Date: February 8, 2012
Source: Covanta Holding Corporation
Covanta Holding Corporation (NYSE: CVA) ("Covanta" or the "Company"), a leading global owner and operator of Energy-from-Waste ("EfW") projects, reported financial results today for the three and twelve months ended December 31, 2011.
Key Full Year 2011 Financial Highlights:
Key Full Year 2011 Operational Highlights:
Commenting on Covanta's 2011 results, Anthony Orlando, Covanta's President and CEO stated, "Covanta had a very good 2011. Operational performance was outstanding and we executed on our plan to grow Adjusted EBITDA by 5 percent. I am also very pleased that we recently extended a number of municipal waste contracts to build upon our tradition of working in partnership with our client communities. These long-term relationships, coupled with our operational expertise and organic growth investments, position us to continue earnings growth in 2012 and beyond."
| Full Year | |||
| Continuing Operations | 2010 | 2011 | 2011 Guidance |
| (Unaudited, $ in millions, except per share amounts) | |||
| Revenues | $1,583 | $ 1,650 | N/A |
| Net Income From Continuing Operations | $30 | $79 | N/A |
| Adjusted EBITDA | $470 | $492 | $485 - $505 |
| Free Cash Flow | $318 | $280 | $260 - $290 |
| Adjusted EPS | $0.42 | $0.52 | $0.45 - $0.55 |
Full Year 2011 Results from Continuing Operations
For the twelve months ended December 31, 2011, total operating revenues increased 4% to $1,650 million from $1,583 million in 2010.
The increase is attributable to improvements in several areas across the business:
price and volume increases in both recycled metals and waste; service fee escalations;
and increased construction revenue. These increases were offset by lower production
at certain biomass facilities that were economically dispatched off-line, lower
debt service pass through revenue as project debt matures, and lower energy
pricing.
Operating expenses of $1,432 million were flat versus the prior year.
Excluding the non-cash write-downs in 2010, operating expenses increased $38
million or 3%, primarily due to normal cost escalations, higher fuel related
costs, lower Renewable Energy Credits and increased construction expense, partially
offset by lower costs at certain biomass facilities that were economically dispatched
off-line.
Operating income increased by $63 million, or 41%, to $218 million compared with 2010. Excluding the non-cash write-downs in 2010, operating income increased by $29 million, or 15%, primarily as a result of higher recycled metal revenues, service fee contract escalations, higher waste volumes and operational improvements. This increase was partially offset by lower debt service pass through revenue, lower operating income at our biomass facilities and lower energy pricing.
Adjusted EBITDA increased $22 million, or 5%, to $492 million.
Free Cash Flow declined by $38 million, or 12%, to $280 million, which was in line with guidance. The decline was primarily due to interest payments made in 2011 for high yield notes issued in 2010 and unfavorable changes in working capital compared to 2010.
Adjusted EPS was $0.52, an increase of 24% compared to $0.42 in 2010, with the increase attributable to improved operating income and a lower number of shares outstanding due to the Company's common stock buyback program, offset by higher interest expense.
Shareholder Returns and Liquidity
In 2011, the Company sold three of the four Asia IPP assets held for sale, raising a total of $266 million in gross proceeds. The Company utilized cash on hand, Free Cash Flow and cash repatriated from the Asia asset divestitures to: return $272 million of capital to shareholders; invest $53 million in growth initiatives, net of project debt issued; and repay debt of $176 million.
The Company repurchased $230 million of common stock, or 14.4 million shares (10% of outstanding shares), at a weighted average cost of $15.99 per share in 2011. Aggregate repurchases since June 2010 total $325 million, or 20.5 million shares, representing 14% of outstanding shares. In the first quarter, the Company also initiated a quarterly cash dividend in the amount of $0.075 per share ($0.30 per share annualized).
Sanjiv Khattri, Covanta's Chief Financial Officer, commented, "Our disciplined balance sheet management, predictable business model and consistent Free Cash Flow generation continue to provide ample liquidity and flexibility to actively return capital to shareholders and pay down debt, while simultaneously investing in our business. I am also very pleased that in 2011, not only did we achieve our target for asset sales, but we also efficiently repatriated $137 million of these funds to the U.S."
Fourth Quarter Results
Operating revenues increased $11 million, or 3%, to $430 million, compared to the prior year period. Revenue growth was primarily due to service fee contract escalations, increased recycled metals pricing and volume, higher tip fee volume and increased construction revenue. These increases were partially offset by lower debt service pass through revenue, lower production at certain biomass facilities that were economically dispatched off-line and lower energy pricing.
Operating expenses of $350 million declined 2% from $356 million in the prior year comparative period. The decline was primarily attributable to a shift in timing of planned scheduled maintenance activity from the fourth quarter to the second quarter of this year and lower costs associated with certain biomass facilities being economically dispatched off-line, which was partially offset by lower alternative fuel tax credits and normal cost escalations.
Operating income increased by $17 million, or 27%, to $80 million compared with 2010 as a result of higher recycled metal revenues, service fee contract escalations, higher tip fee volume, and timing of scheduled maintenance activities offset by lower energy pricing.
Adjusted EBITDA was $146 million, up $17 million or 13% from the prior year comparative period, largely driven by higher waste and recycled metals revenues and lower maintenance expense. These benefits were partially offset by reduced debt service pass through billings and lower energy revenue.
Free Cash Flow was $65 million compared to $82 million in the prior year comparative period. The decline was primarily due to a semi-annual high yield interest payment and the expected working capital changes, offset by improved operating performance, as discussed above.
Adjusted EPS was $0.26 or a 37% increase compared to $0.19 in the prior year comparative period, with the increase attributable to improved operating income and a lower number of shares outstanding due to the Company's common stock buyback program, partially offset by a higher effective tax rate and increased interest expense.
2012 Guidance
The Company is establishing guidance for 2012 for the following key metrics:
| Continuing Operations | |||
|
|
Full Year | Full Year | % Change At |
| 2011 Actual | 2012 Guidance | Midpoint | |
| Adjusted EBITDA | $492 | $500 - $530 | 5% |
| Free Cash Flow | $280 | $250 - $280 | (5)% |
| Adjusted EPS | $0.52 | $0.55 - $0.65 | 15% |
Conference Call Information
Covanta will host a conference call at 8:30 am (Eastern) on Thursday, February 9, 2012 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, please dial 877-806-3982 approximately 10 minutes prior to the scheduled start of the call. If calling from outside of the United States, please dial 702-928-7062. Please utilize conference ID number 44475437 when prompted by the conference call operator. The conference call will also be webcast live from the Investor Information section of the Company's website. A presentation will be made available during the call and will be found on the Investor Relations section of the Covanta website at www.covantaenergy.com.
A replay of the conference call will be available from 11:30 am (Eastern) on Thursday, February 9, 2012. To access the replay, please dial 855-859-2056 or 800-585-8367, or from outside of the United States 404-537-3406 and use the replay conference ID number 44475437. The webcast will also be archived on www.covantaenergy.com.
10-K Filing Update
The Company expects its 2011 Annual Report on Form 10-K to be filed the week of February 13, 2012.
About Covanta
Covanta Energy 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 46 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 9 million megawatt hours of clean renewable electricity and create more than 9 billion pounds of steam that are sold to a variety of industries. For more information, visit www.covantaenergy.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 grow its business as expected or close its announced or planned acquisitions or projects in development, 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 to 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.
Investor Contacts
Alan Katz
1.862.345.5456
Clare Rauseo
1.862.345.5236
Media Contact
James Regan
1.862.345.5216
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