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) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12(b)) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | 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. |
Exhibit No. | Exhibit | |
99.1 | Press Release, dated July 27, 2017. | |
99.2 | Earnings Materials, dated July 27, 2017. |
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 July 27, 2017. | |
99.2 | Earnings Materials, dated July 27, 2017. |
Three Months Ended June 30, | |||
2016 | 2017 | ||
(Unaudited, $ in millions, except per share amounts) | |||
Revenue | $418 | $424 | |
Net Loss | $(29) | $(37) | |
Adjusted EBITDA | $82 | $93 | |
Net cash provided by operating activities | $27 | $16 | |
Free Cash Flow | $(5) | $(21) | |
Diluted EPS | $(0.23) | $(0.28) | |
Adjusted EPS | $(0.22) | $(0.22) |
• | Reaffirming 2017 guidance |
• | Dublin remains on track for commercial operations by the start of Q4 2017 |
• | Fairfax expected to return to service in Q4 2017 |
• | Strong waste market conditions and growth in Covanta Environmental Solutions |
• | Expanded centralized metals processing operations to include non-ferrous |
• | Enhanced UK development pipeline through Joint Development Agreement with Biffa for two new projects |
Metric | 2016 Actual | 2017 Guidance Range (1) |
Adjusted EBITDA | $410 | $400 - $440 |
Free Cash Flow | $172 | $100 - $150 |
Covanta Holding Corporation | Exhibit 1 |
Condensed Consolidated Statements of Operations |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(Unaudited) (In millions, except per share amounts) | |||||||||||||||
Operating revenue | |||||||||||||||
Waste and service revenue | $ | 310 | $ | 297 | $ | 596 | $ | 576 | |||||||
Energy revenue | 75 | 86 | 161 | 187 | |||||||||||
Recycled metals revenue | 15 | 17 | 31 | 30 | |||||||||||
Other operating revenue | 24 | 18 | 40 | 28 | |||||||||||
Total operating revenue | 424 | 418 | 828 | 821 | |||||||||||
Operating expense | |||||||||||||||
Plant operating expense | 319 | 314 | 651 | 629 | |||||||||||
Other operating expense | 2 | 19 | 17 | 31 | |||||||||||
General and administrative expense | 30 | 25 | 58 | 48 | |||||||||||
Depreciation and amortization expense | 52 | 51 | 104 | 103 | |||||||||||
Impairment charges (a) | 1 | 4 | 1 | 19 | |||||||||||
Total operating expense | 404 | 413 | 831 | 830 | |||||||||||
Operating income (loss) | 20 | 5 | (3 | ) | (9 | ) | |||||||||
Other expense | |||||||||||||||
Interest expense, net | (35 | ) | (34 | ) | (71 | ) | (68 | ) | |||||||
Loss on asset sales (a) | (2 | ) | — | (6 | ) | — | |||||||||
Loss on extinguishment of debt | (13 | ) | — | (13 | ) | — | |||||||||
Other income, net | — | 2 | — | — | |||||||||||
Total other expense | (50 | ) | (32 | ) | (90 | ) | (68 | ) | |||||||
Loss before income tax (expense) benefit and equity in net income from unconsolidated investments | (30 | ) | (27 | ) | (93 | ) | (77 | ) | |||||||
Income tax (expense) benefit | (8 | ) | (3 | ) | 3 | 7 | |||||||||
Equity in net income from unconsolidated investments | 1 | 1 | 1 | 4 | |||||||||||
Net Loss Attributable to Covanta Holding Corporation | $ | (37 | ) | $ | (29 | ) | $ | (89 | ) | $ | (66 | ) | |||
Weighted Average Common Shares Outstanding: | |||||||||||||||
Basic | 130 | 129 | 129 | 129 | |||||||||||
Diluted | 130 | 129 | 129 | 129 | |||||||||||
Loss Per Share: | |||||||||||||||
Basic | $ | (0.28 | ) | $ | (0.23 | ) | $ | (0.69 | ) | $ | (0.51 | ) | |||
Diluted | $ | (0.28 | ) | $ | (0.23 | ) | $ | (0.69 | ) | $ | (0.51 | ) | |||
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 |
Condensed Consolidated Balance Sheets |
As of | |||||||
June 30, 2017 | December 31, 2016 | ||||||
(Unaudited) | |||||||
ASSETS | (In millions, except per share amounts) | ||||||
Current: | |||||||
Cash and cash equivalents | $ | 48 | $ | 84 | |||
Restricted funds held in trust | 50 | 56 | |||||
Receivables (less allowances of $10 million and $9 million, respectively) | 302 | 332 | |||||
Prepaid expenses and other current assets | 77 | 72 | |||||
Total Current Assets | 477 | 544 | |||||
Property, plant and equipment, net | 3,113 | 3,024 | |||||
Restricted funds held in trust | 55 | 54 | |||||
Waste, service and energy contract intangibles, net | 257 | 263 | |||||
Other intangible assets, net | 39 | 34 | |||||
Goodwill | 312 | 302 | |||||
Other assets | 67 | 63 | |||||
Total Assets | $ | 4,320 | $ | 4,284 | |||
LIABILITIES AND EQUITY | |||||||
Current: | |||||||
Current portion of long-term debt | $ | 10 | $ | 9 | |||
Current portion of project debt | 22 | 22 | |||||
Accounts payable | 54 | 98 | |||||
Accrued expenses and other current liabilities | 292 | 289 | |||||
Total Current Liabilities | 378 | 418 | |||||
Long-term debt | 2,368 | 2,243 | |||||
Project debt | 436 | 361 | |||||
Deferred income taxes | 606 | 617 | |||||
Other liabilities | 186 | 176 | |||||
Total Liabilities | 3,974 | 3,815 | |||||
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 136 shares, outstanding 131 and 130, respectively) | 14 | 14 | |||||
Additional paid-in capital | 816 | 807 | |||||
Accumulated other comprehensive loss | (47 | ) | (62 | ) | |||
Accumulated deficit | (436 | ) | (289 | ) | |||
Treasury stock, at par | (1 | ) | (1 | ) | |||
Total Covanta Holding Corporation stockholders' equity | 346 | 469 | |||||
Total Liabilities and Equity | $ | 4,320 | $ | 4,284 | |||
Covanta Holding Corporation | Exhibit 3 |
Condensed Consolidated Statements of Cash Flow |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
(Unaudited, in millions) | |||||||
OPERATING ACTIVITIES: | |||||||
Net loss | $ | (89 | ) | $ | (66 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization expense | 104 | 103 | |||||
Impairment charges (a) | 1 | 19 | |||||
Loss on asset sales (a) | 6 | — | |||||
Loss on extinguishment of debt | 13 | — | |||||
Stock-based compensation expense | 11 | 9 | |||||
Deferred income taxes | (6 | ) | (8 | ) | |||
Other, net | 2 | 2 | |||||
Change in restricted funds held in trust | (1 | ) | 3 | ||||
Change in working capital, net of effects of acquisitions | (15 | ) | — | ||||
Net cash provided by operating activities | 26 | 62 | |||||
INVESTING ACTIVITIES: | |||||||
Purchase of property, plant and equipment | (152 | ) | (184 | ) | |||
Acquisition of business, net of cash acquired | (16 | ) | (9 | ) | |||
Property insurance proceeds | 5 | — | |||||
Other, net | (3 | ) | 2 | ||||
Net cash used in investing activities | (166 | ) | (191 | ) | |||
FINANCING ACTIVITIES: | |||||||
Proceeds from borrowings on long-term debt | 400 | — | |||||
Proceeds from borrowings on revolving credit facility | 633 | 515 | |||||
Proceeds from Dublin financing | 60 | 77 | |||||
Payments of borrowings on revolving credit facility | (501 | ) | (370 | ) | |||
Payments on long-term debt | (412 | ) | (1 | ) | |||
Payments of equipment financing capital leases | (2 | ) | (2 | ) | |||
Payments on project debt | (12 | ) | (9 | ) | |||
Payments of deferred financing costs | (9 | ) | (3 | ) | |||
Cash dividends paid to stockholders | (65 | ) | (65 | ) | |||
Change in restricted funds held in trust | 5 | 18 | |||||
Common stock repurchased | — | (20 | ) | ||||
Other, net | 4 | (1 | ) | ||||
Net cash provided by financing activities | 101 | 139 | |||||
Effect of exchange rate changes on cash and cash equivalents | 3 | 2 | |||||
Net (decrease) increase in cash and cash equivalents | (36 | ) | 12 | ||||
Cash and cash equivalents at beginning of period | 84 | 96 | |||||
Cash and cash equivalents at end of period | $ | 48 | $ | 108 | |||
(a) For additional information, see Exhibit 4 of this Press Release. | |||||||
Covanta Holding Corporation | Exhibit 4 |
Consolidated Reconciliation of Net Loss and Net Cash Provided by Operating Activities to Adjusted EBITDA |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(Unaudited, in millions) | |||||||||||||||
Net Loss Attributable to Covanta Holding Corporation | $ | (37 | ) | $ | (29 | ) | $ | (89 | ) | $ | (66 | ) | |||
Depreciation and amortization expense | 52 | 51 | 104 | 103 | |||||||||||
Interest expense, net | 35 | 34 | 71 | 68 | |||||||||||
Income tax expense (benefit) | 8 | 3 | (3 | ) | (7 | ) | |||||||||
Impairment charges (a) | 1 | 4 | 1 | 19 | |||||||||||
Loss on asset sales (b) | 2 | — | 6 | — | |||||||||||
Loss on extinguishment of debt | 13 | — | 13 | — | |||||||||||
Property insurance recoveries (c) | (3 | ) | — | (3 | ) | — | |||||||||
Other adjustments: | |||||||||||||||
Capital type expenditures at service fee operated facilities (d) | 12 | 12 | 26 | 23 | |||||||||||
Debt service billings in excess of revenue recognized | 1 | 1 | 2 | 2 | |||||||||||
Severance and reorganization costs | 1 | 1 | 1 | 2 | |||||||||||
Non-cash compensation expense | 6 | 4 | 11 | 9 | |||||||||||
Other non-cash items | 1 | — | 3 | 3 | |||||||||||
Other (e) | 1 | 1 | 1 | 2 | |||||||||||
Adjusted EBITDA | $ | 93 | $ | 82 | $ | 144 | $ | 158 | |||||||
Capital type expenditures at service fee operated facilities (d) | (12 | ) | (12 | ) | (26 | ) | (23 | ) | |||||||
Cash paid for interest, net of capitalized interest | (41 | ) | (45 | ) | (67 | ) | (67 | ) | |||||||
Cash paid for taxes, net | (2 | ) | — | (1 | ) | (4 | ) | ||||||||
Adjustment for working capital and other | (22 | ) | 2 | (24 | ) | (2 | ) | ||||||||
Net cash provided by operating activities | $ | 16 | $ | 27 | $ | 26 | $ | 62 |
Covanta Holding Corporation | Exhibit 5 |
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow |
Three Months Ended June 30, | Six Months Ended June 30, | Full Year Estimated 2017 | |||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
(Unaudited, in millions) | |||||||||||||||||
Net cash provided by operating activities | $ | 16 | $ | 27 | $ | 26 | $ | 62 | $210 - $270 | ||||||||
Less: Maintenance capital expenditures (a) | (37 | ) | (32 | ) | (64 | ) | (68 | ) | (110) - (120) | ||||||||
Free Cash Flow | $ | (21 | ) | $ | (5 | ) | $ | (38 | ) | $ | (6 | ) | $100 - $150 | ||||
Uses of Free Cash Flow | |||||||||||||||||
Investments: | |||||||||||||||||
Growth investments (b) | $ | (45 | ) | $ | (66 | ) | $ | (95 | ) | $ | (125 | ) | |||||
Property insurance proceeds | 3 | — | 5 | — | |||||||||||||
Capital expenditures associated with property insurance events | (8 | ) | — | (9 | ) | — | |||||||||||
Other investing activities, net | (2 | ) | 2 | (3 | ) | 2 | |||||||||||
Total investments | $ | (52 | ) | $ | (64 | ) | $ | (102 | ) | $ | (123 | ) | |||||
Return of capital to stockholders: | |||||||||||||||||
Cash dividends paid to stockholders | $ | (32 | ) | $ | (32 | ) | $ | (65 | ) | $ | (65 | ) | |||||
Common stock repurchased | — | — | — | (20 | ) | ||||||||||||
Total return of capital to stockholders | $ | (32 | ) | $ | (32 | ) | $ | (65 | ) | $ | (85 | ) | |||||
Capital raising activities: | |||||||||||||||||
Net proceeds from issuance of corporate debt (c) | $ | — | $ | — | $ | 393 | $ | — | |||||||||
Proceeds from Dublin financing | 27 | 40 | 60 | 77 | |||||||||||||
Change in restricted funds held in trust | (4 | ) | 3 | — | 13 | ||||||||||||
Other financing activities, net | 8 | (2 | ) | 4 | (1 | ) | |||||||||||
Payment of deferred financing costs | (1 | ) | — | (2 | ) | (3 | ) | ||||||||||
Net proceeds from capital raising activities | $ | 30 | $ | 41 | $ | 455 | $ | 86 | |||||||||
Debt repayments: | |||||||||||||||||
Net cash used for scheduled principal payments on corporate debt | $ | (1 | ) | $ | (1 | ) | $ | (2 | ) | $ | (1 | ) | |||||
Net cash used for principal payments on project debt (d) | — | — | (7 | ) | (4 | ) | |||||||||||
Voluntary prepayment of corporate debt | (410 | ) | — | (410 | ) | — | |||||||||||
Payments of equipment financing capital leases | (1 | ) | (1 | ) | (2 | ) | (2 | ) | |||||||||
Total debt repayments | $ | (412 | ) | $ | (2 | ) | $ | (421 | ) | $ | (7 | ) | |||||
Borrowing activities - Revolving credit facility, net | $ | 89 | $ | 64 | $ | 132 | $ | 145 | |||||||||
Effect of exchange rate changes on cash and cash equivalents | $ | 2 | $ | — | $ | 3 | $ | 2 | |||||||||
Net change in cash and cash equivalents | $ | (396 | ) | $ | 2 | $ | (36 | ) | $ | 12 | |||||||
(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 June 30, | Six Months Ended June 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Maintenance capital expenditures | $ | (37 | ) | $ | (32 | ) | $ | (64 | ) | $ | (68 | ) | |||||
Capital expenditures associated with construction of Dublin EfW facility | (36 | ) | (48 | ) | (56 | ) | (73 | ) | |||||||||
Capital expenditures associated with organic growth initiatives | (9 | ) | (8 | ) | (20 | ) | (22 | ) | |||||||||
Capital expenditures associated with the New York City MTS contract | — | (2 | ) | — | (3 | ) | |||||||||||
Capital expenditures associated with Essex County EfW emissions control system | — | (8 | ) | (3 | ) | (18 | ) | ||||||||||
Total capital expenditures associated with growth investments | (45 | ) | (66 | ) | (79 | ) | (116 | ) | |||||||||
Capital expenditures associated with property insurance events | (8 | ) | — | (9 | ) | — | |||||||||||
Total purchases of property, plant and equipment | $ | (90 | ) | $ | (98 | ) | $ | (152 | ) | $ | (184 | ) | |||||
(b) Growth investments include investments in growth opportunities, including organic growth initiatives, technology, business development, and other similar expenditures. | |||||||||||||||||
Capital expenditures associated with growth investments | $ | (45 | ) | $ | (66 | ) | $ | (79 | ) | $ | (116 | ) | |||||
Acquisition of business, net of cash acquired | — | — | (16 | ) | (9 | ) | |||||||||||
Total growth investments | $ | (45 | ) | $ | (66 | ) | $ | (95 | ) | $ | (125 | ) | |||||
(c) Excludes borrowings under Revolving Credit Facility. Calculated as follows: | |||||||||||||||||
Proceeds from borrowings on long-term debt | $ | — | $ | — | $ | 400 | $ | — | |||||||||
Less: Financing costs related to issuance of long-term debt | — | — | (7 | ) | — | ||||||||||||
Net proceeds from issuance of corporate debt | $ | — | $ | — | $ | 393 | $ | — | |||||||||
(d) Calculated as follows: | |||||||||||||||||
Total principal payments on project debt | $ | (3 | ) | $ | (1 | ) | $ | (12 | ) | $ | (9 | ) | |||||
Change in related restricted funds held in trust | 3 | 1 | 5 | 5 | |||||||||||||
Net cash used for principal payments on project debt | $ | — | $ | — | $ | (7 | ) | $ | (4 | ) |
Covanta Holding Corporation | Exhibit 6 |
Reconciliation of Diluted Loss Per Share to Adjusted EPS |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(Unaudited) | |||||||||||||||
Diluted Loss Per Share | $ | (0.28 | ) | $ | (0.23 | ) | $ | (0.69 | ) | $ | (0.51 | ) | |||
Reconciling Items (a) | 0.06 | 0.01 | 0.10 | 0.10 | |||||||||||
Adjusted EPS | $ | (0.22 | ) | $ | (0.22 | ) | $ | (0.59 | ) | $ | (0.41 | ) | |||
(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, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(Unaudited) (In millions, except per share amounts) | |||||||||||||||
Reconciling Items | |||||||||||||||
Impairment charges (a) | $ | 1 | $ | 4 | $ | 1 | $ | 19 | |||||||
Loss on asset sales (a) | 2 | — | 6 | — | |||||||||||
Property insurance recoveries (a) | (3 | ) | — | (3 | ) | — | |||||||||
Severance and reorganization costs | 1 | 1 | 1 | 2 | |||||||||||
Loss on extinguishment of debt | 13 | — | 13 | — | |||||||||||
Effect on income of derivative instruments not designated as hedging instruments | — | (3 | ) | — | 1 | ||||||||||
Effect of foreign exchange loss on indebtedness | (1 | ) | — | (1 | ) | (1 | ) | ||||||||
Total Reconciling Items, pre-tax | 13 | 2 | 17 | 21 | |||||||||||
Pro forma income tax impact (b) | (5 | ) | (1 | ) | (5 | ) | (8 | ) | |||||||
Grantor trust activity | — | — | 1 | — | |||||||||||
Total Reconciling Items, net of tax | $ | 8 | $ | 1 | $ | 13 | $ | 13 | |||||||
Diluted Earnings Per Share Impact | $ | 0.06 | $ | 0.01 | $ | 0.10 | $ | 0.10 | |||||||
Weighted Average Diluted Shares Outstanding | 130 | 129 | 129 | 129 | |||||||||||
(a) For additional information, see Exhibit 4 of this Press Release. | |||||||||||||||
(b) We calculate the federal and state tax impact of each item using the statutory federal tax rate and applicable blended state rate. |
Covanta Holding Corporation | Exhibit 7 | ||||||
Supplemental Information | |||||||
(Unaudited, $ in millions) | |||||||
Three Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Revenue: | |||||||
Waste and service: | |||||||
EfW waste processing | $ | 242 | $ | 238 | |||
Environmental services (a) | 30 | 25 | |||||
Municipal services (b) | 52 | 49 | |||||
Other revenue (c) | 10 | 9 | |||||
Intercompany (d) | (25 | ) | (24 | ) | |||
Total waste and service | 310 | 297 | |||||
Energy: | |||||||
EfW energy sales | 64 | 76 | |||||
EfW capacity | 11 | 10 | |||||
Total energy revenue | 75 | 86 | |||||
Recycled metals: | |||||||
Ferrous | 10 | 11 | |||||
Non-ferrous | 4 | 6 | |||||
Total recycled metals | 15 | 17 | |||||
Other revenue | 24 | 18 | |||||
Total revenue | $ | 424 | $ | 418 | |||
Operating expense: | |||||||
Plant operating expense: | |||||||
Plant maintenance | $ | 79 | $ | 82 | |||
Other plant operating expense | 240 | 232 | |||||
Total plant operating expense | 319 | 314 | |||||
Other operating expense | 2 | 19 | |||||
General and administrative | 30 | 25 | |||||
Depreciation and amortization | 52 | 51 | |||||
Impairment charges | 1 | 4 | |||||
Total operating expense | $ | 404 | $ | 413 | |||
Operating Income | $ | 20 | $ | 5 | |||
Operating Income excluding Impairment charges: | $ | 21 | $ | 9 | |||
(a) Includes the operation of material processing facilities and related services. | |||||||
(b) Consists of transfer stations and transportation component of NYC MTS contract. | |||||||
(c) Includes waste brokerage, debt service and other revenue unrelated to EfW waste processing. | |||||||
(d) Consists of elimination of intercompany transactions primarily relating to transfer stations. | |||||||
Note: Certain amounts may not total due to rounding. |
Covanta Holding Corporation | Exhibit 8 | |||||||||||||||||||||||||||||
Revenue and Operating Income Changes - Q2 2016 to Q2 2017 | ||||||||||||||||||||||||||||||
(Unaudited, $ in millions) | ||||||||||||||||||||||||||||||
Organic Growth (a) | Contract Transitions (b) | |||||||||||||||||||||||||||||
Q2 2016 | Total | % | Waste | PPA | Trans- actions (c) | Total Changes | Q2 2017 | |||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||||
Waste and service: | ||||||||||||||||||||||||||||||
EfW waste processing | $ | 238 | $ | 2 | 0.8 | % | $ | 2 | $ | — | $ | — | $ | 4 | $ | 242 | ||||||||||||||
Environmental services | 25 | 3 | 10.6 | % | — | — | 3 | 5 | 30 | |||||||||||||||||||||
Municipal services | 49 | 3 | — | — | — | 3 | 52 | |||||||||||||||||||||||
Other revenue | 9 | 1 | — | — | — | 1 | 10 | |||||||||||||||||||||||
Intercompany | (24 | ) | (1 | ) | — | — | — | (1 | ) | (25 | ) | |||||||||||||||||||
Total waste and service | 297 | 7 | 2.4 | % | 2 | — | 3 | 12 | 310 | |||||||||||||||||||||
Energy: | ||||||||||||||||||||||||||||||
EfW energy sales | 76 | (5 | ) | -6.3 | % | 1 | (8 | ) | — | (12 | ) | 64 | ||||||||||||||||||
EfW capacity | 10 | 1 | 13.9 | % | — | — | — | 1 | 11 | |||||||||||||||||||||
Total energy revenue | 86 | (3 | ) | -4.1 | % | 1 | (8 | ) | — | (11 | ) | 75 | ||||||||||||||||||
Recycled metals: | ||||||||||||||||||||||||||||||
Ferrous | 11 | — | -2.0 | % | — | — | — | — | 10 | |||||||||||||||||||||
Non-ferrous | 6 | (2 | ) | -31.2 | % | — | — | — | (2 | ) | 4 | |||||||||||||||||||
Total recycled metals | 17 | (2 | ) | -12.6 | % | — | — | — | (2 | ) | 15 | |||||||||||||||||||
Other revenue | 18 | 7 | 36.9 | % | — | — | — | 7 | 24 | |||||||||||||||||||||
Total revenue | $ | 418 | $ | 8 | 2.0 | % | $ | 3 | $ | (8 | ) | $ | 2 | $ | 5 | $ | 424 | |||||||||||||
Operating expense: | ||||||||||||||||||||||||||||||
Plant operating expense: | ||||||||||||||||||||||||||||||
Plant maintenance | $ | 82 | $ | (4 | ) | -4.5 | % | $ | — | $ | — | $ | — | $ | (4 | ) | $ | 79 | ||||||||||||
Other plant operating expense | 232 | 8 | 3.4 | % | (1 | ) | — | 1 | 8 | 240 | ||||||||||||||||||||
Total plant operating expense | 314 | 4 | 1.3 | % | (1 | ) | — | 1 | 5 | 319 | ||||||||||||||||||||
Other operating expense (income) | 19 | (17 | ) | — | — | — | (17 | ) | 2 | |||||||||||||||||||||
General and administrative | 25 | 4 | — | — | — | 4 | 30 | |||||||||||||||||||||||
Depreciation and amortization | 51 | (1 | ) | 1 | — | — | 1 | 52 | ||||||||||||||||||||||
Total operating expense (income) | $ | 409 | $ | (9 | ) | $ | 1 | $ | — | $ | 1 | $ | (7 | ) | $ | 403 | ||||||||||||||
Operating Income (Loss) excluding Impairment Charges | $ | 9 | $ | 17 | $ | 2 | $ | (8 | ) | $ | 1 | $ | 12 | $ | 21 | |||||||||||||||
(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. |
North America - Operating Metrics | Exhibit 9 | ||||||
(Unaudited) | |||||||
Three Months Ended June 30, | |||||||
2017 | 2016 | ||||||
EfW Waste | |||||||
Tons: (in millions) | |||||||
Contracted | 4.3 | 4.4 | |||||
Uncontracted | 0.5 | 0.5 | |||||
Total tons | 4.8 | 4.9 | |||||
Revenue per ton: | |||||||
Contracted | $ | 47.70 | $ | 45.87 | |||
Uncontracted | $ | 79.95 | $ | 74.94 | |||
Average revenue per ton | $ | 50.88 | $ | 48.71 | |||
EfW Energy | |||||||
Energy sales: (MWh in millions) | |||||||
Contracted | 0.6 | 0.9 | |||||
Hedged | 0.7 | 0.4 | |||||
Market | 0.2 | 0.2 | |||||
Total energy sales | 1.4 | 1.5 | |||||
Market sales by geography: | |||||||
PJM East | — | 0.1 | |||||
NEPOOL | 0.1 | — | |||||
NYISO | — | — | |||||
Other | 0.1 | 0.1 | |||||
Revenue per MWh (excludes capacity): | |||||||
Contracted | $ | 67.70 | $ | 62.06 | |||
Hedged | $ | 29.02 | $ | 37.19 | |||
Market | $ | 27.80 | $ | 26.02 | |||
Average revenue per MWh | $ | 44.83 | $ | 49.25 | |||
Metals | |||||||
Tons Recovered: (in thousands) | |||||||
Ferrous | 98 | 102 | |||||
Non-ferrous | 9 | 9 | |||||
Tons Sold: (in thousands) | |||||||
Ferrous | 68 | 77 | |||||
Non-ferrous | 5 | 9 | |||||
Revenue per ton: | |||||||
Ferrous | $ | 152 | $ | 138 | |||
Non-ferrous | $ | 892 | $ | 650 | |||
EfW plant operating expense: ($ in millions) | |||||||
Plant operating expense - gross | $ | 255 | $ | 255 | |||
Less: Client pass-through costs | (13 | ) | (9 | ) | |||
Less: REC sales - contra-expense | (2 | ) | (1 | ) | |||
Plant operating expense - reported | $ | 240 | $ | 245 | |||
Client pass-throughs as % of gross costs | 5.1 | % | 3.6 | % | |||
• | 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. |
• | seasonal or long-term fluctuations in the prices of energy, waste disposal, scrap metal and commodities, and our ability to renew or replace expiring contracts at comparable pricing; |
• | adoption of new laws and regulations in the United States and abroad, including energy laws, environmental laws, labor laws and healthcare laws; |
• | 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; |
• | our ability to utilize net operating loss carryforwards; |
• | 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 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; |
• | the scalability of our business; |
• | 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 |
• | 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, 2016 and in other filings by Covanta with the SEC. |
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