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Covanta Holding Corporation Reports 2014 Fourth Quarter And Full Year Results And Provides 2015 Guidance

MORRISTOWN, N.J., Feb. 11, 2015  /PRNewswire/ -- Covanta Holding Corporation (NYSE: CVA) ("Covanta" or the "Company"), a leading global owner and operator of Energy-from-Waste ("EfW") projects, reported financial results today for the three and twelve months ended December 31, 2014.



FY 2013


FY 2014


FY 2014

Guidance (1)

Continuing Operations


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

Revenue


$      1,630


$      1,682


NA

Net Income (Loss) from Continuing Operations


$           45


$           (6)


NA

Adjusted EBITDA


$         494


$         474


$   470 - $500

Free Cash Flow


$         245


$         240


$   170 - $210

Adjusted EPS


$        0.38


$        0.39


$  0.35 - $0.50

(1) Reaffirmed as of October 22, 2014.

Covanta Logo

Full Year 2014 Highlights :

  • Commenced construction of Dublin EfW facility
  • Won Pinellas County, FL EfW facility operating contract and commenced operations
  • Record recycled metal and special waste volumes and revenue
  • Executed waste and service contracts totaling approximately 4 million tons per year – continued track record of successfully extending long-term client relationships
  • Launched efficiency improvement initiative – on track to deliver $30 million in Adjusted EBITDA benefit in 2015
  • Extended expected benefit of tax NOL into late decade
  • Increased regular dividend by 52% to $1.00 per share (annualized)

"I am very pleased with our team's performance. We delivered a solid year operationally and financially, and we positioned Covanta for long-term growth with a number of strategic wins, most notably commencing construction of the Dublin facility and winning a new contract to operate the Pinellas facility. Furthermore, we continued our track record of successfully extending waste and service contracts, our organic growth initiatives are delivering results and we announced an important efficiency improvement program that will benefit 2015," stated Anthony Orlando, Covanta's President and CEO.

Stephen J. Jones, Covanta's incoming President and CEO, further stated, "I am extremely excited for the opportunity to lead such a dynamic organization. The Company has a solid base business that generates strong free cash flow, which allows us tremendous flexibility to invest in strategic growth opportunities while also returning capital to shareholders.  I'm looking forward to joining the best team in the industry, which is always focused on improving operations to better serve our clients, and engaging with all of Covanta's stakeholders."

Full Year 2014 – From Continuing Operations
For the twelve months ended December 31, 2014, total revenues increased by $52 million to $1,682 million from $1,630 million in 2013. The primary driver for the increase was North America EfW revenue, which increased by $39 million.

Same store North America EfW revenue increased by $49 million as follows:

  • waste and service revenues increased by $14 million;
  • energy revenues increased by $17 million, driven by an $11 million increase related to higher prices and a $7 million increase related to higher energy production; and
  • recycled metals revenues increased by $17 million, driven by a $13 million increase in volume, primarily as a result of capital investment to increase recovery rates, and a $5 million increase due to higher market prices.

Also within North America EfW revenue, contract transitions, including lower debt service revenues, resulted in a decrease of $18 million. Transactions, primarily related to the full year impact from the Camden facility acquisition, increased revenue by $11 million.

Other operating revenues decreased by $21 million, primarily due to lower construction revenue, while non-EfW waste and services revenues in the North America segment increased by $19 million, primarily due to transfer stations acquired in the fourth quarter of 2013.

All other energy revenue (non-EfW operations) increased by $10 million on a consolidated basis, driven by a $2 million increase in revenue from biomass operations due to higher energy prices and $8 million in higher steam revenue from a facility in China.

Excluding write-offs (2), operating expenses increased by $81 million to $1,475 million. The year-over-year increase was primarily due to:

  • a $23 million increase in North America EfW plant operating expenses primarily resulting from an $11 million increase in EfW same store plant operating expenses and an $11 million increase due to transactions;
  • a $40 million increase in North America segment non-EfW plant operating expenses, primarily related to additional expenses from transfer stations acquired in the fourth quarter of 2013, higher wood fuel cost at our biomass facilities, higher employee incentive compensation, and other expenses related to increased revenue as noted above, partially offset by the benefit of higher renewable energy credits, which are accounted for as a contra expense; and
  • a $15 million increase in consolidated general and administrative expenses, primarily due to higher non-cash stock compensation and expenses incurred related to the implementation of our cost efficiency initiatives.

Excluding write-offs (2), operating income decreased by $29 million to $207 million in 2014 due to the revenue and expense items noted above.

Adjusted EBITDA declined by $20 million on a year-over-year basis to $474 million due to contract transitions (primarily a reduction in debt service billings), higher scheduled plant maintenance expense, lower construction profit, and one-time gains that occurred in 2013.  

Free Cash Flow declined by $5 million to $240 million, primarily as a result of lower Adjusted EBITDA and higher maintenance capital expenditures, partially offset by favorable working capital changes.

Adjusted EPS increased by $0.01 to $0.39.  The increase was driven by lower book interest expense and higher equity income, partially offset by lower operating income.

(2) 2014 and 2013 include net write-offs of $64 million and $15 million, respectively.

Shareholder Returns
In 2014, the Company increased its cash dividend to $1.00 per share on annualized basis and returned $114 million in dividends to shareholders during the year. 

Fourth Quarter Results – From Continuing Operations
For the three months ended December 31, 2014 compared to the same period last year:

  • Total revenues increased $13 million (3%) to $435 million;
  • Adjusted EBITDA decreased $21 million to $131 million;
  • Free Cash Flow increased $21 million to $54 million; and
  • Adjusted EPS decreased by $0.12 to $0.06.  

2015 Guidance
The Company is establishing guidance for 2015 for the following key metrics:

Continuing Operations
(In millions)

Metric

2014

Actual

2015

Guidance Range

Adjusted EBITDA

$   474

$  450 - $  490

Free Cash Flow

$   240

$  200 - $  240

Brad Helgeson, Covanta's CFO, stated, "Our guidance for 2015 reflects benefits of several new contracts generating revenue and our efficiency initiatives, but also reflects the recent meaningful decline in energy and scrap metal market prices. Despite the current commodity price environment, the business continues to generate significant cash flow, and we remain squarely focused on executing our plan in 2015, returning capital to shareholders through our dividend and investing for growth over the long-term."

Conference Call Information  
Covanta will host a conference call at 8:30 AM (Eastern) on Thursday, February 12, 2015 to discuss its fourth quarter and full year results.  The conference call will begin with prepared remarks, which will be followed by a question and answer session.  To participate, please dial 1-800-860-2442 approximately 10 minutes prior to the scheduled start of the call.  If calling from Canada, please dial 1-866-605-3852. If calling outside of the United States and Canada, please dial 1-412-858-4600. Please request the "Covanta Holding Corporation call" when prompted by the conference call operator. The conference call will also be webcast live from the Investor Relations section of the Company's website.  A presentation will be made available during the call and will be found on the Investor Relations section of the Covanta website at www.covanta.com.

A replay will be available one hour after the end of the conference call through 9:00 AM (Eastern) February 19, 2015. To access the replay, please dial 1-877-344-7529, or from outside of the United States 1-412-317-0088 and use the replay conference ID number 10059534. The webcast will also be archived on www.covanta.com.

About Covanta
Covanta is a world leader in providing sustainable waste and energy solutions. The Company's 46 Energy-from-Waste facilities provide communities and businesses around the world with environmentally sound solid waste disposal by using waste to generate clean, renewable energy. Annually, Covanta's modern Energy-from-Waste facilities safely and securely convert approximately 20 million tons of waste into clean, renewable electricity to power approximately one million homes and recycle approximately 500,000 tons of metal. Energy-from-Waste facilities reduce greenhouse gases, complement recycling and are a critical component to sustainable solid waste management. For more information, visit www.covanta.com.

Cautionary Note Regarding Forward-Looking Statements  
Certain statements in this press release may constitute "forward-looking" statements as defined in Section 27A of the Securities Act of 1933 (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), the Private Securities Litigation Reform Act of 1995 (the "PSLRA") or in releases made by the Securities and Exchange Commission ("SEC"), all as may be amended from time to time. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Covanta Holding Corporation and its subsidiaries ("Covanta") or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward-looking statements.  For additional information see the Cautionary Note Regarding Forward-Looking Statements at the end of the Exhibits. 

 

Covanta Holding Corporation


Exhibit 1


Consolidated Statements of Operations








Three Months Ended
December 31,


Twelve Months Ended
December 31,


2014


2013


2014


2013


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

Operating revenues












Waste and service revenues

$

272



$

266



$

1,032



$

1,008


Recycled metals revenues

21



21



93



73


Energy revenues

110



109



460



431


Other operating revenues

32



26



97



118


Total operating revenues

435



422



1,682



1,630


Operating expenses












Plant operating expenses

257



232



1,055



992


Other operating expenses

35



28



101



97


General and administrative expenses

24



20



97



82


Depreciation and amortization expense

54



53



212



210


Net interest expense on project debt

2



3



10



13


Net (gains) write-offs



(1)



64



15


Total operating expenses

372



335



1,539



1,409


Operating income

63



87



143



221


Other income (expense)












Investment income

1





1




Interest expense

(33)



(30)



(125)



(118)


Non-cash convertible debt related expense



(7)



(13)



(28)


Loss on extinguishment of debt





(2)



(1)


Other income, net

(1)



4



(1)



4


Total other expenses

(33)



(33)



(140)



(143)


Income from continuing operations before income tax

    expense and equity in net income from

    unconsolidated investments

30



54



3



78


Income tax expense

(38)



(29)



(18)



(40)


Equity in net income from unconsolidated investments

5



2



10



6


(Loss) income from continuing operations

(3)



27



(5)



44


Income (loss) from discontinued operations, net of income

    tax benefit of $0, $0, $0 and $1, respectively



1





(52)


Net (Loss) Income

(3)



28



(5)



(8)


Noncontrolling interests:












Less: Net (income) loss from continuing operations

    attributable to noncontrolling interests in subsidiaries

(1)





(1)



1


Net (Loss) Income Attributable to Covanta Holding

    Corporation

$

(4)



$

28



$

(6)



$

(7)






























































Covanta Holding Corporation












Consolidated Statements of Operations (continued)

























Three Months Ended
December 31,


Twelve Months Ended
December 31,


2014


2013


2014


2013


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

Amounts Attributable to Covanta Holding

    Corporation stockholders:












Continuing operations

$

(4)



$

27



$

(6)



$

45


Discontinued operations



1





(52)


Net (Loss) Income Attributable to Covanta Holding

    Corporation

$

(4)



$

28



$

(6)



$

(7)














(Loss) Earnings Per Share Attributable to Covanta

    Holding Corporation stockholders:












Basic












Continuing operations

$

(0.03)



$

0.21



$

(0.05)



$

0.35


Discontinued operations



0.01





(0.40)


Covanta Holding Corporation

$

(0.03)



$

0.22



$

(0.05)



$

(0.05)


Weighted Average Shares

131



129



130



129














Diluted












Continuing operations

$

(0.03)



$

0.21



$

(0.05)



$

0.35


Discontinued operations



0.01





(0.40)


Covanta Holding Corporation

$

(0.03)



$

0.22



$

(0.05)



$

(0.05)


Weighted Average Shares

131



130



130



130














Cash Dividend Declared Per Share:

$

0.25



$

0.165



$

0.86



$

0.66














Supplemental Information - Non-GAAP












Adjusted EPS(a)

$

0.06



$

0.18



$

0.39



$

0.38














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

 

 

Covanta Holding Corporation

Exhibit 2


Consolidated Balance Sheets





As of December 31,


2014


2013


(Unaudited)





(In millions, except per share amounts)

ASSETS


Current:






Cash and cash equivalents

$

91



$

195


Restricted funds held in trust

105



41


Receivables (less allowances of $6 and $4, respectively)

302



264


Unbilled service receivables

8



16


Deferred income taxes

21



25


Note Hedge



78


Prepaid expenses and other current assets

95



100


Assets held for sale



71


Total Current Assets

622



790


Property, plant and equipment, net

2,667



2,636


Restricted funds held in trust

91



126


Unbilled service receivables

8



13


Waste, service and energy contract intangibles, net

316



364


Other intangible assets, net

17



20


Goodwill

276



249


Investments in investees and joint ventures

46



47


Other assets

170



133


Total Assets

$

4,213



$

4,378


LIABILITIES AND EQUITY






Current:






Current portion of long-term debt (a)

$

5



$

528


Current portion of project debt (a)

40



55


Accounts payable

34



24


Accrued expenses and other current liabilities

303



250


Liabilities held for sale



49


Total Current Liabilities

382



906


Long-term debt (a)

1,968



1,557


Project debt (a)

207



181


Deferred income taxes

749



722


Waste, service and other contract intangibles, net

19



30


Other liabilities

103



71


Total Liabilities

3,428



3,467


Equity:






Covanta Holding Corporation stockholders' equity:






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




Common stock ($0.10 par value; authorized 250 shares; issued 136 and 136 shares, respectively;

    outstanding 133 and 130 shares, respectively)

14



14


Additional paid-in capital

805



790


Accumulated other comprehensive loss

(22)



(2)


Accumulated (deficit) earnings

(14)



106


Treasury stock, at par



(1)


Total Covanta Holding Corporation stockholders equity

783



907


Noncontrolling interests in subsidiaries

2



4


Total Equity

785



911


Total Liabilities and Equity

$

4,213



$

4,378








(a) For additional information, see Exhibit 7 of this Press Release.






 

 


Covanta Holding Corporation

Exhibit 3


Consolidated Statements of Cash Flow



Twelve Months Ended
December 31,


2014



2013








OPERATING ACTIVITIES:







Net loss

$

(5)




$

(8)


Less: Loss from discontinued operations, net of tax expense




(52)


(Loss) income from continuing operations

(5)




44


Adjustments to reconcile net (loss) income from continuing operations to net cash provided by

   operating activities from continuing operations:







Depreciation and amortization expense

212




210


Net write-offs

64




15


Pension plan settlement gain




(6)


Loss on extinguishment of debt

2




1


Non-cash convertible debt related expense

13




28


Stock-based compensation expense

17




15


Deferred income taxes

7




28


Other, net

15




2


Change in restricted funds held in trust

11




20


Change in working capital, net of effects of acquisitions

4




(33)


Net cash provided by operating activities from continuing operations

340




324


Net cash provided by (used in) operating activities of discontinued operations

1




(8)


Net cash provided by operating activities

341




316


INVESTING ACTIVITIES:







Purchase of property, plant and equipment

(216)




(188)


Change in restricted funds held in trust

(3)





Acquisition of business, net of cash acquired

(13)




(57)


Acquisition of noncontrolling interest in subsidiary

(12)




(14)


Proceeds from the sale of available-for-sale marketable securities

11





Payment received for loan issued for the Harrisburg EfW facility




9


Property insurance proceeds

2




4


Other, net

(4)




(12)


Net cash used in investing activities from continuing operations

(235)




(258)


Net cash provided by investing activities of discontinued operations

3





Net cash used in investing activities

(232)




(258)


FINANCING ACTIVITIES:(a)







Proceeds from borrowings on long-term debt

412




22


Payment of deferred financing costs

(36)




(1)


Principal payments on long-term debt

(557)




(3)


Payments related to Cash Conversion Option

(83)





Proceeds from settlement of Note Hedge

83





Principal payments on project debt

(52)




(83)


Payments of borrowings on revolving credit facility

(496)




(595)


Proceeds from borrowings on revolving credit facility

531




645


Proceeds from borrowings on project debt

63





Proceeds from equipment financing capital lease

63





Payment of equipment financing capital lease

(1)





Change in restricted funds held in trust

(40)




27


Cash dividends paid to stockholders

(101)




(65)


Common stock repurchased




(34)


Other, net

7




(24)


Net cash used in financing activities from continuing operations

(207)




(111)


Net cash (used in) provided by financing activities of discontinued operations

(6)




8


Net cash used in financing activities

(213)




(103)


Effect of exchange rate changes on cash and cash equivalents

(5)




(1)


Net decrease in cash and cash equivalents

(109)




(46)


Cash and cash equivalents at beginning of period

200




246


Cash and cash equivalents at end of period

91




200


Less: Cash and cash equivalents of discontinued operations at end of period




5


Cash and cash equivalents of continuing operations at end of period

$

91




$

195









(a) For additional information, see Exhibit 7 of this Press Release.











 

 


Covanta Holding Corporation










Exhibit 4


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
















Three Months Ended
December 31,


Twelve Months Ended
December 31,



2014


2013


2014


2013


(Unaudited)


Continuing Operations - Diluted (Loss) Income Per Share

$

(0.03)



$

0.21



$

(0.05)



$

0.35



Reconciling Items(a)

0.09



(0.03)



0.44



0.03



Adjusted EPS

$

0.06



$

0.18



$

0.39



$

0.38
















(a) For details related to the Reconciling Items, see Exhibit 4A of this Press Release.


























Covanta Holding Corporation










Exhibit 4A


Reconciling Items














Three Months Ended
December 31,


Twelve Months Ended
December 31,



2014


2013


2014


2013



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


Reconciling Items













Operating loss related to insurance subsidiaries

$

1



$

1



$

2



$

2



Net (gains) write-offs



(1)



64



15



Severance and other restructuring(a)

3



2



9



2



Pension plan settlement gain(b)







(6)



Gain related to trust distribution(c)



(4)





(4)



Loss on extinguishment of debt





2



1



Loss on derivative instruments not designated as hedging

    instruments



(1)





(1)



Effect of foreign exchange loss on indebtedness

1





1





Other



(1)



1





   Total Reconciling Items, pre-tax

5



(4)



79



9



Proforma income tax impact

2





(32)



(5)



ARC purchase accounting adjustment tax impact

4





8





Grantor trust activity

1





1





   Total Reconciling Items, net of tax

$

12



$

(4)



$

56



$

4



Diluted EPS Impact from Reconciling Items

$

0.09



$

(0.03)



$

0.44



$

0.03



Weighted Average Diluted Shares Outstanding

131



130



130



130
















(a) Includes certain costs incurred in connection with costs savings initiatives.


(b) In 2013, we recorded a defined benefit pension plan settlement gain of $6 million.


(c) In 2013, we recorded a $4 million gain related to a distribution received from an insurance subsidiary grantor trust.




























 

 


Covanta Holding Corporation













Exhibit 5

Reconciliation of Net (Loss) Income to Adjusted EBITDA
















Three Months Ended
December 31,


Twelve Months Ended
December 31,


Full  Year
Estimated 2015







2014


2013


2014


2013



(Unaudited, in millions)



Net (Loss) Income from Continuing Operations

    Attributable to Covanta Holding Corporation

$

(4)



$

27



$

(6)



$

45



$35 - $60

Operating loss related to insurance subsidiaries

1



1



2



2




Depreciation and amortization expense

54



53



212



210



227 - 217

Debt service:














Net interest expense on project debt

2



3



10



13




Interest expense

33



30



125



118




Non-cash convertible debt related expense



7



13



28




Investment income

(1)





(1)






Subtotal debt service

34



40



147



159



145 - 135

Income tax expense

38



29



18



40



20 - 45

Net (gains) write-offs



(1)



64



15




Pension plan settlement gain







(6)




Gain related to trust distribution



(4)





(4)




Loss on extinguishment of debt





2



1




Net income (loss) attributable to noncontrolling

    interests in subsidiaries

1





1



(1)



0 - 2

Other adjustments:














Debt service billings in excess of revenue
   
recognized

1





2



9




Severance and other restructuring

3



2



9



2




Non-cash compensation expense

2



3



17



15




 Other non-cash items(a)

1



2



6



7




Subtotal other adjustments

7



7



34



33



23 - 31

Total adjustments

135



125



480



449




Adjusted EBITDA

$

131



$

152



$

474



$

494



$450 - $490















(a)  Includes certain non-cash items that are added back under the definition of Adjusted EBITDA in Covanta Energy Corporation's credit agreement.

 

 

Covanta Holding Corporation


Exhibit 6

Consolidated Reconciliation of Cash Flow Provided by Operating Activities to Adjusted EBITDA










Three Months Ended
December 31,


Twelve Months Ended
December 31,


Full Year
Estimated 2014


2014


2013


2014


2013



(Unaudited, in millions)



Cash flow provided by operating activities

    from continuing operations

$

76



$

49



$

340



$

324



$310 - $360

Cash flow used in operating activities from

    insurance subsidiaries

1



4



1



8




Debt service

34



40



147



159



145 - 135

Change in working capital

(3)



69



(4)



33




Change in restricted funds held in trust

3



(3)



(11)



(20)




Non-cash convertible debt related

    expense



(7)



(13)



(28)




Equity in net income from unconsolidated

    investments

5



2



10



6




Dividends from unconsolidated

    investments

(1)





(11)



(7)




Current tax provision

18



9



11



12




Other

(2)



(11)



4



7




Sub-total

20



59



(14)



3



(5)

Adjusted EBITDA

$

131



$

152



$

474



$

494



$450 - $490






























 

 


Covanta Holding Corporation


Exhibit 7

Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow







Three Months Ended
December 31,


Twelve Months Ended
December 31,


Full  Year
Estimated 2015


2014


2013


2014


2013



(Unaudited, in millions)

















Cash flow provided by operating activities from

    continuing operations

$

76



$

49



$

340



$

324



$310 - $360

Plus: Cash flow used in operating activities from

    insurance subsidiaries

1



4



1



8




Less: Maintenance capital expenditures(a)

(23)



(20)



(101)



(87)



(110) - (120)

Free Cash Flow

$

54



$

33



$

240



$

245



$200 - $240

Weighted Average Diluted Shares Outstanding

131



130



130



130


















Uses of Free Cash Flow














Investments:














Acquisition of business, net of cash acquired (b)

$



$

(8)



$

(13)



$

(57)




Property insurance proceeds

2





2



4




Non-maintenance capital expenditures(b)

(41)



(28)



(115)



(101)




Change in restricted funds held in trust for

    project development

17





(3)






Other growth investments(b)

2



(1)



(15)



(4)




Other investing activities, net(c)

9



9



10



(13)




Total investments

$

(11)



$

(28)



$

(134)



$

(171)


















Return of capital to stockholders:














Cash dividends paid to stockholders

$

(32)



$

(20)



$

(101)



$

(65)




Common stock repurchased







(34)




Total return of capital to stockholders

$

(32)



$

(20)



$

(101)



$

(99)


















Capital raising activities:














Net proceeds from issuance of corporate debt(d)(e)

$



$



$

405



$

21




Net proceeds from issuance of project debt (f)










Net proceeds from equipment capital leases(g)

16





63






Net proceeds from the exercise of options for

    common stock

9





10



1




Other financing activities, net

5



(7)



(3)



(25)




Net proceeds from capital raising activities

$

30



$

(7)



$

475



$

(3)


















Debt repayments:














Net cash used for scheduled principal payments

    on corporate debt(e)

$



$

(1)



$

(462)



$

(3)




Payments related to Cash Conversion Option(h)





(83)






Proceeds from the settlement of Note Hedge(h)





83






Net cash used for scheduled principal payments

    on project debt (i)

(2)



(6)



(29)



(56)




Payment of equipment capital leases(g)

(1)





(1)






Voluntary prepayment of corporate debt(e)





(95)






Fees incurred for debt redemption





(29)






Total debt repayments

$

(3)



$

(7)



$

(616)



$

(59)




























































Covanta Holding Corporation


Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow (continued)

















Three Months Ended
December 31,


Twelve Months Ended
December 31,




2014


2013


2014


2013

















Borrowing activities - Revolving credit facility,

     net(e)

$

(35)



$

(16)



$

35



$

50




Effect of exchange rate changes on cash and cash

     equivalents

$

(2)



$

(2)



$

(5)



$

(1)




Net change in cash and cash equivalents

$

1



$

(47)



$

(106)



$

(38)


















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









Maintenance capital expenditures

$

(23)



$

(20)



$

(101)



$

(87)




Capital expenditures associated with organic growth

    initiatives

(13)



(17)



(42)



(78)




Capital expenditures associated with the New York

    City contract

(14)



(11)



(59)



(23)




Capital expenditures associated with

    construction of Dublin EfW facility

(14)





(14)






Total capital expenditures associated with the

    organic growth initiatives, New York City

    contract and Dublin EfW facility

(41)



(28)



(115)



(101)




Total purchases of property, plant and equipment

$

(64)



$

(48)



$

(216)



$

(188)


















(b)  Growth investments includes investments in growth opportunities, including organic growth initiatives, technology, business development,
       and other similar expenditures. Other organic growth investments include investments primarily in our TARTECH joint venture.

















Capital expenditures associated with organic growth

    initiatives

$

(13)



$

(17)



$

(42)



$

(78)




Capital expenditures associated with the New York

    City contract

(14)



(11)



(59)



(23)




Capital expenditures associated with Dublin EfW

    facility construction

(14)





(14)






Other organic growth investments



(1)



(1)



(4)




Acquisition of business, net of cash acquired



(8)



(13)



(57)




Other investments in connection with the Dublin

    EfW facility

2





(14)






Total growth investments

$

(39)



$

(37)



$

(143)



$

(162)


















(c)  Other investing activities includes net payments from the purchase/sale of investment securities.




(d)  Excludes borrowings under Revolving Credit Facility. Calculated as follows:

















Proceeds from borrowings on long-term debt(e)

$



$



$

412



$

22




Less: Financing costs related to issuance of long-

    term debt





(7)



(1)




Net proceeds from issuance of corporate debt (e)

$



$



$

405



$

21










































































Covanta Holding Corporation


Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow (continued)
















(e) During the first quarter in 2014, we completed the following financing transactions:



-  We issued $400 million aggregate principal amount 5.875% senior notes due 2024. The proceeds of the Notes were used for general
   corporate purposes including to repay, at maturity, the 3.25% Cash Convertible Notes due June 1, 2014.






-  We amended our credit facilities. The amendment: (i) raised the revolving credit facility maximum available credit by a $100 million to $1.0
   billion; (ii) extended the maturity of the revolving credit facility by two additional years through March 2019; and (iii) reduced the interest rate
   on the term loan by 25 basis points.






-  We made a voluntary prepayment on the term loan of $95 million, consisting of principal and accrued interest. As a result of these 
   transactions, we recognized a loss on extinguishment of debt of approximately $2 million, pre-tax, consisting of the write-
   off of deferred financing costs and discounts related to the pre-amended credit facilities. We incurred $10 million in costs related to these 
   transactions which have been paid as of December 31, 2014.



















(f) During 2014, we received proceeds from a Junior Term Loan related to our Dublin project.


















Three Months Ended
December 31,


Twelve Months Ended
December 31,




2014


2013


2014


2013

















Proceeds from borrowings on project debt

$



$



$

63



$




Less: Funding into escrow





(63)






Net proceeds from issuance of project debt

$



$



$



$


















(g) During 2014, we financed $63 million for equipment related to our New York City contract.






(h) The $460 million of 3.25% Cash Convertible Senior Notes matured on June 1, 2014. Upon maturity, we were required to pay $83 million to 
      satisfy the obligation under the Cash Conversion Option in addition to the principal amount of the 3.25% Notes. We cash-settled the Note
      Hedge for $83 million effectively offsetting our liability under the Cash Conversion Option.

















(i) Calculated as follows:




























Total scheduled principal payments on project debt

$

(19)



$

(30)



$

(52)



$

(83)




Decrease in related restricted funds held in trust

17



24



23



27




Net cash used for principal payments on project

    debt

$

(2)



$

(6)



$

(29)



$

(56)














































 

 



Covanta Holding Corporation

Exhibit 8


Supplemental Information on Operations (a)

(Unaudited, $ in millions)






Twelve Months Ended December 31, 2014



North America









EfW


Other


Total


Other


Consolidated

Revenue:
















Waste and service:
















Waste processing & handling


$

933



$

56



$

989



$

1



$

990


Debt service


21





21





21


Other revenues


7



13



20



1



21


Total waste and service


961



69



1,030



2



1,032


Recycled metals:
















Ferrous


61



4



65





65


Non-ferrous


28





28





28


Total recycled metals


89



4



93





93


Energy:
















Energy sales


325



52



377



37



414


Capacity


32



14



46





46


Total energy revenue


357



66



423



37



460


Other revenue




95



95



2



97


Total revenue


$

1,407



$

234



$

1,641



$

41



$

1,682


















Operating expenses:
















Plant operating expenses:
















Plant maintenance


227



17



244



1



245


Other plant operating expenses


600



179



779



31



810


Total plant operating expenses


827



196



1,023



32



1,055


Other operating expenses


(1)



99



98



3



101


General and administrative




94



94



3



97


Depreciation and amortization


186



23



209



3



212


Net interest expense on project debt


9





9



1



10


Net write-offs


9



41



50



14



64


Total operating expenses


$

1,030



$

453



$

1,483



$

56



$

1,539


















Operating Income (Loss)


$

377



$

(219)



$

158



$

(15)



$

143


















Operating Income (Loss) excluding Net write-offs:


$

386



$

(178)



$

208



$

(1)



$

207


















(a) Supplemental information provided in order to present the financial performance of our North America EfW operations.  "Other" within our North America segment includes all non-EfW operations, including transfer stations, landfills, e-waste, biomass facilities, construction and corporate overhead.  This information is provided as supplemental detail only and is not intended to replace our North America reporting segment.

















Note: Certain amounts may not total due to rounding



 

 



Covanta Holding Corporation

Exhibit 8A


Supplemental Information on Operations (a)

(Unaudited, $ in millions)






Twelve Months Ended December 31, 2013



North America









EfW


Other


Total


Other


Consolidated


Revenue:
















Waste and service:
















Waste processing & handling


$

912



$

45



$

957



$

1



$

958


Debt service


35





35





35


Other revenues


9



5



14



1



15


Total waste and service


956



50



1,006



2



1,008


Recycled metals:
















Ferrous


56





56





56


Non-ferrous


17





17





17


Total recycled metals


73





73





73


Energy:
















Energy sales


298



48



346



30



376


Capacity


40



15



55





55


Total energy revenue


338



63



401



30



431


Other revenue


1



114



115



3



118


Total revenue


$

1,368



$

227



$

1,595



$

35



$

1,630


















Operating expenses:
















Plant operating expenses:
















Plant maintenance


218



14



232



2



234


Other plant operating expenses


586



141



727



31



758


Total plant operating expenses


804



155



959



33



992


Other operating expenses


(13)



105



92



5



97


General and administrative




80



80



2



82


Depreciation and amortization


185



23



208



2



210


Net interest expense on project debt


11





11



2



13


Net write-offs


13



2



15





15


Total operating expenses


$

1,000



$

365



$

1,365



$

44



$

1,409


















Operating Income (Loss)


$

368



$

(138)



$

230



$

(9)



$

221


















Operating Income (Loss) excluding net write-offs:


$

381



$

(136)



$

245



$

(9)



$

236


















(a) Supplemental information provided in order to present the financial performance of our North America EfW operations.  "Other" within our North America segment includes all non-EfW operations, including transfer stations, landfills, e-waste, biomass facilities, construction and corporate overhead.  This information is provided as supplemental detail only and is not intended to replace our North America reporting segment.

















Note: Certain amounts may not total due to rounding



 

 

North America EfW










Exhibit 9


Revenue and Operating Income Changes - FY2013 to FY2014












(Unaudited, $ in millions)


































Same Store


Contract

Transitions












FY2013


Price


%


Volume


%


Total


%


Waste


PPA


Transactions


Total

Changes


FY2014

Waste and service:





































Waste processing


$

912



$

11



1.2

%


$

6



0.6

%


$

17



1.9

%


$

(3)



$



$

7



$

21



$

933


Debt service


35




















(13)







(14)



21


Other revenues


9















(2)












(2)



7


Total waste and service



956
















14



1.5

%



(17)







7




5




961


Recycled metals:





































Ferrous


56



2



4.3

%


4



6.8

%


6



11.1

%






1



5



61


Non-ferrous


17



2



13.2

%


9



52.4

%


11



65.7

%








11



28


Total recycled metals


73



5



6.4

%


13



17.5

%


17



24.0

%






1



16



89


Energy:





































Energy sales


298



11



3.8

%


7



2.2

%


18



6.0

%


3



3



3



27



325


Capacity


40

















-1.1

%




(7)





(8)



32


Total energy revenue


338















17



5.2

%


3



(4)



4



19



357


Other revenue


1

















 

11.6

%








(1)




Total revenue



1,368
















49



3.6

%



(14)




(4)




11




39




1,407


Operating expenses:





































Plant operating expenses:





































Plant Maintenance


$

218















$

5



2.2

%


$



$



$

4



$

9



$

227


Other plant operating

    expenses


586















6



1.0

%


1





7



14



600


Total plant operating

    expenses


804















11



1.4

%


1





11



23



827


Other operating expenses


(13)















5








8





12



(1)


General and

    administrative






























Depreciation and

    amortization


185
























2



1



186


Net interest expense on

    project debt


11















(2)












(2)



9


Total operating expenses



987
















13







1




8




13




34




1,021


Operating Income (Loss)


$

381















$

36






$

(16)



$

(12)



$

(2)



$

5



$

386












































































Note: Excludes Net write-offs (gains)



























Note: Certain amounts may not total due to rounding






































































 

 

North America EfW
























Exhibit 10

Operating Metrics (Unaudited) - Summary of 2013 and 2014 by Quarter















































Three Months Ended


Twelve Months Ended


Three Months Ended


Twelve

Months

Ended





Mar 31,


Jun 30,


Sep 30,


Dec 31,


Dec 31,


Mar 31,


Jun 30,


Sep 30,


Dec 31,


Dec 31,


Dec 31,  Y/Y %


2013


2013


2013


2013


2013


2014


2014


2014


2014


2014


Change

EfW Waste
































Tons:  (in millions)
































Contracted

3.5



3.9



4.0



3.8



15.2



3.6



4.1



4.2



4.1



16.0



5

%

Uncontracted

0.7



0.8



0.9



0.8



3.2



0.8



0.7



0.6



0.6



2.7



(17)

%

Total tons

4.1



4.7



4.9



4.7



18.4



4.4



4.8



4.8



4.7



18.7



2

%

Total contracted tons

    (EfW + transfer

    stations)

3.5



4.0



4.1



3.9



15.4



3.7



4.1



4.2



4.1



16.1



4

%

% of EfW

85

%


84

%


84

%


83

%


84

%


83

%


87

%


87

%


87

%


86

%




Revenue per ton:
































Contracted

$49.86



$48.22



$46.10



$51.59



$48.89



$49.88



$48.39



$45.84



$50.67



$48.65



%

Uncontracted

$49.98



$53.92



$52.48



$54.15



$52.79



$51.08



$59.17



$59.52



$60.44



$57.22



8

%

Average revenue per ton

$49.88



$49.23



$47.24



$52.05



$49.57



$50.09



$49.89



$47.61



$51.96



$49.87



1

%


































EfW Energy

































Energy sales: (MWh in millions)































Contracted

0.9



0.9



0.9



0.9



3.6



0.7



0.8



0.8



0.8



3.2



(11)

%

Hedged

0.2



0.2



0.2



0.3



0.8



0.3



0.3



0.3



0.4



1.4



71

%

Market

0.2



0.2



0.3



0.3



1.0



0.2



0.2



0.3



0.3



1.1



10

%

Total energy sales

1.2



1.3



1.4



1.4



5.3



1.3



1.4



1.5



1.5



5.6



5

%


































Market sales by

    geography:

































PJM East

0.1



0.1



0.2



0.2



0.6



0.1



0.1



0.1



0.1



0.4



(40)

%

NEPOOL



0.1



0.1



0.1



0.3



0.1



0.1



0.1



0.1



0.3



26

%

NYISO





















%

Other









0.1



0.1



0.1



0.1



0.1



0.3



494

%


































Revenue per MWh (excludes capacity):




























Contracted

$64.87



$63.82



$63.42



$63.57



$63.92



$70.66



$68.07



$64.94



$66.93



$67.56



6

%

Hedged

$39.75



$39.86



$38.60



$38.37



$39.01



$41.57



$43.20



$42.49



$44.14



$42.87



10

%

Market

$41.07



$37.99



$41.88



$42.35



$40.88



$86.29



$43.29



$40.33



$38.61



$49.12



20

%

Average revenue per

    MWh

$58.17



$55.97



$55.09



$55.07



$56.01



$65.21



$57.77



$54.54



$55.70



$58.06



4

%


































Metals

































Tons Sold: (in thousands)




























Ferrous

70



75



84



82



311



77



85



92



87



340



9

%

Non-ferrous

4



5



5



6



20



6



8



8



8



30



46

%


































Revenue per ton:

































Ferrous

$179



$176



$172



$185



$178



$201



$204



$204



$151



$190



7

%

Non-ferrous

$929



$841



$876



$792



$852



$963



$963



$984



$939



$962



13

%


































EfW plant operating expenses ($ in millions)

























Plant operating

    expenses - gross

$

251



$

221



$

200



$

210



$

882



$

250



$

229



$

203



$

213



$

896



2

%

Less: Client pass-

    through costs

(17)



(18)



(16)



(20)



(71)



(15)



(15)



(12)



(17)



(59)



(16)

%

Less: REC sales -

    contra-expense

(1)



(2)



(2)



(2)



(7)



(2)



(3)



(3)



(2)



(10)



35

%

Plant operating expenses -

    reported

$

233



$

201



$

182



$

188



$804



$

233



$

211



$

188



$

194



$

827



3

%

Client pass-throughs as

    % of gross costs

6.8

%


8.1

%


7.9

%


9.6

%


8.0

%


6.0

%


6.6

%


5.9

%


8.0

%


6.6

%





































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


























Note: Certain amounts may not total due to rounding












































 

 

Discussion of Non-GAAP Financial Measures

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

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

Adjusted EBITDA

We use Adjusted EBITDA to provide further information that is useful to an understanding of the financial covenants contained in the credit facilities as of December 31, 2014 of our most significant subsidiary, Covanta Energy, through which we conduct our core waste and energy services business, and as additional ways of viewing aspects of its operations that, when viewed with the GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of our core business. The calculation of Adjusted EBITDA is based on the definition in Covanta Energy's credit facilities as of December 31, 2014, 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, less the results of operations of our insurance subsidiaries.

Under the credit facilities as of December 31, 2014, 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 December 31, 2014. Failure to comply with such financial covenants could result in a default under these credit facilities, which default would have a material adverse affect on our financial condition and liquidity.

These financial covenants are measured on a trailing four quarter period basis and the material covenants are as follows:

  • maximum Covanta Energy leverage ratio of 4.00 to 1.00, which measures Covanta Energy's Consolidated Adjusted Debt (which is the principal amount of its consolidated debt less certain restricted funds dedicated to repayment of project debt principal and construction costs) to its Adjusted EBITDA (which for purposes of calculating the leverage ratio and interest coverage ratio, is adjusted on a pro forma basis for acquisitions and dispositions made during the relevant period); and
  • minimum Covanta Energy interest coverage ratio of 3.00 to 1.00, which measures Covanta Energy's Adjusted EBITDA to its consolidated interest expense plus certain interest expense of ours, to the extent paid by Covanta Energy.

In order to provide a meaningful basis for comparison, we are providing information with respect to our Adjusted EBITDA for the three and twelve months ended December 31, 2014 and 2013, reconciled for each such period to net income and cash flow provided by operating activities, which are believed to be the most directly comparable measures under GAAP.

Free Cash Flow

Free Cash Flow is defined as cash flow provided by operating activities from continuing operations, excluding the cash flow provided by or used in our insurance subsidiaries, less maintenance capital expenditures, which are capital expenditures primarily to maintain our existing facilities. We use the non-GAAP measure of Free Cash Flow as a criterion of liquidity and performance-based components of employee compensation. We use Free Cash Flow as a measure of liquidity to determine amounts we can reinvest in our core businesses, such as amounts available to make acquisitions, invest in construction of new projects, make principal payments on debt, or amounts we can return to our stockholders through dividends and/or stock repurchases.

In order to provide a meaningful basis for comparison, we are providing information with respect to our Free Cash Flow for the three and twelve months ended December 31, 2014 and 2013, reconciled for each such period to cash flow provided by operating activities, which we believe to be the most directly comparable measure under GAAP.

Adjusted EPS

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

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

In order to provide a meaningful basis for comparison, we are providing information with respect to our Adjusted EPS for the three and twelve months ended December 31, 2014 and 2013, reconciled for each such period to diluted income per share, which is believed to be the most directly comparable measure under GAAP.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

  • seasonal or long-term fluctuations in the prices of energy, waste disposal, scrap metal and commodities;
  • our ability to renew or replace expiring contracts at comparable pricing and with other acceptable terms;
  • adoption of new laws and regulations in the United States and abroad, including energy laws, environmental laws, labor laws and healthcare laws;
  • our ability to utilize net operating loss carryforwards;
  • failure to maintain historical performance levels at our facilities and our ability to retain the rights to operate facilities we do not own;
  • our ability to avoid adverse publicity relating to our business expansion efforts;
  • advances in technology;
  • difficulties in the operation of our facilities, including fuel supply and energy delivery interruptions, failure to obtain regulatory approvals, equipment failures, labor disputes and work stoppages, and weather interference and catastrophic events;
  • difficulties in the financing, development and construction of new projects and expansions, including increased construction costs and delays;
  • limits of insurance coverage;
  • our ability to avoid defaults under our long-term contracts;
  • performance of third parties under our contracts and such third parties' observance of laws and regulations;
  • concentration of suppliers and customers;
  • geographic concentration of facilities;
  • increased competitiveness in the energy and waste industries;
  • changes in foreign currency exchange rates;
  • limitations imposed by our existing indebtedness and our ability to perform our financial obligations and guarantees and to refinance our existing indebtedness;
  • exposure to counterparty credit risk and instability of financial institutions in connection with financing transactions;
  • the scalability of our business;
  • restrictions in our certificate of incorporation and debt documents regarding strategic alternatives;
  • failures of disclosure controls and procedures and internal controls over financial reporting;
  • our ability to attract and retain talented people;
  • general economic conditions in the United States and abroad, including the availability of credit and debt financing; and
  • other risks and uncertainties affecting our businesses described in Item 1A. Risk Factors of Covanta's Annual Report on Form 10-K for the year ended December 31, 2013 and in other filings by Covanta with the SEC.

Although we believe that our 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 of our forward-looking statements. Our 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 we do 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.

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SOURCE Covanta Holding Corporation

For further information: Investor Contacts: Alan Katz, 1.862.345.5456, IR@covanta.com; Media Contact: James Regan, 1.862.345.5216