Date: February 22, 2010
Source: Covanta Holding Corp.
2009 Operating Cash Flow of $397 Million Exceeds Guidance
Covanta Holding Corporation (NYSE: CVA) ("Covanta" or the "Company") reported financial results today for the three and twelve months ended December 31, 2009.
Anthony Orlando, President and CEO of Covanta noted that, "Our base business demonstrated strength and resiliency by generating more free cash flow than our prior best year in spite of lower recycled metal and energy prices. In addition, we made excellent progress on our growth initiatives by acquiring Veolia's North American Energy-from-Waste business and breaking ground on strategic new Energy-from-Waste capacity on three continents. This performance is a real credit to all of Covanta's outstanding employees."
Fourth Quarter Results
For the three months ended December 31, 2009, consolidated operating revenues decreased 2% to $407 million, down from $414 million in the prior year comparative period.
Revenues from the Americas segment increased $16 million, or 5%, to $358 million. New business revenues of $37 million related primarily to the acquisition of Veolia's North American Energy-from-Waste business (the "Veolia Acquisition") more than offset the $21 million decline in the existing business revenue.
Operating expenses for the Americas segment increased by $26 million during the quarter. New business operating expenses of $34 million were primarily related to the Veolia Acquisition.
International segment revenue decreased by $24 million in the fourth quarter while plant operating expenses declined by $32 million. The decline in both revenues and operating expenses resulted primarily from lower demand and fuel costs at our Indian facilities.
Adjusted EBITDA was $140 million, compared to $138 million for 2008, an increase of 1%. Fourth quarter 2008 Adjusted EBITDA benefitted from an insurance recovery of $8 million and an $8 million project debt prepayment made by our Stanislaus municipal client. Excluding these benefits in last year's fourth quarter, Adjusted EBITDA increased by approximately $18 million with a $10 million contribution from the Veolia Acquisition and $10 million from our international operations, offset partially by lower electricity and waste prices.
Cash flow provided by operating activities ("Operating Cash Flow") was $150 million in the fourth quarter, compared to $132 million in 2008. The fourth quarter 2008 results exclude the $8 million insurance recovery. The approximately $10 million increase in Operating Cash Flow was driven by project dividends and working capital.
Full-Year 2009 Results
For the twelve months ended December 31, 2009, consolidated operating revenues were $1.55 billion down 7% from $1.66 billion in 2008, primarily as a result of lower International segment revenues.
Americas segment revenues declined $25 million or 2% to $1.35 billion. New business revenue was $73 million. Existing business revenues declined by $98 million, largely due to lower pricing on recycled metals, energy and waste.
International segment revenues decreased $95 million during the year while operating expenses declined by $97 million. The decreases in revenues and operating expenses resulted primarily from lower fuel costs at our Indian facilities.
For the year, Operating Cash Flow was $397 million and Free Cash Flow (defined as Operating Cash Flow less maintenance capital expenditures) was $345 million. Operating Cash Flow was nearly flat with the prior year while Free Cash Flow improved slightly.
Adjusted EBITDA was $515 million in 2009 compared to $552 million in the prior year when excluding the benefit of the 2008 insurance recovery and the Stanislaus project debt prepayment. This decline was driven largely by lower recycled metal and energy prices off-set by the Veolia Acquisition.
Net income was $102 million compared to $129 million in 2008. 2009 diluted EPS was $0.66 compared to $0.83 in the prior year.
At year end, the Company's balance sheet remained strong and had ample liquidity with $434 million of unrestricted cash, $278 million of restricted cash (of which $166 million is designated for future project debt principal repayment), and an undrawn $300 million revolving credit facility.
"We anticipate 2010 Adjusted EBITDA to increase modestly driven by last year's acquisitions and organic growth, off-set by head winds related to contract transitions and our decision to increase development spending," stated Anthony Orlando. He continued, "This is an important year for our development activities, particularly in the U.K. where we are vigorously pursuing several large Energy-from-Waste opportunities. I'm confident our investment in long-term growth will bear fruit. In addition, we're advocating for U.S. Renewable Electricity Standards that would accelerate our growth."
2010 Guidance
The Company is establishing guidance for 2010 for the following key metrics:
Free Cash Flow in the range of $300 million to $340 million;
Adjusted EBITDA of $520 million to $560 million; and
Diluted earnings per share of $0.55 to $0.75.
Please note that we have elected to provide Free Cash Flow guidance rather than guidance relating to Operating Cash Flow for 2010. We are focused on generating cash and believe that Free Cash Flow is a more useful metric for evaluating the liquidity of the business as it represents cash that is available to invest in growth and repay debt.
Conference Call Information
Covanta will host a conference call at 8:30 am (Eastern) on Tuesday, February 23, 2010 to discuss its results for the three and twelve months ended December 31, 2009. Prepared remarks 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 and when prompted, enter the passcode 53809407. If you are calling from outside of the United States, please dial 702-928-7062 and use the same passcode. The conference call will also be web cast live on the Investor Relations section of the Covanta website at www.covantaholding.com.
A replay of the conference call will be available from 11:30 am (Eastern) on Tuesday, February 23, 2010 through midnight (Eastern) on Tuesday, March 2, 2010. To access the replay, please dial 800-642-1687 or, from outside of the United States, please dial 706-645-9291 and use the replay passcode: 53809407. The webcast will also be archived on www.covantaholding.com and available for MP3 download.
Additional Information
The Company's annual report on Form 10-K will be filed with the Securities and Exchange Commission on February 22, 2010. Printed copies of this document are available free of charge. Requests can be submitted at http://investors.covantaholding.com or by calling 1-800-882-4122, Ext. 7001.
About Covanta
Covanta Holding Corporation (NYSE: CVA), 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 45 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 more than 9 million megawatt hours of clean renewable electricity and create 10 billion pounds of steam that are sold to a variety of industries. For more information, visit www.covantaholding.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 (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 and its subsidiaries, or general industry or broader economic performance in global markets in which Covanta operates or competes, 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. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words "plan," "believe," "expect," "anticipate," "intend," "estimate," "project," "may," "will," "would," "could," "should," "seeks," or "scheduled to," or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the "safe harbor" provisions of such laws. Covanta cautions investors that any forward-looking statements made by Covanta are not guarantees or indicative of future performance. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements with respect to Covanta, include, but are not limited to, the risk that Covanta may not successfully close its announced or planned acquisitions or projects indevelopment and those factors, risks and uncertainties that are described in periodic securities filings by Covanta with the SEC. Although Covanta believes that its plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, actual results could differ materially from a projection or assumption in any forward-looking statements. Covanta's future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The forward-looking statements contained in this press release are made only as of the date hereof and Covanta does not have or undertake any obligation to update or revise any forward-looking statements whether as a result of new information, subsequent events or otherwise, unless otherwise required by law.
Attachments
Covanta Holding Corporation Exhibit 1
Consolidated Statements of Income
Three Months Twelve Months
Ended Ended
December 31, December 31,
----------------- --------------------
2009 2008 2009 2008
------- ------- --------- ---------
(Unaudited) (Audited)
(in thousands, except per share amounts)
Operating revenues
Waste and service revenues $252,306 $235,911 $919,604 $934,527
Electricity and steam sales 140,497 159,898 580,248 660,616
Other operating revenues 14,409 18,011 50,615 69,110
------- ------- --------- ---------
Total operating revenues 407,212 413,820 1,550,467 1,664,253
------- ------- --------- ---------
Operating expenses
Plant operating expenses (A) 242,278 256,089 946,166 999,674
Depreciation and
amortization expense 52,155 47,344 202,872 199,488
Net interest expense on
project debt 10,880 12,452 48,391 53,734
General and administrative
expenses 27,869 26,445 109,235 97,016
Insurance recoveries, net of
write-down of assets (A) - (8,325) - (8,325)
Other operating expenses 13,698 19,227 47,968 66,701
------- ------- --------- ---------
Total operating expenses 346,880 353,232 1,354,632 1,408,288
------- ------- --------- ---------
Operating income 60,332 60,588 195,835 255,965
------- ------- --------- ---------
Other income (expense)
Investment income 871 1,505 4,007 5,717
Interest expense (10,825) (10,928) (38,116) (46,804)
Non-cash convertible debt
related expense (9,728) (4,617) (24,290) (17,979)
------- ------- --------- ---------
Total other expenses (19,682) (14,040) (58,399) (59,066)
------- ------- --------- ---------
Income before income tax
expense and equity in
net income from
unconsolidated investments 40,650 46,548 137,436 196,899
Income tax expense (15,847) (24,776) (50,044) (84,561)
Equity in net income from
unconsolidated investments 5,945 5,228 23,036 23,583
------- ------- --------- ---------
Net Income 30,748 27,000 110,428 135,921
------- ------- --------- ---------
Less: Net (income) loss
attributable to
noncontrolling interests in
subsidiaries (2,471) 299 (8,783) (6,961)
------- ------- --------- ---------
Net Income Attributable to
Covanta Holding Corporation $28,277 $27,299 $101,645 $128,960
======= ======= ========= =========
Earnings Per Share:
Basic $0.18 $0.18 $0.66 $0.84
======= ======= ========= =========
Weighted Average Shares 153,796 153,417 153,694 153,345
======= ======= ========= =========
Diluted $0.18 $0.18 $0.66 $0.83
======= ======= ========= =========
Weighted Average Shares 155,171 154,673 154,994 154,732
======= ======= ========= =========
(A) The SEMASS energy-from-waste facility was damaged by a fire on March
31, 2007. The cost of repair or replacement was insured under the
terms of the applicable insurance policy, subject to deductibles.
During the year ended 2008, Covanta recorded insurance recoveries of
$5.2 million related to business interruption losses as a reduction to
operating expenses and $8.3 million related to repair and
reconstruction costs as a reduction to the loss related to the write-
down of assets. Settlement of the property damage insurance claim
occurred in December 2008. See Note 15 – Supplementary Financial
Information of the Notes to the Consolidated Financial Statements
included in our Annual Report on Form 10-K for the year ended December
31, 2009 for a discussion of the insurance recoveries.
Covanta Holding Corporation Exhibit 2
Reconciliation of Net Income to Adjusted EBITDA
Three Months Twelve Months
Ended Ended
December 31, December 31,
----------------- ----------------- Full Year
2009 2008 2009 2008 Estimated 2010
-------- -------- -------- -------- -------------------
(Unaudited, in thousands)
Net Income Attributable
to Covanta Holding
Corporation $28,277 $27,299 $101,645 $128,960 $85,000 - $117,000
Depreciation and
amortization
expense 52,155 47,344 202,872 199,488 192,000 - 198,000
Debt service:
Net interest
expense on
project debt 10,880 12,452 48,391 53,734
Interest expense 10,825 10,928 38,116 46,804
Non-cash
convertible
debt related
expense 9,728 4,617 24,290 17,979
Investment
income (871) (1,505) (4,007) (5,717)
-------- -------- -------- --------
Subtotal debt
service 30,562 26,492 106,790 112,800 127,000 - 121,000
Income tax expense 15,847 24,776 50,044 84,561 61,000 - 71,000
Acquisition-related
costs (A) 337 - 6,289 - -
Other adjustments:
Change in unbilled
service
receivables 4,964 7,319 18,620 14,020
Non-cash
compensation
expense 3,496 3,364 14,220 14,750
Other (B) 1,880 1,773 5,835 12,249
-------- -------- -------- --------
Subtotal other
adjustments 10,340 12,456 38,675 41,019 49,000 - 43,000
Net income (loss)
attributable
to noncontrolling
interests in
subsidiaries 2,471 (299) 8,783 6,961 6,000 - 10,000
-------- -------- -------- --------
Total adjustments 111,712 110,769 413,453 444,829
-------- -------- -------- -------- -------------------
Adjusted
EBITDA (C) $139,989 $138,068 $515,098 $573,789 $520,000 - $560,000
======== ======== ======== ======== ===================
(A) This amount relates primarily to acquisition-related costs associated
with the Veolia EfW acquisition in 2009. Acquisition-related costs
are no longer capitalized as a cost of the business acquired. Instead,
these costs are expensed as they are incurred as a result of a recent
accounting pronouncement which was effective January 1, 2009.
(B) These items represent amounts that are non-cash in nature.
(C) The components of Adjusted EBITDA are as follows:
Three Months Twelve Months
Ended Ended
December 31, December 31,
----------------- -----------------
2009 2008 2009 2008
-------- -------- -------- --------
(Unaudited, in thousands)
Impact of SEMASS fire (1) $ - $8,268 $ - $13,380
Stanislaus debt service prepayment - 8,007 - 8,007
All other 139,989 121,793 515,098 552,402
-------- -------- -------- --------
Adjusted EBITDA $139,989 $138,068 $515,098 $573,789
======== ======== ======== ========
(1) This amount primarily includes insurance recoveries received in 2008
for business interruption losses related to the SEMASS energy-from-
waste facility fire on March 31, 2007.
Covanta Holding Corporation Exhibit 3
Reconciliation of Cash Flow Provided by Operating Activities
to Adjusted EBITDA
Three Months Twelve Months
Ended Ended
December 31, December 31,
----------------- ----------------- Full Year
2009 2008 2009 2008 Estimated 2010
-------- -------- -------- -------- -------------------
(Unaudited, in thousands)
Cash flow provided
by operating
activities (A) $149,505 $131,905 $397,238 $402,607 $370,000 - $420,000
Acquisition-
related costs 3,930 - 4,619 - -
Debt service 30,562 26,492 106,790 112,800 127,000 - 121,000
Amortization of
debt premium and
deferred financing
costs 474 1,518 3,265 7,023 7,000
Other (44,482) (21,847) 3,186 51,359 16,000 - 12,000
-------- -------- -------- -------- -------------------
Adjusted EBITDA $139,989 $138,068 $515,098 $573,789 $520,000 - $560,000
======== ======== ======== ======== ===================
(A) Cash flow provided by operating activities was negatively affected by
payments for acquisition-related costs related to acquisitions made in
2009.
Covanta Holding Corporation Exhibit 4
Reconciliation of Cash Flow Provided by Operating Activities
to Free Cash Flow
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------- ------------------ Full Year
2009 2008 2009 2008 Estimated 2010
-------- -------- -------- -------- -------------------
(Unaudited, in thousands)
Cash flow provided by
operating
activities (A) $149,505 $131,905 $397,238 $402,607 $370,000 - $420,000
Less: Maintenance
capital
expenditures (B) (7,792) (14,849) (51,937) (60,639) (70,000)-(80,000)
-------- -------- -------- -------- -------------------
Free Cash Flow $141,713 $117,056 $345,301 $341,968 $300,000 - $340,000
======== ======== ======== ======== ===================
Selected Uses
of Free Cash
Flow:
-------------
Principal
payments on
long-term
debt $(1,582) $(1,831) $(6,591) $(6,877)
Principal
payments on
project debt,
net of
restricted
funds
used (C) $(40,071)$(47,305)$(129,183)$(166,225)
Distributions
to partners of
noncontrolling
interests in
subsidiaries $(1,408) $(2,023) $(11,004) $(7,061)
Non-maintenance
capital expend-
itures (D) $(6,718) $(5,771) $(21,682) $(27,281)
Acquisition of
businesses,
net of cash
acquired $(13,910)$(53,265)$(265,644) $(73,393)
Acquisition of
noncontrolling
interests in
subsidiary $(23,700)$ - $(23,700) $ -
Purchase of
equity
interests $ - $ - $(8,938) $(18,503)
Other
investment
activities,
net $(5,496) $2,833 $(15,339) $(9,492)
Purchases of
property, plant
and equipment:
---------------
Maintenance
capital
expend-
itures (B) $(7,792)$(14,849) $(51,937) $(60,639)
Pre-construction
development
projects (E) (3,439) (1,208) (13,233) (1,208)
Capital
expenditures
associated with
technology
development(F) (1,739) (1,284) (5,008) (5,882)
Capital
expenditures
associated with
certain
acquisitions(G) (273) (2,851) (1,353) (17,126)
Capital
expenditures
associated
with SEMASS
fire (H) (1,267) (428) (2,088) (3,065)
-------- -------- -------- --------
Total purchases
of property,
plant and
equipment $(14,510)$(20,620) $(73,619) $(87,920)
======== ======== ======== ========
(A) Cash flow provided by operating activities was negatively affected by
payments for acquisition-related costs related to acquisitions made
in 2009 of $3.9 million and $4.6 million for the quarter and year
ended December 31, 2009, respectively.
(B) Capital Expenditures primarily to maintain existing facilities.
Purchase of property, plant and equipment is also referred to as
Capital Expenditures.
(C) Principal payments on project debt are net of restricted funds held in
trust used to pay debt principal of $23.6 million and $66.2 million
for the quarters ended December 31, 2009 and 2008, respectively and
$54.6 million and $21.6 million for the years ended December 31, 2009
and 2008, respectively. Principal payments on project debt excludes a
project debt refinancing transaction related to a domestic energy-
from-waste facility in 2009 ($63.7 million) and excludes principal
repayments on working capital borrowings relating to the operations of
our Indian facilities ($9.8 million).
(D) Non-maintenance capital expenditures include certain capital
expenditures made at our facilities as described in notes E through H
below.
(E) Covanta has entered into definitive agreements for the development of
a 1,700 metric ton per day energy-from-waste project serving the City
of Dublin, Ireland and surrounding communities. Construction
commenced in the fourth quarter of 2009. Covanta incurred capital
expenditures related to pre-construction activities, such as site
preparation costs, for this project.
(F) Capital Expenditures related to internal development efforts and/or
agreements with multiple partners for the development, testing or
licensing of new technologies related to our energy-from-waste and
renewable energy business.
(G) Capital Expenditures were incurred at four facilities that Covanta
acquired in 2008 and 2007 primarily to improve the productivity or
environmental performance of those facilities.
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.
(H) 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 was insured under the terms of the applicable insurance
policy, subject to deductibles. Settlement of the property damage
insurance claim occurred in December 2008.
Covanta Holding Corporation Exhibit 5
Components of Diluted Earnings Per Share
Three Months Twelve Months
Ended Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
----- ----- ----- -----
(Unaudited)
Impact of SEMASS fire and insurance
recoveries, net of write-down of
assets and tax (A) $ - $0.03 $ - $0.05
Net tax impact from Grantor Trust
activity (B) 0.01 (0.06) (0.01) (0.10)
Veolia EfW acquisition-related costs,
net of tax (C) - - (0.02) -
All other 0.17 0.21 0.69 0.88
----- ----- ----- -----
Diluted Earnings Per Share $0.18 $0.18 $0.66 $0.83
===== ===== ===== =====
(A) This amount primarily includes insurance recoveries received in 2008
for business interruption losses related to the SEMASS energy-from-
waste facility fire on March 31, 2007.
(B) During 2008, Covanta recognized additional tax liabilities associated
with the activity from the wind-down of the grantor trusts that arose
from our predecessor insurance entities.
(C) This amount relates primarily to acquisition-related costs associated
with the Veolia EfW acquisition in 2009. Acquisition-related costs
are no longer capitalized as a cost of the business acquired.
Instead, these costs are expensed as they are incurred as a result of
a recent accounting pronouncement which was effective January 1, 2009.
Discussion of Non-GAAP Financial Measures
To supplement our results prepared in accordance with United States generally accepted accounting principles (“GAAP”), we use the measures of Adjusted EBITDA and Free Cash Flow, which are non-GAAP measures as defined by the Securities and Exchange Commission. The non-GAAP financial measures of Adjusted EBITDA and Free Cash Flow as described below, and used in the tables above, are 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, our non-GAAP financial measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes.
We use a number of different financial measures, both GAAP and non-GAAP, in assessing the overall performance of our business. We use Adjusted EBITDA to provide further information that is useful to an understanding of the financial covenants contained in the credit facilities of our most significant subsidiary, Covanta Energy Corporation, 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 our business. The presentations of Adjusted EBITDA and Free Cash Flow are intended to enhance the usefulness of our financial information by providing measures which management internally use to assess and evaluate the overall performance of its business and those of possible acquisition candidates, and highlight trends in the overall business.
Adjusted EBITDA and Free Cash Flow should not be considered as an alternative to net income or an alternative to cash flow provided by operating activities as indicators of our 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 definition in Covanta Energy’s credit facilities, which we have guaranteed. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, as adjusted for additional items subtracted from or added to net income. Because our business is substantially comprised of that of Covanta Energy, our financial performance is substantially similar to that of Covanta Energy. For this reason, and in order to avoid use of multiple financial measures which are not all from the same entity, the calculation of Adjusted EBITDA and other financial measures presented herein are ours, measured on a consolidated basis.
Under these 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 our ability to engage in a broad range of activities in furtherance of our business, including making certain investments, acquiring businesses and incurring additional debt. Covanta Energy was in compliance with these covenants as of December 31, 2009. Failure to comply with such financial covenants could result in a default under these credit facilities, which default would have a material adverse affect on our financial condition and liquidity.
These financial covenants are measured on a trailing four quarter period basis and the material covenants are as follows:
maximum Covanta Energy leverage ratio of 3.75 to 1.00 (which declines to 3.50 to 1.00 for quarterly periods after September 30, 2010), which measures Covanta Energy’s Consolidated Adjusted Debt (which is the principal amount of its consolidated debt less certain restricted funds dedicated to repayment of project debt principal and construction costs) to its Adjusted EBITDA (which for purposes of calculating the leverage ratio and interest coverage ratio, is adjusted on a pro forma basis for acquisitions and dispositions made during the relevant period); and
minimum Covanta Energy interest coverage ratio of 3.00 to 1.00, which measures Covanta Energy's Adjusted EBITDA to its consolidated interest expense plus certain interest expense of ours, to the extent paid by Covanta Energy.
In order to provide a meaningful basis for comparison, we are providing information with respect to our Adjusted EBITDA for the three and twelve months ended December 31, 2009 and 2008, reconciled for each such periods to net income and cash flow provided by operating activities, which are believed to be the most directly comparable measures under GAAP.
Free Cash Flow
Free Cash Flow is defined as cash flow provided by operating activities less maintenance capital expenditures, which are capital expenditures primarily to maintain our existing facilities. We use the non-GAAP measure of Free Cash Flow as a criterion of liquidity and performance-based components of employee compensation. We use Free Cash Flow as a measure of liquidity to determine amounts we can reinvest in our businesses, such as amounts available to make acquisitions, invest in construction of new projects or make principal payments on debt.
In order to provide a meaningful basis for comparison, we are providing information with respect to our Free Cash Flow for the three and twelve months ended December 31, 2009 and 2008, reconciled for each such periods to cash flow provided by operating activities, which we believe to be the most directly comparable measure under GAAP.
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