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

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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)
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

$