July 26, 2018 - 4:15 PM EDT
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Covanta Holding Corporation Reports 2018 Second Quarter Results And Reaffirms 2018 Guidance

MORRISTOWN, N.J., July 26, 2018 /PRNewswire/ -- Covanta Holding Corporation (NYSE: CVA) ("Covanta" or the "Company"), a world leader in sustainable waste and energy solutions, reported financial results today for the three and six months ended June 30, 2018.


Three Months
Ended June 30,


2018

2017


(Unaudited, $ in millions, except
per share amounts)

Revenue

$454

$424

Net loss

$(31)

$(37)

Adjusted EBITDA

$103

$93

Net cash provided by operating activities

$60

$18

Free Cash Flow Before Working Capital

$3

$4

Free Cash Flow

$26

$(21)

Diluted EPS

$(0.24)

$(0.28)

Adjusted EPS

$(0.01)

$(0.22)

Reconciliations of non-GAAP measures can be found in the exhibits to this press release.

Covanta Logo (PRNewsFoto/Covanta)

Key Highlights

  • Reaffirming 2018 guidance
  • Strong plant operations driving production to high end of expectations
  • Accelerated pace of EfW profiled waste growth
  • Continuing plant rationalization activities

"Our second quarter results highlight our momentum across multiple fronts," said Stephen J. Jones, Covanta's President and CEO. "Plant operations continue to show year-over-year improvement, led by the resurgence of Fairfax. Meanwhile, we are benefiting from improving waste pricing given the preferential location of our plants relative to alternative disposal during this period of strong waste flows. Improved plant production coupled with effective sales of our unique disposal capability is also driving incremental profiled waste volumes. Overall, I am very pleased with our performance to date and, in light of our current outlook for 2018, I expect our full year Adjusted EBITDA will be above the midpoint of our guidance range."

More detail on our second quarter results can be found in the exhibits to this release and in our second quarter 2018 earnings presentation found in the Investor Relations section of the Covanta website at www.covanta.com.

2018 Guidance
The Company reaffirmed guidance for 2018 for the following key metrics:

(In millions)

Metric

2018
Guidance Range (1)

2017
Actual

Adjusted EBITDA

$425 - $455

$408

Free Cash Flow Before Working Capital

$100 - $130

$88

Free Cash Flow

$70 - $100

$132


(1)  For additional information on the reconciliation of Free Cash Flow and Free Cash Flow Before Working Capital to Net cash provided by operating activities, see Exhibit 5 of this press release. Guidance as of July 26, 2018.

Conference Call Information
Covanta will host a conference call at 8:30 AM (Eastern) on Friday, July 27, 2018 to discuss its second quarter results.

The conference call will begin with prepared remarks, which will be followed by a question and answer session.  To participate, please dial 1-866-393-4306 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
June 30,


Six Months Ended
June 30,



2018


2017


2018


2017



(Unaudited)
(In millions, except per share amounts)

OPERATING REVENUE:









Waste and service revenue


$

333



$

310



$

645



$

596

Energy revenue


76



75



176



161

Recycled metals revenue


25



15



49



31

Other operating revenue


20



24



42



40

Total operating revenue


454



424



912



828

OPERATING EXPENSE:









Plant operating expense


334



319



679



651

Other operating expense, net


19



2



27



17

General and administrative expense


27



30



58



58

Depreciation and amortization expense


55



52



109



104

Impairment charges


37



1



37



1

Total operating expense


472



404



910



831

Operating (loss) income


(18)



20



2



(3)

OTHER INCOME (EXPENSE):









Interest expense


(36)



(35)



(74)



(71)

(Loss) gain on sale of assets (a)




(2)



210



(6)

Loss on extinguishment of debt




(13)





(13)

Other (expense) income, net


(1)





(1)



Total (expense) income


(37)



(50)



135



(90)

(Loss) income before income tax benefit (expense)


(55)



(30)



137



(93)

Income tax benefit (expense)


22



(8)



31



3

Equity in net income from unconsolidated investments


2



1



2



1

Net (loss) income


$

(31)



$

(37)



$

170



$

(89)










Weighted Average Common Shares Outstanding:









Basic


130



130



130



129

Diluted


130



130



132



129










(Loss) Earnings Per Share:









Basic


$

(0.24)



$

(0.28)



$

1.31



$

(0.69)

Diluted


$

(0.24)



$

(0.28)



$

1.29



$

(0.69)










Cash Dividend Declared Per Share


$

0.25



$

0.25



$

0.50



$

0.50










(a) For additional information, see Exhibit 4 of this Press Release.


 

Covanta Holding Corporation

Exhibit 2

Consolidated Balance Sheets



As of


June 30, 2018


December 31, 2017


(Unaudited)



ASSETS

(In millions, except per
share amounts)

Current:




Cash and cash equivalents

$

39



$

46


Restricted funds held in trust

37



43


Receivables (less allowances of $9 million and $14 million, respectively)

324



341


Prepaid expenses and other current assets

62



73


Assets held for sale (a)

3



653


Total Current Assets

465



1,156


Property, plant and equipment, net

2,556



2,606


Restricted funds held in trust

24



28


Intangible assets, net

276



287


Goodwill

312



313


Other assets

211



51


Total Assets

$

3,844



$

4,441


LIABILITIES AND EQUITY




Current:




Current portion of long-term debt

$

10



$

10


Current portion of project debt

24



23


Accounts payable

64



151


Accrued expenses and other current liabilities

290



313


Liabilities held for sale (a)



540


Total Current Liabilities

388



1,037


Long-term debt

2,295



2,339


Project debt

137



151


Deferred income taxes

385



412


Other liabilities

68



75


Total Liabilities

3,273



4,014


Equity:




Preferred stock ($0.10 par value; authorized 10 shares; none issued and 
     outstanding)




Common stock ($0.10 par value; authorized 250 shares; issued 136 shares, 
     outstanding 131 shares)

14



14


Additional paid-in capital

833



822


Accumulated other comprehensive loss

(26)



(55)


Accumulated deficit

(249)



(353)


Treasury stock, at par

(1)



(1)


Total Stockholders' Equity

571



427


Total Liabilities and Equity

$

3,844



$

4,441






(a)  During the fourth quarter of 2017, our EfW facility in Dublin, Ireland met the criteria to be classified as held for sale

 

Covanta Holding Corporation

Exhibit 3

Consolidated Statements of Cash Flow





Six Months Ended June 30,


2018


2017 (a)


(Unaudited, in millions)

OPERATING ACTIVITIES:




Net income (loss)

$

170



$

(89)


Adjustments to reconcile net income (loss) to net cash provided by operating activities:




Depreciation and amortization expense

109



104


Amortization of deferred debt financing costs

3



3


(Gain) loss on asset sales (b)

(210)



6


Impairment charges

37



1


Loss on extinguishment of debt



13


Stock-based compensation expense

14



11


Provision for doubtful accounts



3


Equity in net income from unconsolidated investments

(2)



(1)


Deferred income taxes

(28)



(6)


Dividends from unconsolidated investments

1




Other, net

(8)



(3)


Change in working capital, net of effects of acquisitions and dispositions

(21)



(20)


Changes in noncurrent assets and liabilities, net

(2)



5


Net cash provided by operating activities

63



27


INVESTING ACTIVITIES:




Purchase of property, plant and equipment

(130)



(152)


Acquisition of businesses, net of cash acquired

(4)



(16)


Proceeds from the sale of assets, net of restricted cash

112




Property insurance proceeds

7



5


Payment of indemnification claim from sale of asset

(7)




Other, net

(1)



(3)


Net cash used in investing activities

(23)



(166)


FINANCING ACTIVITIES:




Proceeds from borrowings on long-term debt

30



400


Proceeds from borrowings on revolving credit facility

317



633


Proceeds from borrowing on Dublin project financing



60


Payments on long-term debt

(3)



(412)


Payment on revolving credit facility

(387)



(501)


Payments on equipment financing capital leases

(3)



(2)


Principal payments on project debt

(13)



(12)


Payment of deferred financing costs



(9)


Cash dividends paid to stockholders

(66)



(65)


Financing of insurance premiums, net

(13)




Other, net

2



3


Net cash (used in) provided by financing activities

(136)



95


Effect of exchange rate changes on cash and cash equivalents

2



3


Net decrease in cash, cash equivalents and restricted cash

(94)



(41)


Cash, cash equivalents and restricted cash at beginning of period (c)

194



194


Cash and cash equivalents of continuing operations at end of period

$

100



$

153






(a)  As adjusted to reflect the adoption of ASU 2016-18 effective January 1, 2018. As a result of adoption, the statement of cash flows explains 
       the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash 
       equivalents.

(b)  For additional information, see Exhibit 4 of this Press Release.

(c)  For the six months ended June 30, 2018, includes $77 million of restricted cash classified as held for sale as of December 31, 2017.

 

Covanta Holding Corporation

Exhibit 4

Consolidated Reconciliation of Net (Loss) Income and Net Cash Provided by Operating Activities 
     to Adjusted EBITDA






Three Months Ended June 30,


Six Months Ended June 30,



2018


2017


2018


2017



(Unaudited, in millions)

Net (loss) income


$

(31)



$

(37)



$

170



$

(89)


Depreciation and amortization expense


55



52



109



104


Interest expense


36



35



74



71


Income tax (benefit) expense


(22)



8



(31)



(3)


Impairment charges (a)


37



1



37



1


Loss (gain) on sale of assets (b)




2



(210)



6


Loss on extinguishment of debt




13





13


Property insurance recoveries, net




(3)



(7)



(3)


Capital type expenditures at client owned facilities (c)


11



12



23



26


Debt service billings in excess of revenue recognized




1



1



2


Business development and transaction costs


1



1



3



1


Severance and reorganization costs


2



1



4



1


Stock-based compensation expense


5



6



14



11


Adjustments to reflect Adjusted EBITDA from unconsolidated 
     investments


7





11




Other (d)


2



1



5



3


Adjusted EBITDA


$

103



$

93



$

203



$

144


Capital type expenditures at client owned facilities (c)


(11)



(12)



(23)



(26)


Cash paid for interest, net of capitalized interest


(40)



(41)



(73)



(67)


Cash paid for taxes, net


(2)



(2)



(2)



(1)


Equity in net income from unconsolidated investments


(2)



(1)



(2)



(1)


Adjustments to reflect Adjusted EBITDA from unconsolidated 
investments


(7)





(11)




Dividends from unconsolidated investments


1





1




Adjustment for working capital and other


18



(19)



(30)



(22)


Net cash provided by operating activities


$

60



$

18



$

63



$

27



(a)    During the six months ended June 30, 2018, we identified indicators of impairment associated with certain of our facilities and recorded a 
         non-cash impairment charge of $37 million to reduce the carrying value of the facilities to their estimated fair value.

(b)    During the six months ended June 30, 2018, we recorded a $204 million gain on the sale of 50% of our Dublin project to our joint venture 
         with GIG and $6 million gain on the sale of our remaining interests in China.

         During the three and six months ended June 30, 2017, we recorded a $2 million and $6 million charge, respectively, for indemnification 
         claims related to the sale of our interests in China, which was completed in 2016.

(c)    Adjustment for impact of adoption of FASB ASC 853 - Service Concession Arrangements.  These types of capital equipment related 
        expenditures at our service fee operated facilities were historically capitalized prior to adoption of this new accounting standard effective 
        January 1, 2015 and are capitalized at facilities that we own.

(d)    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
June 30,


Six Months Ended
June 30,


Full Year Estimated 2018


2018


2017


2018


2017



(Unaudited, in millions)



Net cash provided by operating activities

$

60



$

18



$

63



$

27



$195 - $225

Add: Changes in restricted funds - operating (a)

(1)



(2)



(11)



(1)



10

Less: Maintenance capital expenditures (b)

(33)



(37)



(78)



(64)



(140 - 130)

Free Cash Flow

$

26



$

(21)



$

(26)



$

(38)



$70 - $100

Less: Changes in working capital

(23)



25



21



20



20 - 40

Free Cash Flow Before Working Capital

$

3



$

4



$

(5)



$

(18)



$100 - $130




(a)    Adjustment for the impact of the adoption of ASU 2016-18 effective January 1, 2018. As a result of adoption, 
        the statement of cash flows explains the change during the period in the total of cash, cash equivalents, and 
        amounts generally described as restricted cash or restricted cash equivalents. Therefore, changes in restricted 
        funds are eliminated in arriving at net cash, cash equivalents and restricted funds provided by operating 
        activities













(b)    Purchases of property, plant and equipment are also referred to as capital expenditures. Capital expenditures 
        that primarily maintain existing facilities are classified as maintenance capital expenditures. The following 
        table provides the components of total purchases of property, plant and equipment:










Three Months Ended
June 30,


Six Months Ended
June 30,




2018


2017


2018


2017



Maintenance capital expenditures

$

(33)



$

(37)



$

(78)



$

(64)




Maintenance capital expenditures paid but incurred in 
     prior periods

(5)





(12)






Capital expenditures associated with construction of 
     Dublin EfW facility

(4)



(36)



(21)



(56)




Capital expenditures associated with organic growth 
     initiatives

(7)



(9)



(15)



(23)




Total capital expenditures associated with growth 
     investments

(11)



(45)



(36)



(79)




Capital expenditures associated with property insurance 
     events



(8)



(4)



(9)




Total purchases of property, plant and equipment

$

(49)



$

(90)



$

(130)



$

(152)




 

Covanta Holding Corporation

Exhibit 6

Reconciliation of Diluted Earnings (Loss) Per Share to Adjusted EPS






Three Months Ended
June 30,


Six Months Ended
June 30,



2018


2017


2018


2017



(Unaudited)

Diluted (Loss) Earnings Per Share:


$

(0.24)



$

(0.28)



$

1.29



$

(0.69)


Reconciling Items (a)


0.23



0.06



(1.39)



0.10


Adjusted EPS


$

(0.01)



$

(0.22)



$

(0.10)



$

(0.59)











(a) For details related to the Reconciling Items, see Exhibit 6A of this Press Release



Covanta Holding Corporation

Exhibit 6A

Reconciling Items






Three Months Ended
June 30,


Six Months Ended
June 30,



2018


2017


2018


2017



(Unaudited)
(In millions, except per share amounts)

Reconciling Items









Impairment charges (a)


$

37



$

1



$

37



$

1


Loss (gain) on sale of assets






2



(210)



6


Property insurance recoveries, net




(3)



(7)



(3)


Severance and reorganization costs


2



1



4



1


Loss on extinguishment of debt (a)




13





13


Effect of foreign exchange loss on indebtedness




(1)



1



(1)


Other






(1)




Total Reconciling Items, pre-tax


39



13



(176)



17


Pro forma income tax impact (b)


(10)



(5)



(8)



(5)


Grantor trust activity








1


Total Reconciling Items, net of tax


$

29



$

8



$

(184)



$

13


Diluted Per Share Impact


$

0.23



$

0.06



$

(1.39)



$

0.10


Weighted Average Diluted Shares Outstanding


130



130



132



129











(a) For additional information, see Exhibit 4 of this Press Release

(b) We calculate the federal and state tax impact of each item using the statutory federal tax rate of 21% for 2018 and 35% for 2017 and applicable state rates

 

Covanta Holding Corporation




Exhibit 7

Supplemental Information





(Unaudited, $ in millions)







Three Months Ended
June 30,



2018


2017

REVENUE





Waste and service revenue:





EfW tip fees


$

156



$

143


EfW service fees


100



97


Environmental services (a)


37



32


Municipal services (b)


54



52


Other (c)


12



10


Intercompany (d)


(27)



(25)


Total waste and service


333



310


Energy Revenue:





Energy sales


64



64


Capacity


13



11


Total energy revenue


76



75


Recycled metals revenue:





Ferrous


15



10


Non-ferrous


10



4


Total recycled metals


25



15


Other revenue (e)


20



24


Total revenue


$

454



$

424







OPERATING EXPENSE





Plant operating expense:





Plant maintenance


$

79



$

79


Other plant operating expense


255



240


Total plant operating expense


334



319


Other operating expense


19



2


General and administrative


27



30


Depreciation and amortization


55



52


Impairment charges


37



1


Total operating expense


$

472



$

404







Operating (loss) income


$

(18)



$

20







Plus: Impairment charges


37



1


Operating income excluding impairment charges


$

19



$

21







(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) Consists primarily of construction revenue.

Note: Certain amounts may not total due to rounding.

 

Covanta Holding Corporation











Exhibit 8

Revenue and Operating Income Changes - Q2 2017 to Q2 2018









(Unaudited, $ in millions)
































Contract Transitions (b)








Q2 2017


Organic
Growth (a)


%


Waste


PPA


Trans-
actions (c)


Total
Changes


Q2 2018

REVENUE
















Waste and service:
















EfW tip fees

$

143



$

12



8.6

%


$

1



$



$



$

13



$

156


EfW service fees

97



(2)



(1.8)

%


(4)





8



3



100


Environmental services

32



4



12.8

%








5



37


Municipal services

52



2



3.2

%








2



54


Other revenue

10



2



23.5

%








2



12


Intercompany

(25)



(2)











(2)



(27)


Total waste and service

310



17



5.3

%


(3)





9



23



333


Energy:
















Energy Sales

64



4



5.8

%




(4)







64


Capacity

11



1



13.4

%


(1)



2





2



13


Total energy revenue

75



5



6.7

%


(1)



(3)





2



76


Recycled metals:
















Ferrous

10



4



42.8

%








4



15


Non-ferrous

4



6



141.6

%








6



10


Total recycled metals

15



10



71.1

%








10



25


Other revenue

24



(2)



(7.8)

%


(2)







(4)



20


Total revenue

$

424



$

30



7.1

%


$

(5)



$

(3)



$

9



$

31



$

454


















OPERATING EXPENSE
















Plant operating expense:
















Plant maintenance

$

79



$

1



1.0

%


$

(1)



$



$



$



$

79


Other plant operating expense

240



10



4.0

%


(2)





7



14



255


Total plant operating expense

319



10



3.2

%


(3)





7



14



334


Other operating expense (income)

2



20





(2)







18



19


General and administrative

30



(3)











(3)



27


Depreciation and amortization

52



3











3



55


Total operating expense (income)

$

403



$

30





$

(5)



$



$

8



$

33



$

435


Operating Income excluding 
     Impairment Charges

$

21



$





$

(1)



$

(3)



$

1



$

(3)



$

19


















(a) Reflects performance on a comparable period-over-period basis, excluding the impacts of transitions and transactions.

(b) Includes the impact of the expiration of: (1) long-term major waste and service contracts, most typically representing the transition to a new contract structure, and (2) long-term energy contracts.

(c) Includes the impacts of acquisitions, divestitures, new projects and the addition or loss of operating contracts.















Note: Excludes impairment charges.

Note: Certain amounts may not total due to rounding.

 

Operating Metrics



Exhibit 9

(Unaudited)





Three Months Ended
June 30,


2018


2017

EfW Waste




Tons: (in millions)




Tip fee- contracted

2.3



2.0


Tip fee- uncontracted

0.4



0.5


Service fee

2.3



2.3


Total tons

5.1



4.8


Revenue per ton:




Tip fee- contracted

$

51.52



$

54.05


Tip fee- uncontracted

$

84.05



$

76.02


Average revenue per ton

$

56.68



$

57.13


EfW Energy




Energy sales: (MWh in millions)




Contracted

0.5



0.6


Hedged

0.8



0.7


Market

0.3



0.2


Total energy sales

1.6



1.4


Market sales by geography:




PJM East

0.1




NEPOOL

0.1



0.1


NYISO




Other

0.1



0.1


Revenue per MWh (excludes capacity):




Contracted

$

64.81



$

67.70


Hedged

$

25.99



$

29.02


Market

$

30.86



$

27.80


Average revenue per MWh

$

39.28



$

44.83


Metals




Tons Recovered: (in thousands)




Ferrous

107



98


Non-ferrous

12



9


Tons Sold: (in thousands)




Ferrous

81



68


Non-ferrous

7



5


Revenue per ton:




Ferrous

$

182



$

152


Non-ferrous

$

1,432



$

892


EfW plant operating expense: ($ in millions)




Plant operating expense - gross

$

264



$

254


Less: Client pass-through costs

(12)



(13)


Less: REC sales - contra-expense

(3)



(3)


Plant operating expense, net

$

250



$

239


Client pass-throughs as % of gross costs

4.5

%


5.1

%





Note: Waste volume includes solid tons only. Metals and energy volume are presented net of client revenue sharing. Steam sales are converted to MWh
equivalent at an assumed average rate of 11 klbs of steam / MWh. Uncontracted energy sales include sales under PPAs that are based on market prices.

Note: Certain amounts may not total due to rounding.





Discussion of Non-GAAP Financial Measures

We use a number of different financial measures, both United States generally accepted accounting principles ("GAAP") and non-GAAP, in assessing the overall performance of our business.  To supplement our assessment of results prepared in accordance with GAAP, we use the measures of Adjusted EBITDA, Free Cash Flow, Free Cash Flow Before Working Capital, and Adjusted EPS, which are non-GAAP financial measures as defined by the Securities and Exchange Commission.  The non-GAAP financial measures of Adjusted EBITDA, Free Cash Flow, Free Cash Flow Before Working Capital, and Adjusted EPS as described below, and used in the tables above, are not intended as a substitute or as an alternative to net income, cash flow provided by operating activities or diluted earnings per share as indicators of our performance or liquidity or any other measures of performance or liquidity derived in accordance with GAAP.  In addition, our non-GAAP financial measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes.

The presentations of Adjusted EBITDA, Free Cash Flow, Free Cash Flow Before Working Capital, and Adjusted EPS are intended to enhance the usefulness of our financial information by providing measures which management internally use to assess and evaluate the overall performance of its business and those of possible acquisition candidates, and highlight trends in the overall business.

Adjusted EBITDA

We use Adjusted EBITDA to provide additional ways of viewing aspects of operations that, when viewed with the GAAP results provide a more complete understanding of our core business. As we define it, Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, as adjusted for additional items subtracted from or added to net income including the effects of impairment losses, gains or losses on sales, dispositions or retirements of assets, adjustments to reflect the Adjusted EBITDA from our unconsolidated investments, adjustments to exclude significant unusual or non-recurring items that are not directly related to our operating performance plus adjustments to capital type expenses for our service fee facilities in line with our credit agreements. We adjust for these items in our Adjusted EBITDA as our management believes that these items would distort their ability to efficiently view and assess our core operating trends. As larger parts of our business are conducted through unconsolidated entities that we do not control, we adjust for our proportionate share of the entities depreciation and amortization, interest expense and taxes in order to improve comparability to the Adjusted EBITDA of our wholly owned entities.

In order to provide a meaningful basis for comparison, we are providing information with respect to our Adjusted EBITDA for the three and six months ended June 30, 2018 and 2017, reconciled for each such period to net income and cash flow provided by operating activities, which are believed to be the most directly comparable measures under GAAP.

Our projections of the proportional contribution of our interests in the JV to our Adjusted EBITDA and Free Cash Flow are not based on GAAP net income/loss or Cash flow provided by operating activities, respectively, and are anticipated to be adjusted to exclude the effects of events or circumstances in 2018 that are not representative or indicative of our results of operations and that are not currently determinable. Due to the uncertainty of the likelihood, amount and timing of any such adjusting items, we do not have information available to provide a quantitative reconciliation of projected net income/loss to an Adjusted EBITDA projection.

Free Cash Flow and Free Cash Flow Before Working Capital

Free Cash Flow is defined as cash flow provided by operating activities, plus changes in operating restricted funds, less maintenance capital expenditures, which are capital expenditures primarily to maintain our existing facilities.  Free Cash Flow Before Working Capital is defined as Free Cash Flow excluding changes in working capital.

We use the non-GAAP measures of Free Cash Flow and Free Cash Flow Before Working Capital as criteria of liquidity and performance-based components of employee compensation.  We use Free Cash Flow and Free Cash Flow Before Working Capital as measures of liquidity to determine amounts we can reinvest in our core businesses, such as amounts available to make acquisitions, invest in construction of new projects, make principal payments on debt, or amounts we can return to our stockholders through dividends and/or stock repurchases.

In order to provide a meaningful basis for comparison, we are providing information with respect to our Free Cash Flow and Free Cash Flow Before Working Capital for the three and six months ended June 30, 2018 and 2017, reconciled for each such period to cash flow provided by operating activities, which we believe to be the most directly comparable measure under GAAP.

Adjusted EPS

Adjusted EPS excludes certain income and expense items that are not representative of our ongoing business and operations, which are included in the calculation of Diluted Earnings Per Share in accordance with GAAP.  The following items are not all-inclusive, but are examples of reconciling items in prior comparative and future periods.  They would include impairment charges, the effect of derivative instruments not designated as hedging instruments, significant gains or losses from the disposition or restructuring of businesses, gains and losses on assets held for sale, transaction-related costs, income and loss on the extinguishment of debt and other significant items that would not be representative of our ongoing business.

We will use the non-GAAP measure of Adjusted EPS to enhance the usefulness of our financial information by providing a measure which management internally uses to assess and evaluate the overall performance and highlight trends in the ongoing business.

In order to provide a meaningful basis for comparison, we are providing information with respect to our Adjusted EPS for the three and six months ended June 30, 2018 and 2017, reconciled for each such period to diluted income per share, which is believed to be the most directly comparable measure under GAAP.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this press release may constitute "forward-looking" statements as defined in Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), the Private Securities Litigation Reform Act of 1995 (the "PSLRA") or in releases made by the Securities and Exchange Commission ("SEC"), all as may be amended from time to time.  Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Covanta Holding Corporation and its subsidiaries ("Covanta") or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.  Statements that are not historical fact are forward-looking statements.  Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words "plan," "believe," "expect," "anticipate," "intend," "estimate," "project," "may," "will," "would," "could," "should," "seeks," or "scheduled to," or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions.  These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the "safe harbor" provisions of such laws.  Covanta cautions investors that any forward-looking statements made by Covanta are not guarantees or indicative of future performance.  Important factors, risks, and uncertainties that could cause actual results of Covanta and the JV to differ materially from those forward-looking statements include, but are not limited to:

  • seasonal or long-term fluctuations in the prices of energy, waste disposal, scrap metal and commodities, and Covanta's ability to renew or replace expiring contracts at comparable prices and with other acceptable terms;
  • adoption of new laws and regulations in the United States and abroad, including energy laws, tax laws, environmental laws, labor laws and healthcare laws;
  • advances in technology;
  • difficulties in the operation of our facilities, including fuel supply and energy delivery interruptions, failure to obtain regulatory approvals, equipment failures, labor disputes and work stoppages, and weather interference and catastrophic events;
  • failure to maintain historical performance levels at Covanta's facilities and Covanta's ability to retain the rights to operate facilities Covanta does not own;
  • Covanta's and the joint ventures ability to avoid adverse publicity or reputational damage relating to its business;
  • difficulties in the financing, development and construction of new projects and expansions, including increased construction costs and delays;
  • Covanta's ability to realize the benefits of long-term business development and bear the costs of business development over time;
  • Covanta's ability to utilize net operating loss carryforwards;
  • limits of insurance coverage;
  • Covanta's ability to avoid defaults under its long-term contracts;
  • performance of third parties under its contracts and such third parties' observance of laws and regulations;
  • concentration of suppliers and customers;
  • geographic concentration of facilities;
  • increased competitiveness in the energy and waste industries;
  • changes in foreign currency exchange rates;
  • limitations imposed by Covanta's existing indebtedness and its ability to perform its financial obligations and guarantees and to refinance its existing indebtedness;
  • exposure to counterparty credit risk and instability of financial institutions in connection with financing transactions;
  • the scalability of its business;
  • restrictions in its certificate of incorporation and debt documents regarding strategic alternatives;
  • failures of disclosure controls and procedures and internal controls over financial reporting;
  • Covanta's and the joint ventures ability to attract and retain talented people;
  • general economic conditions in the United States and abroad, including the availability of credit and debt financing; and
  • other risks and uncertainties affecting Covanta's businesses described periodic securities filings by Covanta with the SEC.

Although Covanta believes that its plans, cost estimates, returns on investments, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, actual results could differ materially from a projection or assumption in any forward-looking statements. Covanta's and the joint ventures future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties.  The forward-looking statements contained in this press release are made only as of the date hereof and Covanta does not have, or undertake, any obligation to update or revise any forward-looking statements whether as a result of new information, subsequent events or otherwise, unless otherwise required by law.

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/covanta-holding-corporation-reports-2018-second-quarter-results-and-reaffirms-2018-guidance-300687390.html

SOURCE Covanta Holding Corporation


Source: PR Newswire (July 26, 2018 - 4:15 PM EDT)

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