3
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total energy
revenue
|
93
|
|
|
78
|
|
|
93
|
|
|
93
|
|
|
94
|
|
|
72
|
|
|
81
|
|
|
82
|
|
Materials
sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ferrous
|
10
|
|
|
10
|
|
|
12
|
|
|
15
|
|
|
11
|
|
|
13
|
|
|
11
|
|
|
10
|
|
Non-ferrous
|
7
|
|
|
9
|
|
|
9
|
|
|
9
|
|
|
9
|
|
|
8
|
|
|
8
|
|
|
14
|
|
Other
Materials
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total materials
sales revenue (2)(3)
|
17
|
|
|
20
|
|
|
21
|
|
|
24
|
|
|
21
|
|
|
21
|
|
|
20
|
|
|
24
|
|
Services revenue
(1)(4)
|
18
|
|
|
19
|
|
|
19
|
|
|
27
|
|
|
19
|
|
|
23
|
|
|
18
|
|
|
32
|
|
Total
revenue
|
$
|
468
|
|
|
$
|
454
|
|
|
$
|
491
|
|
|
$
|
491
|
|
|
$
|
453
|
|
|
$
|
467
|
|
|
$
|
465
|
|
|
$
|
485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wages &
benefits
|
$
|
122
|
|
|
$
|
111
|
|
|
$
|
118
|
|
|
$
|
126
|
|
|
$
|
120
|
|
|
$
|
116
|
|
|
$
|
115
|
|
|
$
|
120
|
|
Maintenance
|
92
|
|
|
81
|
|
|
66
|
|
|
88
|
|
|
96
|
|
|
83
|
|
|
63
|
|
|
68
|
|
Other operating
costs
|
157
|
|
|
159
|
|
|
174
|
|
|
173
|
|
|
154
|
|
|
170
|
|
|
156
|
|
|
166
|
|
Cost of operations
(5)
|
371
|
|
|
351
|
|
|
358
|
|
|
387
|
|
|
370
|
|
|
369
|
|
|
334
|
|
|
354
|
|
Other operating
expense, net (5)
|
2
|
|
|
2
|
|
|
2
|
|
|
(2)
|
|
|
5
|
|
|
1
|
|
|
1
|
|
|
(1)
|
|
General and
administrative
|
30
|
|
|
27
|
|
|
27
|
|
|
37
|
|
|
31
|
|
|
31
|
|
|
29
|
|
|
33
|
|
Depreciation and
amortization
|
58
|
|
|
56
|
|
|
54
|
|
|
56
|
|
|
55
|
|
|
55
|
|
|
55
|
|
|
56
|
|
Impairments
|
19
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
2
|
|
|
(1)
|
|
Total operating
expense
|
$
|
480
|
|
|
$
|
436
|
|
|
$
|
441
|
|
|
$
|
478
|
|
|
$
|
461
|
|
|
$
|
457
|
|
|
$
|
421
|
|
|
$
|
441
|
|
Operating (loss)
income
|
$
|
(12)
|
|
|
$
|
18
|
|
|
$
|
50
|
|
|
$
|
13
|
|
|
$
|
(8)
|
|
|
$
|
10
|
|
|
$
|
44
|
|
|
$
|
44
|
|
|
|
|
|
|
Plus: impairment
charges
|
19
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
2
|
|
|
(1)
|
|
Operating income
(loss) excluding impairment charges
|
$
|
7
|
|
|
$
|
18
|
|
|
$
|
50
|
|
|
$
|
13
|
|
|
$
|
(8)
|
|
|
$
|
11
|
|
|
$
|
46
|
|
|
$
|
43
|
|
|
Note: Certain amounts
may not total due to rounding.
|
|
(1)
|
Reflects
reclassification of certain services performed by CES from the
former Waste and service revenue category to the new Services
revenue category.
|
(2)
|
Reflects
reclassification of the former Recycled metals revenue category to
the new Materials sales revenue category.
|
(3)
|
Reflects
reclassification of E-waste recycling revenue from the former Waste
and service revenue category to the new Materials sales revenue
category.
|
(4)
|
Reflects
reclassification of construction related revenue from the former
Other operating revenue category to the new Services revenue
category.
|
(5)
|
Expense classified
under the former Plant operating expense category is now included
in the new Cost of operations category, which also reflects the
reclassification of construction related expense from the Other
operating expense, net category.
|
Discussion of Non-GAAP Financial Measures
We use a number of different financial measures, both
United States generally accepted
accounting principles ("GAAP") and non-GAAP, in assessing the
overall performance of our business. To supplement our
assessment of results prepared in accordance with GAAP, we use the
measures of Adjusted EBITDA and Free Cash Flow, which are non-GAAP
financial measures as defined by the Securities and Exchange
Commission. The non-GAAP financial measures of Adjusted
EBITDA and Free Cash Flow as described below, and used in the
tables above, are not intended as a substitute or as an alternative
to net income, cash flow provided by operating activities or
diluted earnings per share as indicators of our performance or
liquidity or any other measures of performance or liquidity derived
in accordance with GAAP. In addition, our non-GAAP financial
measures may be different from non-GAAP measures used by other
companies, limiting their usefulness for comparison purposes.
The presentations of Adjusted EBITDA and Free Cash Flow are
intended to enhance the usefulness of our financial information by
providing measures which management internally use to assess and
evaluate the overall performance of its business and those of
possible acquisition candidates, and highlight trends in the
overall business.
Adjusted EBITDA
We use Adjusted EBITDA to provide additional ways of viewing
aspects of operations that, when viewed with the GAAP results
provide a more complete understanding of our core business. As we
define it, Adjusted EBITDA represents earnings before interest,
taxes, depreciation and amortization, as adjusted for additional
items subtracted from or added to net income including the effects
of impairment losses, gains or losses on sales, dispositions or
retirements of assets, adjustments to reflect the Adjusted EBITDA
from our unconsolidated investments, adjustments to exclude
significant unusual or non-recurring items that are not directly
related to our operating performance plus adjustments to capital
type expenses for our service fee facilities in line with our
credit agreements. We adjust for these items in our Adjusted EBITDA
as our management believes that these items would distort their
ability to efficiently view and assess our core operating trends.
As larger parts of our business are conducted through
unconsolidated investments, we adjust EBITDA for our proportionate
share of the entity's depreciation and amortization, interest
expense, tax expense and other adjustments to exclude significant
unusual or non-recurring items that are not directly related to the
entity's operating performance. in order to improve
comparability to the Adjusted EBITDA of our wholly owned entities.
We do not have control, nor have any legal claim to the portion of
our unconsolidated investees' revenues and expenses allocable to
our joint venture partners. As we do not control, but do exercise
significant influence, we account for these unconsolidated
investments in accordance with the equity method of accounting. Net
income (losses) from these investments are reflected within our
consolidated statements of operations in Equity in net income from
unconsolidated investments. In order to provide a meaningful basis
for comparison, we are providing information with respect to our
Adjusted EBITDA for the three months ended March 31, 2021 and 2020, reconciled for each such
period to net income and cash flow provided by operating
activities, which are believed to be the most directly comparable
measures under GAAP.
Our projections of the proportional contribution of our
interests in joint ventures to our Adjusted EBITDA and Free Cash
Flow are not based on GAAP net income/loss or cash flow provided by
operating activities, respectively, and are anticipated to be
adjusted to exclude the effects of events or circumstances in 2021
that are not representative or indicative of our results of
operations and that are not currently determinable. Due to the
uncertainty of the likelihood, amount and timing of any such
adjusting items, we do not have information available to provide a
quantitative reconciliation of projected net income/loss to an
Adjusted EBITDA projection.
Free Cash Flow
Free Cash Flow is defined as cash flow provided by operating
activities, plus changes in operating restricted funds, less
expenditures for software implementation and 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 months ended March 31, 2021 and
2020, reconciled for each such period to cash flow provided by
operating activities, which we believe to be the most directly
comparable measure under GAAP.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
Certain statements in this press release may constitute
"forward-looking" statements as defined in Section 27A of the
Securities Act of 1933 (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:
- the impact of the COVID-19 pandemic on our employees, business,
and operations, or on the economy in general, including commercial
and financial markets;
- our ability to identify opportunities and execute on strategies
and transactions, including in connection with a strategic review
of our business and including acquisitions, divestitures, and
restructuring opportunities;
- seasonal or long-term fluctuations in the prices of energy,
waste disposal, scrap metal and commodities;
- our 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, environmental laws, tax laws, labor laws and healthcare
laws;
- failure to maintain historical performance levels at our
facilities and our ability to retain the rights to operate
facilities we do not own;
- our ability to avoid adverse publicity or reputational damage
relating to our business;
- 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;
- 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 cost of business development over
time;
- limits of insurance coverage;
- our ability to avoid defaults under our long-term
contracts;
- performance of third parties under our 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 our existing indebtedness, including
limitations on strategic alternatives or transactions;
- 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;
- the scalability of our business;
- our ability to attract and retain talented people;
- failures of disclosure controls and procedures and internal
controls over financial reporting;
- our ability to utilize net operating loss carryforwards;
- general economic conditions in the
United States and abroad, including the availability of
credit and debt financing; and
- other risks and uncertainties affecting our business described
in Item 1A. Risk Factors of our Annual Report on Form 10-K
and in other 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