Date: July 25, 2007
Source: Covanta Holding Corporation
Reaffirms 2007 Guidance
Covanta Holding Corporation (NYSE: CVA) reported financial results today for the three months ended June 30, 2007. Diluted earnings per share was $0.24 in the second quarter of 2007, which included a net benefit of $0.03 per diluted share from insurance recoveries and expenses relating to a fire at the SEMASS facility which occurred in the first quarter of 2007. These results compare to diluted earnings per share of $0.35 in the prior year period, which included a net benefit of $0.09 per diluted share for certain items impacting the results of the Company.
Second Quarter Results
For the three months ended June 30, 2007 total Company operating revenues grew 6 percent to $355 million, up from $334 million in the prior year comparative period.
The Company's domestic waste and energy operating revenues grew 5 percent to $301 million, driven primarily by contractual service fee escalations, construction revenues related to the Hillsborough County facility expansion and two facilities added to the company's portfolio this year; the Harrisburg Energy-from-Waste facility and the Holliston transfer station. International revenues of $52 million grew by 17 percent primarily due to higher electricity sales at both Indian facilities.
Adjusted EBITDA at the Company's principal subsidiary Covanta Energy Corporation ("Covanta Energy") was $141 million in the second quarter while Covanta's Cash Flow Provided by Operating Activities ("Operating Cash Flow") was $86 million for the three months ended June 30, 2007.
Six Months Results
For the six months ended June 30, 2007, total Company operating revenues rose 7 percent to $685 million. Covanta Energy's Adjusted EBITDA was $246 million while Covanta's Operating Cash Flow was $143 million for the year-to- date period.
"The second quarter was marked by solid operating performance and tangible progress on our growth initiatives that position us to take advantage of promising opportunities around the world," said Anthony Orlando, President and Chief Executive Officer of Covanta. "Notably, we signed a 10 year agreement to operate the Harrisburg Energy-from-Waste facility, completed our joint venture to enter the Energy-from-Waste market in China, announced the acquisition of two biomass renewable energy facilities in California, and received a Letter of Intent to design, build and operate a 1,700 ton per day Energy-from-Waste facility in Dublin, Ireland."
2007 Guidance
The Company is reaffirming its full year 2007 guidance for the following key metrics:
To provide additional clarity as to Covanta's cash flow generated and available to grow its business and repay debt, the Company is for the first time providing full year 2007 guidance for Covanta's Operating Cash Flow, together with information regarding how the company has utilized its cash flow for these purposes. This key metric, which is a GAAP metric, is provided in lieu of Free Cash Flow, a non-GAAP metric which was previously furnished.
The Company is providing full year 2007 guidance for Operating Cash Flow:
Conference Call Information
Covanta will host a conference call at 8:30 am (Eastern) on Thursday, July 26, 2007 to discuss its results for the three months ended June 30, 2007. Prepared remarks will be followed by a question-and-answer session. To participate, please dial 800-475-3716 approximately 10 minutes prior to the scheduled start of the call. If you are calling from outside of the United States, please dial 719-457-2728. 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 11:00 am (Eastern) on Thursday, July 26, 2007 through midnight (Eastern) Thursday, August 2, 2007. To access the replay, please dial 888-203-1112 or 719-457-0820 and use the replay pass code: 7109495. The webcast will also be archived on www.covantaholding.com.
About Covanta
Covanta 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, is an internationally recognized owner and operator of energy-from-waste and power generation projects. Covanta Energy's energy-from-waste facilities convert municipal solid waste into renewable energy for numerous communities, predominantly in the United States.
Covanta Holding Corporation Exhibit 1
Condensed Consolidated Statements of Operations
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 (A) 2007 2006 (A)
(Unaudited in thousands, except per share amounts)
Operating revenues
Waste and service revenues $218,040 $213,501 $416,951 $404,870
Electricity and steam sales 126,815 116,413 240,481 225,591
Other operating revenues 10,285 4,222 27,917 9,031
Total operating revenues 355,140 334,136 685,349 639,492
Operating expenses
Plant operating expenses 199,561 175,696 401,568 362,245
Depreciation and amortization
expense 48,436 48,838 96,479 95,235
Net interest expense on project
debt 13,886 15,293 28,491 31,291
General and administrative
expenses 20,029 16,101 42,221 34,305
Write-down of assets, net
of insurance recoveries (B) (13,341) - 4,925 -
Other operating expenses 9,357 1,520 26,173 4,210
Total operating expenses 277,928 257,448 599,857 527,286
Operating income 77,212 76,688 85,492 112,206
Other income (expense)
Investment income 1,819 2,915 7,003 5,318
Interest expense (14,718) (27,361) (35,978) (55,844)
Loss on extinguishment of
debt (C)(D) - (6,795) (32,006) (6,795)
Total other expenses (12,899) (31,241) (60,981) (57,321)
Income before income tax
expense, minority interests
and equity in net income from
unconsolidated investments 64,313 45,447 24,511 54,885
Income tax expense (28,822) (6,662) (10,646) (10,925)
Minority interests (2,091) (2,279) (3,489) (2,879)
Equity in net income from
unconsolidated investments 4,316 14,672 9,422 21,515
Net Income $37,716 $51,178 $19,798 $62,596
Earnings Per Share:
Basic $0.25 $0.35 $0.13 $0.43
Weighted Average Shares 152,983 146,343 152,234 144,872
Diluted $0.24 $0.35 $0.13 $0.43
Weighted Average Shares 154,307 147,087 153,603 146,423
(A) Certain prior period amounts have been reclassified to conform to
current period presentation.
(B) On March 31, 2007, the SEMASS energy-from-waste facility experienced a
fire in the front-end receiving portion of the facility. Damage was
extensive to this portion of the facility and operations at the
facility were suspended completely for approximately 20 days. As a
result of this loss, Covanta recorded an asset impairment of
$18.3 million, pre-tax, in the first quarter of 2007, which
represented a preliminary estimate of the net book value of the assets
destroyed. Based upon additional analysis as the facility is fully
restored, Covanta may increase the impairment recorded.
The cost of repair or replacement, and business interruption losses,
are insured under the terms of applicable insurance policies, subject
to deductibles. Covanta cannot predict the timing of when it will
receive the proceeds under such policies. During the second quarter of
2007, Covanta recorded insurance recoveries of $13.3 million related
to repair and reconstruction and $2.7 million related to clean-up
costs. Insurance recoveries are recorded as a reduction to the loss
related to the write-down of assets where such recoveries relate to
repair and reconstruction costs, or as a reduction to operating
expenses where such recoveries relate to other costs or business
interruption losses. Covanta expects the cost of repair or replacement
and business interruption losses it does not recover, representing
deductibles under such policies, will not be material.
(C) During January and February 2007, Covanta completed public offerings
of common stock and 1.00% Senior Convertible Debentures, and Covanta
Energy closed on new credit facilities. In addition, in February 2007,
Covanta Energy completed tender offers for outstanding notes
previously issued by its intermediate subsidiaries. As a result of
the recapitalization plan in the first quarter of 2007, Covanta
recognized a loss on extinguishment of debt charge of approximately
$32.0 million, pre-tax, which was comprised of the write-down of
deferred financing costs, tender premiums paid for the intermediate
subsidiary debt, and a call premium paid for a credit facility
refinanced, which was in effect prior to Covanta Energy's new credit
facilities. These amounts were partially offset by the write-down of
unamortized premiums relating to the intermediate subsidiary debt and
a gain associated with the settlement of interest rate swap
agreements.
(D) As a result of amendments to Covanta Energy's financing arrangements
in May 2006, in the three months ended June 30, 2006, Covanta
recognized a loss on extinguishment of debt of $6.8 million, pre-tax,
which was comprised of the write-down of deferred financing costs and
a call premium paid on the extinguishment.
Covanta Holding Corporation Exhibit 2
Reconciliation of Net Income to Adjusted EBITDA
Three Months Ended Six Months Ended Full Year
June 30, June 30, Estimated
2007 2006 2007 2006 2007
(Unaudited, in thousands)
Net Income -
Covanta Holding
Corporation $37,716 $51,178 $19,798 $62,596
Less: Net Income -
All Other (3,546) 474 (848) 1,049
Net Income -
Covanta Energy
Corporation 41,262 50,704 20,646 61,547 $99,000 -
$114,000
Depreciation and
amortization
expense 48,410 48,820 96,442 95,200 193,000
Debt service:
Net interest
expense on
project debt 13,886 15,293 28,491 31,291
Interest expense 13,223 27,361 33,511 55,844
Investment income (876) (2,216) (3,601) (4,134)
Subtotal debt
service 26,233 40,438 58,401 83,001 114,000
Income tax expense 26,596 6,228 9,771 10,150 61,000 -
69,000
Other Adjustments:(A)
Change in
unbilled
service
receivables 5,145 4,192 10,191 8,261
Non-cash
compensation
expense 4,350 2,537 6,121 3,368
Other 405 3,615 3,637 5,484
Subtotal other
adjustments 9,900 10,344 19,949 17,113 38,000 -
35,000
Write-down of
assets, net of
insurance
recoveries (B) (13,341) - 4,925 -
Loss on
extinguishment of
debt (C)(D) - 6,795 32,006 6,795 32,000
Minority interests 2,012 2,406 3,728 3,236 8,000
Total adjustments 99,810 115,031 225,222 215,495
Adjusted EBITDA -
Covanta Energy
Corporation $141,072 $165,735 $245,868 $277,042 $545,000 -
$565,000
(A) These items represent amounts that are non-cash in nature.
(B) On March 31, 2007, the SEMASS energy-from-waste facility experienced a
fire in the front-end receiving portion of the facility. Damage was
extensive to this portion of the facility and operations at the
facility were suspended completely for approximately 20 days. As a
result of this loss, Covanta recorded an asset impairment of
$18.3 million, pre-tax, in the first quarter of 2007, which
represented a preliminary estimate of the net book value of the assets
destroyed. Based upon additional analysis as the facility is fully
restored, Covanta may increase the impairment recorded.
The cost of repair or replacement, and business interruption losses,
are insured under the terms of applicable insurance policies, subject
to deductibles. Covanta cannot predict the timing of when it will
receive the proceeds under such policies. During the second quarter of
2007, Covanta recorded insurance recoveries of $13.3 million related
to repair and reconstruction and $2.7 million related to clean-up
costs. Insurance recoveries are recorded as a reduction to the loss
related to the write-down of assets where such recoveries relate to
repair and reconstruction costs, or as a reduction to operating
expenses where such recoveries relate to other costs or business
interruption losses. Covanta expects the cost of repair or replacement
and business interruption losses it does not recover, representing
deductibles under such policies, will not be material.
(C) During January and February 2007, Covanta completed public offerings
of common stock and 1.00% Senior Convertible Debentures, and Covanta
Energy closed on new credit facilities. In addition, in February 2007,
Covanta Energy completed tender offers for outstanding notes
previously issued by its intermediate subsidiaries. As a result of
the recapitalization plan in the first quarter of 2007, Covanta
recognized a loss on extinguishment of debt charge of approximately
$32.0 million, pre-tax, which was comprised of the write-down of
deferred financing costs, tender premiums paid for the intermediate
subsidiary debt, and a call premium paid for a credit facility
refinanced, which was in effect prior to Covanta Energy's new credit
facilities. These amounts were partially offset by the write-down of
unamortized premiums relating to the intermediate subsidiary debt and
a gain associated with the settlement of interest rate swap
agreements.
(D) As a result of amendments to Covanta Energy's financing arrangements
in May 2006, in the three months ended June 30, 2006, Covanta
recognized a loss on extinguishment of debt of $6.8 million, pre-tax,
which was comprised of the write-down of deferred financing costs and
a call premium paid on the extinguishment.
Covanta Energy Corporation Exhibit 3
Reconciliation of Cash Flow Provided by Operating Activities
to Adjusted EBITDA
Three Months Ended Six Months Ended Full Year
June 30, June 30, Estimated
2007 2006 2007 2006 2007
(Unaudited, in thousands)
Cash flow provided by
operating activities
- Covanta Energy
Corporation $88,377 $77,572 $141,589 $117,960 $345,000 -
$375,000
Debt Service 26,233 40,438 58,401 83,001 114,000
Amortization of debt
premium and deferred
financing costs 3,631 4,779 6,884 10,037 14,000
Other 22,831 42,946 38,994 66,044 72,000 -
62,000
Adjusted EBITDA -
Covanta Energy
Corporation $141,072 $165,735 $245,868 $277,042 $545,000 -
$565,000
Covanta Holding Corporation Exhibit 4
Statements of Cash Flows Selected Data
Three Months Ended Six Months Ended Full Year
June 30, June 30, Estimated
2007 2006 2007 2006 2007
(Unaudited, in thousands)
Cash Flow Provided
by Operating
Activities (A) $86,084 $66,565 $142,538 $116,665 $345,000 -
$375,000
Uses of Cash Flow
Provided by
Operating
Activities
Purchase of
property, plant
and equipment (B)
Capital
expenditures
associated with
SEMASS fire (C) $(10,379) $- $(10,379) $-
Capital
expenditures
associated with
acquisitions (D) - - - -
All other capital
expenditures (E) (13,563) (8,767) (32,637) (26,797) (55,000)
Total purchases
of property,
plant and
equipment $(23,942) $(8,767) $(43,016) $(26,797)
Acquisition of
business $(7,439) $- $(7,439) $-
Purchase of
equity
interest $(10,253) $- $(10,253) $-
Principal
payments on
project debt $(9,550) $(16,108) $(65,489) $(69,009)
Principal payments
on long-term
debt (F) $(1,417) $(106,009) $(1,160,385) $(120,039)
(A) Guidance is only provided for cash flow provided by operating
activities for Covanta.
(B) Purchase of property, plant and equipment is also referred to as
Capital Expenditures.
(C) During the three months ended June 30, 2007, Capital Expenditures were
incurred that related to the repair and replacement of assets at the
SEMASS energy-from-waste facility that were damaged by a fire on March
31, 2007. The cost of repair or replacement is insured under the
terms of the applicable insurance policy, subject to deductibles.
Covanta cannot predict the timing of when all proceeds under such
policy will be received. During the second quarter of 2007, Covanta
received $7.3 million in insurance proceeds related to property damage
and is included as Property Insurance Proceeds in the investing
activities section of Covanta's statement of cash flows for the six
months ended June 30, 2007. Covanta expects the cost of repair or
replacement not recovered, representing deductibles under such policy,
will not be material.
(D) On July 16, 2007, Covanta Energy acquired two biomass energy
facilities and a biomass energy fuel management business. In
connection with the acquisition, Covanta Energy expects to invest
between $15 and $20 million in capital improvements to increase the
facilities' productivity and environmental performance. The project
to increase the facilities' productivity and environmental performance
had been commenced by the seller. Covanta Energy expects to incur
such Capital Expenditures for the project during 2007. Although, in
accordance with GAAP this spending will be recorded as a component of
purchase of property, plant and equipment on Covanta's statement of
cash flows, management considers this spending as a component of the
cost to acquire these businesses since these major capital
improvements are required to achieve desired facility performance.
(E) Capital expenditures for existing facilities.
(F) During January and February 2007, Covanta completed public offerings
of common stock and 1.00% Senior Convertible Debentures, and Covanta
Energy closed on new credit facilities. In addition, in February 2007,
Covanta completed tender offers for outstanding notes previously
issued by its intermediate subsidiaries. Covanta expects to have
redeemed all of the remaining intermediate subsidiary debt by the end
of the third quarter of 2007.
Covanta Holding Corporation Exhibit 5
Components of Diluted Earnings Per Share
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
(Unaudited)
Write-down of assets, net of
insurance recoveries and tax (A) $0.05 $- $(0.02) $-
Impact of SEMASS fire, net of tax
(B) (0.02) - (0.02) -
Loss on extinguishment of debt,
net of tax (C) - (0.03) (0.12) (0.03)
Philippine Tax Ruling - Cumulative
Adjustment (D) - 0.05 - 0.05
APB 23 - Cumulative Adjustment (E) - 0.07 - 0.07
All other 0.21 0.26 0.29 0.34
Diluted Earnings Per Share $0.24 $0.35 $0.13 $0.43
(A) On March 31, 2007, the SEMASS energy-from-waste facility experienced a
fire in the front-end receiving portion of the facility. Damage was
extensive to this portion of the facility and operations at the
facility were suspended completely for approximately 20 days. As a
result of this loss, Covanta recorded an asset impairment of
$18.3 million, pre-tax, in the first quarter of 2007, which
represented a preliminary estimate of the net book value of the assets
destroyed. Based upon additional analysis as the facility is fully
restored, Covanta may increase the impairment recorded.
The cost of repair or replacement, and business interruption losses,
are insured under the terms of applicable insurance policies, subject
to deductibles. Covanta cannot predict the timing of when it will
receive the proceeds under such policies. During the second quarter of
2007, Covanta recorded insurance recoveries of $13.3 million related
to repair and reconstruction and $2.7 million related to clean-up
costs. Insurance recoveries are recorded as a reduction to the loss
related to the write-down of assets where such recoveries relate to
repair and reconstruction costs, or as a reduction to operating
expenses where such recoveries relate to other costs or business
interruption losses. Covanta expects the cost of repair or replacement
and business interruption losses it does not recover, representing
deductibles under such policies, will not be material.
(B) This amount represents plant operating expenses related to the SEMASS
fire, but excludes lost revenue during the restoration of the SEMASS
energy-from-waste facility.
(C) During January and February 2007, Covanta completed public offerings
of common stock and 1.00% Senior Convertible Debentures, and Covanta
Energy closed on new credit facilities. In addition, in February 2007,
Covanta Energy completed tender offers for outstanding notes
previously issued by its intermediate subsidiaries. As a result of
the recapitalization plan in the first quarter of 2007, Covanta
recognized a loss on extinguishment of debt charge of approximately
$32.0 million, pre-tax, which was comprised of the write-down of
deferred financing costs, tender premiums paid for the intermediate
subsidiary debt, and a call premium paid for a credit facility
refinanced, which was in effect prior to Covanta Energy's new credit
facilities. These amounts were partially offset by the write-down of
unamortized premiums relating to the intermediate subsidiary debt and
a gain associated with the settlement of interest rate swap
agreements.
As a result of amendments to Covanta Energy's financing arrangements
in May 2006, in the three months ended June 30, 2006, Covanta
recognized a loss on extinguishment of debt of $6.8 million, pre-tax,
which was comprised of the write-down of deferred financing costs and
a call premium paid on the extinguishment.
(D) Covanta is a minority shareholder in the "Quezon Project Company" that
owns the Quezon Power, Inc. ("Quezon") facility in the Philippines.
In June 2006, the Philippine tax authorities issued a ruling
clarifying the deductibility of unrealized foreign exchange losses to
the Quezon Project Company. As a result, the Quezon Project Company
recorded a cumulative deferred income tax benefit in the quarter ended
June 30, 2006 which increased Covanta's equity in net income from
unconsolidated investments by $7 million or 5 cents per diluted share
for the three months ended June 30, 2006. The impact of this ruling,
on periods subsequent to the quarter ended June 30, 2006, will be
based on the fluctuations in the value of the Philippine peso versus
the US dollar in those respective periods.
(E) During the quarter ended June 30, 2006, consistent with its strategy
to pursue international investment opportunities, Covanta adopted the
permanent reinvestment exception under APB 23 with respect to the
earnings of its foreign subsidiaries. Pursuant to this election,
Covanta now considers foreign earnings to be permanently reinvested
and, as a result, Covanta recorded a catch-up, cumulative adjustment
in the second quarter of 2006 of $10 million or 7 cents per diluted
share to reflect the reversal of the deferred taxes that were accrued
over the last two years prior to the election under APB 23.
Covanta Energy Corporation Exhibit 6
Components of Adjusted EBITDA
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
(Unaudited, in thousands)
Philippine Tax Ruling -
Cumulative Adjustment(A) $- $7,037 $- $7,037
Impact of SEMASS fire (B) (4,312) - (4,312) -
All other 145,384 158,698 250,180 270,005
Adjusted EBITDA - Covanta Energy
Corporation $141,072 $165,735 $245,868 $277,042
(A) Covanta is a minority shareholder in the "Quezon Project Company" that
owns the Quezon facility in the Philippines. In June 2006, the
Philippine tax authorities issued a ruling clarifying the
deductibility of unrealized foreign exchange losses to the Quezon
Project Company. As a result, the Quezon Project Company recorded a
cumulative deferred income tax benefit in the quarter ended June 30,
2006 which increased Covanta's equity in net income from
unconsolidated investments by $7 million or 5 cents per diluted share
for the three months ended June 30, 2006. The impact of this ruling,
on periods subsequent to the quarter ended June 30, 2006, will be
based on the fluctuations in the value of the Philippine peso versus
the US dollar in those respective periods.
(B) This amount represents plant operating expenses related to the SEMASS
fire, but excludes lost revenue during the restoration of the SEMASS
energy-from-waste facility.
Discussion of Non-GAAP Financial Measures
To supplement Covanta's results prepared in accordance with United States generally accepted accounting principles ("GAAP"), Covanta uses the measure of Adjusted EBITDA, which is a non-GAAP measure as defined by the Securities and Exchange Commission. The non-GAAP financial measure of Adjusted EBITDA described below, and used in the tables above, is not intended as a substitute and should not be considered in isolation from measures of financial performance or liquidity prepared in accordance with GAAP. In addition, Covanta's non-GAAP financial measure may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes.
Covanta uses a number of different financial measures, both GAAP and non- GAAP, in assessing the overall performance of its business. Covanta uses Adjusted EBITDA to provide further information that is useful to an understanding of Covanta Energy's financial covenants contained in its credit facilities, 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 Covanta's business. The presentation of Adjusted EBITDA is intended to enhance the usefulness of Covanta's financial information by providing a measure which management internally uses to assess and evaluate the overall performance of its business and those of possible acquisition candidates, and highlight trends in the overall business. Covanta also uses this non-GAAP financial measure as a significant criterion of performance-based components of employee compensation.
Adjusted EBITDA should not be considered as an alternative to net income or an alternative to cash flow provided by operating activities as indicators of Covanta's performance or liquidity or any other measures of performance or liquidity derived in accordance with GAAP.
Adjusted EBITDA
The calculation of Adjusted EBITDA is based on the definitions in Covanta Energy's credit facilities. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, as adjusted for additional items subtracted from or added to net income.
Under its credit facilities, 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 Covanta Energy's ability to engage in a broad range of activities in furtherance of its business, including making certain investments, acquiring businesses and incurring additional debt. Covanta Energy was in compliance with these covenants as of June 30, 2007. Failure to comply with such financial covenants could result in a default under Covanta Energy's credit facilities, which default would have a material adverse affect on Covanta's financial condition and liquidity.
These financial covenants are measured on a trailing four quarter period basis and the material covenants are as follows:
In order to provide a meaningful basis for comparison, Covanta is providing information with respect to Covanta Energy's Adjusted EBITDA for the three and six months ended June 30, 2007 and 2006, 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. Covanta is providing similar reconciliations with respect to its guidance for full year 2007 Adjusted EBITDA.
Prior Use of Free Cash Flow
Previously, Covanta has provided annual guidance for Covanta Energy Free Cash Flow as a liquidity measure, and furnished Free Cash Flow results on a quarterly basis. Free Cash Flow had been used by management as a liquidity measure which provided useful information about the amount of cash flow generated by Covanta Energy available for the repayment of debt and for strategic opportunities, including, among others, investing in the business, making strategic acquisitions and constructing new or expanding existing facilities.
Covanta calculated Free Cash Flow as cash flow provided by operating activities, less purchases of property, plant and equipment (also referred to as "Capital Expenditures"). The amount of Capital Expenditures Covanta has historically incurred were primarily related to maintaining existing operating facilities. However, Covanta's Capital Expenditures, as calculated and disclosed in accordance with GAAP, can materially increase in certain situations that are outside of the scope of maintaining its existing facilities and do not affect its ability to repay debt or invest in strategic opportunities, including those where we incur Capital Expenditures that are:
In addition, with its new capital structure that closed during the first quarter of 2007, Covanta Energy now has greater, but not unrestricted, flexibility to use its cash flow for a variety of purposes. As a result, management has determined that a more clear and useful measure of its cash flow available for the repayment of debt and for strategic opportunities, is cash flow provided by operating activities, which is a GAAP measure. In addition, management has determined that it is appropriate to provide guidance and additional information for Covanta given the immaterial differences between its and Covanta Energy's cash flow provided by operating activities. Going forward, Covanta intends to furnish such information, as well as additional information regarding how it has utilized its cash flow provided by operating activities to repay debt, invest in strategic opportunities, and incur Capital Expenditures.
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