Covanta Holding Corporation Reports 2017 Fourth Quarter And Full Year Results And Provides 2018 Guidance
MORRISTOWN, N.J., Feb. 22, 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 year ended December 31, 2017.
Year Ended December
31,
2016 2017
---- ----
(Unaudited, $ in
millions, except
per share amounts)
Revenue $1,699 $1,752
Net (loss) income $(4) $57
Adjusted EBITDA $410 $408
Net cash provided by
operating activities $286 $243
Free Cash Flow Before
Working Capital $135 $88
Free Cash Flow $176 $132
Diluted EPS $(0.03) $0.44
Adjusted EPS $(0.06) $(0.37)
(Reconciliations of non-GAAP measures can be found in the exhibits to this press release.)
Highlights and Accomplishments
-- 2017 financial performance in-line with guidance ranges
-- Dublin commenced commercial operations
-- Announced strategic partnership with the Green Investment Group ("GIG")
-- Fairfax restarted operations in late December 2017
-- Continued progress on strategic initiatives that support organic growth
"We are entering the year in a strong position to deliver on our 2018 plan and execute on our attractive longer-term growth opportunities," said Stephen J. Jones, Covanta's President and CEO. "The Dublin plant is operating extremely well, waste markets are robust, and metal prices have clearly firmed. Our strategic partnership with GIG headlines our international development plan, and we are excited about the growth opportunities this platform enables. The Rookery project is scheduled to break ground in the first half of 2018, and we expect incremental progress on other UK development projects as we move through the year. We look forward to solid growth in 2018, supported by the recovery of the Fairfax facility, and I am excited by the growth trajectory going forward."
More detail on our fourth quarter and full year results can be found in the exhibits to this release and in our fourth quarter 2017 earnings presentation found in the Investor Relations section of the Covanta website at www.covanta.com.
2018 Guidance
The Company established guidance for 2018 for the following key metrics:
(In millions)
Metric 2017 2018
Actual Guidance Range (1)
--- ------ -----------------
Adjusted EBITDA $408 $425 - $455
--------------- ---- -----------
Free Cash Flow Before
Working Capital $88 $100 - $130
--------------------- --- -----------
Free Cash Flow $132 $70 - $100
-------------- ---- ----------
((1) For additional information on the reconciliation of Free Cash Flow and Free Cash Flow Excluding Working Capital to Cash flow provided by operating activities, see Exhibit 5 of this press release. Guidance as of February 22, 2018.)
Conference Call Information
Covanta will host a conference call at 8:30 AM (Eastern) on Friday, February 23, 2018 to discuss its fourth quarter and full year results.
The conference call will begin with prepared remarks, which will be followed by a question and answer session. To participate, please dial 1-866-393-4306 approximately 10 minutes prior to the scheduled start of the call. If calling outside of the United States, please dial 1-734-385-2616. 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 20 million tons of waste from municipalities and businesses into clean, renewable electricity to power one million homes and recycle over 550,000 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 Twelve Months Ended
December 31, December 31, 2017
2017 2016 2017 2016
---- ---- ---- ----
(Unaudited)
(In millions, except per share amounts)
OPERATING REVENUE:
Waste and service revenue $329 $312 $1,231 $1,187
Energy revenue 93 91 334 370
Recycled metals revenue 28 17 82 61
Other operating revenue 45 37 105 81
--- --- --- ---
Total operating revenue 495 457 1,752 1,699
--- --- ----- -----
OPERATING EXPENSE:
Plant operating expense 319 276 1,271 1,177
Other operating expense, net 27 41 51 86
General and administrative expense 30 29 112 100
Depreciation and amortization expense 60 52 215 207
Impairment charges (a) 1 1 2 20
--- --- --- ---
Total operating expense 437 399 1,651 1,590
--- --- ----- -----
Operating income 58 58 101 109
--- --- --- ---
OTHER INCOME (EXPENSE):
Interest expense, net (41) (35) (147) (138)
Gain (loss) on asset sales (a) - 1 (6) 44
Loss on extinguishment of debt (a) (71) - (84) -
Other (expense) income, net (1) - 1 (1)
--- --- --- ---
Total other expense (113) (34) (236) (95)
---- --- ---- ---
(Loss) income before income tax benefit (expense) and equity in net (55) 24 (135) 14
income from unconsolidated investments
Income tax benefit (expense) (b) 186 (17) 191 (22)
Equity in net income from unconsolidated investments - 1 1 4
--- --- --- ---
Net income (loss) (b) $131 $8 $57 $(4)
==== === === ===
Weighted Average Common Shares Outstanding:
Basic 130 129 130 129
=== === === ===
Diluted 131 131 131 129
=== === === ===
Earnings (Loss) Per Share: (b)
Basic $1.02 $0.06 $0.44 $(0.03)
===== ===== ===== ======
Diluted $1.01 $0.06 $0.44 $(0.03)
===== ===== ===== ======
Cash Dividend Declared Per Share $0.25 $0.25 $1.00 $1.00
===== ===== ===== =====
(a) For additional information, see
Exhibit 4 of this Press Release.
(b) The three and twelve months
ended December 31, 2017 include a
provisional net tax benefit of
$183 million ($1.39 and $1.40 per
diluted share, respectively)
associated with the enactment of
the Tax Cuts and Jobs Act of 2017.
The enactment of this legislation
resulted in an estimated income
tax benefit and net income
increase of $204 million,
primarily due to a one-time
revaluation of our net deferred
tax liability based on a U.S.
federal tax rate of 21%, partially
offset by the estimated impact of
a one-time transition tax on our
unremitted foreign earnings
totaling $21 million, which we
will elect to offset with
historical net operating losses.
These amounts are provisional and
subject to change.
Covanta Holding Corporation Exhibit 2
Consolidated Balance Sheets
As of December 31,
2017 2016
---- ----
(Unaudited)
ASSETS (In millions, except per share
amounts)
Current:
Cash and cash equivalents $46 $84
Restricted funds held in trust 43 56
Receivables (less allowances of
$14 million and $9 million,
respectively) 341 332
Prepaid expenses and other
current assets 73 72
Assets held for sale (a) 653 -
--- ---
Total Current Assets 1,156 544
Property, plant and equipment,
net 2,606 3,024
Restricted funds held in trust 28 54
Waste, service and energy
contract intangibles, net 251 263
Other intangible assets, net 36 34
Goodwill 313 302
Other assets 51 63
--- ---
Total Assets $4,441 $4,284
====== ======
LIABILITIES AND EQUITY
Current:
Current portion of long-term
debt $10 $9
Current portion of project debt 23 22
Accounts payable 151 98
Accrued expenses and other
current liabilities 313 289
Liabilities held for sale (a) 540 -
--- ---
Total Current Liabilities 1,037 418
Long-term debt 2,339 2,243
Project debt 151 361
Deferred income taxes (b) 412 617
Other liabilities 75 176
--- ---
Total Liabilities 4,014 3,815
----- -----
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, 14 14
outstanding 131 and 130, respectively)
Additional paid-in capital 822 807
Accumulated other comprehensive
loss (55) (62)
Accumulated deficit (353) (289)
Treasury stock, at par (1) (1)
--- ---
Total Equity 427 469
Total Liabilities and Equity $4,441 $4,284
====== ======
(a) During the fourth quarter of 2017, our EfW facility in Dublin, Ireland met the criteria to be classified as held for
sale.
(b) For additional information, see Exhibit 1
-Note (b) of this Press Release.
Covanta Holding
Corporation Exhibit 3
Consolidated Statements of Cash Flow
Twelve Months Ended
December 31,
2017 2016
---- ----
(Unaudited, in millions)
OPERATING ACTIVITIES:
Net income (loss) $57 $(4)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and
amortization
expense 215 207
Amortization of
deferred debt
financing costs 7 6
Loss (gain) on
asset sales (a) 6 (44)
Impairment
charges (a) 2 20
Loss on
extinguishment
of debt (a) 84 -
Stock-based
compensation
expense 18 16
Provision for
doubtful
accounts 9 2
Equity in net
income from
unconsolidated
investments (1) (4)
Deferred income
taxes (b) (193) 21
Dividends from
unconsolidated
investments 2 2
Other, net (13) (1)
Change in
restricted funds
held in trust 1 22
Change in working
capital, net of
effects of
acquisitions 44 41
Changes in
noncurrent
assets and
liabilities, net 5 2
--- ---
Net cash provided
by operating
activities 243 286
--- ---
INVESTING ACTIVITIES:
Purchase of
property, plant
and equipment (277) (359)
Acquisition of
businesses, net
of cash acquired (16) (9)
Proceeds from
asset sales 4 109
Property
insurance
proceeds 8 3
Other, net (8) 2
--- ---
Net cash used in
investing
activities (289) (254)
---- ----
FINANCING ACTIVITIES:
Proceeds from
borrowings on
long-term debt 400 -
Proceeds from
borrowings on
revolving credit
facility 952 744
Proceeds from
borrowing on
Dublin project
financing 643 159
Payment related
to Dublin
interest rate
swap (17) -
Payments on the
Dublin
Convertible
Preferred (132) -
Payments of
borrowings on
revolving credit
facility (850) (749)
Payments on long-
term debt (415) (4)
Payments on
equipment
financing
capital leases (5) (4)
Principal
payments on
project debt (382) (51)
Payment of
deferred
financing costs (21) (6)
Payment of Dublin
financing costs (19) -
Cash dividends
paid to
stockholders (131) (131)
Change in
restricted funds
held in trust (37) 28
Common stock
repurchased - (20)
Financing of
insurance
premiums, net 20 -
Other, net (3) (10)
--- ---
Net cash provided
by (used in)
financing
activities 3 (44)
--- ---
Effect of
exchange rate
changes on cash
and cash
equivalents 5 -
--- ---
Net decrease in
cash and cash
equivalents (38) (12)
Cash and cash
equivalents at
beginning of
period 84 96
--- ---
Cash and cash
equivalents at
end of period $46 $84
=== ===
(a) For additional
information, see Exhibit 4 of
this Press Release.
(b) For additional information, see Exhibit 1 - Note (b) 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 Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
---- ---- ---- ----
(Unaudited, in millions)
Net Income (Loss) (a) $131 $8 $57 $(4)
Depreciation and amortization expense 60 52 215 207
Interest expense, net 41 35 147 138
Income tax (benefit) expense (a) (186) 17 (191) 22
Impairment charges (b) 1 1 2 20
(Gain) loss on asset sales (c) - (1) 6 (44)
Loss on extinguishment of debt (d) 71 - 84 -
Property insurance recoveries, net (e) - - (2) -
Capital type expenditures at client owned facilities (f) 19 10 55 39
Debt service billings in excess of revenue recognized 1 1 5 4
Business development and transaction costs 4 - 5 2
Severance and reorganization costs - - 1 3
Stock-based compensation expense 2 3 18 16
Other (g) 3 2 6 7
--- --- --- ---
Adjusted EBITDA $147 $128 $408 $410
==== ==== ==== ====
Capital type expenditures at client owned facilities (f) (19) (10) (55) (39)
Cash paid for interest, net of capitalized interest (32) (44) (132) (135)
Cash paid for taxes, net - 1 - (6)
Equity in net income from unconsolidated investments - (1) (1) (4)
Dividends from unconsolidated investments 1 - 2 2
Adjustment for working capital and other 32 62 21 58
--- --- --- ---
Net cash provided by operating activities $129 $136 $243 $286
==== ==== ==== ====
(a) For additional information, see Exhibit 1 -Note
(b) of this Press Release.
During the year ended December 31, 2016, we
recorded a non-cash impairment totaling $20
million which primarily consisted of $13 million
related to the previously planned closure of our
Pittsfield EfW facility in March 2017, which we
now continue to operate, and $3 million related
to an investment in a joint venture to recover
(b) and recycle metals.
During the year ended December 31, 2017, we
recorded a $6 million charge for indemnification
claims related to the sale of our interests in
China, which was completed in 2016. During the
year ended ended December 31, 2016, we recorded
a $41 million gain on the sale of our interests
(c) in China.
During the year ended December 31, 2017, we
recorded a $71 million loss related to our
Dublin debt refinancing and a $13 million loss
related to the redemption of our 7.25% Senior
(d) Notes.
(e) During the year ended December 31, 2017, we
recorded a $2 million property insurance gain
related to our property insurance recoveries.
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
(f) we own.
(g) 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 Twelve Months Ended Full Year
December 31, December 31, Estimated 2018
2017 2016 2017 2016
---- ---- ---- ----
(Unaudited, in millions)
Net cash provided by operating activities $129 $136 $243 $286 $195 - $225
Add: Changes in restricted funds - operating (a) - - - - 10
Less: Maintenance capital expenditures (b) (27) (28) (111) (110) (140 - 130)
--- --- ---- ---- ----------
Free Cash Flow $102 $108 $132 $176 $70 - $100
Less: Changes in working capital (74) (52) (44) (41) 20 - 40
--- --- --- --- -------
Free Cash Flow Before Working Capital $28 $56 $88 $135 $100 - $130
=== === === ==== ===========
(a) Adjustment for the impact of the pending adoption of ASU 2016-18 effective January 1, 2018. Upon adoption, the statement of cash flows will explain the change during the period in the total of cash, cash equivalents, and amounts generally described as
restricted cash or restricted cash equivalents. Therefore, beginning in 2018, changes in restricted funds will be 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. Maintenance capital expenditures in 2017 include
amounts incurred but not paid as of December 31, 2017. The following table provides the components of total purchases of property, plant and equipment:
Three Months Ended Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
---- ---- ---- ----
Maintenance capital expenditures $(27) $(28) $(111) $(110)
Maintenance capital expenditures incurred but not yet paid 5 - 5 -
Capital expenditures associated with construction of Dublin EfW facility (26) (30) (117) (162)
Capital expenditures associated with organic growth initiatives (6) (8) (33) (46)
Capital expenditures associated with the New York City MTS contract - - - (3)
Capital expenditures associated with Essex County EfW emissions control system (1) (6) (4) (33)
--- --- --- ---
Total capital expenditures associated with growth investments (33) (44) (154) (244)
Capital expenditures associated with property insurance events (4) (5) (17) (5)
--- --- --- ---
Total purchases of property, plant and equipment $(59) $(77) $(277) $(359)
==== ==== ===== =====
Covanta Holding Corporation Exhibit 6
Reconciliation of Diluted Earnings (Loss) Per Share to Adjusted EPS
Three Months Ended Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
---- ---- ---- ----
(Unaudited)
Diluted
Earnings
(Loss) Per
Share:(a) $1.01 $0.06 $0.44 $(0.03)
Reconciling
Items (b) (0.92) 0.11 (0.81) (0.03)
----- ---- ----- -----
Adjusted EPS $0.09 $0.17 $(0.37) $(0.06)
===== ===== ====== ======
(a) For additional information, see Exhibit 1 - Note (b) of this Press Release.
(b) For details related to the Reconciling Items, see Exhibit 6A of this Press Release.
Covanta Holding Corporation Exhibit 6A
Reconciling Items
Three Months Ended Year Ended
December 31, December 31,
2017 2016 2017 2016
---- ---- ---- ----
(Unaudited)
(In millions, except per share amounts)
Reconciling Items
-----------------
Impairment charges (a) $1 $1 $2 $20
(Gain) loss on asset
sales (a) - (1) 6 (44)
Property insurance
recoveries (a) - - (2) -
Severance and
reorganization costs - - 1 2
Loss on extinguishment
of debt (a) 71 - 84 -
Effect on income of
derivative
instruments not
designated as hedging
instruments - - - 2
Effect of foreign
exchange loss on
indebtedness - - (2) (1)
Other 1 - 1 -
--- --- --- ---
Total Reconciling
Items, pre-tax 73 - 90 (21)
Pro forma income tax
impact (b) 1 - (4) 2
Adjustment to
uncertain tax
positions - 14 - 14
Grantor trust activity (11) - (9) 1
Impact of federal tax
reform rate change
(c) (204) - (204) -
Transition tax (c) 21 - 21 -
--- --- --- ---
Total Reconciling
Items, net of tax $(120) $14 $(106) $(4)
===== === ===== ===
Diluted Per Share
Impact $(0.92) $0.11 $(0.81) $(0.03)
====== ===== ====== ======
Weighted Average
Diluted Shares
Outstanding 131 131 131 129
=== === === ===
(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 and applicable blended state rate.
(c) For additional information, see Exhibit 1 - Note (b) of this Press Release.
Covanta Holding Corporation Exhibit 7
Supplemental Information
(Unaudited, $ in millions)
Year Ended December 31,
2017 2016
---- ----
Waste and service revenue:
EfW tip fees $572 $551
EfW service fees 393 406
Environmental services (a) 129 104
Municipal services (b) 194 186
Other (c) 42 36
Intercompany (d) (99) (96)
--- ---
Total waste and service 1,231 1,187
Energy Revenue:
Energy sales 288 321
Capacity 46 40
Other (e) - 9
--- ---
Total energy revenue 334 370
Recycled metals revenue:
Ferrous 48 38
Non-ferrous 34 23
--- ---
Total recycled metals 82 61
Other revenue (f) 105 81
--- ---
Total revenue $1,752 $1,699
------ ------
Operating expense:
Plant operating expense:
Plant maintenance $311 $279
Other plant operating expense 960 898
--- ---
Total plant operating expense 1,271 1,177
Other operating expense 51 86
General and administrative 112 100
Depreciation and amortization 215 207
Impairment charges 2 20
Total operating expense $1,651 $1,590
------ ------
Operating Income $101 $109
==== ====
Operating income excluding
impairment charges $103 $129
==== ====
(a) Includes the operation of material processing facilities and related services provided by our CES business.
(b) Consists of transfer stations and transportation component of 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) Includes biomass and China operations in 2016.
(f) Consists primarily of construction
revenue.
Note: Certain amounts may not total due to
rounding.
Covanta Holding Corporation Exhibit 8
Revenue and Operating Income Changes - FY 2016 to FY 2017
(Unaudited, $ in millions)
Contract Transitions (b)
FY 2016 Organic % Waste PPA Transactions
(c) Total FY 2017
Growth (a) Changes
---
Waste and service revenue:
EfW tip fees $551 $(16) (2.8)% $18 $ - $19 $21 $572
EfW service fees 406 - 0.1% (14) - - (13) 393
Environmental services 104 16 15.6% - - 9 25 129
Municipal services 186 8 4.0% - - - 8 194
Other 36 7 20.4% - - - 6 42
Intercompany (96) (3) - - - (3) (99)
--- --- --- --- --- --- ---
Total waste and
service revenue 1,187 13 1.1% 4 - 28 44 1,231
Energy revenue:
Energy sales 321 (23) (7.1)% 5 (25) 10 (33) 288
Capacity 40 7 17.5% - (3) 1 6 46
Other 9 - - - (9) (9) -
--- --- --- --- --- --- ---
Total energy revenue 370 (15) (4.2)% 5 (28) 2 (36) 334
Recycled metals revenue:
Ferrous 38 9 22.9% - - - 10 48
Non-ferrous 23 11 48.6% - - - 11 34
--- --- --- --- --- --- ---
Total recycled metals
revenue 61 20 32.5% - - - 21 82
Other revenue 81 24 29.7% - - - 24 105
--- --- --- --- --- --- ---
Total revenue $1,699 $41 2.4% $9 $(28) $30 $53 $1,752
Operating expense:
Plant operating expense:
Plant maintenance $279 $32 11.6% $ - $ - $ - $32 $311
Other plant operating
expense 898 54 6.0% 1 - 7 62 960
--- --- --- --- --- --- ---
Total plant operating
expense 1,177 86 7.3% 1 - 7 94 1,271
Other operating
expense 86 (24) (28.3)% (10) - - (35) 51
General and
administrative 100 12 11.7% - - - 12 112
Depreciation and
amortization 207 (3) (1.2)% 3 - 7 8 215
Total operating
expense (d) $1,570 $71 4.5% $(7) $ - $15 $79 $1,649
Operating income
(loss) (d) $129 $(30) $16 $(28) $15 $(26) $103
==== ==== === ==== === ==== ====
(a) Reflects the performance at each facility 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 and the addition or loss of operating contracts.
(d) Excludes impairment charges
Note: Certain amounts may not total due to rounding
EfW Operating Metrics (Unaudited) Exhibit 9
Three Months Ended Twelve Three Months Ended Twelve Months
Ended
Months
Ended
-----
Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, Dec 31,
2017 2017 2017 2017 2017 2016 2016 2016 2016 2016
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
EfW Waste
---------
Tons: (in millions)
Tip fee - contracted 1.9 2.0 2.0 2.1 8.0 2.0 2.2 2.2 2.1 8.4
Tip fee - uncontracted 0.6 0.5 0.5 0.5 2.1 0.6 0.5 0.5 0.6 2.2
Service fee 2.1 2.3 2.2 2.1 8.6 2.1 2.3 2.4 2.2 8.9
--- --- --- --- --- --- --- --- --- ---
Total tons 4.6 4.8 4.7 4.7 18.7 4.7 5.0 5.1 4.9 19.5
EfW tip fee per ton:
Contracted $48.68 $54.05 $52.75 $58.30 $52.87 $45.88 $48.70 $48.41 $48.65 $47.39
Uncontracted $68.45 $76.02 $73.98 $71.35 $72.25 $62.10 $72.57 $74.15 $68.25 $68.95
Average revenue per ton $54.11 $57.13 $57.03 $60.06 $57.11 $48.94 $52.26 $52.49 $53.73 $51.89
EfW Energy
----------
Energy sales: (MWh in millions)
Contracted 0.6 0.6 0.6 0.6 2.5 0.7 0.9 0.8 0.7 3.1
Hedged 0.6 0.7 0.7 0.8 2.7 0.4 0.4 0.5 0.6 1.9
Market 0.2 0.2 0.2 0.2 0.8 0.2 0.2 0.2 0.3 1.0
--- --- --- --- --- --- --- --- --- ---
Total energy sales 1.4 1.4 1.5 1.6 6.0 1.4 1.5 1.5 1.6 6.1
Market sales by geography:
PJM East 0.1 - - - 0.2 0.1 0.1 0.1 0.1 0.3
NEPOOL - 0.1 0.1 - 0.2 - 0.1 0.1 0.1 0.2
NYISO - - - - 0.1 - - - - 0.1
Other 0.1 0.1 0.1 0.1 0.3 0.1 0.1 0.1 0.1 0.4
Revenue per MWh: (excludes capacity)
Contracted $70.85 $67.70 $66.58 $72.23 $69.36 $67.65 $62.06 $65.82 $69.23 $65.98
Hedged $47.76 $29.02 $32.25 $32.11 $34.92 $62.64 $37.19 $37.98 $36.64 $42.77
Market $24.44 $27.80 $25.79 $36.94 $28.84 $27.91 $26.02 $37.32 $34.44 $31.35
Average revenue per MWh $53.76 $44.83 $45.83 $48.69 $48.26 $59.30 $49.25 $52.63 $50.33 $52.70
Metals
------
Tons recovered, net: (in thousands)
Ferrous 95 98 98 105 396 95 102 101 103 401
Non-ferrous 9 9 10 10 38 8 9 10 9 36
Tons sold, net: (in thousands)
Ferrous 60 68 81 92 302 86 77 72 110 345
Non-ferrous 9 5 8 9 31 8 9 10 9 36
Revenue per ton:
Ferrous $169 $152 $158 $151 $157 $91 $138 $117 $105 $111
Non-ferrous $615 $892 $1,201 $1,570 $1,088 $624 $650 $581 $675 $632
EfW plant operating expenses: ($ in millions)
--------------------------------------------
Plant operating expenses - gross $275 $254 $232 $264 $1,025 $256 $255 $216 $225 $952
Less: Client pass-through costs (10) (13) (14) (22) (59) (10) (9) (9) (13) (41)
Less: REC sales - contra-expense (3) (2) (3) (5) (13) (3) (1) (2) (3) (9)
--- --- --- --- --- --- --- --- --- ---
Plant operating expenses - reported $262 $239 $215 $237 $953 $243 $245 $205 $209 $902
Client pass-throughs as % of gross costs 3.6% 5.1% 6.0% 8.4% 5.8% 3.9% 3.5% 4.2% 5.6% 4.3%
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
Covanta Holding Corporation Exhibit 10
Supplemental Information - Waste and Service Revenue and Other Plant Operating Expense (a)
(Unaudited, $ in millions)
Three Months Ended
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
2017 2017 2017 2017 2016 2016 2016 2016
---- ---- ---- ---- ---- ---- ---- ----
Waste and service revenue:
EfW tip fees $131 $143 $142 $156 $126 $138 $143 $144
EfW service fees 98 97 95 103 100 100 97 110
Environmental
services 29 32 34 34 23 26 27 28
Municipal services 44 52 50 47 43 49 48 46
Other revenue 8 10 12 12 8 9 9 9
Intercompany (23) (25) (26) (24) (21) (24) (26) (25)
Total waste and
service revenue $286 $310 $306 $329 $279 $297 $299 $312
==== ==== ==== ==== ==== ==== ==== ====
Other plant operating expense:
EfW $165 161 161 $163 $155 $164 $159 $152
Other 70 79 82 79 71 68 65 65
Total other plant
operating expense $234 $240 $243 $243 $226 $232 $224 $216
==== ==== ==== ==== ==== ==== ==== ====
(a) Supplemental information provided in order to present details of waste and service revenue by service fee and tip fee contracts and the reclassification of profiled waste transportation revenues and costs to environmental services and "other" (non-EfW) plant operating expense, respectively
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 Changes in 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 Changes in 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 Changes in 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. Going forward, as larger parts of our business will be conducted through unconsolidated entities that we do not control, we will begin to 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 year ended and three months ended December 31, 2017 and 2016, 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 Changes in Working Capital
Free Cash Flow is defined as cash flow provided by operating activities, plus changes in restricted funds - operating, less maintenance capital expenditures, which are capital expenditures primarily to maintain our existing facilities. Free Cash Flow Before Changes in 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 Changes in Working Capital as criteria of liquidity and performance-based components of employee compensation. We use Free Cash Flow and Free Cash Flow Before Changes in 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 Changes in Working Capital for the year ended and three months ended December 31, 2017 and 2016, 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 year ended and three months ended December 31, 2017 and 2016, 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 assumptions and other important factors, risks and uncertainties that could cause actual results to differ materially from those forward-looking statements with respect to Covanta include, but are not limited to:
-- the risks and uncertainties affecting Covanta's business described in
periodic securities filings by Covanta with the SEC. 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
