New Jersey-based energy-from-waste developer Covanta more than doubles Q3 net income year-over-year to US$42M as revenues rise 7% to US$432M, mostly on higher construction revenue related to Honolulu expansion project

MORRISTOWN, New Jersey , October 19, 2011 (press release) – 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 nine months ended September 30, 2011.

Key Q3 2011 Financial Highlights:

Revenue increased 7% to $432 million
Adjusted EBITDA increased $2 million to $152 million
Free Cash Flow increased $11 million to $106 million
Adjusted EPS was flat at $0.24
Returned $91 million to shareholders during the quarter


Key Q3 2011 Operational Highlights:

Boiler availability over 90% for the twelve months ended September 30, 2011
Broke ground on Durham-York EfW project, first large scale EfW project in North America in over 15 years
H-Power expansion is ~70% complete and on track to start up in mid-2012
Chengdu EfW project began converting waste to energy


Commenting on the third quarter of 2011, Anthony Orlando, Covanta's President and CEO stated, "We completed another solid quarter in-line with our expectations. I was particularly pleased with our team's effort to successfully manage through Hurricane Irene, drive improved waste disposal revenue and break ground on our Durham-York construction project."

"Looking forward to 2012, we plan to continue growing the business, with a couple of new EfW projects coming online and several organic growth initiatives," Orlando concluded.

Third Quarter Results From Continuing Operations

For the three months ended September 30, 2011, operating revenues increased to $432 million, up $29 million or 7%, from $403 million in the prior year comparative period. Two thirds of this increase is attributable to higher construction revenue related to the Honolulu expansion project. The remainder of the increase was driven by strong recycled metals pricing, contract escalations and higher tip fee pricing and volume. These increases were partially offset by lower debt service pass through revenues, lower energy revenues from our biomass plants and lower energy pricing.

Operating expenses of $345 million declined 3% from $357 million in the prior year comparative period as higher construction costs in the current quarter partially offset $32 million of asset write-downs in the third quarter of last year.

Adjusted EBITDA of $152 million was up $2 million compared with last year's third quarter of $150 million as increases in recycled metals revenues and waste revenues were offset by lower debt service revenue and lower contribution from our biomass facilities.

Free Cash Flow was $106 million in the third quarter, an increase of $11 million compared to $95 million in the prior year comparative period, primarily attributable to an improvement in working capital, which was partially offset by a year over year increase in maintenance capital expenditures.

Adjusted EPS for the quarter was $0.24, which was flat with last year's third quarter, as the lower number of shares outstanding due to the Company's common stock buyback program and improved operating income, were offset by higher interest expense and a higher effective tax rate.

Year-to-Date Results From Continuing Operations

For the nine months ended September 30, 2011, total operating revenues increased 5% to $1,220 million. Free Cash Flow was $215 million for the year-to-date period compared to $236 million for the same period last year. Adjusted EBITDA was $346 million compared to $341 million for the same period last year and Adjusted EPS was $0.26 compared to $0.24 Adjusted EPS in 2010.

Updated 2011 Guidance for Continuing Operations

The Company is narrowing its 2011 guidance for the following key metrics (in millions, except per share amounts):


Sanjiv Khattri, Covanta's Chief Financial Officer, in commenting on the narrower guidance, noted, "We remain on track for a solid year-over-year increase in Adjusted EBITDA and Adjusted EPS and we continue to generate very strong Free Cash Flow."

Shareholder Return Activities

During the quarter, Covanta repurchased $81 million in common stock, or 5.2 million shares (3.6% of the Company's outstanding shares), at a weighted average cost of $15.58 per share. Aggregate repurchases since June 2010 total $300 million, or 18.7 million shares, representing 12.1% of our outstanding shares. The Company also paid a quarterly dividend on July 6, 2011 and declared another quarterly dividend which was paid on October 14, 2011, both for $0.075 per share. During the quarter, Covanta also increased its share repurchase authorization by $100 million, bringing the total authorized amount to $400 million. Covanta has now returned $565 million to shareholders since the inception of its shareholder return program in the third quarter of last year.

"We continue to benefit from our strong cash generation and predictable business model by proactively returning capital to shareholders. Our commitment to this initiative was echoed during the quarter as our Board increased our repurchase authorization," Khattri concluded.

Sale of Asia IPP Assets

In October, the Company completed the sale of its interests in the Madurai facility in India, the third of the four Asia IPP assets designated as assets held for sale. With this sale, Covanta has realized total net proceeds of approximately $256 million, net of transaction costs, from its asset sales so far this year.

Conference Call Information

Covanta will host a conference call at 8:30 am (Eastern) on Thursday, October 20, 2011 to discuss its results for the three and nine months ended September 30, 2011. The conference call will begin with prepared remarks, which will be followed by a question and answer session. To participate, please dial 877-806-3982 approximately 10 minutes prior to the scheduled start of the call. If you are calling from outside of the United States, please dial 702-928-7062. Please utilize conference ID number 11520954 when prompted by the conference call operator. The conference call will also be webcast live from the Investor Information section of the Covanta Energy website. A presentation, which will be referenced during the call, can be found on the Investor Relations section of the Covanta website at www.covantaenergy.com.

A replay of the conference call will be available from 11:30 AM (Eastern) Thursday, October 20, 2011. To access the replay, please dial 855-859-2056 or 800-585-8367, or from outside of the United States 404-537-3406 and use the replay conference ID number 11520954. The webcast will also be archived on www.covantaenergy.com.

10-Q Filing Update

The Company's Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2011 is expected to be filed during the week of October 24, 2011 and will include additional XBRL information required at this time.

About Covanta

Covanta Energy 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 44 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 approximately 20 million tons of waste into 9 million megawatt hours of clean renewable electricity and create more than 9 billion pounds of steam that are sold to a variety of industries. For more information, visit www.covantaenergy.com.  

Covanta Holding Corporation

Exhibit 1

 

Condensed Consolidated Statements of Operations

   
                 
 

Three Months Ended

 

Nine Months Ended

 
 

September 30,

 

September 30,

 
 

2011

 

2010 (A)

 

2011

 

2010 (A)

 
 

(Unaudited)

 
 

(In millions, except per share amounts)

 

Operating revenues

               

Waste and service revenues

$     273

 

$     257

 

$      800

 

$       766

 

Electricity and steam sales

109

 

115

 

301

 

316

 

Other operating revenues

50

 

31

 

119

 

82

 

Total operating revenues

432

 

403

 

1,220

 

1,164

 
                 

Operating expenses

               

Plant operating expenses

221

 

218

 

740

 

715

 

Other operating expenses

44

 

28

 

102

 

77

 

General and administrative expenses

24

 

22

 

74

 

76

 

Depreciation and amortization expense

48

 

47

 

142

 

142

 

Net interest expense on project debt

8

 

10

 

24

 

30

 

   Write-down of assets (B)

-

 

32

 

-

 

32

 

Total operating expenses

345

 

357

 

1,082

 

1,072

 
                 

Operating income

87

 

46

 

138

 

92

 
                 

Other income (expense)

               

   Investment income

1

 

1

 

1

 

1

 

   Interest expense

(16)

 

(11)

 

(50)

 

(32)

 

   Non-cash convertible debt related expense

(9)

 

(10)

 

(20)

 

(30)

 

   Other expenses, net

(11)

 

-

 

(14)

 

-

 

Total other expenses

(35)

 

(20)

 

(83)

 

(61)

 
                 

Income from continuing operations before income tax expense

               

and equity in net income from unconsolidated investments

52

 

26

 

55

 

31

 

Income tax expense

(2)

 

(15)

 

(3)

 

(18)

 

Equity in net income from unconsolidated investments

1

 

1

 

3

 

1

 
                 

Income from continuing operations

51

 

12

 

55

 

14

 
                 

Income from discontinued operations, net of income tax expense of $0, $1,

               

$3 and $5, respectively (A) (C)

(7)

 

11

 

144

 

32

 

Net Income

44

 

23

 

199

 

46

 
                 

Noncontrolling interests:

               

Less: Net income from continuing operations attributable to noncontrolling

               

     interests in subsidiaries

(2)

 

(2)

 

(3)

 

(4)

 

Less: Net income from discontinued operations attributable to noncontrolling

               

     interests in subsidiaries (A)

-

 

(1)

 

(3)

 

(3)

 

Total net income attributable to noncontrolling interests in subsidiaries

(2)

 

(3)

 

(6)

 

(7)

 

Net Income Attributable to Covanta Holding Corporation

$      42

 

$      20

 

$      193

 

$         39

 
                 
                 

Amounts Attributable to Covanta Holding Corporation stockholders':

               

Continuing operations

$       49

 

$      10

 

$        52

 

$         10

 

Discontinued operations (A)

(7)

 

10

 

141

 

29

 

Net Income Attributable to Covanta Holding Corporation

$       42

 

$      20

 

$      193

 

$         39

 
                 

Earnings Per Share Attributable to Covanta Holding Corporation

               

stockholders':

               

Basic  

               

Continuing operations

$    0.35

 

$    0.07

 

$     0.37

 

$      0.07

 

Discontinued operations (A)

(0.05)

 

0.06

 

0.98

 

0.18

 

Covanta Holding Corporation

$    0.30

 

$    0.13

 

$     1.35

 

$      0.25

 

Weighted Average Shares

139

 

153

 

143

 

154

 
                 

Diluted

               

Continuing operations

$    0.35

 

$    0.07

 

$     0.36

 

$      0.07

 

Discontinued operations (A)

(0.05)

 

0.06

 

0.98

 

0.18

 

Covanta Holding Corporation

$    0.30

 

$    0.13

 

$     1.34

 

$      0.25

 

Weighted Average Shares

140

 

154

 

144

 

155

 
                 

Cash Dividend Declared Per Share:

$   0.075

 

$         -

 

$   0.225

 

$      1.50

 
                 
                 

Supplemental Information - Non-GAAP

               
                 

Adjusted EPS (D)

$      0.24

 

$     0.24

 

$      0.26

 

$       0.24

 
                 
                 

 

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