þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 95-6021257 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) | |
445 South Street, Morristown, NJ | 07960 | |
(Address of Principal Executive Office) | (Zip Code) |
Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company |
þ | o | o | o | o |
(Do not check if a smaller reporting company) |
Class | Outstanding at April 18, 2019 | |
Common Stock, $0.10 par value |
Page | ||
OTHER | ||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(Unaudited) (In millions, except per share amounts) | ||||||||
OPERATING REVENUE: | ||||||||
Waste and service revenue | $ | $ | ||||||
Energy revenue | ||||||||
Recycled metals revenue | ||||||||
Other operating revenue | ||||||||
Total operating revenue | ||||||||
OPERATING EXPENSE: | ||||||||
Plant operating expense | ||||||||
Other operating expense, net | ||||||||
General and administrative expense | ||||||||
Depreciation and amortization expense | ||||||||
Total operating expense | ||||||||
Operating (loss) income | ( | ) | ||||||
OTHER (EXPENSE) INCOME: | ||||||||
Interest expense | ( | ) | ( | ) | ||||
Net gain on sale of business and investments | ||||||||
Other income, net | ||||||||
Total other income | ||||||||
Income before income tax (expense) benefit and equity in net income from unconsolidated investments | ||||||||
Income tax (expense) benefit | ( | ) | ||||||
Equity in net income from unconsolidated investments | ||||||||
Net income | $ | $ | ||||||
Weighted Average Common Shares Outstanding: | ||||||||
Basic | ||||||||
Diluted | ||||||||
Earnings Per Share: | ||||||||
Basic | $ | $ | ||||||
Diluted | $ | $ | ||||||
Cash Dividend Declared Per Share | $ | $ |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(Unaudited, in millions) | ||||||||
Net income | $ | $ | ||||||
Foreign currency translation, net of tax expense of $0 and $1, respectively | ( | ) | ||||||
Net unrealized gain on derivative instruments, net of tax expense of $3 and $1, respectively | ||||||||
Other comprehensive (loss) income | ( | ) | ||||||
Comprehensive income | $ | $ |
March 31, 2019 | December 31, 2018 | ||||||
(Unaudited) | |||||||
(In millions, except per share amounts) | |||||||
ASSETS | |||||||
Current: | |||||||
Cash and cash equivalents | $ | $ | |||||
Restricted funds held in trust | |||||||
Receivables (less allowances of $7 and $8, respectively) | |||||||
Prepaid expenses and other current assets | |||||||
Assets held for sale | |||||||
Total Current Assets | |||||||
Property, plant and equipment, net | |||||||
Restricted funds held in trust | |||||||
Intangible assets, net | |||||||
Goodwill | |||||||
Other assets | |||||||
Total Assets | $ | $ | |||||
LIABILITIES AND EQUITY | |||||||
Current: | |||||||
Current portion of long-term debt | $ | $ | |||||
Current portion of project debt | |||||||
Accounts payable | |||||||
Accrued expenses and other current liabilities | |||||||
Total Current Liabilities | |||||||
Long-term debt | |||||||
Project debt | |||||||
Deferred income taxes | |||||||
Other liabilities | |||||||
Total Liabilities | |||||||
Commitments and Contingencies (Note 13) | |||||||
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) | |||||||
Additional paid-in capital | |||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Accumulated deficit | ( | ) | ( | ) | |||
Treasury stock, at par | ( | ) | |||||
Total equity | |||||||
Total Liabilities and Equity | $ | $ |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
(Unaudited, in millions) | |||||||
OPERATING ACTIVITIES: | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization expense | |||||||
Amortization of deferred debt financing costs | |||||||
Net gain on sale of business and investments | ( | ) | ( | ) | |||
Stock-based compensation expense | |||||||
Deferred income taxes | ( | ) | |||||
Other, net | ( | ) | |||||
Change in working capital, net of effects of acquisitions and dispositions | ( | ) | |||||
Changes in noncurrent assets and liabilities, net | |||||||
Net cash provided by operating activities | |||||||
INVESTING ACTIVITIES: | |||||||
Purchase of property, plant and equipment | ( | ) | ( | ) | |||
Acquisition of businesses, net of cash acquired | ( | ) | |||||
Proceeds from the sale of assets, net of restricted cash | |||||||
Property insurance proceeds | |||||||
Payment of indemnification claim related to sale of asset | ( | ) | |||||
Investment in equity affiliate | ( | ) | |||||
Net cash (used in) provided by investing activities | ( | ) | |||||
FINANCING ACTIVITIES: | |||||||
Proceeds from borrowings on revolving credit facility | |||||||
Payments on long-term debt | ( | ) | ( | ) | |||
Payments on revolving credit facility | ( | ) | ( | ) | |||
Payments on equipment financing capital leases | ( | ) | ( | ) | |||
Payments on project debt | ( | ) | ( | ) | |||
Cash dividends paid to stockholders | ( | ) | ( | ) | |||
Payment of insurance premium financing | ( | ) | ( | ) | |||
Other, net | ( | ) | |||||
Net cash provided by (used in) financing activities | ( | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | |||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | ( | ) | |||||
Cash, cash equivalents and restricted cash at beginning of period | |||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||
Reconciliation of cash, cash equivalents and restricted cash: | |||||||
Cash and cash equivalents | $ | $ | |||||
Restricted funds held in trust- short term | |||||||
Restricted funds held in trust- long term | |||||||
Total cash, cash equivalents and restricted cash | $ | $ |
Covanta Holding Corporation Stockholders’ Equity | Total | |||||||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Earnings (Deficit) | Treasury Stock | ||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||
Balance as of December 31, 2017 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
Cumulative effect change in accounting for revenue recognition | — | — | — | — | — | |||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | — | ||||||||||||||||||||||||
Dividend declared | — | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||||
Shares repurchased for tax withholdings for vested stock awards | — | — | ( | ) | — | — | — | ( | ) | |||||||||||||||||||||
Other | — | — | — | ( | ) | — | — | |||||||||||||||||||||||
Comprehensive income, net of income taxes | — | — | — | — | ||||||||||||||||||||||||||
Balance as of March 31, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
Balance as of December 31, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
Cumulative effect change in accounting for ASU 2018-02 (see Note1) | — | — | — | ( | ) | — | — | |||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | — | ||||||||||||||||||||||||
Dividend declared | — | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||||
Shares repurchased for tax withholdings for vested stock awards | — | — | ( | ) | — | — | — | — | ( | ) | ||||||||||||||||||||
Other | — | — | — | — | — | — | ||||||||||||||||||||||||
Comprehensive (loss) income, net of income taxes | — | — | — | ( | ) | — | — | |||||||||||||||||||||||
Balance as of March 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
1. | Continue to apply the ASC 840 guidance, including the disclosure requirements, in the comparative periods presented in the year of adoption, the hindsight practical expedient; |
2. | Continue applying our current policy for accounting for land easements that existed as of, or expired before, January 1, 2019; |
3. | Not separate non-lease components from lease components and instead to account for each separate lease component and the non-lease components associated with that lease component as a single lease component. We elected to apply this practical expedient to all underlying asset classes; |
4. | Not apply the recognition requirements in ASC 842 to short-term leases; and |
5. | Not record a right of use asset or right of use liability for leases with an asset or liability balance that would be considered immaterial. |
Standard | Description | Effective Date | Effect on the financial statements or other significant matters |
ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments | The standard amends guidance on the impairment of financial instruments. The ASU estimates credit losses based on expected losses and provides for a simplified accounting model for purchased financial assets with credit deterioration. The standard requires a modified retrospective basis adoption through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. | First quarter of 2020, early adoption is permitted. | We are currently evaluating the impact this guidance will have on our consolidated financial statements. |
Three Months Ended March 31, | ||||||
2019 | 2018 | |||||
Basic weighted average common shares outstanding | ||||||
Dilutive effect of stock options, restricted stock and restricted stock units | ||||||
Diluted weighted average common shares outstanding |
Foreign Currency Translation | Pension and Other Postretirement Plan Unrecognized Net Gain | Net Unrealized (Loss) Gain On Derivatives | Total | ||||||||||||
Balance at December 31, 2017 | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||
Other comprehensive income before reclassifications | |||||||||||||||
Amounts reclassified from accumulated other comprehensive (loss) income | |||||||||||||||
Net current period comprehensive income | |||||||||||||||
Balance at March 31, 2018 | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||
Balance at December 31, 2018 | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||
Cumulative effect change in accounting for ASU 2018-02 (see Note1) | |||||||||||||||
Balance at January 1, 2019 | ( | ) | ( | ) | ( | ) | |||||||||
Other comprehensive loss | ( | ) | ( | ) | |||||||||||
Net current period comprehensive loss | ( | ) | ( | ) | |||||||||||
Balance at March 31, 2019 | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) |
Amount Reclassified from Accumulated Other Comprehensive Income | ||||||
Accumulated Other Comprehensive Income Component | Three Months Ended March 31, 2018 | Affected Line Item in the Condensed Consolidated Statement of Operations | ||||
Foreign currency translation | $ | Net gain on sale of business and investments (1) | ||||
Interest rate swap | Net gain on sale of business and investments (1) | |||||
Total before tax | ||||||
Tax benefit | ||||||
Total reclassifications | $ | Net of tax |
1. | The performance obligation is part of a contract that has an original expected duration of one year or less; |
2. | Revenue is recognized from the satisfaction of the performance obligations in the amount billable to our customer that corresponds directly with the value to the customer of our performance completed to date (i.e. “right-to-invoice” practical expedient); and/or |
3. | The variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct service or a series of distinct services that are substantially the same and that have the same pattern of transfer to our customer (i.e. “series practical expedient”). |
Total | |||
Total remaining performance obligation | $ | ||
Percentage expected to be recognized: | |||
Remainder of 2019 | % | ||
2020 | % |
March 31, 2019 | December 31, 2018 | |||||||
Unbilled receivables | $ | $ | ||||||
Deferred revenue | $ | $ |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Share based compensation expense | $ | $ |
As of March 31, 2019 | ||||||
Unrecognized stock- based compensation | Weighted-average years to be recognized | |||||
Restricted stock awards | $ | |||||
Restricted stock units | $ |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Pass through costs | $ | $ |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Insurance gains for property and clean-up costs, net of impairment charges | $ | $ | ||||||
Insurance gains for business interruption costs, net of costs incurred | $ | $ |
• | For marketable securities, the carrying value of these amounts is a reasonable estimate of their fair value. |
• | Fair values for long-term debt and project debt are determined using quoted market prices (Level 1). |
• | The fair value of our floating to fixed rate interest rate swaps is determined using discounted cash flow valuation methodologies that apply the appropriate forward floating rate curve observable in the market to the contractual terms of our swap agreements. The fair value of the interest rate swaps is adjusted to reflect counterparty risk of non-performance, and is based on the counterparty’s credit spread in the credit derivatives market. |
• | The fair values of our energy hedges were determined using the spread between our fixed price and the forward curve information available within the market. |
Financial Instruments Recorded at Fair Value on a Recurring Basis: | Fair Value Measurement Level | March 31, 2019 | December 31, 2018 | |||||||
Assets: | ||||||||||
Investments — mutual and bond funds (1) | 1 | $ | $ | |||||||
Total assets | $ | $ | ||||||||
Liabilities: | ||||||||||
Derivative liability — energy hedges (2) | 2 | $ | $ | |||||||
Total liabilities | $ | $ |
(1) | Included in Other assets in the condensed consolidated balance sheets. |
(2) | The short-term balance is included in Accrued expenses and other current liabilities and the long-term balance is included in Other liabilities in the condensed consolidated balance sheets. |
As of March 31, 2019 | As of December 31, 2018 | |||||||||||||||
Financial Instruments Recorded at Carrying Amount: | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||
Liabilities: | ||||||||||||||||
Long-term debt | $ | $ | $ | $ | ||||||||||||
Project debt | $ | $ | $ | $ |
Calendar Year | Hedged MWh | |
2019 | ||
2020 | ||
Total |
Average Rate (1) | March 31, 2019 | December 31, 2018 | |||||||
LONG-TERM DEBT: | |||||||||
Revolving credit facility | $ | $ | |||||||
Term loan, net | 391 | 394 | |||||||
Credit Facilities subtotal | |||||||||
Senior Notes, net of deferred financing costs | |||||||||
Tax-Exempt Bonds, net of deferred financing costs | |||||||||
Equipment financing capital leases | |||||||||
Total long-term debt | |||||||||
Less: Current portion | ( | ) | ( | ) | |||||
Noncurrent long-term debt | $ | $ | |||||||
PROJECT DEBT: | |||||||||
Total project debt, net of deferred financing costs and unamortized debt premium | $ | $ | |||||||
Less: Current portion | ( | ) | ( | ) | |||||
Noncurrent project debt | $ | $ | |||||||
TOTAL CONSOLIDATED DEBT | $ | $ | |||||||
Less: Current debt | ( | ) | ( | ) | |||||
TOTAL NONCURRENT CONSOLIDATED DEBT | $ | $ |
Total Facility Commitment | Expiring | Direct Borrowings | Outstanding Letters of Credit | Unutilized Capacity | |||||||||||||
Revolving Credit Facility | $ | 2023 | $ | $ | $ |
Three Months Ended March 31, 2019 | ||||
Finance lease: | ||||
Amortization of assets, included in Depreciation and amortization expense | $ | |||
Interest on lease liabilities, included in Interest expense | ||||
Operating lease: | ||||
Amortization of assets, included in Total operating expense | ||||
Interest on lease liabilities, included in Total operating expense | ||||
Total net lease cost | $ |
March 31, 2019 | ||||
Operating leases: | ||||
Operating lease ROU assets, included in Other assets | $ | |||
Current operating lease liabilities, included in Accrued expenses and other current liabilities | $ | |||
Noncurrent operating lease liabilities, included in Other liabilities | ||||
Total operating lease liabilities | $ | |||
Finance leases: | ||||
Property and equipment, at cost | $ | |||
Accumulated amortization | ( | ) | ||
Property and equipment, net | $ | |||
Current obligations of finance leases, included in Current portion of long-term debt | $ | |||
Finance leases, net of current obligations, included in Long-term debt | ||||
Total finance lease liabilities | $ |
Three Months Ended March 31, 2019 | ||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flows related to operating leases | $ | ( | ) | |
Financing cash flows related to finance leases | $ | ( | ) | |
Weighted average remaining lease term (in years): | ||||
Operating leases | ||||
Finance leases | ||||
Weighted average discount rate: | ||||
Operating leases | % | |||
Finance leases | % |
March 31, 2019 | |||||||
Operating Leases | Finance Leases | ||||||
Remainder of 2019 | $ | $ | |||||
2020 | |||||||
2021 | |||||||
2022 | |||||||
2023 | |||||||
2024 and thereafter | |||||||
Total lease payments | |||||||
Less: Amounts representing interest | ( | ) | ( | ) | |||
Total lease obligations | $ | $ |
Letters of credit issued under the Revolving Credit Facility | $ | |||
Letters of credit - other | 40 | |||
Surety bonds | ||||
Total other commitments — net | $ |
March 31, 2019 | March 31, 2018 | |||||||
Consumer Price Index (1) | 1.9 | % | 2.4 | % | ||||
PJM Pricing (Electricity) (2) | $ | 30.53 | $ | 53.85 | ||||
NE ISO Pricing (Electricity) (3) | $ | 43.48 | $ | 54.71 | ||||
Henry Hub Pricing (Natural Gas) (4) | $ | 2.92 | $ | 3.08 | ||||
#1 HMS Pricing (Ferrous Metals) (5) | $ | 306 | $ | 321 | ||||
Old Sheet & Old Cast (Non-Ferrous Metals) (6) | $ | 0.45 | $ | 0.61 |
(1) | 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. |
(2) | Average price per MWh for Q1 2019 and Q1 2018. Pricing for the PJM PSEG Zone is provided by the PJM ISO. |
(3) | Average price per MWh for Q1 2019 and Q1 2018. Pricing for the Mass Hub Zone is provided by the NE ISO. |
(4) | Average price per MMBtu for Q1 2019 and Q1 2018. The Henry Hub Pricing data is provided by the Natural Gas Weekly Update, U.S. Energy Information Administration. |
(5) | Average price per gross ton for Q1 2019 and Q1 2018. The #1 Heavy Melt Steel ("HMS") composite index ($/gross ton) price as published by American Metal Market. |
(6) | Average price per pound for Q1 2019 and Q1 2018. Calculated using the high price of Old Cast Aluminum Scrap ($/lb) as published by American Metal Market. |
• | $34 million in dividends declared to stockholders; and |
• | $17 million for growth investments, including $11 million to service a second marine transfer station under our New York City transportation and disposal contract and $4 million for various organic growth investments, which included metals recovery projects, ash processing technology and investments related to our profiled waste and environmental services businesses. |
• | In March 2019, we reached financial close on the Rookery South Energy Recovery Facility (“Rookery”), a 545,000 metric ton-per-year, 60 megawatt EfW facility under construction in Bedfordshire, England. Rookery is our second investment in the UK with our strategic partner, Green Investment Group Limited (“GIG”). For additional information see Item 1. Financial Statements - Note 3. New Business and Asset Management - Green Investment Group Limited (“GIG”) Joint Venture); |
• | As part of our ongoing asset rationalization and portfolio optimization efforts, we signed an agreement to divest our Pittsfield and Springfield EfW facilities. We expect the transaction will close in the second quarter of 2019. For additional information see Item 1. Financial Statements - Note 3. New Business and Asset Management- Sale of Springfield and Pittsfield EfW facilities; and |
• | During March 2019, we commenced operations at the East 91st Street Marine Transfer Station ("MTS"). The MTS is the second in a pair of marine transfer stations under a 20-year waste transport and disposal agreement between Covanta and New York City's Department of Sanitation. |
• | “Organic growth”: reflects the performance of the business on a comparable period-over-period basis, excluding the impacts of transactions and contract transitions. |
• | “Transactions”: includes the impacts of acquisitions, divestitures, and the addition or loss of operating contracts. |
• | Contract “transitions”: includes the impact of the expiration of: (a) long-term major waste and service contracts, most typically representing the transition to a new contract structure, and (b) long-term energy contracts. |
Three Months Ended March 31, | Variance Increase (Decrease) | ||||||||||
2019 | 2018 | 2019 vs 2018 | |||||||||
(In millions) | |||||||||||
OPERATING REVENUE: | |||||||||||
Waste and service revenue | $ | 327 | $ | 312 | $ | 15 | |||||
Energy revenue | 94 | 100 | (6 | ) | |||||||
Recycled metals revenue | 21 | 24 | (3 | ) | |||||||
Other operating revenue | 11 | 22 | (11 | ) | |||||||
Total operating revenue | 453 | 458 | (5 | ) | |||||||
OPERATING EXPENSE: | |||||||||||
Plant operating expense | 359 | 345 | 14 | ||||||||
Other operating expense, net | 17 | 8 | 9 | ||||||||
General and administrative expense | 30 | 31 | (1 | ) | |||||||
Depreciation and amortization expense | 55 | 54 | 1 | ||||||||
Total operating expense | 461 | 438 | 23 | ||||||||
Operating (loss) income | $ | (8 | ) | $ | 20 | $ | (28 | ) |
In millions: | Three Months Ended March 31, | Variance Increase (Decrease) | ||||||||||
2019 | 2018 | Three Months | ||||||||||
EfW tip fees | $ | 149 | $ | 153 | $ | (4 | ) | |||||
EfW service fees | 117 | 99 | 18 | |||||||||
Environmental services | 32 | 32 | — | |||||||||
Municipal services | 48 | 45 | 3 | |||||||||
Other revenue | 7 | 8 | (1 | ) | ||||||||
Intercompany | (26 | ) | (26 | ) | — | |||||||
Total waste and service revenue | $ | 327 | $ | 312 | $ | 15 |
EfW facilities - Tons (1) (in millions): | Three Months Ended March 31, | Variance Increase (Decrease) | |||||||
2019 | 2018 | Three Months | |||||||
Tip fee - contracted | 2.04 | 2.08 | (0.04 | ) | |||||
Tip fee - uncontracted | 0.54 | 0.65 | (0.11 | ) | |||||
Service fee | 2.62 | 2.11 | 0.51 | ||||||
Total tons | 5.20 | 4.84 | 0.36 |
In millions: (1) | Three Months Ended March 31, | Variance Increase (Decrease) | ||||||||||
2019 | 2018 | Three Months | ||||||||||
Energy Sales | $ | 81 | $ | 87 | $ | (6 | ) | |||||
Capacity | 13 | 13 | — | |||||||||
Total energy | $ | 94 | $ | 100 | $ | (6 | ) |
In millions: | Three Months Ended March 31, | Variance Increase (Decrease) | ||||||||||||||||||||||||
2019 | 2018 | 2019 vs 2018 | ||||||||||||||||||||||||
Revenue (1) | Volume (1) (2) | % of Total Volume | Revenue (1) | Volume (1) (2) | % of Total Volume | Revenue | Volume | |||||||||||||||||||
At Market | $ | 9 | 0.3 | 19 | % | $ | 15 | 0.3 | 21 | % | $ | (6 | ) | — | ||||||||||||
Contracted | 45 | 0.5 | 30 | % | 47 | 0.5 | 32 | % | (2 | ) | — | |||||||||||||||
Hedged | 40 | 0.8 | 51 | % | 38 | 0.8 | 47 | % | 2 | — | ||||||||||||||||
Total EfW | $ | 94 | 1.6 | 100 | % | $ | 100 | 1.6 | 100 | % | $ | (6 | ) | — |
Three Months Ended March 31, | |||||||||||||||||||
Metal Revenue (in millions) | Tons Recovered (in thousands) | Tons Sold (in thousands) (1) | |||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||
Ferrous Metal | $ | 11 | $ | 15 | 96 | 102 | 84 | 77 | |||||||||||
Non-Ferrous Metal | 9 | 9 | 13 | 11 | 8 | 7 | |||||||||||||
Total | $ | 21 | $ | 24 |
In millions: | Three Months Ended March 31, | Variance Increase (Decrease) | ||||||||||
2019 | 2018 | Three Months | ||||||||||
Plant maintenance (1) | $ | 95 | $ | 90 | $ | 5 | ||||||
All other | 264 | 255 | 9 | |||||||||
Plant operating expense | $ | 359 | $ | 345 | $ | 14 |
Three Months Ended March 31, | Variance (Increase) Decrease | ||||||||||
2019 | 2018 | Three Months | |||||||||
(In millions) | |||||||||||
Interest expense | $ | (36 | ) | $ | (38 | ) | $ | 2 | |||
Net gain on sale of business and investments | 50 | 210 | (160 | ) | |||||||
Other income, net | 1 | — | 1 | ||||||||
Total other income | $ | 15 | $ | 172 | $ | (157 | ) |
Three Months Ended March 31, | Variance Increase (Decrease) | ||||||||||
2019 | 2018 | Three Months | |||||||||
(In millions, except percentages) | |||||||||||
Income tax (expense) benefit | $ | (2 | ) | $ | 9 | $ | (11 | ) | |||
Effective income tax rate | 31 | % | (5 | )% | N/A |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(Unaudited) | ||||||||
Net income | $ | 5 | $ | 201 | ||||
Depreciation and amortization expense | 55 | 54 | ||||||
Interest expense | 36 | 38 | ||||||
Income tax expense (benefit) | 2 | (9 | ) | |||||
Net gain on sale of businesses and investments (a) | (50 | ) | (210 | ) | ||||
Property insurance recoveries, net | — | (7 | ) | |||||
Capital type expenditures at client owned facilities (b) | 13 | 12 | ||||||
Debt service billings in excess of revenue recognized | — | 1 | ||||||
Business development and transaction costs | — | 2 | ||||||
Severance and reorganization costs | 3 | 2 | ||||||
Stock-based compensation expense | 8 | 9 | ||||||
Adjustments to reflect Adjusted EBITDA from unconsolidated investments | 6 | 4 | ||||||
Other (c) | 6 | 3 | ||||||
Adjusted EBITDA | $ | 84 | $ | 100 |
(a) | During the three months ended March 31, 2019, we recorded a $57 million gain related to the Rookery South Energy Recovery Facility development project and a $9 million loss related to the pending divestiture of our Springfield and Pittsfield EfW facilities. |
(b) | 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. |
(c) | Includes certain other items that are added back under the definition of Adjusted EBITDA in Covanta Energy, LLC's credit agreement. |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Net cash provided by operating activities | $ | 37 | $ | 3 | ||||
Capital type expenditures at service fee operated facilities (a) | 13 | 12 | ||||||
Cash paid for interest, net of capitalized interest | 47 | 33 | ||||||
Cash paid for taxes, net | 1 | — | ||||||
Adjustments to reflect Adjusted EBITDA from unconsolidated investments | 6 | 4 | ||||||
Adjustment for working capital and other | (20 | ) | 48 | |||||
Adjusted EBITDA | $ | 84 | $ | 100 |
Total Project Debt | Percentage Ownership | Proportionate Unconsolidated Project Debt | Project Stage | |||||||||
Dublin EfW (Ireland) (1) | $ | 455 | 50% | $ | 228 | Operational | ||||||
Earls Gate (UK) (2) | — | 25% | — | Under construction | ||||||||
Rookery (UK) (3) | — | 40% | — | Under construction | ||||||||
Total | $ | 455 | $ | 228 |
(1) | We have a 50% indirect ownership of Dublin EfW, through our 50/50 joint venture with GIG, Covanta Europe Assets Ltd. |
(2) | We have a 25% indirect ownership of Earls Gate, through our 50/50 joint venture with GIG, Covanta Green Jersey Assets Ltd., which owns 50% of Earls Gate. The total estimated project cost is £210 million; £147 million is financed through non-recourse project-based debt, which was undrawn as of March 31, 2019. |
(3) | We have a 40% indirect ownership of Rookery through our 50/50 joint venture with GIG, Covanta Green UK Ltd. The total estimated project cost is £457 million; £310 million is financed through non-recourse project-based debt, which was undrawn as of March 31, 2019. |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(Unaudited) | ||||||||
Net cash provided by operating activities | $ | 37 | $ | 3 | ||||
Add: Changes in restricted funds - operating (a) | — | (10 | ) | |||||
Less: Maintenance capital expenditures (b) | (31 | ) | (45 | ) | ||||
Free Cash Flow | $ | 6 | $ | (52 | ) | |||
(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 March 31, | ||||||||
2019 | 2018 | |||||||
Maintenance capital expenditures | $ | (31 | ) | $ | (45 | ) | ||
Net maintenance capital expenditures paid but incurred in prior periods | (6 | ) | (7 | ) | ||||
Capital expenditures associated with construction of Dublin EfW facility | — | (17 | ) | |||||
Capital expenditures associated with the New York City MTS contract | (11 | ) | — | |||||
Capital expenditures associated with organic growth initiatives | (4 | ) | (8 | ) | ||||
Total capital expenditures associated with growth investments (c) | (15 | ) | (25 | ) | ||||
Capital expenditures associated with property insurance events | — | (4 | ) | |||||
Total purchases of property, plant and equipment | $ | (52 | ) | $ | (81 | ) | ||
(c) Growth investments include investments in growth opportunities, including organic growth initiatives, technology, business development, and other similar expenditures. | ||||||||
Capital expenditures associated with growth investments | $ | (15 | ) | $ | (25 | ) | ||
UK business development projects | (1 | ) | — | |||||
Investment in equity affiliate | (3 | ) | — | |||||
Asset and business acquisitions, net of cash acquired | 2 | (5 | ) | |||||
Total growth investments | $ | (17 | ) | $ | (30 | ) |
Exhibit Number | Description | |
Exhibit 101.INS: | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
Exhibit 101.SCH: | XBRL Taxonomy Extension Schema | |
Exhibit 101.CAL: | XBRL Taxonomy Extension Calculation Linkbase | |
Exhibit 101.DEF: | XBRL Taxonomy Extension Definition Linkbase | |
Exhibit 101.LAB: | XBRL Taxonomy Extension Labels Linkbase | |
Exhibit 101.PRE: | XBRL Taxonomy Extension Presentation Linkbase | |
COVANTA HOLDING CORPORATION (Registrant) | ||
By: | /S/ BRADFORD J. HELGESON | |
Bradford J. Helgeson | ||
Executive Vice President, Chief Financial Officer | ||
By: | /S/ MANPREET S. GREWAL | |
Manpreet S. Grewal | ||
Vice President and Chief Accounting Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Covanta Holding Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/S/ STEPHEN J. JONES | |
Stephen J. Jones | |
President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Covanta Holding Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/S/ BRADFORD J. HELGESON | |
Bradford J. Helgeson | |
Executive Vice President and Chief Financial Officer |
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Covanta Holding Corporation; |
/S/ STEPHEN J. JONES | |
Stephen J. Jones | |
President and Chief Executive Officer | |
/S/ BRADFORD J. HELGESON | |
Bradford J. Helgeson | |
Executive Vice President and Chief Financial Officer | |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Apr. 18, 2019 |
|
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | CVA | |
Entity Registrant Name | COVANTA HOLDING CORP | |
Entity Central Index Key | 0000225648 | |
Current Fiscal Year End Date | --12-31 | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 131,435,608 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 5 | $ 201 |
Foreign currency translation, net of tax expense of $0 and $1, respectively | (5) | 12 |
Net unrealized gain on derivative instruments, net of tax expense of $3 and $1, respectively | 0 | 32 |
Other comprehensive (loss) income | (5) | 44 |
Comprehensive income | $ 0 | $ 245 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - Parenthetical - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax | $ 0 | $ 1 |
Unrealized gain (loss) on derivative instruments, tax | $ 3 | $ 1 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Millions, $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Receivables, allowances | $ 7 | $ 8 |
Preferred stock, par value | $ 0.10 | $ 0.10 |
Preferred stock, shares authorized | 10 | 10 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.10 | $ 0.10 |
Common stock, shares authorized | 250 | 250 |
Common stock, shares issued | 136 | 136 |
Common stock, shares outstanding | 131 | 131 |
ORGANIZATION AND BASIS OF PRESENTATION (Notes) |
3 Months Ended | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||
ORGANIZATION AND BASIS OF PRESENTATION | The terms “we,” “our,” “ours,” “us”, "Covanta" and “Company” refer to Covanta Holding Corporation and its subsidiaries; the term “Covanta Energy” refers to our subsidiary Covanta Energy, LLC and its subsidiaries. Organization Covanta is one of the world’s largest owners and operators of infrastructure for the conversion of waste to energy (known as “energy-from-waste” or “EfW”), and also owns and operates related waste transport, processing and disposal assets. EfW serves as both a sustainable waste management solution that is environmentally superior to landfilling and as a source of clean energy that reduces overall greenhouse gas emissions and is considered renewable under the laws of many states and under federal law. Our facilities are critical infrastructure assets that allow our customers, which are principally municipal entities, to provide an essential public service. Our EfW facilities earn revenue from both the disposal of waste and the generation of electricity and/or steam as well as from the sale of metal recovered during the EfW process. We process approximately 22 million tons of solid waste annually. We operate and/or have ownership positions in 43 energy-from-waste facilities, which are primarily located in North America and Ireland. In total, these assets produce approximately 10 million megawatt hours (“MWh”) of baseload electricity annually. We also operate a waste management infrastructure that is complementary to our core EfW business. In addition, we offer a variety of sustainable waste management solutions in response to customer demand, including industrial, consumer products and healthcare waste handling, treatment and assured destruction, industrial wastewater treatment and disposal, product depackaging and recycling, on-site cleaning services, and transportation services. Together with our processing of non-hazardous "profiled waste" for purposes of assured destruction or sustainability goals in our EfW facilities, we offer these services under our Covanta Environmental Solutions brand. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes thereto required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for fair presentation have been included in our condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated. Operating results for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019. The condensed consolidated balance sheet at December 31, 2018, was derived from audited annual consolidated financial statements, but does not contain all of the notes thereto from the annual consolidated financial statements. This Form 10-Q should be read in conjunction with the Audited Consolidated Financial Statements and accompanying Notes in our Annual Report on Form 10-K for the year ended December 31, 2018 (“Form 10-K”). Accounting Pronouncements Recently Adopted In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-02 Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this update allow a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings for adjustments to the tax effect of items in AOCI, that were originally recognized in other comprehensive income, related to the new statutory rate prescribed in the Tax Cuts and Jobs Act enacted on December 22, 2017, which reduced the US federal corporate tax rate from 35% to 21%. The amendments in this update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the US federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. Effective January 1, 2019, we adopted this standard and recorded a reclassification of AOCI to accumulated deficit totaling $2 million. In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842) which amended guidance for lease arrangements to increase transparency and comparability by providing additional information to users of financial statements regarding an entity's leasing activities. Subsequent to the issuance of Topic 842, the FASB clarified the guidance through several ASUs; hereinafter the collection of lease guidance is referred to as Accounting Standards Codification (“ASC") 842. The revised guidance seeks to achieve this objective by requiring reporting entities to recognize lease assets and lease liabilities on the balance sheet for substantially all lease arrangements. The standard requires a modified retrospective basis adoption. On January 1, 2019, we adopted ASC 842 using the modified retrospective method and recognized a right of use ("ROU") asset and liability in our consolidated condensed balance sheet in the amount of $57 million and $62 million, respectively, related to our operating leases where we are the lessee. There was no effect on our operating leases as lessor. Results for the three months ended March 31, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported in accordance with the historic accounting guidance under ASC Topic 840, Leases. As part of the adoption, we elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed us to:
|
RECENT ACCOUNTING PRONOUNCEMENTS (Notes) |
3 Months Ended | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||
Notes To Financial Statements [Abstract] | |||||||||||||||||
RECENT ACCOUNTING PRONOUNCEMENTS | The following table summarizes recent ASU's issued by the FASB that could have a material impact on our consolidated financial statements.
|
NEW BUSINESS AND ASSET MANAGMENT NEW BUSINESS AND ASSET MANAGMENT |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Business Combinations [Abstract] | |
NEW BUSINESS AND ASSET MANAGEMENT | Green Investment Group Limited (“GIG”) Joint Venture Rookery EfW In March 2019, we reached financial close on the Rookery South Energy Recovery Facility (“Rookery”), a 1,600 metric ton-per-day, 60 megawatt EfW facility under construction in Bedfordshire, England. Rookery is our second investment in the UK with our strategic partner, Green Investment Group Limited (“GIG”). Through a 50/50 jointly-owned and governed entity (“Covanta Green”), we and GIG will own an 80% interest in the project. We co-developed the project with Veolia ES (UK) Limited (“Veolia”), who will own the remaining 20%. We will provide technical oversight during construction and will provide operations and maintenance (“O&M”) services for the facility, and Veolia will be responsible for supplying at least 70% of the waste processing capacity. The facility is expected to commence commercial operations in 2022. In connection with the transaction, we received $44 million (£34 million) of total consideration for the value of our development costs incurred to date and related fees, and for GIG’s right to invest 40% in the project (50% investment in Covanta Green). For the three months ended March 31, 2019, as a result of this consideration and a step-up in the fair value of our retained equity investment, we recorded a gain of $57 million in Net gain on sale of business and investments in our condensed consolidated statement of operations. As of March 31, 2019, $22 million of the consideration received remained in Covanta Green, and as such this amount is included in Prepaid expenses and other current assets and our $22 million equity method investment is included in Other assets in our condensed consolidated balance sheet. The fair value of our retained equity investment in Covanta Green was determined by the fair value of the consideration received from GIG for the right to invest 40% in the project. Dublin EfW In February 2018, we completed our first investment with GIG, Covanta Europe Assets Limited, which is structured as a 50/50 jointly-owned and governed entity between Covanta and GIG. As an initial step, we contributed 100% of our Dublin EfW project ("Dublin EfW") to the entity, and GIG acquired a 50% ownership in the entity. We retained a 50% equity interest in the entity and retained our role as O&M service provider for the facility. We received gross proceeds of $167 million ($98 million, net of existing restricted cash), which we used to repay borrowings under our Revolving Credit Facility. The sale resulted in our loss of a controlling interest in Dublin EfW, which required the entity to be deconsolidated from our financial statements as of the sale date. For the three months ended March 31, 2018, we recorded a gain on the loss of a controlling interest of the business of $204 million which is included in "Net gain on sale of assets and investments" on our condensed consolidated statement of operations. The gain resulted from the excess of proceeds received plus the fair value of our non-controlling interest in Dublin EfW over our carrying value. Our 50% equity interest is accounted for under the equity method of accounting. As of March 31, 2019 and December 31, 2018, our equity investment of $146 million and $149 million, respectively, is included in "Other assets" on our condensed consolidated balance sheet. The fair value of our investment was determined by the fair value of the consideration received for the 50% acquired by GIG. There were no basis differences between the fair value of the acquired investment and the carrying amounts of the underlying net assets as they were fair valued contemporaneously as of the sale date. Divestiture of Springfield and Pittsfield EfW facilities |
EARNINGS PER SHARE ("EPS") AND EQUITY (Notes) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE AND EQUITY | Earnings Per Share We calculate basic Earnings Per Share ("EPS") using net earnings for the period and the weighted average number of outstanding shares of our common stock, par value $0.10 per share, during the period. Diluted earnings per share computations, as calculated under the treasury stock method, include the weighted average number of shares of additional outstanding common stock issuable for stock options, restricted stock awards and restricted stock units whether or not currently exercisable. Diluted earnings per share does not include securities if their effect was anti-dilutive. Basic and diluted weighted average shares outstanding were as follows (in millions):
Equity Accumulated Other Comprehensive (Loss) Income ("AOCI") The changes in accumulated other comprehensive loss are as follows (in millions):
|
REVENUES (Notes) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Disaggregation of revenue A disaggregation of revenue from contracts with customers is presented in our condensed consolidated statements of operations for the three months ended March 31, 2019 and 2018. We have one reportable segment which comprises our entire operating business. Performance Obligations and Transaction Price Allocated to Remaining Performance Obligations ASC 606 requires disclosure of the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of March 31, 2019. The guidance provides certain conditions (identified as "practical expedients") that limit this disclosure requirement. We have contracts that meet the following practical expedients provided by ASC 606:
The following table shows our remaining performance obligations which primarily consists of the fixed consideration contained in our contracts as of March 31, 2019 (dollars in millions):
Contract Balances The following table reflects the balance in our contract assets, which we classify as “Accounts receivable unbilled” and present net in Accounts receivable, and our contract liabilities, which we classify as deferred revenue and present in “Accrued expenses and other current liabilities” in our condensed consolidated balance sheet (in millions):
|
STOCK-BASED AWARD PLANS (Notes) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED AWARD PLANS | During the three months ended March 31, 2019, we awarded certain employees grants of 1,048,315 restricted stock units ("RSUs"). The RSUs will be expensed over the requisite service period. The terms of the RSUs include vesting provisions based solely on continued service. If the service criteria are satisfied, the RSUs will generally vest during March of 2020, 2021, and 2022. During the three months ended March 31, 2019, we awarded certain employees 395,320 performance based RSUs of which 50% will vest based upon our cumulative Free Cash Flow per share target over a three year performance period and the other 50% will vest based on a total shareholder return ("TSR") against metrics consistent with market practices and our peers. During the three months ended March 31, 2019, we awarded 5,777 RSUs, for quarterly director fees for certain of our directors who elected to receive RSUs in lieu of cash payments. We determined the service vesting condition of these restricted stock awards and RSU's to be non-substantive and, in accordance with accounting principles for stock compensation, recorded the entire fair value of the awards as compensation expense on the grant date. During the three months ended March 31, 2019, we withheld 452,025 shares of our common stock in connection with tax withholdings for vested stock awards. Compensation expense related to our stock-based awards was as follows (in millions):
Unrecognized stock-based compensation expense and weighted-average years to be recognized are as follows (in millions, except for weighted average years):
|
SUPPLEMENTARY INFORMATION (Notes) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUPPLEMENTARY INFORMATION | Pass through costs Pass through costs are costs for which we receive a direct contractually committed reimbursement from the public sector client that sponsors an EfW project. These costs generally include utility charges, insurance premiums, ash residue transportation and disposal, and certain chemical costs. These costs are recorded net of public sector client reimbursements as a reduction to "Plant operating expense" in our condensed consolidated statement of operations. Pass through costs were as follows (in millions):
Other operating expenses, net Insurance Recoveries Fairfax County Energy-from-Waste Facility In February 2017, our Fairfax County energy-from-waste facility experienced a fire in the front-end receiving portion of the facility. During the first quarter of 2017, we completed our evaluation of the impact of this event and recorded an immaterial asset impairment, which we have since recovered from insurance proceeds. The facility resumed operations in December 2017. We expect to receive the remaining insurance recoveries for both property loss and business interruption during 2019. The cost of repair or replacement of assets and business interruption losses are insured under the terms of applicable insurance policies, subject to deductibles. We recorded insurance gains, as a reduction to "Other operating expense, net," in our condensed consolidated statement of operations as follows (in millions):
|
INCOME TAXES (Notes) |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | We generally record our interim tax provision based upon a projection of the Company’s annual effective tax rate ("AETR"). This AETR is applied to the year-to-date consolidated pre-tax income to determine the interim provision for income taxes before discrete items. We update the AETR on a quarterly basis as the pre-tax income projections are revised and tax laws are enacted. The effective tax rate ("ETR") each period is impacted by a number of factors, including the relative mix of domestic and international earnings, adjustments to the valuation allowances and discrete items. The currently forecasted ETR may vary from the actual year-end due to the changes in these factors. |
FINANCIAL INSTRUMENTS (Notes) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FINANCIAL INSTRUMENTS | Fair Value Measurements Authoritative guidance associated with fair value measurements provides a framework for measuring fair value and establishes a fair value hierarchy that prioritizes the inputs used to measure fair value, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs), then significant other observable inputs (Level 2 inputs) and the lowest priority to significant unobservable inputs (Level 3 inputs). The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we would realize in a current market exchange and are based on pertinent information available to us as of March 31, 2019. Such amounts have not been comprehensively revalued for purposes of these financial statements and current estimates of fair value may differ significantly from the amounts presented herein. The following table presents information about the fair value measurement of our assets and liabilities as of March 31, 2019 and December 31, 2018 (in millions):
The following financial instruments are recorded at their carrying amount (in millions):
We are required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, accounts receivables, prepaid expenses and other assets, accounts payable and accrued expenses approximates their carrying value on the condensed consolidated balance sheets due to their short-term nature. |
DERIVATIVE INSTRUMENTS (Notes) |
3 Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||
DERIVATIVE INSTRUMENTS | Energy Price Risk We have entered into a variety of contractual hedging arrangements, designated as cash flow hedges, in order to mitigate our exposure to energy market risk, and will continue to do so in the future. Our efforts in this regard involve only mitigation of price volatility for the energy we produce and do not involve taking positions (either long or short) on energy prices in excess of our physical generation. The amount of energy generation which we have hedged on a forward basis under agreements with various financial institutions as of March 31, 2019 is indicated in the following table (in millions):
As of March 31, 2019, the fair value of the energy derivative liability was $5 million. The change in fair value was recorded as a component of AOCI. During the three months ended March 31, 2019, cash provided by and used in energy derivative settlements of $10 million and $1 million, respectively, was included in net cash provided by operating activities on our condensed consolidated statement of cash flows. During the three months ended March 31, 2018, cash provided by and used in energy derivative settlements of $6 million and $13 million, respectively, was included in the change in net cash provided by operating activities on our condensed consolidated statement of cash flows. Interest Rate Swaps We may utilize derivative instruments to reduce our exposure to fluctuations in cash flows due to changes in variable interest rates paid on our direct borrowings under the senior secured revolving credit facility and term loan of our subsidiary Covanta Energy (collectively referred to as the "Credit Facilities"). To achieve that objective, during the three months ended March 31, 2019, we entered into a pay-fixed, receive-variable swap agreement with a financial institution on $100 million notional amount of our variable rate debt under the Credit Facilities. This interest rate swap is designated specifically to the Credit Facilities as a cash flow hedge and is recorded at fair value with changes in fair value recorded as a component of AOCI. For further information on our Credit Facilities see Note 11. Consolidated Debt. |
CONSOLIDATED DEBT (Notes) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED DEBT | Consolidated debt is as follows (in millions)
(1) On March 31, 2019 we entered into an interest rate swap agreement to swap the LIBOR portion of our floating interest rate to a fixed rate of 2.132%. See Note 10. Derivative Instruments for further information. Our subsidiary, Covanta Energy, has a senior secured credit facility consisting of a revolving credit facility (the “Revolving Credit Facility”) and a term loan (the “Term Loan”). The nature and terms of our Credit Facilities, Senior Notes, Tax-Exempt Bonds, project debt and other long-term debt are described in detail in Note 16. Consolidated Debt in our Annual Report on Form 10-K for the year ended December 31, 2018. Revolving Credit Facility As of March 31, 2019, we had unutilized capacity under the Revolving Credit Facility as follows (in millions):
Credit Agreement Covenants The loan documentation governing the Credit Facilities contains various affirmative and negative covenants, as well as financial maintenance covenants (financial ratios), that limit our ability to engage in certain types of transactions. We were in compliance with all of the affirmative and negative covenants under the Credit Facilities as of March 31, 2019.
|
LEASES |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES | NOTE 12. LEASES We determine if an arrangement contains a lease at inception. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. Our leases consist of leaseholds on EfW facilities, land, trucks and automobiles, office space and machinery and equipment. We utilized a portfolio approach in determining our discount rate. The portfolio approach takes into consideration the range of the term, the range of the lease payments, the category of the underlying asset and our estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. We also give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. Our lease term includes options to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet, per the election of the practical expedient noted above. We recognize lease expense for these leases on a straight-line basis over the lease term. We recognize variable lease payments in the period in which the obligation for those payments is incurred. Variable lease payments that depend on an index or a rate are initially measured using the index or rate at the commencement date, otherwise variable lease payments are recognized in the period incurred. The components of lease expense were as follows (in millions):
Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):
Supplemental cash flow and other information related to leases was as follows (in millions):
Maturities of lease liabilities were as follows (in millions):
As of March 31, 2019, we had no additional significant operating or finance leases that had not yet commenced. Disclosures related to periods prior to the adoption of ASC 842 |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES | We determine if an arrangement contains a lease at inception. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. Our leases consist of leaseholds on EfW facilities, land, trucks and automobiles, office space and machinery and equipment. We utilized a portfolio approach in determining our discount rate. The portfolio approach takes into consideration the range of the term, the range of the lease payments, the category of the underlying asset and our estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. We also give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. Our lease term includes options to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet, per the election of the practical expedient noted above. We recognize lease expense for these leases on a straight-line basis over the lease term. We recognize variable lease payments in the period in which the obligation for those payments is incurred. Variable lease payments that depend on an index or a rate are initially measured using the index or rate at the commencement date, otherwise variable lease payments are recognized in the period incurred. The components of lease expense were as follows (in millions):
Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):
Supplemental cash flow and other information related to leases was as follows (in millions):
Maturities of lease liabilities were as follows (in millions):
As of March 31, 2019, we had no additional significant operating or finance leases that had not yet commenced. Disclosures related to periods prior to the adoption of ASC 842 |
COMMITMENTS AND CONTINGENCIES (Notes) |
3 Months Ended | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | We and/or our subsidiaries are party to a number of claims, lawsuits and pending actions, most of which are routine and all of which are incidental to our business. We assess the likelihood of potential losses on an ongoing basis to determine whether losses are considered probable and reasonably estimable prior to recording an estimate of the outcome. If we can only estimate the range of a possible loss, an amount representing the low end of the range of possible outcomes is recorded. The final consequences of these proceedings are not presently determinable with certainty. As of March 31, 2019 and December 31, 2018, accruals for our loss contingencies recorded in "Accrued expenses and other current liabilities" in our condensed consolidated balance sheets were $21 million and $16 million, respectively. Environmental Matters Our operations are subject to environmental regulatory laws and environmental remediation laws. Although our operations are occasionally subject to proceedings and orders pertaining to emissions into the environment and other environmental violations, which may result in fines, penalties, damages or other sanctions, we believe that we are in substantial compliance with existing environmental laws and regulations. We may be identified, along with other entities, as being among parties potentially responsible for contribution to costs associated with the correction and remediation of environmental conditions at disposal sites subject to federal and/or analogous state laws. In certain instances, we may be exposed to joint and several liabilities for remedial action or damages. Our liability in connection with such environmental claims will depend on many factors, including our volumetric share of waste, the total cost of remediation, and the financial viability of other companies that also sent waste to a given site and, in the case of divested operations, the contractual arrangement with the purchaser of such operations. The potential costs related to the matters described below and the possible impact on future operations are uncertain due in part to the complexity of governmental laws and regulations and their interpretations, the varying costs and effectiveness of cleanup technologies, the uncertain level of insurance or other types of recovery and the questionable level of our responsibility. Although the ultimate outcome and expense of any litigation, including environmental remediation, is uncertain, we believe that the following proceedings will not have a material adverse effect on our condensed consolidated results of operations, financial position or cash flows. Lower Passaic River Matter. In August 2004, the United States Environmental Protection Agency (the “EPA”) notified our subsidiary, Covanta Essex Company (“Essex”), that it was a potentially responsible party (“PRP”) for Superfund response actions in the Lower Passaic River Study Area (“LPRSA”), a 17 mile stretch of river in northern New Jersey. Essex’s LPRSA costs to date are not material to its financial position and results of operations; however, to date the EPA has not sought any LPRSA remedial costs or natural resource damages against PRPs. In March 2016, the EPA released the Record of Decision (“ROD”) for its Focused Feasibility Study of the lower 8 miles of the LPRSA; the EPA’s selected remedy includes capping/dredging of sediment, institutional controls and long-term monitoring. In June 2018, PRP Occidental Chemical Corporation (“OCC”) filed a federal Superfund lawsuit against 120 PRPs including Essex with respect to past and future response costs expended by OCC with respect to the LPRSA. The Essex facility started operating in 1990 and Essex does not believe there have been any releases to the LPRSA, but in any event believes any releases would have been de minimis considering the history of the LPRSA; however, it is not possible at this time to predict that outcome or to estimate the range of possible loss relating to Essex’s liability in the matter, including for LPRSA remedial costs and/or natural resource damages. Other Matters Durham-York Contractor Arbitration In January 2019, the arbitrator issued a decision regarding outstanding disputes with our primary contractor for the Durham-York construction project, which related to: (i) claims by the contractor for the balance of the contract price withheld, change orders, delay damages and other expense reimbursement and (ii) claims by us for charges and liquidated damages for project completion delays. Other Commitments Other commitments as of March 31, 2019 were as follows (in millions):
The letters of credit were issued to secure our performance under various contractual undertakings related to our domestic and international projects or to secure obligations under our insurance program. Each letter of credit relating to a project is required to be maintained in effect for the period specified in related project contracts, and generally may be drawn if it is not renewed prior to expiration of that period. We believe that we will be able to fully perform under our contracts to which these existing letters of credit relate, and that it is unlikely that letters of credit would be drawn because of a default of our performance obligations. If any of these letters of credit were to be drawn by the beneficiary, the amount drawn would be immediately repayable by us to the issuing bank. If we do not immediately repay such amounts drawn under letters of credit issued under the Revolving Credit Facility, unreimbursed amounts would be treated under the Credit Facilities as either additional term loans or as revolving loans. The surety bonds listed in the table above relate primarily to construction and performance obligations and support for other obligations, including closure requirements of various energy projects when such projects cease operating. Were these bonds to be drawn upon, we would have a contractual obligation to indemnify the surety company. We have certain contingent obligations related to our Senior Notes and Tax-Exempt Bonds. Holders may require us to repurchase their Senior Notes and Tax-Exempt Bonds if a fundamental change occurs. For specific criteria related to the redemption features of the Senior Notes and Tax-Exempt Bonds, see Item 8. Financial Statements And Supplementary Data — Note 16. Consolidated Debt of our Annual Report on Form 10-K. |
ORGANIZATION AND BASIS OF PRESENTATION (Policies) |
3 Months Ended | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||
Basis of Presentation | Basis of PresentationThe accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes thereto required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for fair presentation have been included in our condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated. Operating results for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019. The condensed consolidated balance sheet at December 31, 2018, was derived from audited annual consolidated financial statements, but does not contain all of the notes thereto from the annual consolidated financial statements. This Form 10-Q should be read in conjunction with the Audited Consolidated Financial Statements and accompanying Notes in our Annual Report on Form 10-K for the year ended December 31, 2018 (“Form 10-K”) | ||||||||||||||||||||
Change in Accounting Principle | Accounting Pronouncements Recently Adopted In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-02 Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this update allow a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings for adjustments to the tax effect of items in AOCI, that were originally recognized in other comprehensive income, related to the new statutory rate prescribed in the Tax Cuts and Jobs Act enacted on December 22, 2017, which reduced the US federal corporate tax rate from 35% to 21%. The amendments in this update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the US federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. Effective January 1, 2019, we adopted this standard and recorded a reclassification of AOCI to accumulated deficit totaling $2 million. In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842) which amended guidance for lease arrangements to increase transparency and comparability by providing additional information to users of financial statements regarding an entity's leasing activities. Subsequent to the issuance of Topic 842, the FASB clarified the guidance through several ASUs; hereinafter the collection of lease guidance is referred to as Accounting Standards Codification (“ASC") 842. The revised guidance seeks to achieve this objective by requiring reporting entities to recognize lease assets and lease liabilities on the balance sheet for substantially all lease arrangements. The standard requires a modified retrospective basis adoption. On January 1, 2019, we adopted ASC 842 using the modified retrospective method and recognized a right of use ("ROU") asset and liability in our consolidated condensed balance sheet in the amount of $57 million and $62 million, respectively, related to our operating leases where we are the lessee. There was no effect on our operating leases as lessor. Results for the three months ended March 31, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported in accordance with the historic accounting guidance under ASC Topic 840, Leases. As part of the adoption, we elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed us to:
|
||||||||||||||||||||
Earnings Per Share | Earnings Per Share |
||||||||||||||||||||
Pass Through Costs | Pass through costs Pass through costs are costs for which we receive a direct contractually committed reimbursement from the public sector client that sponsors an EfW project. These costs generally include utility charges, insurance premiums, ash residue transportation and disposal, and certain chemical costs. These costs are recorded net of public sector client reimbursements as a reduction to "Plant operating expense" in our condensed consolidated statement of operations. |
||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements Authoritative guidance associated with fair value measurements provides a framework for measuring fair value and establishes a fair value hierarchy that prioritizes the inputs used to measure fair value, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs), then significant other observable inputs (Level 2 inputs) and the lowest priority to significant unobservable inputs (Level 3 inputs). The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we would realize in a current market exchange and are based on pertinent information available to us as of March 31, 2019. Such amounts have not been comprehensively revalued for purposes of these financial statements and current estimates of fair value may differ significantly from the amounts presented herein. |
||||||||||||||||||||
Leases | We determine if an arrangement contains a lease at inception. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. Our leases consist of leaseholds on EfW facilities, land, trucks and automobiles, office space and machinery and equipment. We utilized a portfolio approach in determining our discount rate. The portfolio approach takes into consideration the range of the term, the range of the lease payments, the category of the underlying asset and our estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. We also give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. Our lease term includes options to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet, per the election of the practical expedient noted above. |
||||||||||||||||||||
Commitments and Contingencies | We and/or our subsidiaries are party to a number of claims, lawsuits and pending actions, most of which are routine and all of which are incidental to our business. We assess the likelihood of potential losses on an ongoing basis to determine whether losses are considered probable and reasonably estimable prior to recording an estimate of the outcome. If we can only estimate the range of a possible loss, an amount representing the low end of the range of possible outcomes is recorded. The final consequences of these proceedings are not presently determinable with certainty. |
EARNINGS PER SHARE ("EPS") AND EQUITY (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Basic and Diluted Earnings per Share | Basic and diluted weighted average shares outstanding were as follows (in millions):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Accumulated Other Comprehensive Income | The changes in accumulated other comprehensive loss are as follows (in millions):
|
REVENUES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | The following table shows our remaining performance obligations which primarily consists of the fixed consideration contained in our contracts as of March 31, 2019 (dollars in millions):
|
|||||||||||||||||||||||||||||||||||||||||||||
Contract with Customer, Asset and Liability | The following table reflects the balance in our contract assets, which we classify as “Accounts receivable unbilled” and present net in Accounts receivable, and our contract liabilities, which we classify as deferred revenue and present in “Accrued expenses and other current liabilities” in our condensed consolidated balance sheet (in millions):
|
STOCK-BASED AWARD PLANS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Compensation Expense Related to Stock-Based Awards | Compensation expense related to our stock-based awards was as follows (in millions):
|
|||||||||||||||||||||||||||||||||||||||||||||
Unrecognized Stock-based Compensation Expense | Unrecognized stock-based compensation expense and weighted-average years to be recognized are as follows (in millions, except for weighted average years):
|
SUPPLEMENTARY INFORMATION Supplementary Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Pass Through Costs | Pass through costs were as follows (in millions):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Operating Cost and Expense, by Component | We recorded insurance gains, as a reduction to "Other operating expense, net," in our condensed consolidated statement of operations as follows (in millions):
|
FINANCIAL INSTRUMENTS Financial Instruments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements of Assets and Liabilities | The following table presents information about the fair value measurement of our assets and liabilities as of March 31, 2019 and December 31, 2018 (in millions):
The following financial instruments are recorded at their carrying amount (in millions):
|
DERIVATIVE INSTRUMENTS (Tables) |
3 Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||
Schedule of Energy Generation Amounts | The amount of energy generation which we have hedged on a forward basis under agreements with various financial institutions as of March 31, 2019 is indicated in the following table (in millions):
|
CONSOLIDATED DEBT (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Consolidated Debt | Consolidated debt is as follows (in millions)
(1) On March 31, 2019 we entered into an interest rate swap agreement to swap the LIBOR portion of our floating interest rate to a fixed rate of 2.132%. See Note 10. Derivative Instruments for further information. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revolving Credit Facility | As of March 31, 2019, we had unutilized capacity under the Revolving Credit Facility as follows (in millions):
|
LEASES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease Expense and Supplemental Cash Flow Information | The components of lease expense were as follows (in millions):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Balance Sheet Information | Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maturity of Lease Liabilities, Finance | Maturities of lease liabilities were as follows (in millions):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maturity of Lease Liabilities, Operating | Maturities of lease liabilities were as follows (in millions):
|
COMMITMENTS AND CONTINGENCIES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||
Other Commitments | Other commitments as of March 31, 2019 were as follows (in millions):
|
EARNINGS PER SHARE ("EPS") AND EQUITY Narrative (Details) - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Earnings Per Share [Abstract] | ||
Common stock, par value | $ 0.10 | $ 0.10 |
EARNINGS PER SHARE ("EPS") AND EQUITY Schedule of Basic and Diluted Earnings per Share (Details) - shares shares in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Basic | 131 | 130 |
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements | 2 | 2 |
Diluted | 133 | 132 |
REVENUES Contract Balances (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Revenue from Contract with Customer [Abstract] | ||
Contract with Customer, Asset, Gross | $ 14 | $ 16 |
Contract with Customer, Liability | 18 | $ 15 |
Contract with Customer, Liability, Revenue Recognized | $ 3 |
STOCK-BASED AWARD PLANS Schedule of Compensation Expense Related to Stock-Based Awards (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based Compensation | $ 8 | $ 9 |
Director [Member] | Quarterly Compensation [Member] | Restricted Stock Units (RSUs) [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 5,777 |
SUPPLEMENTARY INFORMATION Schedule of Pass Through Costs (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Other Operating Expenses [Line Items] | ||
Cost of Goods and Services Sold | $ 359 | $ 345 |
Pass through costs [Member] | ||
Other Operating Expenses [Line Items] | ||
Cost of Goods and Services Sold | $ 13 | $ 14 |
SUPPLEMENTARY INFORMATION Schedule of Other Operating Cost and Expense, by Component (Details) - Other Operating Income (Expense) [Member] - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Property Costs, net of impairment [Member] | ||
Business Interruption Loss [Line Items] | ||
Insurance Recoveries | $ 0 | $ 7 |
Business interruption and clean up costs, net [Member] | ||
Business Interruption Loss [Line Items] | ||
Insurance Recoveries | $ 0 | $ 7 |
INCOME TAXES (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Income Tax Disclosure [Abstract] | ||
Effective Income Tax Rate Reconciliation, Percent | 31.00% | (5.00%) |
Fair Value Measurements of Assets and Liabilities (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Long-term Debt | $ 2,408 | $ 2,342 |
Project Debt | 141 | 152 |
Estimate of Fair Value Measurement [Member] | ||
Assets, Fair Value Disclosure | 2 | 2 |
Financial and Nonfinancial Liabilities, Fair Value Disclosure | 5 | 13 |
Long-term Debt | 2,434 | 2,245 |
Project Debt | 145 | 154 |
Reported Value Measurement [Member] | ||
Long-term Debt | 2,408 | 2,342 |
Project Debt | 141 | 152 |
Fair Value, Inputs, Level 1 [Member] | Mutual And Bond Funds [Member] | Estimate of Fair Value Measurement [Member] | ||
Investments, Fair Value Disclosure | 2 | 2 |
Energy Hedges [Member] | Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member] | ||
Derivative Liability | $ 5 | $ 13 |
DERIVATIVE INSTRUMENTS Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Energy Hedges [Member] | ||
Derivative [Line Items] | ||
Proceeds from Hedge, Investing Activities | $ 10 | $ 6 |
Payments for (Proceeds from) Hedge, Investing Activities | (1) | $ 13 |
Interest Rate Swap [Member] | ||
Derivative [Line Items] | ||
Derivative, notional amount | $ 100 |
DERIVATIVE INSTRUMENTS Schedule of Energy Generation Amounts (Details) MW in Millions |
Mar. 31, 2019
MW
|
---|---|
Derivative [Line Items] | |
Derivative, Nonmonetary Notional Amount | 3.0 |
Fiscal Year 2019 [Member] | |
Derivative [Line Items] | |
Derivative, Nonmonetary Notional Amount | 2.0 |
Fiscal Year 2020 [Member] | |
Derivative [Line Items] | |
Derivative, Nonmonetary Notional Amount | 1.0 |
Schedule of Consolidated Debt (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Instrument [Line Items] | ||
Long-term line of credit | $ 672 | $ 606 |
Long-term Debt | 2,408 | 2,342 |
Total Long Term Debt, Senior Notes | 1,184 | 1,184 |
Total Long Term Debt, Tax Exempt Bonds | 489 | 488 |
Current portion of long-term debt | (15) | (15) |
Long-term debt, Noncurrent | 2,393 | 2,327 |
Project Debt | 141 | 152 |
Current portion of project debt | (10) | (19) |
Project Debt Noncurrent | 131 | 133 |
Debt, Total | 2,549 | 2,494 |
Debt, Current | (25) | (34) |
Debt, Noncurrent | $ 2,524 | 2,460 |
Revolving Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Fixed interest rate | 4.38% | |
Long-term line of credit | $ 281 | 212 |
Term Loan [Member] | ||
Debt Instrument [Line Items] | ||
Fixed interest rate | 4.47% | |
Equipment Financing Capital Lease [Member] | ||
Debt Instrument [Line Items] | ||
Capital Lease Obligations | $ 63 | $ 64 |
Interest Rate Swap [Member] | ||
Debt Instrument [Line Items] | ||
Derivative, fixed interest rate | 2.132% |
CONSOLIDATED DEBT Revolving Credit Facility (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Line of Credit Facility [Line Items] | ||
Long-term Debt | $ 2,408 | $ 2,342 |
Long-term line of credit | 672 | 606 |
Revolving Credit Facility [Member] | ||
Line of Credit Facility [Line Items] | ||
Total facility commitment | 900 | |
Long-term line of credit | 281 | $ 212 |
Line of credit facility, remaining borrowing capacity | 342 | |
Letter of Credit [Member] | Revolving Credit Facility [Member] | ||
Line of Credit Facility [Line Items] | ||
Letters of credit outstanding | $ 277 |
LEASES - Narrative (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Lessee, Lease, Description [Line Items] | |
Operating leases, rent expense | $ 6 |
LEASES - Lease Expense (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Leases [Abstract] | |
Amortization of assets, included in Depreciation and amortization expense | $ 3 |
Interest on lease liabilities, included in Interest expense | 2 |
Amortization of assets, included in Total operating expense | 2 |
Interest on lease liabilities, included in Total operating expense | 1 |
Total net lease cost | $ 8 |
LEASES - Supplemental Balance Sheet Information (Details) $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
Operating lease ROU assets, included in Other assets | $ 55 |
Current operating lease liabilities, included in Accrued expenses and other current liabilities | 7 |
Noncurrent operating lease liabilities, included in Other liabilities | 53 |
Total operating lease liabilities | 60 |
Property and equipment, at cost | 248 |
Accumulated amortization | (43) |
Property and equipment, net | 205 |
Current obligations of finance leases, included in Current portion of long-term debt | 11 |
Finance leases, net of current obligations, included in Long-term debt | 140 |
Total finance lease liabilities | $ 151 |
LEASES - Supplemental Cash Flow Information (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Leases [Abstract] | |
Operating cash flows related to operating leases | $ (2) |
Financing cash flows related to finance leases | $ (1) |
Weighted average remaining lease term (in years): operating | 12 years 10 months 24 days |
Weighted average remaining lease term (in years): finance | 23 years 6 months |
Weighted average discount rate: operating | 4.66% |
Weighted average discount rate: finance | 4.66% |
LEASES - Lease Maturity (Details) $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
Operating Leases | |
Remainder of 2019 | $ 7 |
2020 | 8 |
2021 | 8 |
2022 | 7 |
2023 | 7 |
2024 and thereafter | 44 |
Total lease payments | 81 |
Less: Amounts representing interest | (21) |
Total lease obligations | 60 |
Finance Leases | |
Remainder of 2019 | 13 |
2020 | 18 |
2021 | 18 |
2022 | 17 |
2023 | 18 |
2024 and thereafter | 149 |
Total lease payments | 233 |
Less: Amounts representing interest | (82) |
Total lease obligations | $ 151 |
COMMITMENTS AND CONTINGENCIES Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Loss Contingencies [Line Items] | |||
Loss Contingency Accrual | $ 21 | $ 16 | |
Loss Contingency Accrual, Payments | 0 | $ 7 | |
Other Commitment | 494 | ||
Capital Expenditures Incurred but Not yet Paid | 52 | $ 81 | |
Surety Bonds [Member] | |||
Loss Contingencies [Line Items] | |||
Other Commitment | 177 | ||
Revolving Credit Facility [Member] | Letter of Credit [Member] | |||
Loss Contingencies [Line Items] | |||
Letters of credit outstanding | $ 277 |
Label | Element | Value |
---|---|---|
Retained Earnings, Unappropriated [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 1,000,000 |
APIC [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 0 |
Accounting Standards Update 2018-02 [Member] | Retained Earnings, Unappropriated [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (2,000,000) |
VDJL0+];X7*:>;P4!A4+;
M",0L-\B!4AO(R/@UQ?3FE):XW-^C?W2UFUJN1$$NZ,^VU$WJ/7JHA(KT5#^+
MX1-,]<0>FHK_ C>@!FZ5F!R%H,I]4=$K+=@4Q4AAY'5<6^[688I_I^T3@HD0
MS(1#_%]".!'"-T+DBA^5N5(_$$VR1(H!R?&P.F+OQ.$4FF86UNEZY_Z9:I7Q
MWK)CF.";C3-!SB,D6$ .,P*;X'.&8"_#.=C0@[\3Y#N(]_L9PMT:0L%_SX
M<9\?[?(CQX^6/8A6/1@A1P?A#N*OBM@B_M&E>%=#O-40KS3$FPRKD\JWB+4&
MO+@7#&3M1DBA0O1 >.(^G1/-L:P)%7);5-:>U<>V3,YC4H86^P!>UO2C1*.&^:BMG6@"@B2$G&
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M>"FK&S]"M?]@DR&A=.&X]V D@IKWTC^:X0&F
M>JXIF8K_"1>0&!Z48([22!=74O;.&S6QH!3%7\==Z+@/XTUZ.\'6 <4="W%D?X'I^OP[:K";81O/RG
4?N>=58(?B'7JO57IW5[!K(%IB3G-,MHU9
M(QBRKRFRO12G[#]XM@\_["H\1/AA"T^2?8)\ER"/!/D_!.F;$O=BWJIDFYXJ
ML%V<)D=J,^HXR1OO.K#W67R3O^'SM'_CMA/:D8OQ^+*Q_ZTQ'E!*
_@?O07XRVVL%120V
@UYWLD8*FP)_BW3YS
M^3[A=P>COIDCY^0HY;-;?*L+'+F&@$-E'('9X0*/P+D#V3;^SDR\2+K"V_F5
M_L5[MUZ.3,.CY'^ZVK0%WF)40\/.W#S)\2O,?M88S>:_PP6X37>=6(U*