Covanta Holding Corporation Reports 2020 Fourth Quarter and Full Year Results and Provides 2021 Guidance
MORRISTOWN, N.J., Feb. 18, 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 year ended December 31, 2020.
Year Ended December 31,
2020 2019
---
(Unaudited, $ in millions)
Revenue $1,904 $1,870
Net (loss) income $(28) $10
Adjusted EBITDA $424 $428
Net cash provided by operating activities $254 $226
Free Cash Flow $95 $140
Reconciliations of non-GAAP measures can be found in the exhibits to this press release.
Key Highlights
-- Strategic review progressing, with initial implementation steps to be
announced by mid-year 2021
-- Protos project reached financial close in Q4, marking fourth UK project
in construction
-- Resilient business model minimized financial impact of the pandemic in
2020
-- Reestablishing guidance for Adjusted EBITDA and Free Cash Flow for 2021
"Covanta's 2020 results highlighted the underlying resilience of our business model and the capabilities of our incredible operating team," said Michael Ranger, President and CEO. "Waste flows in our markets have largely returned to pre-pandemic levels and we've seen recent strength in the recycled metal markets, both of which are adding momentum as we look ahead to 2021. Our strategic review is progressing and we look forward to announcing concrete steps as they are developed and executed in the coming quarters."
More detail on our fourth quarter results can be found in the exhibits to this release and in our fourth quarter 2020 earnings presentation found in the Investor Relations section of the Covanta website at www.covanta.com.
2021 Guidance
The Company established 2021 guidance for the following key metrics:
($ in millions)
Metric
2020 Actual 2021
Guidance Range
--- ---
Adjusted EBITDA $424
$435 - $465
Free Cash Flow $95
$100 - $140
Reconciliations of non-GAAP measures can be found in the exhibits to this press release.
Guidance as of February 19, 2021.
Conference Call Information
Covanta will host a conference call at 8:30 AM (Eastern) on Friday, February 19, 2021 to discuss its fourth quarter results.
The conference call will begin with prepared remarks, which will be followed by a question and answer session. To participate 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 3286737. 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 Twelve Months Ended
December 31, December 31,
2020 2019 2020 2019
(Unaudited)
(In millions, except per
share amounts)
OPERATING REVENUE:
Waste and service revenue $
356 $
354 $
1,412 $
1,393
Energy revenue 93 82 357 329
Recycled metals revenue 24 25 81 86
Other operating revenue 18 24 54 62
Total operating revenue 491 485 1,904 1,870
OPERATING EXPENSE:
Plant operating expense 370 333 1,420 1,371
Other operating expense, net 15 21 52 64
General and administrative expense 37 32 120 122
Depreciation and amortization expense 56 56 224 221
Impairment charges (a) (1) 19 2
Total operating expense 478 441 1,835 1,780
Operating income 13 44 69 90
OTHER (EXPENSE) INCOME:
Interest expense (33) (35) (133) (143)
Net gain on sale of business and investments (a) 17 26 49
Loss on extinguishment of debt (a) (12)
Other income 2 1
Total other expense (14) (35) (119) (93)
(Loss) income before income tax benefit and equity in net income (1) 9 (50) (3)
from unconsolidated investments
Income tax benefit 12 1 18 7
Equity in net income from unconsolidated investments 1 2 4 6
Net income (loss) $
12 $
12 $
(28) $
10
Weighted Average Common Shares Outstanding:
Basic 132 131 132 131
Diluted 135 134 132 133
Earnings (Loss) Per Share
Basic $
0.09 $
0.09 $
(0.21) $
0.07
Diluted $
0.09 $
0.09 $
(0.21) $
0.07
Cash Dividend Declared Per Share $
0.08 $
0.25 $
0.49 $
1.00
(a) For additional information, see Exhibit 4 of this Press Release.
Covanta Holding Corporation Exhibit 2
Consolidated Balance Sheets
As of December 31,
2020 2019
---
(Unaudited)
ASSETS (In millions, except per share
amounts)
Current:
Cash and cash equivalents $
55 $
37
Restricted funds held in trust 11 18
Receivables (less allowances of $8 and $9, respectively) 260 240
Prepaid expenses and other current assets 117 105
Total Current Assets 443 400
Property, plant and equipment, net 2,421 2,451
Restricted funds held in trust 6 8
Intangible assets, net 237 258
Goodwill 302 321
Other assets 297 277
Total Assets $
3,706 $
3,715
LIABILITIES AND EQUITY
Current:
Current portion of long-term debt $
18 $
17
Current portion of project debt 9 8
Accounts payable 75 36
Accrued expenses and other current liabilities 303 292
Total Current Liabilities 405 353
Long-term debt 2,396 2,366
Project debt 116 125
Deferred income taxes 362 372
Other liabilities 117 123
Total Liabilities 3,396 3,339
Equity:
Preferred stock ($0.10 par value; authorized 10 shares; none issued and -
outstanding)
Common stock ($0.10 par value; authorized 250 shares; issued 136 shares, 14 14
outstanding 132 shares)
Additional paid-in capital 882 857
Accumulated other comprehensive loss (32) (35)
Accumulated deficit (554) (460)
Treasury stock, at par -
Total Equity 310 376
Total Liabilities and Equity $
3,706 $
3,715
Covanta Holding Corporation Exhibit 3
Consolidated Statements of Cash Flow
Twelve Months Ended December 31,
2020 2019
---
(Unaudited, in millions)
OPERATING ACTIVITIES:
Net (loss) income $
(28) $
10
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization expense 224 221
Amortization of deferred debt financing costs 4 5
Net gain on sale of business and investments (a) (26) (49)
Impairment charges (a) 19 2
Loss on extinguishment of debt (a) 12
Provision for expected credit losses 1 2
Stock-based compensation expense 29 25
Equity in net income from unconsolidated investments (4) (6)
Deferred income taxes (10) (9)
Dividends from unconsolidated investments 9 9
Other, net (6) 3
Change in working capital, net of effects of acquisitions and dispositions 24 12
Changes in noncurrent assets and liabilities, net 6 1
Net cash provided by operating activities 254 226
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (162) (158)
Acquisition of businesses, net of cash acquired 2
Proceeds from asset sales 15 27
Property insurance proceeds 1
Investment in equity affiliates (15) (14)
Other, net (15) (2)
Net cash used in investing activities (176) (145)
FINANCING ACTIVITIES:
Proceeds from borrowings on long-term debt 538 80
Proceeds from borrowings on revolving credit facility 724 536
Proceeds from insurance premium financing 37 29
Payments on long-term debt (555) (16)
Payments on revolving credit facility (685) (565)
Payments on project debt (8) (18)
Payment of deferred financing costs (8) (1)
Cash dividends paid to stockholders (89) (133)
Payment of insurance premium financing (33) (26)
Proceeds from related party note 9
Other, net (1) (8)
Net cash used in financing activities (71) (122)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 2 (1)
Net increase (decrease) in cash, cash equivalents and restricted cash 9 (42)
Cash, cash equivalents and restricted cash at beginning of period 63 105
Cash, cash equivalents and restricted cash at end of period $
72 $
63
(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 Twelve Months Ended
December 31, December 31,
2020 2019 2020 2019
(Unaudited, in millions)
Net income (loss) $
12 $
12 $
(28) $
10
Depreciation and amortization expense 56 56 224 221
Interest expense 33 35 133 143
Income tax benefit (12) (1) (18) (7)
Impairment charges (a) (1) 19 2
Net gain on sale of businesses and investments (b) (17) (26) (49)
Loss on extinguishment of debt(c) 12
Property insurance recoveries, net (1) (1)
Loss on asset retirements 1 1 3 4
Accretion expense 2 2
Business development and transaction costs (f) 1 2
Severance and reorganization costs (d) (f) 3 2 5 13
Stock-based compensation expense 10 5 29 25
Adjustments to reflect Adjusted EBITDA from unconsolidated 6 7 24 25
investments
Capital type expenditures at client owned facilities (e) 12 6 36 34
Other (f) 3 9 3
Adjusted EBITDA $
103 $
125 $
424 $
428
(a) During the year ended December 31, 2020,
we recorded a $19 million non-cash
impairment charge related to our Covanta
Environmental Solutions reporting unit.
(b) During the year ended December 31, 2020,
we recorded a $26 million gain on the
sale of business and investments
comprised of a $9 million gain related
to the Newhurst Energy Recovery Facility
development project and a $17 million
gain related to the Protos Energy
Recovery Facility development project.
During the year ended December 31, 2019,
we recorded a $56 million gain related
to the Rookery South Energy Recovery
Facility development project and a $11
million loss related to the divestiture
of our Springfield and Pittsfield WtE
facilities.
(c) During the year ended December 31, 2020,
we recorded a $12 million loss on
extinguishment of debt comprised of
approximately $10 million related to the
redemption of our 5.875% Senior Notes
due 2024 and approximately $1 million
related to the refinancing of our tax-
exempt bonds.
(d) During the years ended December 31, 2020
and 2019, we recorded $5 million and
$13 million, respectively, of costs
related to our ongoing asset
rationalization and portfolio
optimization efforts, early retirement
program, and certain organizational
restructuring activities.
(e) Adjustment for capital equipment related
expenditures at our service fee operated
facilities which are capitalized at
facilities that we own.
(f) Added back under the definition of
Adjusted EBITDA in Covanta Energy, LLC's
credit agreement.
Three Months Ended Twelve Months Ended
December 31, December 31,
2020 2019 2020 2019
(Unaudited, in millions)
Net cash provided by operating activities $
63 $
114 $
254 $
226
Capital type expenditures at client owned facilities (a) 12 6 36 34
Cash paid for interest 8 29 112 152
Cash (refunded) paid for taxes, net (7) (4) 5
Equity in net income from unconsolidated investments 1 2 4 6
Adjustments to reflect Adjusted EBITDA from unconsolidated 6 7 24 25
investments
Dividends from unconsolidated investments (6) (4) (9) (9)
Adjustment for working capital and other 26 (29) 7 (11)
Adjusted EBITDA $
103 $
125 $
424 $
428
(a) See Adjusted EBITDA reconciliation above - Note (e).
Covanta Holding Corporation
Exhibit 5
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Three Months Ended Twelve Months Ended
Full Year
December 31, December 31, Estimated 2021
---
2020 2019 2020 2019
(Unaudited, in millions)
Net cash provided by operating activities $
63 $
114 $
254 $
226
$230 - $260
Add: Changes in restricted funds - operating (a) 1 2 1 20 -
Less: Maintenance capital expenditures (b) (53) (25) (160) (106)
(120) - (135)
Free Cash Flow $
11 $
91 $
95 $
140
$100 - $140
===
(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 Twelve Months Ended
December 31,
December 31,
2020 2019 2020 2019
(Unaudited, in millions)
Maintenance capital expenditures $
(53) $
(25) $
(160) $
(106)
Net maintenance capital expenditures paid but incurred 10 (2) 12 (9)
in prior periods
Total ash processing system (2) (5) (13) (9)
Capital expenditures associated with the New York City (19)
MTS contract
Capital expenditures associated with other organic (3) (1) (13)
growth initiatives
Total capital expenditures associated with growth (2) (8) (14) (41)
investments (c)
Capital expenditures associated with property (2) (2)
insurance events
Total purchases of property, plant and equipment $
(45) $
(37) $
(162) $
(158)
(c) Total growth investments represents investments in growth opportunities, including organic growth
initiatives, technology, business development, and other similar expenditures, net of third party loans
collateralized by unconsolidated project equity.
Capital expenditures associated with growth investments $
(2) $
(8) $
(14) $
(41)
UK business development projects (4) (2) (13) (3)
Investment in equity affiliate (4) (5) (15) (14)
Asset and business acquisitions, net of cash acquired 2
Less: third party project loan proceeds collateralized 9
by project equity
Total growth investments $
(10) $
(15) $
(33) $
(56)
Covanta Holding Corporation Exhibit 6
Supplemental Information
(Unaudited, $ in millions)
Twelve Months Ended
December 31,
2020 2019
REVENUE:
Waste and service revenue:
WtE tip fees $
651 $
638
WtE service fees 466 466
Environmental services (a) 136 140
Municipal services (b) 242 231
Other (c) 37 34
Intercompany (d) (120) (116)
Total waste and service 1,412 1,393
Energy revenue:
Energy sales 266 273
Capacity 41 44
Other (e) 51 12
Total energy 357 329
Recycled metals revenue:
Ferrous 47 46
Non-ferrous 34 40
Total recycled metals 81 86
Other revenue (f) 54 62
Total revenue $
1,904 $
1,870
OPERATING EXPENSE:
Plant operating expense:
Plant maintenance $
326 $
308
Other plant operating expense 1,094 1,063
Total plant operating expense 1,420 1,371
Other operating expense 52 64
General and administrative 120 122
Depreciation and amortization 224 221
Impairment charges 19 2
Total operating expense $
1,835 $
1,780
Operating income $
69 $
90
Plus: impairment charges 19 2
Operating income excluding impairment charges $
88 $
92
(a) Includes the operation of material processing facilities and related services provided by our Covanta Environmental Solutions business.
(b) Consists of transfer stations and the transportation component of our NYC Marine Transfer Station contract.
(c) Includes waste brokerage, debt service and other revenue not directly related to WtE waste processing activities.
(d) Consists of elimination of intercompany transactions primarily relating to transfer stations.
(e) Primarily components of wholesale load serving revenue not included in Energy sales line, such as transmission and ancillaries.
(f) Consists primarily of construction revenue.
Note: Certain amounts may not total due to rounding.
Covanta Holding Corporation
Exhibit 7
Revenue and Operating Income Changes - FY 2019 to FY 2020
(Unaudited, $ in millions)
Contract
Transitions(b)
FY 2019 Organic % Waste Transactions (c) Total FY 2020
Growth (a) Changes
---
REVENUE:
Waste and service:
WtE tip fees $
638 $
16 2.5
% $
4 $
(7) $
13 $
651
WtE service fees 466 (1) (0.3)
% 1 466
Environmental services 140 (4) (2.8)
% (1) (4) 136
Municipal services 231 9 4.1
% 2 11 242
Other revenue 34 3 9.6
% 3 37
Intercompany (116) (3) (1) (4) (120)
Total waste and service 1,393 20 1.5
% 5 (7) 19 1,412
Energy revenue:
Energy sales 273 (5) (1.9)
% 1 (3) (7) 266
Capacity 44 (3) (6.5)
% (3) 41
Other 12 39 % 39 51
Total energy 329 31 9.3
% 1 (3) 28 357
Recycled metals:
Ferrous 46 2 3.4
% 1 47
Non-ferrous 40 (6) (15.3)
% (6) 34
Total recycled metals 86 (5) (5.3)
% (5) 81
Other revenue 62 (9) (14.0)
% (8) 54
Total revenue $
1,870 $
38 2.0
% $
6 $
(10) $
34 $
1,904
OPERATING EXPENSE:
Plant operating expense:
Plant maintenance $
308 $
20 6.4
%
$ $
(2) $
18 $
326
Other plant operating expense 1,063 37 3.5
% 6 (11) 31 1,094
Total plant operating expense 1,371 57 4.2
% 6 (13) 49 1,420
Other operating expense 64 (11) (12) 52
General and administrative 122 (2) (2) 120
Depreciation and amortization 221 5 (2) 3 224
Total operating expense(d) $
1,778 $
48 $
6 $
(15) $
38 $
1,816
Operating income (loss) (d) $
92 $
(11) $
1 $
5 $
(4) $
88
(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
WtE Operating Metrics (Unaudited)
Exhibit 8
Three Months Ended Year
Three Months Ended Year
Ended Ended
---
Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, Dec 31,
2020 2020 2020 2020 2020 2019 2019 2019 2019 2019
---
WtE Waste
Tons: (in millions)
Tip fee - contracted 2.08 2.15 2.28 2.14 8.65 2.04 2.29 2.28 2.18 8.78
Tip fee - uncontracted 0.58 0.52 0.46 0.53 2.09 0.54 0.43 0.48 0.57 2.01
Service fee 2.62 2.51 2.74 2.53 10.41 2.62 2.70 2.74 2.64 10.70
Total tons 5.28 5.19 5.48 5.20 21.15 5.20 5.41 5.49 5.39 21.49
WtE tip fee per ton:
Contracted $
54.04 $
54.37 $
55.45 $
55.77 $
54.92 $
52.64 $
54.16 $
53.93 $
53.93 $
53.69
Uncontracted $
82.87 $
78.71 $
89.89 $
84.96 $
83.91 $
76.57 $
89.06 $
85.22 $
81.31 $
82.61
Average revenue per ton $
60.36 $
59.10 $
61.23 $
61.57 $
60.57 $
57.66 $
59.66 $
59.36 $
59.58 $
59.08
WtE Energy
Energy sales: (MWh in millions)
Contracted 0.51 0.48 0.51 0.53 2.03 0.47 0.47 0.55 0.57 2.06
Hedged 0.82 0.87 1.13 0.99 3.81 0.80 0.73 0.76 0.73 3.02
Market 0.30 0.18 NM 0.12 0.62 0.29 0.37 0.38 0.27 1.31
Total energy sales 1.64 1.52 1.65 1.64 6.45 1.56 1.57 1.69 1.56 6.38
Market sales by geography:
PJM East 0.1 0.1 0.1 0.2 0.2 0.1 0.6
NEPOOL 0.1 0.1 0.1 0.1 0.1 0.1 0.3
NYISO - 0.1 0.1
Other 0.1 0.1 0.1 0.3 0.1 0.1 0.1 0.1 0.3
Revenue per MWh: (excludes capacity)
Contracted $
66.32 $
69.06 $
65.89 $
70.30 $
67.90 $
67.33 $
66.00 $
62.77 $
67.33 $
65.80
Hedged $
45.68 $
23.76 $
26.31 $
28.54 $
30.51 $
49.67 $
26.42 $
28.69 $
31.10 $
34.29
Market $
19.15 $
17.85 NM $
27.09 $
19.83 $
32.44 $
21.69 $
25.36 $
27.22 $
26.31
Average revenue per MWh $
47.27 $
37.25 $
38.24 $
41.97 $
41.24 $
51.74 $
37.19 $
39.08 $
43.52 $
42.81
Metals
Tons recovered, net: (in thousands)
Ferrous 103.1 115.7 118.2 120.3 457.3 96.3 110.8 111.9 104.7 423.7
Non-ferrous 12.0 12.3 12.2 11.5 47.9 12.6 12.5 12.8 13.0 50.8
Tons sold, net: (in thousands)
Ferrous 90.6 99.2 101.3 110.8 401.8 84.0 94.9 96.4 94.9 370.3
Non-ferrous 7.5 8.1 9.1 7.3 32.1 8.3 6.7 8.2 10.4 33.7
Revenue per ton: ($ in millions)
Ferrous $
115 $
104 $
115 $
133 $
117 $
137 $
132 $
118 $
108 $
123
Non-ferrous $
900 $
1,123 $
1,003 $
1,201 $
1,054 $
1,123 $
1,255 $
984 $
1,346 $
1,184
WtE plant operating expenses: ($ in millions)
Plant operating $
292 $
274 $
270 $
300 $
1,137 $
294 $
278 $
256 $
269 $
1,097
expenses - gross
Less: Client pass- (13) (10) (13) (22) (58) (13) (12) (12) (20) (57)
through costs
Less: REC sales - (4) (3) (3) (7) (17) (3) (2) (4) (3) (12)
contra-expense
Plant operating $
275 $
261 $
255 $
271 $
1,062 $
278 $
264 $
240 $
247 $
1,028
expenses - reported
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 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 year ended December 31, 2020 and 2019, reconciled for each such period to net income and cash flow provided by operating activities, which are believed to be the most directly comparable measures under GAAP.
Our projections of the proportional contribution of our interests in joint ventures to our Adjusted EBITDA and Free Cash Flow are not based on GAAP net income/loss or cash flow provided by operating activities, respectively, and are anticipated to be adjusted to exclude the effects of events or circumstances in 2020 that are not representative or indicative of our results of operations and that are not currently determinable. Due to the uncertainty of the likelihood, amount and timing of any such adjusting items, we do not have information available to provide a quantitative reconciliation of projected net income/loss to an Adjusted EBITDA projection.
Free Cash Flow
Free Cash Flow is defined as cash flow provided by operating activities, plus changes in operating restricted funds, less maintenance capital expenditures, which are capital expenditures primarily to maintain our existing facilities.
We use the non-GAAP measure of Free Cash Flow as a criterion of liquidity and performance-based components of employee compensation. We use Free Cash Flow as a measure of liquidity to determine amounts we can reinvest in our core businesses, such as amounts available to make acquisitions, invest in construction of new projects, make principal payments on debt, or amounts we can return to our stockholders through dividends and/or stock repurchases.
In order to provide a meaningful basis for comparison, we are providing information with respect to our Free Cash Flow for the year ended December 31, 2020 and 2019, reconciled for each such period to cash flow provided by operating activities, which we believe to be the most directly comparable measure under GAAP.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this press release may constitute "forward-looking" statements as defined in Section 27A of the Securities Act of 1933 (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
