Delaware | 1-06732 | 95-6021257 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
445 South Street Morristown, New Jersey | 07960 | |||
(Address of principal executive offices) | (Zip Code) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12(b)) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
Item 7.01. | Regulation FD Disclosure. |
Item 9.01. | Financial Statements and Exhibits. |
(a) | Financial Statements of Business Acquired – Not Applicable |
(b) | Pro Forma Financial Information – Not Applicable |
(c) | Exhibits |
Exhibit No. | Exhibit | |
99.1 | Press Release, dated April 17, 2013. | |
99.2 | Earnings Materials, dated April 18, 2013. |
By: | /s/ Timothy J. Simpson | |
Name: | Timothy J. Simpson | |
Title: | Executive Vice President, General Counsel and Secretary |
Exhibit No. | Exhibit | |
99.1 | Press Release, dated April 17, 2013. | |
99.2 | Earnings Materials, dated April 18, 2013. |
Three Months Ended March 31, | ||||||
2013 | 2012 | |||||
(Unaudited, $ in millions, except per share amounts) | ||||||
Revenue | $ 373 | $ 392 | ||||
Net Loss | $ (26) | $ (11) | ||||
Adjusted EBITDA | $ 58 | $ 74 | ||||
Free Cash Flow | $ 25 | $ 77 | ||||
Adjusted EPS | $ (0.21) | $ (0.09) |
• | Organic growth initiatives on track |
• | Unfavorable impact of increased maintenance activity |
• | Raised cash dividend by 10% to $0.165 per share ($0.66 per share annually) |
• | Increased buyback authorization to $150 million |
• | Reaffirming FY2013 guidance |
Metric | Full Year 2012 Actual | Full Year 2013 Guidance Range | % Change At Midpoint |
Adjusted EBITDA | $ 492 | $ 500 - $ 530 | 5% |
Free Cash Flow | $ 262 | $ 250 - $ 280 | 1% |
Adjusted EPS | $ 0.52 | $ 0.40 - $ 0.50 | (13)% |
Covanta Holding Corporation | Exhibit 1 |
Condensed Consolidated Statements of Operations |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
(Unaudited) (In millions, except per share amounts) | |||||||
Operating revenues | |||||||
Waste and service revenues | $ | 231 | $ | 238 | |||
Recycled metals revenues | 16 | 20 | |||||
Electricity and steam sales | 102 | 91 | |||||
Other operating revenues | 24 | 43 | |||||
Total operating revenues | 373 | 392 | |||||
Operating expenses | |||||||
Plant operating expenses | 281 | 267 | |||||
Other operating expenses | 17 | 39 | |||||
General and administrative expenses | 24 | 25 | |||||
Depreciation and amortization expense | 53 | 50 | |||||
Net interest expense on project debt | 3 | 8 | |||||
Total operating expenses | 378 | 389 | |||||
Operating (loss) income | (5 | ) | 3 | ||||
Other income (expense) | |||||||
Interest expense | (29 | ) | (18 | ) | |||
Non-cash convertible debt related expense | (7 | ) | (6 | ) | |||
Loss on extinguishment of debt | (1 | ) | (2 | ) | |||
Other income, net | — | 3 | |||||
Total other expenses | (37 | ) | (23 | ) | |||
Loss before income tax benefit and equity in net income from unconsolidated investments | (42 | ) | (20 | ) | |||
Income tax benefit | 17 | 8 | |||||
Equity in net (loss) income from unconsolidated investments | (1 | ) | 1 | ||||
Net Loss | (26 | ) | (11 | ) | |||
Less: Net loss (income) attributable to noncontrolling interests in subsidiaries | 1 | (1 | ) | ||||
Net Loss Attributable to Covanta Holding Corporation | $ | (25 | ) | $ | (12 | ) | |
Weighted Average Common Shares Outstanding: | |||||||
Basic | 130 | 134 | |||||
Diluted | 130 | 134 | |||||
Loss Per Share: | |||||||
Basic | $ | (0.19 | ) | $ | (0.09 | ) | |
Diluted | $ | (0.19 | ) | $ | (0.09 | ) | |
Cash Dividend Declared Per Share: | $ | 0.165 | $ | 0.15 | |||
Supplemental Information - Non-GAAP | |||||||
Adjusted EPS (a) | $ | (0.21 | ) | $ | (0.09 | ) | |
(a) For additional information, see Exhibit 4 of this Press Release. |
Covanta Holding Corporation | Exhibit 1A |
Condensed Consolidated Statements of Comprehensive Loss |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
(Unaudited, in millions) | |||||||
Net loss | $ | (26 | ) | $ | (11 | ) | |
Foreign currency translation | (5 | ) | 1 | ||||
Adjustment for defined benefit pension plan settlement, net of tax benefit of $2 (a) | (4 | ) | — | ||||
Pension and postretirement plan unrecognized benefits, net of tax expense of $1 | 3 | — | |||||
Net unrealized (loss) gain on derivative instruments, net of tax benefit of $1 and tax expense of $0, respectively | (2 | ) | 1 | ||||
Net unrealized gain on available for sale securities, net of tax expense of $0 | 1 | — | |||||
Other comprehensive (loss) income attributable to Covanta Holding Corporation | (7 | ) | 2 | ||||
Comprehensive loss | (33 | ) | (9 | ) | |||
Less: | |||||||
Net loss (income) attributable to noncontrolling interests in subsidiaries | 1 | (1 | ) | ||||
Comprehensive loss (income) attributable to noncontrolling interests in subsidiaries | 1 | (1 | ) | ||||
Comprehensive loss attributable to Covanta Holding Corporation | $ | (32 | ) | $ | (10 | ) | |
(a) For additional information, see Exhibit 4A - Note (a) of this Press Release. |
Covanta Holding Corporation | Exhibit 2 |
Condensed Consolidated Balance Sheets |
As of | |||||||
March 31, 2013 | December 31, 2012 | ||||||
(Unaudited) | |||||||
(In millions, except per share amounts) | |||||||
ASSETS | |||||||
Current: | |||||||
Cash and cash equivalents | $ | 211 | $ | 246 | |||
Restricted funds held in trust | 53 | 53 | |||||
Receivables (less allowances of $7 and $6, respectively) | 262 | 256 | |||||
Unbilled service receivables | 13 | 18 | |||||
Deferred income taxes | 35 | 18 | |||||
Prepaid expenses and other current assets | 114 | 97 | |||||
Total Current Assets | 688 | 688 | |||||
Property, plant and equipment, net | 2,575 | 2,561 | |||||
Investments in fixed maturities at market (cost: $35 and $36, respectively) | 36 | 36 | |||||
Restricted funds held in trust | 155 | 161 | |||||
Unbilled service receivables | 15 | 17 | |||||
Waste, service and energy contracts, net | 389 | 399 | |||||
Other intangible assets, net | 23 | 23 | |||||
Goodwill | 249 | 249 | |||||
Investments in investees and joint ventures | 46 | 49 | |||||
Other assets | 376 | 343 | |||||
Total Assets | $ | 4,552 | $ | 4,526 | |||
LIABILITIES AND EQUITY | |||||||
Current: | |||||||
Current portion of long-term debt | $ | 3 | $ | 3 | |||
Current portion of project debt | 72 | 80 | |||||
Accounts payable | 55 | 41 | |||||
Deferred revenue | 23 | 31 | |||||
Accrued expenses and other current liabilities | 245 | 205 | |||||
Total Current Liabilities | 398 | 360 | |||||
Long-term debt | 2,101 | 2,012 | |||||
Project debt | 229 | 237 | |||||
Deferred income taxes | 694 | 691 | |||||
Waste and service contracts | 33 | 35 | |||||
Other liabilities | 135 | 136 | |||||
Total Liabilities | 3,590 | 3,471 | |||||
Equity: | |||||||
Covanta Holding Corporation stockholders' equity: | |||||||
Preferred stock ($0.10 par value; authorized 10 shares; none issued and outstanding) | — | — | |||||
Common stock ($0.10 par value; authorized 250 shares; issued 159 and 159 shares, respectively; outstanding 131 and 132 shares, respectively) | 16 | 16 | |||||
Additional paid-in capital | 786 | 806 | |||||
Accumulated other comprehensive income | — | 7 | |||||
Accumulated earnings | 159 | 222 | |||||
Treasury stock, at par | (3 | ) | (3 | ) | |||
Total Covanta Holding Corporation stockholders equity | 958 | 1,048 | |||||
Noncontrolling interests in subsidiaries | 4 | 7 | |||||
Total Equity | 962 | 1,055 | |||||
Total Liabilities and Equity | $ | 4,552 | $ | 4,526 |
Covanta Holding Corporation | Exhibit 3 |
Condensed Consolidated Statements of Cash Flow |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
(Unaudited, in millions) | |||||||
OPERATING ACTIVITIES: | |||||||
Net loss | $ | (26 | ) | $ | (11 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization expense | 53 | 50 | |||||
Defined benefit pension plan settlement gain (a) | (6 | ) | — | ||||
Loss on extinguishment of debt | 1 | 2 | |||||
Non-cash convertible debt related expense | 7 | 6 | |||||
Stock-based compensation expense | 5 | 5 | |||||
Deferred income taxes | (12 | ) | (7 | ) | |||
Other, net | (2 | ) | (6 | ) | |||
Change in restricted funds held in trust | 9 | 2 | |||||
Change in working capital | 33 | 63 | |||||
Net cash provided by operating activities | 62 | 104 | |||||
INVESTING ACTIVITIES: | |||||||
Purchase of property, plant and equipment | (63 | ) | (32 | ) | |||
Acquisition of noncontrolling interest in subsidiary | (14 | ) | — | ||||
Acquisition of land use rights | — | (1 | ) | ||||
Other, net | (10 | ) | 1 | ||||
Net cash used in investing activities | (87 | ) | (32 | ) | |||
FINANCING ACTIVITIES: | |||||||
Proceeds from borrowings on long-term debt | — | 699 | |||||
Payment of deferred financing costs | (1 | ) | (23 | ) | |||
Principal payments on long-term debt | (1 | ) | (619 | ) | |||
Principal payments on project debt | (16 | ) | (37 | ) | |||
Convertible debenture repurchases | — | (25 | ) | ||||
Payments of borrowings on revolving credit facility | (51 | ) | — | ||||
Proceeds from borrowings on revolving credit facility | 98 | — | |||||
Change in restricted funds held in trust | (3 | ) | 12 | ||||
Cash dividends paid to stockholders | — | (10 | ) | ||||
Common stock repurchased | (24 | ) | (30 | ) | |||
Financing of insurance premiums, net | — | (3 | ) | ||||
Other, net | (12 | ) | (1 | ) | |||
Net cash used in financing activities | (10 | ) | (37 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | — | — | |||||
Net (decrease) increase in cash and cash equivalents | (35 | ) | 35 | ||||
Cash and cash equivalents at beginning of period | 246 | 234 | |||||
Cash and cash equivalents at end of period | 211 | 269 | |||||
Less: Cash and cash equivalents of discontinued operations at end of period | — | 2 | |||||
Cash and cash equivalents of continuing operations at end of period | $ | 211 | $ | 267 | |||
(a) For additional information, see Exhibit 4A - Note (a) of this Press Release. |
Covanta Holding Corporation | Exhibit 4 |
Reconciliation of Diluted Loss Per Share to Adjusted EPS |
Three Months Ended March 31, | Full Year Estimated 2013 | ||||||||
2013 | 2012 | ||||||||
(Unaudited) | |||||||||
Diluted Loss Per Share | $ | (0.19 | ) | $ | (0.09 | ) | $0.42 - $0.52 | ||
Reconciling Items (a) | (0.02 | ) | — | (0.02) | |||||
Adjusted EPS | $ | (0.21 | ) | $ | (0.09 | ) | $0.40 - $0.50 | ||
(a) For details related to the Reconciling Items, see Exhibit 4A of this Press Release. |
Covanta Holding Corporation | Exhibit 4A |
Reconciling Items |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
(Unaudited) (In millions, except per share amounts) | |||||||
Reconciling Items | |||||||
Operating loss related to insurance subsidiaries | $ | — | $ | 1 | |||
Defined benefit pension plan settlement gain (a) | (6 | ) | — | ||||
Loss on extinguishment of debt | 1 | 2 | |||||
Effect of foreign exchange gain on indebtedness | — | (3 | ) | ||||
Other | 1 | — | |||||
Total Reconciling Items, pre-tax | (4 | ) | — | ||||
Pro forma income tax impact | 2 | — | |||||
Total Reconciling Items, net of tax | $ | (2 | ) | $ | — | ||
Diluted Loss Per Share Impact | $ | (0.02 | ) | $ | — | ||
Weighted Average Diluted Shares Outstanding | 130 | 134 |
(a) During the three months ended March 31, 2013, we recorded a defined benefit pension plan settlement gain of $6 million. |
Covanta Holding Corporation | Exhibit 4B |
Effective Tax Rate ("ETR") |
Three Months Ended March 31, | |||||
2013 | 2012 | ||||
(Unaudited) | |||||
Effective Tax Rate (a) | (40.4 | )% | (38.0 | )% |
(a) The increase in the effective tax rate was primarily a result of an increase in taxes on foreign operations and development activities, and an increase in state taxes related to the mix of earnings and losses from subsidiaries that are subject to state taxes on a separate entity basis. We currently estimate our annual effective tax rate for the year ending December 31, 2013 to be approximately 45.6%. We review the annual effective tax rate on a quarterly basis as projections are revised and laws are enacted. |
Covanta Holding Corporation | Exhibit 5 |
Reconciliation of Net Loss to Adjusted EBITDA |
Three Months Ended March 31, | Full Year Estimated 2013 | ||||||||
2013 | 2012 | ||||||||
(Unaudited, in millions) | |||||||||
Net Loss Attributable to Covanta Holding Corporation | $ | (25 | ) | $ | (12 | ) | $53 - $66 | ||
Operating loss related to insurance subsidiaries | — | 1 | (5) - 0 | ||||||
Depreciation and amortization expense | 53 | 50 | 220 - 210 | ||||||
Debt service: | |||||||||
Net interest expense on project debt | 3 | 8 | |||||||
Interest expense | 29 | 18 | |||||||
Non-cash convertible debt related expense | 7 | 6 | |||||||
Subtotal debt service | 39 | 32 | 171 - 155 | ||||||
Income tax benefit | (17 | ) | (8 | ) | 40 - 65 | ||||
Defined benefit pension plan settlement gain (a) | (6 | ) | — | ||||||
Loss on extinguishment of debt | 1 | 2 | |||||||
Net (loss) income attributable to noncontrolling interests in subsidiaries | (1 | ) | 1 | 3 - 8 | |||||
Other adjustments: | |||||||||
Debt service billings in excess of revenue recognized | 7 | 6 | |||||||
Non-cash compensation expense | 5 | 5 | |||||||
Other non-cash items (b) | 2 | (3 | ) | ||||||
Subtotal other adjustments | 14 | 8 | 18 - 26 | ||||||
Total adjustments | 83 | 86 | |||||||
Adjusted EBITDA | $ | 58 | $ | 74 | $500 - $530 | ||||
(a) For additional information, see Exhibit 4A - Note (a) of this Press Release. | |||||||||
(b) Includes certain non-cash items that are added back under the definition of Adjusted EBITDA in Covanta Energy Corporation's credit agreement. |
Covanta Holding Corporation | Exhibit 6 |
Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow |
Three Months Ended March 31, | Full Year Estimated 2013 | ||||||||
2013 | 2012 | ||||||||
(Unaudited, in millions) | |||||||||
Cash flow provided by operating activities | $ | 62 | $ | 104 | $325 - $360 | ||||
Plus: Cash flow used in operating activities from insurance subsidiaries | 1 | 1 | 5 - 10 | ||||||
Less: Maintenance capital expenditures (a) | (38 | ) | (28 | ) | (80) - (90) | ||||
Free Cash Flow | $ | 25 | $ | 77 | $250 -$280 | ||||
Weighted Average Diluted Shares Outstanding | 130 | 134 | |||||||
Uses of Free Cash Flow | |||||||||
Investments: | |||||||||
Acquisition of noncontrolling interest in subsidiary | $ | (14 | ) | $ | — | ||||
Non-maintenance capital expenditures (b) | (25 | ) | (4 | ) | |||||
Acquisition of land use rights (b) | — | (1 | ) | ||||||
Other growth investments (b) | — | 1 | |||||||
Other investing activities, net (c) | (10 | ) | — | ||||||
Total investments | $ | (49 | ) | $ | (4 | ) | |||
Return of capital to stockholders: | |||||||||
Cash dividends paid to stockholders | $ | — | $ | (10 | ) | ||||
Common stock repurchased | (24 | ) | (30 | ) | |||||
Total return of capital to stockholders | $ | (24 | ) | $ | (40 | ) | |||
Capital raising activities: | |||||||||
Net proceeds from issuance of corporate debt (d) | $ | — | $ | 676 | |||||
Other financing activities, net | (13 | ) | (1 | ) | |||||
Net proceeds from capital raising activities | $ | (13 | ) | $ | 675 | ||||
Debt repayments: | |||||||||
Net cash used for scheduled principal payments on corporate debt | $ | (1 | ) | $ | (23 | ) | |||
Net cash used for scheduled principal payments on project debt (e) | (19 | ) | (25 | ) | |||||
Optional repayment of corporate debt (f) | — | (621 | ) | ||||||
Total debt repayments | $ | (20 | ) | $ | (669 | ) | |||
Borrowing activities - Revolving credit facility, net | $ | 47 | $ | — | |||||
Short-term borrowing activities - Financing of insurance premiums, net | $ | — | $ | (3 | ) | ||||
Net change in cash and cash equivalents | $ | (34 | ) | $ | 36 | ||||
(a) Purchases of property, plant and equipment are also referred to as capital expenditures. Capital expenditures that primarily maintain existing facilities are classified as maintenance capital expenditures. The following table provides the components of total purchases of property, plant and equipment: | |||||||||
Three Months Ended March 31, | |||||||||
2013 | 2012 | ||||||||
Maintenance capital expenditures | $ | (38 | ) | $ | (28 | ) | |||
Capital expenditures associated with organic growth initiatives and technology development | (25 | ) | (4 | ) | |||||
Total purchases of property, plant and equipment | $ | (63 | ) | $ | (32 | ) | |||
(b) Investments in growth opportunities, including organic growth initiatives, technology, business development, and other similar expenditures, excluding acquisitions of businesses. | |||||||||
(c) Other investing activities is primarily comprised of net payments from the purchase/sale of investment securities and business development expenses. | |||||||||
(d) Excludes borrowings under Revolving Credit Facility. Calculated as follows: | |||||||||
Proceeds from borrowings on long-term debt | $ | — | $ | 699 | |||||
Less: Financing costs related to issuance of long-term debt | — | (23 | ) | ||||||
Net proceeds from issuance of corporate debt | $ | — | $ | 676 | |||||
(e) Calculated as follows: | |||||||||
Total scheduled principal payments on project debt | $ | (16 | ) | $ | (37 | ) | |||
(Increase) decrease in related restricted funds held in trust | (3 | ) | 12 | ||||||
Net cash used for principal payments on project debt | $ | (19 | ) | $ | (25 | ) | |||
(f) Calculated as follows: | |||||||||
Redemption of Term Loan due 2014 | $ | — | $ | (619 | ) | ||||
Redemption of Convertible Debentures | — | (2 | ) | ||||||
Total optional repayment of corporate debt | $ | — | $ | (621 | ) | ||||
Covanta Holding Corporation | Exhibit 7 |
Capitalization Information |
As of | |||||||
March 31, 2013 | December 31, 2012 | ||||||
(Unaudited, in millions) | |||||||
Cash and Cash Equivalents: | |||||||
Domestic | $ | 11 | $ | 12 | |||
International | 193 | 215 | |||||
Insurance Subsidiary | 7 | 19 | |||||
Total Cash and Cash Equivalents | $ | 211 | $ | 246 | |||
Restricted Funds Held in Trust: (a) | |||||||
Debt Service Funds - Principal | $ | 74 | $ | 72 | |||
Debt Service Funds - Interest | 6 | 6 | |||||
Debt Service Funds - Total | 80 | 78 | |||||
Revenue Funds | 6 | 9 | |||||
Other Funds | 122 | 127 | |||||
Total Restricted Funds Held in Trust | $ | 208 | $ | 214 | |||
(a) Restricted funds held in trust are primarily amounts received by third-party trustees relating to certain projects we own which may be used only for specified purposes. We generally do not control these accounts. They primarily include debt service reserves for payment of principal and interest on project debt. Revenue funds are comprised of deposits of revenues received with respect to projects prior to their disbursement. Other funds are primarily amounts held in trust for operations, maintenance, environmental obligations, operating lease reserves in accordance with agreements with our clients and amounts held for future scheduled distributions. |
Exhibit 7A | |||||||||||||||
As of March 31, 2013 | As of December 31, 2012 | ||||||||||||||
Face Value | Book Value | Face Value | Book Value | ||||||||||||
(Unaudited, in millions) | |||||||||||||||
Corporate Debt: | |||||||||||||||
Revolving Credit Facility | $ | 107 | $ | 107 | $ | 60 | $ | 60 | |||||||
Term Loan due 2019 | 297 | 296 | 298 | 297 | |||||||||||
7.25% Senior Notes due 2020 | 400 | 400 | 400 | 400 | |||||||||||
6.375% Senior Notes due 2022 | 400 | 400 | 400 | 400 | |||||||||||
3.25% Cash Convertible Senior Notes due 2014 | 460 | 566 | 460 | 523 | |||||||||||
Sub-total | $ | 1,664 | $ | 1,769 | $ | 1,618 | $ | 1,680 | |||||||
Tax-Exempt Bonds | |||||||||||||||
4.875% Massachusetts Series 2012A due 2027 | $ | 20 | $ | 20 | $ | 20 | $ | 20 | |||||||
4.875% Massachusetts Series 2012B due 2042 | 67 | 67 | 67 | 67 | |||||||||||
5.25% Massachusetts Series 2012C due 2042 | 83 | 83 | 83 | 83 | |||||||||||
5.25% Niagara Series 2012A due 2042 | 130 | 130 | 130 | 130 | |||||||||||
4.00% Niagara Series 2012B due 2024 | 35 | 35 | 35 | 35 | |||||||||||
Sub-total Tax-Exempt Bonds | $ | 335 | $ | 335 | $ | 335 | $ | 335 | |||||||
Total corporate debt (including current portion) | $ | 1,999 | $ | 2,104 | $ | 1,953 | $ | 2,015 | |||||||
Project Debt: | |||||||||||||||
Domestic project debt - service fee facilities | $ | 207 | $ | 209 | $ | 223 | $ | 226 | |||||||
Domestic project debt - tip fee facilities | 69 | 69 | 68 | 68 | |||||||||||
International project debt | 23 | 23 | 23 | 23 | |||||||||||
Total project debt (including current portion) | $ | 299 | $ | 301 | $ | 314 | $ | 317 | |||||||
Total Debt Outstanding | $ | 2,298 | $ | 2,405 | $ | 2,267 | $ | 2,332 | |||||||
Net Debt (a) | $ | 2,013 | $ | 1,949 | |||||||||||
Availability for Borrowings under the Revolving Credit Facility | $ | 536 | $ | 584 |
(a) Net Debt is calculated as total principal amount of debt outstanding less cash and cash equivalents and debt service principal restricted funds. |
Covanta Holding Corporation | Exhibit 8 |
Return to Stockholders | |
(Unaudited, in millions, except per share amounts and percentages) |
During years ended December 31, 2010, 2011, 2012 and the three months ended March 31, 2013, the following amounts were returned to stockholders: | |||||||||||||
Amount | Shares Repurchased | Weighted Average Cost Per Share | % of Common Stock Outstanding Repurchased | ||||||||||
Common Stock Repurchased (a) | |||||||||||||
FY 2010 | $ | 95 | 6.1 | $ | 15.56 | 3.9% | |||||||
FY 2011 | $ | 230 | 14.4 | $ | 15.99 | 9.6% | |||||||
FY 2012 | $ | 88 | 5.3 | $ | 16.55 | 3.9% | |||||||
Q1 2013 | $ | 24 | 1.2 | $ | 19.27 | 0.9% | |||||||
Total Common Stock Repurchased | $ | 437 | 27.0 | $ | 16.15 | 17.5% | |||||||
Cash Dividends Declared to Stockholders | |||||||||||||
FY 2010 | $ | 233 | |||||||||||
FY 2011 | $ | 42 | |||||||||||
FY 2012 | $ | 81 | |||||||||||
Q1 2013 (b) | $ | 22 | |||||||||||
Total Cash Dividends Declared to Stockholders | $ | 378 | |||||||||||
Total Return to Stockholders | $ | 815 | |||||||||||
(a) We increased the authorization to repurchase shares of outstanding common stock to $150 million during the three months ended March 31, 2013. As of March 31, 2013, the amount remaining under our currently authorized share repurchase program was $126 million. | |||||||||||||
(b) On March 7, 2013, we authorized a quarterly cash dividend of $0.165 per share. The Q1 2013 payment was made on April 5, 2013 to stockholders of record as of the close of business on March 28, 2013. | |||||||||||||
Covanta Holding Corporation | Exhibit 9 |
Consolidated Reconciliation of Cash Flow Provided by Operating Activities to Adjusted EBITDA |
Three Months Ended March 31, | Full Year Estimated 2013 | ||||||||
2013 | 2012 | ||||||||
(Unaudited, in millions) | |||||||||
Cash flow provided by operating activities | $ | 62 | $ | 104 | $325 - $360 | ||||
Cash flow used in operating activities from insurance subsidiaries | 1 | 1 | 5 - 10 | ||||||
Debt service | 39 | 32 | 171 - 155 | ||||||
Change in working capital | (33 | ) | (63 | ) | |||||
Change in restricted funds held in trust | (9 | ) | (2 | ) | |||||
Non-cash convertible debt related expense | (7 | ) | (6 | ) | |||||
Equity in net income from unconsolidated investments | (1 | ) | 1 | ||||||
Dividends from unconsolidated investments | (1 | ) | — | ||||||
Current tax provision | (5 | ) | (1 | ) | |||||
Other | 12 | 8 | |||||||
Sub-total | (44 | ) | (63 | ) | (1) - 5 | ||||
Adjusted EBITDA | $ | 58 | $ | 74 | $500 - $530 | ||||
Covanta Holding Corporation | Exhibit 10 |
Plant Operating Expenses Detail - Americas |
The Americas segment quarterly plant operating expenses typically differs substantially as a result of the timing of scheduled plant maintenance. We typically conduct scheduled maintenance periodically each year, which requires that individual boiler units temporarily cease operations. During these scheduled maintenance periods, we incur material repair and maintenance expenses and receive less revenue until the boiler and/or turbine units resume operations. This scheduled maintenance typically occurs during periods of off-peak electric demand and/or lower waste volumes, which are our first, second and fourth fiscal quarters. The first half of the year scheduled maintenance period is typically the most extensive. The third quarter scheduled maintenance period is typically the least extensive. Given these factors, we typically experience our lowest operating income from our projects during the first half of each year. The aggregate of all other components of plant operating expense is relatively consistent each quarter of the year. |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
(Unaudited, in millions) | |||||||
Plant Operating Expenses: | |||||||
Plant maintenance (a) | $ | 88 | $ | 81 | |||
All other | 184 | 179 | |||||
Plant operating expenses | $ | 272 | $ | 260 | |||
(a) Plant maintenance costs include our internal maintenance team and non-facility employee costs for facility scheduled and unscheduled maintenance and repair expenses. |
Covanta Holding Corporation - Americas Segment | Exhibit 11A | ||
Statistics - (Unaudited, in millions, except percentages) |
Boiler Availability | |||
Last Twelve Months as of March 31, | |||
2013 | 2012 | ||
EfW Facilities | 92.5% | 91.9% |
Waste and Service Revenue | |||||||
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Waste and service revenue unrelated to project debt | $ | 220 | $ | 225 | |||
Revenue earned explicitly to service project debt - principal | 8 | 10 | |||||
Revenue earned explicitly to service project debt - interest | 1 | 2 | |||||
Total waste and service revenue | $ | 229 | $ | 237 |
Energy Revenue and Megawatt Hours (MWh) At Market and Contracted by Facility Type | |||||||||||||||||||
Three Months Ended March 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Revenue (a) | Volume (a), (b) | % of Total Volume | Revenue (a) | Volume (a), (b) | % of Total Volume | ||||||||||||||
EfW | |||||||||||||||||||
At Market | $ | 7 | 0.17 | 12 | % | $ | 16 | 0.31 | 23 | % | |||||||||
Contracted & Hedged | 74 | 1.05 | 74 | % | 57 | 0.85 | 63 | % | |||||||||||
Total EfW | $ | 81 | 1.22 | 86 | % | $ | 73 | 1.16 | 86 | % | |||||||||
Biomass | |||||||||||||||||||
At Market | $ | 7 | 0.11 | 8 | % | $ | 3 | 0.11 | 8 | % | |||||||||
Contracted | 7 | 0.09 | 6 | % | 8 | 0.08 | 6 | % | |||||||||||
Total Biomass | $ | 14 | 0.20 | 14 | % | $ | 11 | 0.19 | 14 | % | |||||||||
Total | $ | 95 | 1.42 | 100 | % | $ | 84 | 1.35 | 100 | % | |||||||||
(a) Covanta share only | |||||||||||||||||||
(b) Steam sales converted to MWh equivalents (0.2M MWh for both 2013 and 2012) |
Projected Energy Megawatt Hours (MWh) At Market and Contracted by Facility Type (a) | |||
Full Year 2013E As of April 1, 2013 | |||
EfW | |||
At Market | 0.9 | ||
Contracted & Hedged | 4.5 | ||
Total EfW | 5.4 | ||
Biomass (b) | |||
At Market | 0.4 | ||
Contracted | 0.4 | ||
Total Biomass | 0.8 | ||
Total | 6.2 | ||
(a) Covanta share only | |||
(b) Additional 0.3 million MWh of Biomass energy is economically dispatched, but available to run |
Covanta Holding Corporation - Americas Segment | Exhibit 11B | ||
Statistics - (Unaudited, in millions, except percentages, metal tons (in thousands), and pricing data in Economic Drivers Section) |
Recycled Metal Net Revenue by Type (a) | |||||||
Last Twelve Months as of March 31, | |||||||
2013 | 2012 | ||||||
Ferrous Metal | $ | 55 | $ | 63 | |||
Non-Ferrous Metal | 13 | 14 | |||||
Total | $ | 68 | $ | 77 | |||
(a) Covanta share only |
Recycled Metal Net Tons Recovered by Type (a),(b) | |||||
Last Twelve Months as of March 31, | |||||
2013 | 2012 | ||||
Ferrous Metal | 300.0 | 319.3 | |||
Non-Ferrous Metal | 14.8 | 14.5 | |||
Total | 314.8 | 333.8 | |||
(a) Net volume: Covanta share only | |||||
(b) Tons in thousands |
Published Industry U.S. Economic Drivers (a) | |||||||
As of March 31, | |||||||
2013 | 2012 | ||||||
Consumer Price Index (b) | 1.5 | % | 2.7 | % | |||
PJM Pricing (Electricity) (c) | $ | 44.82 | $ | 31.93 | |||
Henry Hub Pricing (Natural Gas) (d) | $ | 3.49 | $ | 2.46 | |||
#1 HMS Pricing (Ferrous Metals) (e) | $ | 350 | $ | 411 | |||
Scrap Metals - Old Sheet & Old Cast (f) | $ | 0.74 | $ | 0.74 | |||
(a) While these drivers impact our business, there is not an exact correlation between our results and changes in these metrics. | |||||||
(b) Represents the year-over-year percent change in the Headline CPI number. The Consumer Price Index (CPI-U) data is provided by the U.S. Department of Labor Bureau of Labor Statistics. | |||||||
(c) Average price per MWh for Q1 2013 and Q1 2012. Pricing for the PJM PSEG Zone is provided by the PJM ISO. | |||||||
(d) Average price per MMBtu for Q1 2013 and Q1 2012. The Henry Hub Pricing data is provided by the Natural Gas Weekly Update, Energy Information Administration, Washington, DC. Nebraska Energy Office, Lincoln, NE. | |||||||
(e) Average price per gross ton for Q1 2013 and Q1 2012. The #1 Heavy Melt Steel (HMS) composite index ($/gross ton) price is published by American Metal Market. | |||||||
(f) Average price per pound for Q1 2013 and Q1 2012. Calculated using high and low prices for Old Sheet & Old Cast Scrap Metals ($/lb) published by American Metal Market. |
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, and Adjusted EPS, which are non-GAAP measures as defined by the Securities and Exchange Commission. The non-GAAP financial measures of Adjusted EBITDA, Free Cash Flow, and Adjusted EPS as described below, and used in the tables above, are not intended as a substitute or as an alternative to net loss, cash flow provided by operating activities or diluted loss 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 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 further information that is useful to an understanding of the financial covenants contained in the credit facilities as of March 31, 2013 of our most significant subsidiary, Covanta Energy, through which we conduct our core waste and energy services business, and as additional ways of viewing aspects of its operations that, when viewed with the GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of our core business. The calculation of Adjusted EBITDA is based on the definition in Covanta Energy’s credit facilities as of March 31, 2013, which we have guaranteed. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, as adjusted for additional items subtracted from or added to net loss. Because our business is substantially comprised of that of Covanta Energy, our financial performance is substantially similar to that of Covanta Energy. For this reason, and in order to avoid use of multiple financial measures which are not all from the same entity, the calculation of Adjusted EBITDA and other financial measures presented herein are ours, measured on a consolidated basis, less the results of operations of our insurance subsidiaries. |
Under the credit facilities as of March 31, 2013, Covanta Energy is required to satisfy certain financial covenants, including certain ratios of which Adjusted EBITDA is an important component. Compliance with such financial covenants is expected to be the principal limiting factor which will affect our ability to engage in a broad range of activities in furtherance of our business, including making certain investments, acquiring businesses and incurring additional debt. Covanta Energy was in compliance with these covenants as of March 31, 2013. Failure to comply with such financial covenants could result in a default under these credit facilities, which default would have a material adverse affect on our financial condition and liquidity. |
These financial covenants are measured on a trailing four quarter period basis and the material covenants are as follows: |
- maximum Covanta Energy leverage ratio of 4.00 to 1.00, which measures Covanta Energy’s Consolidated Adjusted Debt (which is the principal amount of its consolidated debt less certain restricted funds dedicated to repayment of project debt principal and construction costs) to its Adjusted EBITDA (which for purposes of calculating the leverage ratio and interest coverage ratio, is adjusted on a pro forma basis for acquisitions and dispositions made during the relevant period); and |
- minimum Covanta Energy interest coverage ratio of 3.00 to 1.00, which measures Covanta Energy’s Adjusted EBITDA to its consolidated interest expense plus certain interest expense of ours, to the extent paid by Covanta Energy. |
In order to provide a meaningful basis for comparison, we are providing information with respect to our Adjusted EBITDA for the three months ended March 31, 2013 and 2012, reconciled for each such periods to net loss and cash flow provided by operating activities, which are believed to be the most directly comparable measures under GAAP. |
Free Cash Flow |
Free Cash Flow is defined as cash flow provided by operating activities, excluding the cash flow provided by or used in our insurance subsidiaries, 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 three months ended March 31, 2013 and 2012, reconciled for each such periods 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 the results of operations of our insurance subsidiaries, write-off of assets and liabilities, 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 months ended March 31, 2013 and 2012, reconciled for each such periods to diluted loss per share, which is believed to be the most directly comparable measure under GAAP. |
• | fluctuations in the prices of energy, waste disposal, scrap metal and commodities; |
• | adoption of new laws and regulations in the United States and abroad, including energy laws, environmental laws, labor laws and healthcare laws; |
• | the fee structures of our contracts; |
• | our ability to avoid adverse publicity relating to our business expansion efforts; |
• | 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 our facilities and our ability to retain the rights to operate facilities we do not own; |
• | 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 costs of business development over time; |
• | the scalability of our business; |
• | limits of insurance coverage; |
• | our ability to avoid defaults under our long-term contracts; |
• | performance of third parties under our contractual arrangements 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 and 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; |
• | our ability to utilize net operating loss carryforwards; |
• | restrictions in our certificate of incorporation and debt documents regarding strategic alternatives; |
• | failures of disclosure controls and procedures and internal controls over financial reporting; |
• | our 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 market conditions at the time our contracts expire; and |
• | other risks and uncertainties affecting our businesses described in Item 1A. Risk Factors of Covanta's Annual Report on Form 10-K for the year ended December 31, 2012 and in other filings by Covanta with the SEC. |
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