Date: August 3, 2006
Source: Covanta Holding Corporation
Diluted EPS of $0.35
* Adjusted EBITDA of $165 million for Covanta Energy
* Updated 2006 guidance reflects strong performance
Covanta Holding Corporation (NYSE:CVA) ("Covanta" or the "Company") reported financial results today for the three and six months ended June 30, 2006. The Company is presenting financial results on an as reported and pro forma basis. The pro forma information was prepared as if the acquisition of Covanta ARC Holdings, Inc., formerly American Ref-Fuel Holdings Corp. ("Ref-Fuel"), was consummated on January 1, 2005. The Company believes a comparison between the 2006 results and the 2005 pro forma financial information will assist in assessing Covanta's performance.
Second Quarter and YTD 2006 Results
For the 2006 second quarter, total revenues as reported were $334.1 million, versus $199.1 million for the same period of 2005. This increase was the result of the Ref-Fuel acquisition that occurred at the end of the second quarter last year. Net income for the second quarter of 2006 was $51.2 million, or $0.35 per diluted share which compares with 2005 second quarter net income of $5.9 million, or $0.05 per diluted share.
Comparing 2006 results to 2005 pro forma financial information, total second quarter revenues rose 6% to $334.1 million from $315.7 million, and second quarter 2006 net income increased to $51.2 million from $18.3 million for the second quarter of 2005. The increase in net income was driven primarily by strong operating performance, a lower effective tax rate and two tax benefits relating to the Company's international business which are described further in the accompanying exhibits.
Continuing the comparison to the prior year pro forma results, for the Company's principal subsidiary, Covanta Energy Corporation, ("Covanta Energy"), domestic waste and energy business revenues were $286 million for the 2006 second quarter compared to pro forma prior year revenues of $275.6 million. This revenue growth of $10.4 million, or 4%, was driven primarily by higher energy rates, contractual service fee escalation and favorable scrap metal pricing. International revenues for the second quarter of 2006 were $44.6 million compared to prior year revenues of $36.3 million, an increase of $8.3 million primarily due to higher energy prices contractually provided to offset increased fuel cost. Covanta Energy's adjusted EBITDA for the second quarter of 2006 was $165 million versus $135 million on a pro forma basis for the second quarter of 2005. This increase of 22% was largely due to higher operating revenues, successful execution of cost reduction initiatives, reduced scope of scheduled maintenance work and a Philippine tax ruling which increased equity income.
For the six months ended June 30, 2006, total revenues rose 6% to $639.5 million from 2005 pro forma revenues of $604.2 million. 2006 net income also increased to $62.6 million for the six months ended June 30, 2006 from $23.4 million on a pro forma basis for the six months ended June 30, 2005. During the same period, earnings per diluted share increased to $0.43 versus $0.16 for the prior year on a pro forma basis. This increase of $0.27 was driven primarily by strong operating performance, a lower effective tax rate and the two tax benefits outlined in Exhibit 5 of this press release.
"We are very pleased with our results for the first half of 2006", stated President and Chief Executive Officer, Anthony Orlando. He continued, "Our people have executed effectively in all key areas. Waste-to-energy boiler availability remains above 90% and we've grown our top line while leveraging our larger size to achieve cost savings. As a result, we are generating meaningful growth from our existing portfolio. In addition, we remain optimistic about opportunities to expand our business."
Update of 2006 Guidance - Company Expects to Outperform Original Key Financial Targets
Given the strong first half performance and its outlook for the remainder of the year, the Company expects to outperform its original 2006 guidance and is, therefore, updating its guidance on the following key metrics:
Covanta Energy adjusted EBITDA in the range of $535 million to $545 million,
* Covanta Energy free cash flow of approximately $235 million, and
* Diluted earnings per share of approximately $0.75.
Conference Call Information
Covanta Holding Corporation will host a conference call at 11:00 am (Eastern) on Friday, August 4, 2006 to discuss its results for the three and six months ended June 30, 2006. Prepared remarks will be followed by a question-and-answer session. To participate, please dial 800-310-6649 approximately 10 minutes prior to the scheduled start of the call. If you are calling from outside of the United States, please dial 719-457-2693. The conference call will also be webcast live on the Investor Relations section of the Covanta website at www.covantaholding.com.
A replay of the conference call will be available from 2:00 pm (Eastern) Friday, August 4, 2006 through midnight (Eastern) Friday, August 11, 2006. To access the replay, please dial 888-203-1112 or 719-457-0820 and use the replay passcode: 4008868. The webcast will also be archived on www.covantaholding.com.
About Covanta Holding Corporation
Covanta Holding Corporation is a New York Stock Exchange listed company engaging in waste disposal, energy services and specialty insurance through its subsidiaries. Covanta's subsidiary, Covanta Energy Corporation, is an internationally recognized owner and operator of waste-to-energy and power generation projects. Covanta Energy's waste-to-energy facilities convert municipal solid waste into renewable energy for numerous communities, predominantly in the United States.
For more information visit: www.covantaholding.com.
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