Covanta Holding Corporation Reports 2020 Fourth Quarter and Full Year Results and Provides 2021 Guidance

MORRISTOWN, N.J., Feb. 18, 2021 /PRNewswire/ -- Covanta Holding Corporation (NYSE: CVA) ("Covanta" or the "Company"), a world leader in sustainable waste and energy solutions, reported financial results today for the year ended December 31, 2020.

Covanta Logo (PRNewsFoto/Covanta)

	Year Ended December 31,
	2020		2019
	(Unaudited, $ in millions)
Revenue	$1,904		$1,870
Net (loss) income	$(28)		$10
Adjusted EBITDA	$424		$428
Net cash provided by operating activities	$254		$226
Free Cash Flow	$95		$140
Reconciliations of non-GAAP measures can be found in the exhibits to this press release.

Key Highlights

• Strategic review progressing, with initial implementation steps to be announced by mid-year 2021

• Protos project reached financial close in Q4, marking fourth UK project in construction

• Resilient business model minimized financial impact of the pandemic in 2020

• Reestablishing guidance for Adjusted EBITDA and Free Cash Flow for 2021

"Covanta's 2020 results highlighted the underlying resilience of our business model and the capabilities of our incredible operating team," said Michael Ranger, President and CEO. "Waste flows in our markets have largely returned to pre-pandemic levels and we've seen recent strength in the recycled metal markets, both of which are adding momentum as we look ahead to 2021. Our strategic review is progressing and we look forward to announcing concrete steps as they are developed and executed in the coming quarters."

More detail on our fourth quarter results can be found in the exhibits to this release and in our fourth quarter 2020 earnings presentation found in the Investor Relations section of the Covanta website at www.covanta.com.

2021 Guidance

The Company established 2021 guidance for the following key metrics:

($ in millions)

Metric	2020 Actual	2021 Guidance Range
Adjusted EBITDA	$424	$435 - $465
Free Cash Flow	$95	$100 - $140
Reconciliations of non-GAAP measures can be found in the exhibits to this press release.
Guidance as of February 19, 2021.

Conference Call Information

Covanta will host a conference call at 8:30 AM (Eastern) on Friday, February 19, 2021 to discuss its fourth quarter results.

The conference call will begin with prepared remarks, which will be followed by a question and answer session. To participate on the live call, please dial 1-888-317-6003 (US) or 1-412-317-6061 (international) approximately 15 minutes prior to the scheduled start of the call and enter the passcode 3286737. 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 in the Investor Relations section of the Covanta website at www.covanta.com.

An archived webcast will be available two hours after the end of the conference call and can be accessed through the Investor Relations section of the Covanta website at www.covanta.com.

About Covanta

Covanta is a world leader in providing sustainable waste and energy solutions. Annually, Covanta's modern Waste-to-Energy ("WtE") facilities safely convert approximately 21 million tons of waste from municipalities and businesses into clean, renewable electricity to power one million homes and recycle 600,000 tons of metal. Through a vast network of treatment and recycling facilities, Covanta also provides comprehensive industrial material management services to companies seeking solutions to some of today's most complex environmental challenges. 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, as amended (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,
		2020				2019				2020				2019
		(Unaudited) (In millions, except per share amounts)
OPERATING REVENUE:
Waste and service revenue		$	356			$	354			$	1,412			$	1,393
Energy revenue		93				82				357				329
Recycled metals revenue		24				25				81				86
Other operating revenue		18				24				54				62
Total operating revenue		491				485				1,904				1,870
OPERATING EXPENSE:
Plant operating expense		370				333				1,420				1,371
Other operating expense, net		15				21				52				64
General and administrative expense		37				32				120				122
Depreciation and amortization expense		56				56				224				221
Impairment charges (a)		—				(1)				19				2
Total operating expense		478				441				1,835				1,780
Operating income		13				44				69				90
OTHER (EXPENSE) INCOME:
Interest expense		(33)				(35)				(133)				(143)
Net gain on sale of business and investments (a)		17				—				26				49
Loss on extinguishment of debt (a)		—				—				(12)				—
Other income		2				—				—				1
Total other expense		(14)				(35)				(119)				(93)
(Loss) income before income tax benefit and equity in net income from unconsolidated investments		(1)				9				(50)				(3)
Income tax benefit		12				1				18				7
Equity in net income from unconsolidated investments		1				2				4				6
Net income (loss)		$	12			$	12			$	(28)			$	10
Weighted Average Common Shares Outstanding:
Basic		132				131				132				131
Diluted		135				134				132				133
Earnings (Loss) Per Share
Basic		$	0.09			$	0.09			$	(0.21)			$	0.07
Diluted		$	0.09			$	0.09			$	(0.21)			$	0.07
Cash Dividend Declared Per Share		$	0.08			$	0.25			$	0.49			$	1.00
(a) For additional information, see Exhibit 4 of this Press Release.

Covanta Holding Corporation					Exhibit 2
Consolidated Balance Sheets
	As of December 31,
	2020				2019
	(Unaudited)
ASSETS	(In millions, except per share amounts)
Current:
Cash and cash equivalents	$	55			$	37
Restricted funds held in trust	11				18
Receivables (less allowances of $8 and $9, respectively)	260				240
Prepaid expenses and other current assets	117				105
Total Current Assets	443				400
Property, plant and equipment, net	2,421				2,451
Restricted funds held in trust	6				8
Intangible assets, net	237				258
Goodwill	302				321
Other assets	297				277
Total Assets	$	3,706			$	3,715
LIABILITIES AND EQUITY
Current:
Current portion of long-term debt	$	18			$	17
Current portion of project debt	9				8
Accounts payable	75				36
Accrued expenses and other current liabilities	303				292
Total Current Liabilities	405				353
Long-term debt	2,396				2,366
Project debt	116				125
Deferred income taxes	362				372
Other liabilities	117				123
Total Liabilities	3,396				3,339
Equity:
Preferred stock ($0.10 par value; authorized 10 shares; none issued and outstanding)	—				—
Common stock ($0.10 par value; authorized 250 shares; issued 136 shares, outstanding 132 shares)	14				14
Additional paid-in capital	882				857
Accumulated other comprehensive loss	(32)				(35)
Accumulated deficit	(554)				(460)
Treasury stock, at par	—				—
Total Equity	310				376
Total Liabilities and Equity	$	3,706			$	3,715

Covanta Holding Corporation					Exhibit 3
Consolidated Statements of Cash Flow
	Twelve Months Ended December 31,
	2020				2019
	(Unaudited, in millions)
OPERATING ACTIVITIES:
Net (loss) income	$	(28)			$	10
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization expense	224				221
Amortization of deferred debt financing costs	4				5
Net gain on sale of business and investments (a)	(26)				(49)
Impairment charges (a)	19				2
Loss on extinguishment of debt (a)	12				—
Provision for expected credit losses	1				2
Stock-based compensation expense	29				25
Equity in net income from unconsolidated investments	(4)				(6)
Deferred income taxes	(10)				(9)
Dividends from unconsolidated investments	9				9
Other, net	(6)				3
Change in working capital, net of effects of acquisitions and dispositions	24				12
Changes in noncurrent assets and liabilities, net	6				1
Net cash provided by operating activities	254				226
INVESTING ACTIVITIES:
Purchase of property, plant and equipment	(162)				(158)
Acquisition of businesses, net of cash acquired	—				2
Proceeds from asset sales	15				27
Property insurance proceeds	1				—
Investment in equity affiliates	(15)				(14)
Other, net	(15)				(2)
Net cash used in investing activities	(176)				(145)
FINANCING ACTIVITIES:
Proceeds from borrowings on long-term debt	538				80
Proceeds from borrowings on revolving credit facility	724				536
Proceeds from insurance premium financing	37				29
Payments on long-term debt	(555)				(16)
Payments on revolving credit facility	(685)				(565)
Payments on project debt	(8)				(18)
Payment of deferred financing costs	(8)				(1)
Cash dividends paid to stockholders	(89)				(133)
Payment of insurance premium financing	(33)				(26)
Proceeds from related party note	9				—
Other, net	(1)				(8)
Net cash used in financing activities	(71)				(122)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	2				(1)
Net increase (decrease) in cash, cash equivalents and restricted cash	9				(42)
Cash, cash equivalents and restricted cash at beginning of period	63				105
Cash, cash equivalents and restricted cash at end of period	$	72			$	63
(a) For additional information, see Exhibit 4 of this Press Release.

Covanta Holding Corporation

Exhibit 4

Consolidated Reconciliation of Net Income (Loss) and Net Cash Provided by Operating Activities to
Adjusted EBITDA

Three Months Ended
December 31,

Twelve Months Ended
December 31,

2020

2019

2020

2019

(Unaudited, in millions)

Net income (loss)

$

12

$

...

12

$

(28)

$

10

Depreciation and amortization expense

56

56

224

221

Interest expense

33

35

133

143

Income tax benefit

(12)

(1)

(18)

(7)

Impairment charges ^(a)

—

(1)

19

2

Net gain on sale of businesses and investments ^(b)

(17)

—

(26)

(49)

Loss on extinguishment of debt^(c)

—

—

12

—

Property insurance recoveries, net

(1)

—

(1)

—

Loss on asset retirements

1

1

3

4

Accretion expense

—

—

2

2

Business development and transaction costs ^(f)

—

—

1

2

Severance and reorganization costs ^{(d) (f)}

3

2

5

13

Stock-based compensation expense

10

5

29

25

Adjustments to reflect Adjusted EBITDA from unconsolidated
investments

6

7

24

25

Capital type expenditures at client owned facilities ^(e)

12

6

36

34

Other ^(f)

—

3

9

3

Adjusted EBITDA

$

103

$

125

$

424

$

428

(a)	During the year ended December 31, 2020, we recorded a $19 million non-cash impairment charge related to our Covanta Environmental Solutions reporting unit.
(b)	During the year ended December 31, 2020, we recorded a $26 million gain on the sale of business and investments comprised of a $9 million gain related to the Newhurst Energy Recovery Facility development project and a $17 million gain related to the Protos Energy Recovery Facility development project.
	During the year ended December 31, 2019, we recorded a $56 million gain related to the Rookery South Energy Recovery Facility development project and a $11 million loss related to the divestiture of our Springfield and Pittsfield WtE facilities.
(c)	During the year ended December 31, 2020, we recorded a $12 million loss on extinguishment of debt comprised of approximately $10 million related to the redemption of our 5.875% Senior Notes due 2024 and approximately $1 million related to the refinancing of our tax-exempt bonds.
(d)	During the years ended December 31, 2020 and 2019, we recorded $5 million and $13 million, respectively, of costs related to our ongoing asset rationalization and portfolio optimization efforts, early retirement program, and certain organizational restructuring activities.
(e)	Adjustment for capital equipment related expenditures at our service fee operated facilities which are capitalized at facilities that we own.
(f)	Added back under the definition of Adjusted EBITDA in Covanta Energy, LLC's credit agreement.

		Three Months Ended December 31,								Twelve Months Ended December 31,
		2020				2019				2020				2019
		(Unaudited, in millions)
Net cash provided by operating activities		$	63			$	114			$	254			$	226
Capital type expenditures at client owned facilities (a)		12				6				36				34
Cash paid for interest		8				29				112				152
Cash (refunded) paid for taxes, net		(7)				—				(4)				5
Equity in net income from unconsolidated investments		1				2				4				6
Adjustments to reflect Adjusted EBITDA from unconsolidated investments		6				7				24				25
Dividends from unconsolidated investments		(6)				(4)				(9)				(9)
Adjustment for working capital and other		26				(29)				7				(11)
Adjusted EBITDA		$	103			$	125			$	424			$	428
(a) See Adjusted EBITDA reconciliation above - Note (e).

Covanta Holding Corporation																	Exhibit 5
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
	Three Months Ended December 31,								Twelve Months Ended December 31,								Full Year Estimated 2021
	2020				2019				2020				2019
	(Unaudited, in millions)
Net cash provided by operating activities	$	63			$	114			$	254			$	226			$230 - $260
Add: Changes in restricted funds - operating (a)	1				2				1				20				-
Less: Maintenance capital expenditures (b)	(53)				(25)				(160)				(106)				(120) - (135)
Free Cash Flow	$	11			$	91			$	95			$	140			$100 - $140
(a) Adjustment for the impact of the adoption of ASU 2016-18 effective January 1, 2018. As a result of adoption, the statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, changes in restricted funds are eliminated in arriving at net cash, cash equivalents and restricted funds provided by operating activities.
(b) Purchases of property, plant and equipment are also referred to as capital expenditures. Capital expenditures that primarily maintain existing facilities are classified as maintenance capital expenditures. The following table provides the components of total purchases of property, plant and equipment:
	Three Months Ended December 31,								Twelve Months Ended December 31,
	2020				2019				2020				2019
	(Unaudited, in millions)
Maintenance capital expenditures	$	(53)			$	(25)			$	(160)			$	(106)
Net maintenance capital expenditures paid but incurred in prior periods	10				(2)				12				(9)
Total ash processing system	(2)				(5)				(13)				(9)
Capital expenditures associated with the New York City MTS contract	—				—				—				(19)
Capital expenditures associated with other organic growth initiatives	—				(3)				(1)				(13)
Total capital expenditures associated with growth investments (c)	(2)				(8)				(14)				(41)
Capital expenditures associated with property insurance events	—				(2)				—				(2)
Total purchases of property, plant and equipment	$	(45)			$	(37)			$	(162)			$	(158)
(c) Total growth investments represents investments in growth opportunities, including organic growth initiatives, technology, business development, and other similar expenditures, net of third party loans collateralized by unconsolidated project equity.
Capital expenditures associated with growth investments	$	(2)			$	(8)			$	(14)			$	(41)
UK business development projects	(4)				(2)				(13)				(3)
Investment in equity affiliate	(4)				(5)				(15)				(14)
Asset and business acquisitions, net of cash acquired	—				—				—				2
Less: third party project loan proceeds collateralized by project equity	—				—				9				—
Total growth investments	$	(10)			$	(15)			$	(33)			$	(56)

Covanta Holding Corporation							Exhibit 6
Supplemental Information
(Unaudited, $ in millions)
			Twelve Months Ended December 31,
			2020				2019
REVENUE:
Waste and service revenue:
WtE tip fees			$	651			$	638
WtE service fees			466				466
Environmental services (a)			136				140
Municipal services (b)			242				231
Other (c)			37				34
Intercompany (d)			(120)				(116)
Total waste and service			1,412				1,393
Energy revenue:
Energy sales			266				273
Capacity			41				44
Other (e)			51				12
Total energy			357				329
Recycled metals revenue:
Ferrous			47				46
Non-ferrous			34				40
Total recycled metals			81				86
Other revenue (f)			54				62
Total revenue			$	1,904			$	1,870
OPERATING EXPENSE:
Plant operating expense:
Plant maintenance			$	326			$	308
Other plant operating expense			1,094				1,063
Total plant operating expense			1,420				1,371
Other operating expense			52				64
General and administrative			120				122
Depreciation and amortization			224				221
Impairment charges			19				2
Total operating expense			$	1,835			$	1,780
Operating income			$	69			$	90
Plus: impairment charges			19				2
Operating income excluding impairment charges			$	88			$	92
(a) Includes the operation of material processing facilities and related services provided by our Covanta Environmental Solutions business.
(b) Consists of transfer stations and the transportation component of our NYC Marine Transfer Station contract.
(c) Includes waste brokerage, debt service and other revenue not directly related to WtE waste processing activities.
(d) Consists of elimination of intercompany transactions primarily relating to transfer stations.
(e) Primarily components of wholesale load serving revenue not included in Energy sales line, such as transmission and ancillaries.
(f) Consists primarily of construction revenue.
Note: Certain amounts may not total due to rounding.

Covanta Holding Corporation																			Exhibit 7
Revenue and Operating Income Changes - FY 2019 to FY 2020
(Unaudited, $ in millions)
												Contract Transitions(b)
	FY 2019				Organic Growth (a)				%			Waste				Transactions (c)				Total Changes				FY 2020
REVENUE:
Waste and service:
WtE tip fees	$	638			$	16			2.5	%		$	4			$	(7)			$	13			$	651
WtE service fees	466				(1)				(0.3)	%		1				—				—				466
Environmental services	140				(4)				(2.8)	%		—				(1)				(4)				136
Municipal services	231				9				4.1	%		—				2				11				242
Other revenue	34				3				9.6	%		—				—				3				37
Intercompany	(116)				(3)							—				(1)				(4)				(120)
Total waste and service	1,393				20				1.5	%		5				(7)				19				1,412
Energy revenue:
Energy sales	273				(5)				(1.9)	%		1				(3)				(7)				266
Capacity	44				(3)				(6.5)	%		—				—				(3)				41
Other	12				39				—	%		—				—				39				51
Total energy	329				31				9.3	%		1				(3)				28				357
Recycled metals:
Ferrous	46				2				3.4	%		—				—				1				47
Non-ferrous	40				(6)				(15.3)	%		—				—				(6)				34
Total recycled metals	86				(5)				(5.3)	%		—				—				(5)				81
Other revenue	62				(9)				(14.0)	%		—				—				(8)				54
Total revenue	$	1,870			$	38			2.0	%		$	6			$	(10)			$	34			$	1,904
OPERATING EXPENSE:
Plant operating expense:
Plant maintenance	$	308			$	20			6.4	%		$	—			$	(2)			$	18			$	326
Other plant operating expense	1,063				37				3.5	%		6				(11)				31				1,094
Total plant operating expense	1,371				57				4.2	%		6				(13)				49				1,420
Other operating expense	64				(11)							—				—				(12)				52
General and administrative	122				(2)							—				—				(2)				120
Depreciation and amortization	221				5							—				(2)				3				224
Total operating expense(d)	$	1,778			$	48						$	6			$	(15)			$	38			$	1,816
Operating income (loss) (d)	$	92			$	(11)						$	1			$	5			$	(4)			$	88
(a) Reflects the performance at each facility on a comparable period-over-period basis, excluding the impacts of transitions and transactions.
(b) Includes the impact of the expiration of: (1) long-term major waste and service contracts, most typically representing the transition to a new contract structure, and (2) long-term energy contracts.
(c) Includes the impacts of acquisitions, divestitures and the addition or loss of operating contracts.
(d) Excludes impairment charges
Note: Certain amounts may not total due to rounding

WtE Operating Metrics (Unaudited)																																	Exhibit 8
	Three Months Ended																Year Ended				Three Months Ended																Year Ended
	Mar 31,				Jun 30,				Sep 30,				Dec 31,				Dec 31,				Mar 31,				Jun 30,				Sep 30,				Dec 31,				Dec 31,
	2020				2020				2020				2020				2020				2019				2019				2019				2019				2019
WtE Waste
Tons: (in millions)
Tip fee - contracted	2.08				2.15				2.28				2.14				8.65				2.04				2.29				2.28				2.18				8.78
Tip fee - uncontracted	0.58				0.52				0.46				0.53				2.09				0.54				0.43				0.48				0.57				2.01
Service fee	2.62				2.51				2.74				2.53				10.41				2.62				2.70				2.74				2.64				10.70
Total tons	5.28				5.19				5.48				5.20				21.15				5.20				5.41				5.49				5.39				21.49
WtE tip fee per ton:
Contracted	$	54.04			$	54.37			$	55.45			$	55.77			$	54.92			$	52.64			$	54.16			$	53.93			$	53.93			$	53.69
Uncontracted	$	82.87			$	78.71			$	89.89			$	84.96			$	83.91			$	76.57			$	89.06			$	85.22			$	81.31			$	82.61
Average revenue per ton	$	60.36			$	59.10			$	61.23			$	61.57			$	60.57			$	57.66			$	59.66			$	59.36			$	59.58			$	59.08
WtE Energy
Energy sales: (MWh in millions)
Contracted	0.51				0.48				0.51				0.53				2.03				0.47				0.47				0.55				0.57				2.06
Hedged	0.82				0.87				1.13				0.99				3.81				0.80				0.73				0.76				0.73				3.02
Market	0.30				0.18				NM				0.12				0.62				0.29				0.37				0.38				0.27				1.31
Total energy sales	1.64				1.52				1.65				1.64				6.45				1.56				1.57				1.69				1.56				6.38
Market sales by geography:
PJM East	0.1				—				—				—				0.1				0.1				0.2				0.2				0.1				0.6
NEPOOL	0.1				—				—				—				0.1				0.1				0.1				0.1				0.1				0.3
NYISO	—				—				—				—				0.1				—				—				—				—				0.1
Other	0.1				0.1				—				0.1				0.3				0.1				0.1				0.1				0.1				0.3
Revenue per MWh: (excludes capacity)
Contracted	$	66.32			$	69.06			$	65.89			$	70.30			$	67.90			$	67.33			$	66.00			$	62.77			$	67.33			$	65.80
Hedged	$	45.68			$	23.76			$	26.31			$	28.54			$	30.51			$	49.67			$	26.42			$	28.69			$	31.10			$	34.29
Market	$	19.15			$	17.85			NM				$	27.09			$	19.83			$	32.44			$	21.69			$	25.36			$	27.22			$	26.31
Average revenue per MWh	$	47.27			$	37.25			$	38.24			$	41.97			$	41.24			$	51.74			$	37.19			$	39.08			$	43.52			$	42.81
Metals
Tons recovered, net: (in thousands)
Ferrous	103.1				115.7				118.2				120.3				457.3				96.3				110.8				111.9				104.7				423.7
Non-ferrous	12.0				12.3				12.2				11.5				47.9				12.6				12.5				12.8				13.0				50.8
Tons sold, net: (in thousands)
Ferrous	90.6				99.2				101.3				110.8				401.8				84.0				94.9				96.4				94.9				370.3
Non-ferrous	7.5				8.1				9.1				7.3				32.1				8.3				6.7				8.2				10.4				33.7
Revenue per ton: ($ in millions)
Ferrous	$	115			$	104			$	115			$	133			$	117			$	137			$	132			$	118			$	108			$	123
Non-ferrous	$	900			$	1,123			$	1,003			$	1,201			$	1,054			$	1,123			$	1,255			$	984			$	1,346			$	1,184
WtE plant operating expenses: ($ in millions)
Plant operating expenses - gross	$