Morristown, N.J. – Covanta Holding Corporation (NYSE: CVA) ("Covanta" or the "Company"), a world leader in sustainable waste and energy solutions, reported financial results today for the three months ended March 31, 2017."We continued making meaningful progress across our strategic initiatives in the first quarter, nearing completion of construction of the Dublin facility, driving growth in our Environmental Solutions business, and beginning to process metals at our centralized non-ferrous processing facility," said Stephen J. Jones, Covanta's President and CEO. "The fire and resulting downtime at the Fairfax facility impacted results in the first quarter, but recovery is well underway, with credit to our outstanding team on the ground. We expect to recoup much of the financial impact later in the year as we receive insurance payments. We also took the opportunity to accelerate scheduled outages at a few facilities into the first quarter while these facilities were down for other reasons, which contributed to our completing about 35% of our annual planned maintenance expense in Q1. We are very well positioned to post improved year-over-year performance for the balance of the year, and remain squarely on track with our full year outlook."
First Quarter Results
For the three months ended March 31, 2017, total revenue increased by $1 million to $404 million from $403 million in Q1 2016. Higher waste and service, metals and construction revenue were largely offset by lower energy revenue.
Organic growth contributed an overall revenue increase of $14 million as follows:
- Waste and service revenue grew by $8 million, which primarily consisted of:
- EfW waste processing of $4 million (1.7%), driven by improved pricing and growth in profiled waste, partially offset by lower volume due to plant downtime; and environmental services revenue of $6 million;
- Energy revenue decreased by $3 million due to lower production volume related to plant downtime;
- Recycled metals revenue increased by $3 million driven by improved ferrous market prices and better price realization after metals processing, partially offset by lower volume due to the timing of shipments; and
- Other revenue increased by $6 million due to construction activity.
Contract transitions reduced revenue by $4 million, as the expiration of certain long-term energy contracts offset an increased share of energy revenue following service fee to tip fee contract transitions. Transactions, most notably the exit from our China operations, resulted in a net decrease of $8 million in revenue year-over-year.
Excluding impairment charges (1), operating expense increased by $26 million to $427 million. The year-over-year net increase included a $33 million increase in same store costs, driven primarily by a $9 million increase in plant maintenance, largely due to the timing and scope of outage activities, and an $18 million increase in other plant operating expenses, including additional costs related to plant downtime, organic growth in the Environmental Solutions business, and normal wage and benefit escalation. Transactions overall reduced operating expense by $7 million.
Adjusted EBITDA declined by $25 million on a year-over-year basis to $51 million, as improved waste and metals pricing were more than offset by facility downtime, impacting both revenue and plant operating expenses, increased scheduled maintenance activity, and the impact of contract transitions and the China asset sale last year.
Free Cash Flow decreased by $16 million to $(17) million, primarily as a result of the factors that drove Adjusted EBITDA as noted above, partially offset by lower maintenance capital expenditures. Adjusted EPS decreased by $0.18 to $(0.37). The decrease was driven primarily by lower operating income as discussed above.
During the quarter, the Company declared a regular cash dividend of $0.25 per share, totaling $33 million.
Conference Call Information
Covanta Holding Corporation (NYSE: CVA) ("Covanta" or the "Company") will host a conference call at 8:30 AM (Eastern) on Wednesday, April 26, 2017 to discuss its first quarter results.
The conference call will begin with prepared remarks, which will be followed by a question and answer session. To participate, please dial 1-877-201-0168 approximately 10 minutes prior to the scheduled start of the call. If calling outside of the United States, please dial 1-647-788-4901. Please request the "Covanta Holding Corporation Earnings Conference Call" when prompted by the conference call operator. 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.
Covanta is a world leader in providing sustainable waste and energy solutions. Annually, Covanta’s modern Energy-from-Waste facilities safely convert approximately 20 million tons of waste from municipalities and businesses into clean, renewable electricity to power one million homes and recycle approximately 500,000 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 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 (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. 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 factors, risks and uncertainties that could cause actual results to differ materially from those forward-looking statements with respect to Covanta include, but are not limited to: fluctuations in the prices of energy, waste disposal, scrap metal and commodities; adoption of new laws and regulations in the United States and abroad; the fee structures of our contracts; difficulties in the operation of our facilities, including fuel supply and energy transfer interruptions, failure to obtain regulatory approvals, equipment failures, labor disputes and work stoppages, weather interference and catastrophic events; difficulties in the financing, development and construction of new projects and expansions, including increased construction costs and delays; limits of insurance coverage; our ability to avoid defaults under our long-term service contracts; performance of third parties under our contractual arrangements; concentration of suppliers and customers; increased competitiveness in the energy industry; changes in foreign currency exchange rates; limitations imposed by our existing indebtedness; exposure to counterparty credit risk and instability of financial institutions in connection with financing transactions; our ability to utilize our net operating losses; failures of disclosure controls and procedures; general economic conditions in the United States and abroad, including the availability of credit and debt financing and market conditions at the time our contracts expire; and other risks and uncertainties affecting our businesses described in Item 1A. Risk Factors of our Annual Report on Form 10-K and in other 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 of its 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.