FAIRFIELD, N.J., July 29 NJ-Covanta-Q2-Earns
FAIRFIELD, N.J., July 29 /PRNewswire-FirstCall/ -- Covanta Holding
Corporation (NYSE: CVA) ("Covanta" or the "Company") reported financial
results today for the three months ended June 30, 2008. Diluted earnings per
share rose by 21% to $0.29 in the second quarter of 2008, up from $0.24 in the
second quarter of 2007.
Second Quarter Results
For the three months ended June 30, 2008, consolidated operating revenues
grew 19% to $423 million, up from $355 million in the prior year comparative
period. Domestic segment revenue grew 17% to $351 million, driven primarily by
the contribution of revenue from domestic acquisitions completed in 2007,
contractual escalations in service fees, and higher prices for electricity and
recycled metal. Domestic plant operating expenses increased by 15%, primarily
due to the incremental expenses associated with businesses acquired in 2007
and escalating fuel and material costs. International segment revenue
increased by 33% to $69 million, driven primarily by increased electricity
sales at two facilities located in India. International plant operating
expenses increased by 38%, primarily due to higher fuel costs at the same two
facilities.
Cash Flow Provided by Operating Activities ("Operating Cash Flow") was
$111 million in the second quarter. Adjusted EBITDA was $162 million.
Anthony Orlando, President and Chief Executive Officer of Covanta, stated
that "Facility production was solid and energy markets continue to move in our
favor. We turned in a good second quarter and anticipate delivering strong
full year results near the high end of our published guidance ranges. I'm also
optimistic about our long-term prospects. We are effectively managing contract
transitions and capitalizing on global growth opportunities which are being
presented with increasing frequency in light of the sharp rise in energy
prices."
Year-to-Date Results
For the six months ended June 30, 2008, total Company operating revenues
rose 18% to $812 million. Operating Cash Flow was $160 million for the
year-to-date period. Adjusted EBITDA was $268 million.
2008 Guidance
The Company is reaffirming its guidance for 2008 for the following key
metrics:
-- Adjusted EBITDA of $550 million to $575 million;
-- Diluted earnings per share of $0.90 to $1.00; and
-- Operating Cash Flow of $380 million to $420 million.
Conference Call Information
Covanta will host a conference call at 8:30 am (Eastern) on Wednesday,
July 30, 2008 to discuss its results for the three and six months ended June
30, 2008. To participate, please dial 877-604-9675 approximately 10 minutes
prior to the scheduled start of the call. If you are calling from outside of
the United States, please dial 719-325-4873. The conference call will also be
web cast live on the Investor Relations section of the Covanta website at
www.covantaholding.com.
A replay of the conference call will be available from 11:30 am (Eastern)
on Wednesday, July 30, 2008 through midnight (Eastern) on Thursday, August 7,
2008. To access the replay, please dial 888-203-1112 or 719-457-0820 and use
the replay pass code: 9091411. The web cast will also be archived on
www.covantaholding.com.
About Covanta
Covanta Holding Corporation (NYSE: CVA), is an internationally recognized
owner and operator of large-scale Energy-from-Waste and renewable energy
projects and a recipient of the Energy Innovator Award from the U.S.
Department of Energy's Office of Energy Efficiency and Renewable Energy.
Covanta's 38 Energy-from-Waste facilities provide communities with an
environmentally sound solution to their solid waste disposal needs by using
that municipal solid waste to generate clean, renewable energy. Annually,
Covanta's modern Energy-from-Waste facilities safely and securely convert more
than 16 million tons of waste into more than 8 million megawatt hours of clean
renewable electricity and create 10 billion pounds of steam that are sold to a
variety of industries. For more information, visit www.covantaholding.com.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this press release may constitute "forward-looking"
statements as defined in Section 27A of the Securities Act of 1933 (the
"Securities Act"), Section 21E of the Securities Exchange Act of 1934 (the
"Exchange Act"), the Private Securities Litigation Reform Act of 1995 (the
"PSLRA") or in releases made by the Securities and Exchange Commission
("SEC"), all as may be amended from time to time. Such forward-looking
statements involve known and unknown risks, uncertainties and other important
factors that could cause the actual results, performance or achievements of
Covanta and its subsidiaries, or industry results, to differ materially from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Statements that are not historical fact are
forward-looking statements. Forward-looking statements can be identified by,
among other things, the use of forward-looking language, such as the words
"plan," "believe," "expect," "anticipate," "intend," "estimate," "project,"
"may," "will," "would," "could," "should," "seeks," or "scheduled to," or
other similar words, or the negative of these terms or other variations of
these terms or comparable language, or by discussion of strategy or
intentions. These cautionary statements are being made pursuant to the
Securities Act, the Exchange Act and the PSLRA with the intention of obtaining
the benefits of the "safe harbor" provisions of such laws. Covanta cautions
investors that any forward-looking statements made by Covanta are not
guarantees or indicative of future performance. Important assumptions and
other important factors that could cause actual results to differ materially
from those forward-looking statements with respect to Covanta, include, but
are not limited to, those factors, risks and uncertainties that are described
in Item 1A of its Annual Report on Form 10-K for the year ended December 31,
2007, and in securities filings by Covanta with the SEC.
Although Covanta believes that its plans, intentions and expectations
reflected in or suggested by such forward-looking statements are reasonable,
actual results could differ materially from a projection or assumption in any
forward-looking statements. Covanta's future financial condition and results
of operations, as well as any forward-looking statements, are subject to
change and inherent risks and uncertainties. The forward-looking statements
contained in this press release are made only as of the date hereof and
Covanta does not have or undertake any obligation to update or revise any
forward-looking statements whether as a result of new information, subsequent
events or otherwise, unless otherwise required by law.
Covanta Holding CorporationExhibit 1
Condensed Consolidated Statements of Income
Three Months Ended Six Months Ended
June 30, June 30,
2008 20072008 2007
(Unaudited)
(In thousands, except per share amounts)
Operating revenues
Waste and service revenues$242,689 $218,040$460,312 $416,951
Electricity and steam sales163,832 126,815 316,897 240,481
Other operating revenues16,47510,285 34,55327,917
Total operating revenues 422,996 355,140 811,762 685,349
Operating expenses
Plant operating expenses(A)238,608 199,561 497,619 401,568
Depreciation and amortization
expense51,59048,436 100,16496,479
Net interest expense on
project debt 13,77613,886 27,53728,491
General and administrative
expenses 23,13520,029 47,28942,221
Write-down of assets, net
of insurance recoveries(A)- (13,341)- 4,925
Other operating expenses19,358 9,357 31,85926,173
Total operating expenses 346,467 277,928 704,468 599,857
Operating income 76,52977,212 107,29485,492
Other income (expense)
Investment income1,052 1,819 2,692 7,003
Interest expense (11,563) (14,718)(25,283) (35,978)
Loss on extinguishment of
debt(B) - - - (32,006)
Total other expenses (10,511) (12,899)(22,591) (60,981)
Income before income tax
expense, minority interests
and equity in net income from
unconsolidated investments 66,01864,313 84,70324,511
Income tax expense (26,260) (28,822)(33,796) (10,646)
Minority interests(2,225) (2,091) (4,094) (3,489)
Equity in net income from
unconsolidated investments7,320 4,316 12,812 9,422
Net Income $44,853 $37,716 $59,625 $19,798
Earnings Per Share:
Basic $0.29 $0.25 $0.39 $0.13
Weighted Average Shares 153,387 152,983 153,276 152,234
Diluted$0.29 $0.24 $0.39 $0.13
Weighted Average Shares 154,848 154,307 154,710 153,603
(A) On March 31, 2007, the SEMASS energy-from-waste facility experienced a
fire in the front-end receiving portion of the facility. Damage was
extensive to this portion of the facility and operations at the
facility were suspended completely for approximately 20 days. As a
result of this loss, Covanta recorded an asset impairment of $18.3
million, pre-tax, during the first quarter of 2007, which represented
a preliminary estimate of the net book value of the damaged assets.
During the second quarter of 2007, Covanta recorded insurance
recoveries of $13.3 million related to repair and reconstruction and
$2.7 million related to clean-up costs.
During the remainder of the year ended December 31, 2007, Covanta
reduced the impairment recorded by $1.0 million, pre-tax, based upon
additional analysis as the facility was being restored and recorded
additional insurance recoveries of $4.0 million related to repair and
reconstruction and $2.0 million related to business interruption
losses. During the second quarter of 2008, Covanta recorded insurance
recoveries of $5.2 million related to business interruption losses.
The cost of repair or replacement, and business interruption losses,
are insured under the terms of applicable insurance policies, subject
to deductibles. Covanta has received proceeds under such policies, as
discussed above, but cannot predict whether or when they will receive
additional proceeds under such policies. Insurance recoveries are
recorded as a reduction to the loss related to the write-down of
assets where such recoveries relate to repair and reconstruction
costs, or as a reduction to operating expenses where such recoveries
relate to other costs or business interruption losses.
(B) During the first quarter of 2007, Covanta completed public offerings
of common stock and 1.00% Senior Convertible Debentures, and Covanta
Energy closed on new credit facilities. In addition, Covanta Energy
completed tender offers for outstanding notes previously issued by its
intermediate subsidiaries. As a result of the recapitalization,
Covanta recognized a loss on extinguishment of debt of approximately
$32.0 million, pre-tax.
Covanta Holding CorporationExhibit 2
Reconciliation of Net Income to Adjusted EBITDA
Three Months Ended Six Months Ended Full Year
June 30, June 30, Estimated
2008 2007 2008 2007 2008
(Unaudited, in thousands)
Net Income$44,853 $37,716 $59,625 $19,798 $140,000 -
$155,000
Depreciation and
amortization
expense 51,59048,436 100,16496,479 206,000
Debt service:
Net interest
expense on
project debt 13,77613,886 27,53728,491
Interest
expense11,56314,718 25,28335,978
Investment
income (1,052) (1,819) (2,692) (7,003)
Subtotal debt
service 24,28726,785 50,12857,466 95,000 -
92,000
Income tax expense 26,26028,822 33,79610,646 78,000 -
85,000
Other adjustments:(A)
Change in unbilled
service
receivables 2,233 5,1454,28510,191
Non-cash
compensation
expense 4,410 4,6368,061 6,407
Other6,008 4058,048 3,637
Subtotal other
adjustments 12,65110,186 20,39420,235 24,000 -
30,000
Write-down of
assets, net of
insurance
recoveries(B)- (13,341) - 4,925
Loss on
extinguishment of
debt(C) - -- 32,006
Minority interests 2,225 2,0914,094 3,4897,000
Total adjustments 117,013 102,979 208,576 225,246
Adjusted EBITDA(D) $161,866 $140,695 $268,201 $245,044 $550,000 -
$575,000
(A) These items represent amounts that are non-cash in nature.
(B) On March 31, 2007, the SEMASS energy-from-waste facility experienced a
fire in the front-end receiving portion of the facility. Damage was
extensive to this portion of the facility and operations at the
facility were suspended completely for approximately 20 days. As a
result of this loss, Covanta recorded an asset impairment of $18.3
million, pre-tax, during the first quarter of 2007, which represented
a preliminary estimate of the net book value of the damaged assets.
During the second quarter of 2007, Covanta recorded insurance
recoveries of $13.3 million related to repair and reconstruction and
$2.7 million related to clean-up costs.
During the remainder of the year ended December 31, 2007, Covanta
reduced the impairment recorded by $1.0 million, pre-tax, based upon
additional analysis as the facility was being restored and recorded
additional insurance recoveries of $4.0 million related to repair and
reconstruction and $2.0 million related to business interruption
losses. During the second quarter of 2008, Covanta recorded insurance
recoveries of $5.2 million related to business interruption losses.
The cost of repair or replacement, and business interruption losses,
are insured under the terms of applicable insurance policies, subject
to deductibles. Covanta has received proceeds under such policies, as
discussed above, but cannot predict whether or when they will receive
additional proceeds under such policies. Insurance recoveries are
recorded as a reduction to the loss related to the write-down of
assets where such recoveries relate to repair and reconstruction
costs, or as a reduction to operating expenses where such recoveries
relate to other costs or business interruption losses.
(C) During the first quarter of 2007, Covanta completed public offerings
of common stock and 1.00% Senior Convertible Debentures, and Covanta
Energy closed on new credit facilities. In addition, Covanta Energy
completed tender offers for outstanding notes previously issued by its
intermediate subsidiaries. As a result of the recapitalization,
Covanta recognized a loss on extinguishment of debt of approximately
$32.0 million, pre-tax.
(D) The components of Adjusted EBITDA are as follows:
Three Months EndedSix Months Ended
June 30, June 30,
2008 2007 2008 2007
(Unaudited, in thousands)
Impact of SEMASS
fire (1) $5,162 $(4,312)$5,137 $(4,312)
All other 156,704 145,007263,064 249,356
Adjusted EBITDA $161,866 $140,695 $268,201 $245,044
(1) For 2008, this amount primarily includes insurance recoveries for
business interruption losses. For 2007, this amount represents plant
operating expenses related to the SEMASS fire, but excludes lost
revenue during the restoration of the SEMASS energy-from-waste
facility.
Covanta Holding CorporationExhibit 3
Reconciliation of Cash Flow Provided by Operating Activities to Adjusted
EBITDA
Three Months Ended Six Months Ended Full Year
June 30, June 30, Estimated
2008 20072008 2007 2008
(Unaudited, in thousands)
Cash flow provided
by operating
activities$110,904 $89,097$160,377 $145,587 $380,000 -
$420,000
Debt service 24,28726,785 50,12857,46695,000 -
92,000
Amortization of
debt premium and
deferred financing
costs1,852 3,091 3,691 5,985 7,000
Other24,82321,722 54,00536,00668,000 -
56,000
Adjusted EBITDA$161,866 $140,695$268,201 $245,044 $550,000 -
$575,000
Covanta Holding CorporationExhibit 4
Statements of Cash Flows Selected Data
Three Months Ended Six Months EndedFull Year
June 30, June 30,Estimated
2008 20072008 2007 2008
(Unaudited, in thousands)
Cash flow provided
by operating $380,000 -
activities $110,904 $89,097$160,377 $145,587$420,000
Uses of cash flow
provided by
operating
activities
Purchase of
property, plant
and equipment (A)
Capital
expenditures
associated with
SEMASS fire (B) $(911) $(10,379)$(2,101) $(10,379)
Capital
expenditures
associated with
certain
acquisitions (C) (2,642) - (10,635) -
All other capital
expenditures (D)(11,221) (13,563)(41,028) (32,637) $(60,000)
Total purchases of
property, plant
and equipment $(14,774) $(23,942) $(53,764) $(43,016)
Acquisition of
businesses, net of
cash acquired $(20,128) $(7,439) $(20,128) $(7,439)
Purchase of equity
interest $(18,503) $(10,253) $(18,503) $(10,253)
Principal payments
on project debt$(10,045) $(9,550) $(65,164) $(65,489) $(167,000)
(A) Purchase of property, plant and equipment is also referred to as
Capital Expenditures.
(B) Capital Expenditures were incurred that related to the repair and
replacement of assets at the SEMASS energy-from-waste facility that
were damaged by a fire on March 31, 2007. The cost of repair or
replacement is insured under the terms of the applicable insurance
policy, subject to deductibles. Covanta expects the cost of repair or
replacement not recovered, representing deductibles under such policy,
will not be material. During the twelve months ended December 31,
2007 and the six months ended June 30, 2008, Covanta received $9.4
million and $6.3 million, respectively, in insurance proceeds related
to property damage, which is included as Property Insurance Proceeds
in the investing activities section of Covanta's statement of cash
flows for the respective periods. Covanta cannot predict whether or
when they will receive additional proceeds under such policies.
(C) Capital Expenditures were incurred at three facilities that Covanta
acquired in 2007 primarily to improve the productivity or
environmental performance of those facilities. The majority of these
expenditures were incurred at the two California biomass facilities
acquired in July 2007. Covanta invested approximately $8 million
prior to December 31, 2007 and $9.7 million during the six months
ended June 30, 2008 in capital improvements in the biomass facilities.
Although, in accordance with GAAP, this spending will be recorded as a
component of purchase of property, plant and equipment on Covanta's
statement of cash flows, management considers this spending as a
component of the cost to acquire these businesses since these major
capital improvements are required to achieve desired facility
performance.
(D) Capital Expenditures primarily to maintain existing facilities.
Covanta Holding Corporation Exhibit 5
Components of Diluted Earnings Per Share
Three Months Ended Six Months Ended
June 30,June 30,
2008 2007 2008 2007
(Unaudited)
Write-down of assets, net of
insurance recoveries and tax (A) $ - $0.05 $ - $(0.02)
Impact of SEMASS fire, net of tax
(B)0.02(0.02) 0.02 (0.02)
Loss on extinguishment of debt,
net of tax (C) -- - (0.12)
All other 0.27 0.21 0.37 0.29
Diluted Earnings Per Share $0.29$0.24 $0.39 $0.13
(A) On March 31, 2007, the SEMASS energy-from-waste facility experienced a
fire in the front-end receiving portion of the facility. Damage was
extensive to this portion of the facility and operations at the
facility were suspended completely for approximately 20 days. As a
result of this loss, Covanta recorded an asset impairment of $18.3
million, pre-tax, during the first quarter of 2007, which represented
a preliminary estimate of the net book value of the damaged assets.
During the second quarter of 2007, Covanta recorded insurance
recoveries of $13.3 million related to repair and reconstruction and
$2.7 million related to clean-up costs.
During the remainder of the year ended December 31, 2007, Covanta
reduced the impairment recorded by $1.0 million, pre-tax, based upon
additional analysis as the facility was being restored and recorded
additional insurance recoveries of $4.0 million related to repair and
reconstruction and $2.0 million related to business interruption
losses. During the second quarter of 2008, Covanta recorded insurance
recoveries of $5.2 million related to business interruption losses.
The cost of repair or replacement, and business interruption losses,
are insured under the terms of applicable insurance policies, subject
to deductibles. Covanta has received proceeds under such policies, as
discussed above, but cannot predict whether or when they will receive
additional proceeds under such policies. Insurance recoveries are
recorded as a reduction to the loss related to the write-down of
assets where such recoveries relate to repair and reconstruction
costs, or as a reduction to operating expenses where such recoveries
relate to other costs or business interruption losses.
(B) For 2008, this amount primarily includes insurance recoveries for
business interruption losses. For 2007, this amount represents plant
operating expenses related to the SEMASS fire, but excludes lost
revenue during the restoration of the SEMASS energy-from-waste
facility.
(C) During the first quarter of 2007, Covanta completed public offerings
of common stock and 1.00% Senior Convertible Debentures, and Covanta
Energy closed on new credit facilities. In addition, Covanta Energy
completed tender offers for outstanding notes previously issued by its
intermediate subsidiaries. As a result of the recapitalization,
Covanta recognized a loss on extinguishment of debt of approximately
$32.0 million, pre-tax.
Discussion of Non-GAAP Financial Measures
To supplement our results prepared in accordance with United States
generally accepted accounting principles (''GAAP''), we use the measure of
Adjusted EBITDA, which is a non-GAAP measure as defined by the Securities and
Exchange Commission. The non-GAAP financial measure of Adjusted EBITDA
described below, and used in the tables above, is not intended as a substitute
and should not be considered in isolation from measures of financial
performance or liquidity prepared in accordance with GAAP. In addition, our
non-GAAP financial measure may be different from non-GAAP measures used by
other companies, limiting their usefulness for comparison purposes.
We use a number of different financial measures, both GAAP and non-GAAP,
in assessing the overall performance of our business. We use Adjusted EBITDA
to provide further information that is useful to an understanding of the
financial covenants contained in the credit facilities of our most significant
subsidiary, Covanta Energy Corporation, and as additional ways of viewing
aspects of its operations that, when viewed with the GAAP results and the
accompanying reconciliations to corresponding GAAP financial measures, provide
a more complete understanding of our business. The presentation of Adjusted
EBITDA is intended to enhance the usefulness of our financial information by
providing a measure which management internally uses to assess and evaluate
the overall performance of its business and those of possible acquisition
candidates, and highlight trends in the overall business. We also use this
non-GAAP financial measure as a significant criterion of performance-based
components of employee compensation.
Adjusted EBITDA should not be considered as an alternative to net income
or an alternative to cash flow provided by operating activities as indicators
of our performance or liquidity or any other measures of performance or
liquidity derived in accordance with GAAP.
Adjusted EBITDA
The calculation of Adjusted EBITDA is based on the definition in Covanta
Energy's credit facilities, which we have guaranteed. Adjusted EBITDA is
defined as earnings before interest, taxes, depreciation and amortization, as
adjusted for additional items subtracted from or added to net income. Because
our business is substantially comprised of that of Covanta Energy, our
financial performance is substantially similar to that of Covanta Energy. For
this reason, and in order to avoid use of multiple financial measures which
are not all from the same entity, the calculation of Adjusted EBITDA and other
financial measures presented herein are ours, measured on a consolidated
basis.
Under these credit facilities, Covanta Energy is required to satisfy
certain financial covenants, including certain ratios of which Adjusted EBITDA
is an important component. Compliance with such financial covenants is
expected to be the principal limiting factor which will affect our ability to
engage in a broad range of activities in furtherance of our business,
including making certain investments, acquiring businesses and incurring
additional debt. Covanta Energy was in compliance with these covenants as of
June 30, 2008. Failure to comply with such financial covenants could result
in a default under these credit facilities, which default would have a
material adverse affect on our financial condition and liquidity.
These financial covenants are measured on a trailing four quarter period
basis and the material covenants are as follows:
-- maximum Covanta Energy leverage ratio of 4.25 to 1.00 (which declines
for quarterly periods after September 30, 2008), which measures Covanta
Energy's Consolidated Adjusted Debt, (which is the principal amount of its
consolidated debt less certain restricted funds dedicated to repayment of
project debt principal and construction costs) to its Adjusted EBITDA; and
-- minimum Covanta Energy interest coverage ratio of 3.00 to 1.00, which
measures Covanta Energy's Adjusted EBITDA to its consolidated interest expense
plus certain interest expense of ours, to the extent paid by Covanta Energy.
In order to provide a meaningful basis for comparison, we are providing
information with respect to our Adjusted EBITDA for the three and six months
ended June 30, 2008 and 2007, reconciled for each such periods to net income
and cash flow provided by operating activities, which are believed to be the
most directly comparable measures under GAAP.
SOURCE Covanta Holding Corporation
